Canada's economy has entered a technical recession, as a slight contraction in the first quarter was driven by weak spending from both businesses and the government.

Statistics Canada reported on Friday that real gross domestic product (GDP) declined at an annualized rate of 0.1% in the first three months of this year. The economic contraction for the fourth quarter of last year was revised from a previously reported 0.6% to 1%.

The unexpected contraction in the first quarter stands in sharp contrast to institutional forecasts. Economists surveyed had previously anticipated that Canada's economy would grow at an annualized rate of 1.5% in the first quarter, aligning with the Bank of Canada's projection.

The last time Canada's economy recorded two consecutive quarters of negative growth was during the COVID-19 pandemic in 2020. Prior to that, it occurred during the period of low oil prices in 2015.

Following the release of the report, the Canadian dollar fell to a session low, trading at C$1.3822 per U.S. dollar as of 8:39 a.m. Ottawa time. Canadian government bonds extended their outperformance relative to U.S. Treasuries, with yields dropping to the day's lows.