International Week Ahead
- Canada Labor Force Survey: Trade-Related Sectors Likely to Remain a Drag
- Canada Manufacturing Sales: Weak January Print After a Robust December Increase
- U.K. Monthly GDP: Strong Momentum to Start the Year
- Mexico CPI: Oil Price Shock Makes Banxico’s Inflation Outlook More Challenging
- India CPI: RBI Now Firmly on Hold, Balance of Risk Shifts to Hikes
- Brazil CPI: Our Less Dovish BCB Outlook Slowly Being Priced into Financial Markets
- China Activity: Downside Risks to China GDP are Starting to Take Shape
G10
Canada Labor Force Survey • (3/13)
Trade-Related Sectors Likely to Remain a Drag
Canada’s labor market data for February is likely to show a modestly weakening job market, with pain concentrated in trade-centric sectors. For now, much of this has been felt in manufacturing, but is likely to spread to transportation. The Business Outlook Survey for Q4-2025 continues show weak hiring intentions and lack of labor shortages, consistent with falling job vacancies. We look for headline employment to come in at -10K and for the unemployment rate to tick higher, to 6.6%. The sharp decline in labor force participation in January is unlikely to be repeated. However, population growth has slowed markedly in recent months—falling from 3% in 2023/24 to 0.9% in 2024/25. This, along with the medium-term downtrend in labor force demographics on an aging population, implies a very low level of job growth (and even slight job loss) could keep the unemployment rate stable. As such, given these structural shifts, the Bank of Canada (BoC) is likely to pay closer attention to other indicators such as underlying job growth, vacancies, hiring intentions, wages, etc. to form a view on the health of the job market.
Canada Manufacturing Sales • (3/13)
Weak January Print After a Robust December Increase
We expect manufacturing sales to decline 3.3% month-over-month in January. The drop is likely to be driven by transportation equipment and machinery sectors, which in turn reflects the headwinds of trade-exposed industry. The January drop follows a robust December increase but still implies a weak trend in sales. The 3-month average month-over-month growth rate was -0.6% in December, well below the 12-month average -0.08%. We continue to think that the Bank of Canada (BoC) will lean dovishly given the domestic backdrop in our baseline. Higher oil prices, if sustained, change the outlook substantially by boosting both growth and inflation prospects. However, we think these levels need to be sustained for a month or two before a shift from in policy tone. The BoC’s March meeting, on March 18, is likely too soon for it to make such an assessment.
U.K. Monthly GDP • (03/13)
Strong Momentum to Start the Year
We expect the UK’s January GDP print to come in strong at 0.3% month-over-month, up from December’s 0.1% and above consensus expectations (0.2%.) Growth will likely be broad-based across industrial, services and construction sectors, with economic activity indicators and January’s PMIs surveys both pointing to an encouraging start to the year. While services carries more weight on the economy, manufacturing activity also has been trending upward, adding to the positive impulse. However, policymakers’ concerns are heightened as they weigh the impact of the renewed conflict in the Middle East on growth and inflation. As an overall net exporter of oil and gas, the UK economy is exposed to higher energy prices, which if prolonged would act as a drag on activity. At this point, though, this is still not a prolonged conflict. As such, we maintain our view that the Bank of England (BoE) should continue cutting rates—whether that will be the case is another matter. We can see the BoE opting to hold at their March meeting as the language from policymakers has turned cautious over the past week.
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Mexico CPI • (3/9)
Oil Price Shock Makes Banxico’s Inflation Outlook More Challenging
February inflation data will be an input into Banxico’s assessment of monetary policy settings at its March meeting; however, the rise in oil prices due to events in the Middle East takes some of the steam out of the importance of next week’s CPI release. In fairness, oil prices had ticked up before the conflict intensified. A 15% rise in oil prices pre-conflict was not immaterial, and policymakers expressed some concern, but not enough to push Banxico off its bias for lower interest rates. With Brent Crude now up ~35% year-to-date, upside risks to inflation are starting to take shape that policymakers may not be able to dismiss so easily. Elevated oil prices will feed directly into headline inflation, and based on the duration and intensity of the conflict, could potentially have second round effects that impact price formation more broadly. That dynamic may not be fully captured in next week’s CPI data, leaving February CPI data a bit more backward-looking. Our view has been that local inflation trends are more complicated than Banxico’s assessment of CPI, and at some point in the near future, Banxico will adopt a less optimistic stance that the CPI target will be hit in the coming quarters. The sharp rise in oil prices may be the catalyst for Banxico to shift its own inflation expectations. Our views on Mexico inflation led us to adopt a higher terminal rate forecast than markets were pricing pre-conflict, and we remain comfortable with an above-market pricing and consensus forecast given the events of the past week.
