Canada’s economy showed no growth in the first three months of 2026, following a 0.2 percent contraction in the previous quarter.
The real gross domestic product was unchanged as a sharp increase in imports offset gains from business inventory accumulation. Final domestic demand slipped 0.1 percent.
Imports rose 2.9 percent during the quarter, driven largely by gold shipments. Exports fell 0.1 percent. Vehicle exports declined as the auto sector continued to deal with U.S. tariffs, while higher exports of crude oil, bitumen and natural gas helped limit the overall drop.
Businesses continued to pull back on investment. Capital spending fell 0.7 percent, marking the fifth consecutive quarterly decline. A steep drop in engineering projects outweighed gains in machinery, equipment, software and mineral exploration.
The housing sector also weakened. Residential investment fell 2.0 percent, following a 2.4 percent decline in the previous quarter. Activity related to home resales dropped 9.9 percent, while new home construction was little changed.
Consumer spending provided some support for the economy. Household expenditures increased 0.4 percent, led by spending on food and financial services. Spending on new vehicles declined, while fewer Canadians travelled abroad.
Government capital spending fell 2.5 percent after strong growth through much of 2025. The decline was mainly tied to lower spending on military equipment compared with elevated levels recorded late last year.
Workers continued to see income gains. Compensation of employees rose 1.2 percent, with increases in professional services, health care and retail trade. Federal public administration and finance-related industries recorded declines.
Corporate profits increased 1.6 percent for a third straight quarter. Higher energy prices boosted earnings in the oil, gas and mining sectors, while financial corporations reported stronger investment-related revenue.
Households saved less during the quarter. The household saving rate fell to 3.5 percent, the lowest level since early 2024. Disposable income rose 0.6 percent, while consumer spending increased at a faster pace.
Higher oil prices also pushed up economy-wide prices. The GDP deflator rose 1.1 percent, while export prices climbed 3.4 percent during the quarter.
The first-quarter data show an economy that avoided another contraction but generated little momentum. Consumer spending and energy-related income provided support, while weaker investment, slower housing activity and softer exports limited growth.