Economists at the National Bank of Canada point out that Canada’s ranking on the global economic surprise index is particularly noteworthy, but the reason for its inclusion is the continued underperformance of its data. The country’s current reading has plummeted to -88.2, compared to a reading near 100 at the end of last year.
This decline contrasts sharply with the situation in the United States, where the index remained at 43.7 due to consecutive better-than-expected labour market and retail sales data. The gap between the two countries has widened to its largest in four years. The Citigroup Economic Surprise Index reflects the degree of deviation between actual data and market expectations.
A positive value indicates that the data is better than expected, while a negative value indicates that the performance is worse than expected. Canada is currently mired in negative territory due to the sluggish employment situation since the beginning of 2026. Official statistics show that more than 110,000 jobs have been lost since the beginning of the year. The market had expected 10,000 new jobs in May, but nearly 18,000 were lost instead.
The most significant deviation was in March: 84,000 jobs were lost that month, a huge discrepancy from the expected 10,000 increase. The country’s performance on the index is not the worst in history. It hit a low of nearly -150 at the end of 2022. Economists recall that at that time, the Bank of Canada was heavily pressuring the economy with sharp interest rate hikes to curb the energy supply shock and rising inflation caused by the Russia-Ukraine conflict.
Although the current environment also faces an oil supply crisis and inflationary anxieties, they believe that the impact of this weak economic data on interest rate trends may outweigh geopolitical factors. The two scholars corroborated this view with developments in the bond market. The yield on Canadian five-year government bonds continued to decline relative to US Treasuries, a trend consistent with weak domestic economic data. They anticipate further economic weakness, particularly given the apparent threat posed by the USMCA negotiations.
Unlike in 2022, the current economic and inflationary environment gives central banks more room for patience. Policymakers have cut interest rates several times since last year, lowering them from 3.25% to 2.25% to cushion the impact of Trump’s tariff war. Against this backdrop, even if economic surprise indicators flash red, monetary policy is likely to remain on the sidelines.