India CPI • (3/12)
RBI Now Firmly on Hold Although Balance of Risk Shifts to Hikes
India’s economy is heavily exposed to events in the Middle East and the subsequent rise in oil prices, which also makes next week’s CPI data less relevant than usual. One of the largest oil importers in the world, India could experience a notable rise in headline inflation come March with possible pass through to core inflation, depending on how long the oil spike and market volatility persists. The inflationary impact is a potential problem for India, but perhaps not as much of an issue at the moment, as price growth has been well below the Reserve Bank of India (RBI) CPI target for some time. With price growth below target, RBI policymakers may not be as quick to shift in a more hawkish direction on monetary policy. We would also note that government subsidies—despite India’s public finance position being rather weak—could be enhanced to offset household affordability concerns from rising energy prices. Expanding subsidies raises its own challenges, but the combination of already subdued price pressures and fiscal offset could limit the inflationary impact and keep RBI policymakers on hold for now. A sustained rise in oil prices, however, likely prompts a more hawkish response from the RBI, especially if the rupee remains under pressure. For now, we forecast RBI policy rates to be left on hold, but the balance of risk has shifted toward rate hikes, as opposed to further rate cuts, given the upside risks to inflation and downside risks to the rupee.
Brazil CPI • (3/12)
Our Less Dovish BCB Outlook Slowly Being Priced into Financial Markets
Slightly different from Mexico and India, Brazil’s February CPI will remain an influential data point for market participants and local policymakers. Brazilian Central Bank (BCB) policymakers have signaled that rate cuts are set to begin this month, but what is still unclear is the forcefulness of easing to start of the cycle. Next week’s CPI data can offer insight into whether BCB policymakers choose to move quickly when removing monetary policy restriction or take a more gradual approach to lowering the Selic Rate. Worth noting, however, is how Middle East event risk is very much an input for the BCB too. To that point, late this week BCB monetary policy director and COPOM voter Nilton David signaled that the path for rates may change as a result of the conflict in the Middle East. Specifically David commented:
“The central bank can change course if the scenario changes. Our level of conviction extended only to the next meeting. There have been developments that we cannot ignore, and clearly they must be factored into our assessment.”
We have been less dovish on the BCB than market pricing, calling for a more gradual 25 bps rate reduction at the March meeting, as opposed to a 50 bp cut markets are priced for. Consensus economists have also gravitated toward a 50 bp rate cut. We continue to feel comfortable, perhaps more comfortable, with our tempered start to the easing cycle forecast as oil prices pop higher, BRL is under pressure, looser fiscal policy is likely, and now after Monetary Policy Director David’s comments. February CPI will not capture all the recent rise in oil prices, but will still matter, and should another above estimate inflation print, similar to what we saw with mid-month IPCA data hit, our view for a 25 bp cut would be reinforced.
China Activity • (3/15)
Downside Risks to China GDP Are Starting to Take Shape
February retail sales, industrial production and other activity data—which are the first hard data releases since the Lunar New Year period ended—will offer a pre-conflict glimpse into early 2026 economic momentum across China. We noted in recent publications how risks to China’s near-term growth prospects had been tilted to the upside (despite the probability of “hard landing” risks rising); however, the near-term balance of risk for growth has become more two-sided as a result of the conflict with Iran. Should activity data align with underwhelming February manufacturing and non-manufacturing PMIs, the balance of risk could tilt more heavily to the downside. As of now, we forecast China’s economy to grow 4.6% this year, which is notable given that our forecast represents a slower growth profile for China relative to last year, but also as China’s official growth target was lowered to 4.5%–5.0% at the still-ongoing National People’s Congress. The duration of the conflict in the Middle East will ultimately play a role in whether downside risks to growth become our new base case. For now, we have not made adjustments to our China economic outlook, and our GDP forecast is not only in the middle of the new official growth target, but in line with consensus estimates.
 could keep the unemployment rate stable. As such, given these structural shifts, the Bank of Canada (BoC) is likely to pay closer attention to other indicators such as underlying job growth, vacancies, hiring intentions, wages, etc. to form a view on the health of the job market.){kind=link}