US ISM manufacturing falls to 50.3, tariff pressures mount

    US ISM Manufacturing PMI slipped to 50.3 in February, down from 50.9, missing expectations of 50.8. The biggest red flag in the report was the sharp drop in new orders, which plunged from 55.1 to 48.6, marking a return to contraction after three months of growth. Production slowed to 50.7 from 52.5. Employment also fell back into contraction at 47.6 after briefly expanding in January. The figures suggest that while manufacturing activity remains in expansion territory, momentum is weakening.

    One key concern is the rapid acceleration in price growth, with the Prices Index surging from 54.9 to 62.4. According to ISM, this reflects the initial shock of the new administration’s tariff policies, which have disrupted supply chains, caused new order backlogs, and led to supplier delivery stoppages.

    Despite the decline in overall activity, ISM noted that the February reading still signals a 2.2% annualized growth in US GDP.

    Full US ISM manufacturing release here.

    Eurozone CPI falls to 2.4%, core CPI slows to 2.6%, both above expectations

      Eurozone CPI ticked down from 2.5% yoy to 2.4% yoy in February, above expectation of 2.3% yoy. Core CPI (ex-energy, food, alcohol & tobacco), fell from 2.7% yoy to 2.6% yoy, above expectation of 2.5% yoy.

      Looking at the main components of inflation, services is expected to have the highest annual rate in February (3.7%, compared with 3.9% in January), followed by food, alcohol & tobacco (2.7%, compared with 2.3% in January), non-energy industrial goods (0.6%, compared with 0.5% in January) and energy (0.2%, compared with 1.9% in January).

      Full Eurozone CPI flash release here.

      UK PMI manufacturing finalized at 46.9, job cuts accelerate

        The UK manufacturing sector continued to struggle in February, with PMI Manufacturing finalized at 46.9, down from January’s 48.3, marking a 14-month low. Weak demand and declining confidence among clients have exacerbated the downturn, leading to falling output and new orders.

        Rob Dobson, Director at S&P Global Market Intelligence, noted that UK manufacturers are facing an “increasingly difficult trading environment.” The combination of subdued demand, rising cost pressures, and uncertainty over future economic conditions is making it harder for firms to sustain growth.

        Inflation fears are also rising, particularly due to changes in the national minimum wage and employer NICs announced in the Autumn Budget.

        One of the most concerning trends is the acceleration in job losses. The pace of staff reductions in the sector is now at levels not seen since the pandemic-induced slump in mid-2020.

        Full UK PMI manufacturing final release here.

        Eurozone PMI manufacturing finalized at 47.6, a 24-mth high

          Eurozone manufacturing activity showed signs of stabilization in February, with PMI finalized at 47.6, a 24-month high, up from January’s 46.6. While still in contraction territory, the improvement offers some hope that the sector may be finding its footing.

          Among individual countries, Ireland led the rankings at 51.9, marking a 12-month high, while the Netherlands reached the neutral 50.0 mark for the first time in eight months. However, Spain dipped to a 13-month low at 49.7, and Italy, Austria, Germany, and France all remained below 50, despite showing some improvement.

          Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, emphasized that while the data is encouraging, it’s “too early to call it a recovery”. New orders are still falling but at the slowest rate since May 2022, and production is inching closer to stabilization. After nearly three years of recession, there is potential for modest growth in the coming months.

          Despite ongoing risks, most businesses remain optimistic about the future, with confidence slightly above its long-term average. This resilience is notable, given the looming threat of US tariffs. Additional positive factors include hopes that Russia’s war in Ukraine could come to an end this year, alongside expectations of greater political stability in Germany following the recent elections.

          Full Eurozone PMI manufacturing final release here.

          China’s Caixin PMI manufacturing rises to 50.8, but employment remains a concern

            China’s Caixin PMI Manufacturing climbed to 50.8 in February, up from 50.1, exceeding expectations of 50.3.

            Wang Zhe, Senior Economist at Caixin Insight Group, noted that new export orders rebounded, corporate purchasing increased, and logistics remained smooth. However, employment continued to decline, and output prices stayed weak.

            Additionally, official PMI data released over the weekend further reinforced signs of recovery. The official PMI Manufacturing rebounded from 49.1 to 50.2, marking its highest level since November and moving back into expansionary territory. Additionally, the non-manufacturing PMI, which covers services and construction, ticked up to 50.4 from 50.2.

            Full China Caixin PMI manufacturing release here.

            Japan’s PMI manufacturing finalized at 49 in Feb, modest improvement but outlook remains weak

              Japan’s manufacturing sector showed slight improvement in February, with PMI finalized at 49.0, up from 48.7 in January. However, the sector remains in contraction territory, reflecting ongoing struggles with weak demand.

              According to Usamah Bhatti at S&P Global Market Intelligence, manufacturers cited soft global and domestic demand, with “muted conditions” in key markets such as the US, Europe, and China. Additionally, purchasing activity saw a solid and sustained decline.

              The “near-term outlook remains clouded”. Business confidence fell to its lowest level since mid-2020, driven by growing concerns over the impact of US trade policies and a slower-than-expected global economic recovery.

              Full Japan PMI manufacturing final release here.

              US PCE inflation slows as expected, personal income surges but spending contracts

                The latest US PCE inflation data showed price pressures moderating slightly in January. Both headline and core PCE (excluding food and energy) price indices rose 0.3% month-over-month, aligning with market expectations.

                On an annual basis, headline PCE inflation slowed to 2.5% yoy from 2.6% yoy, while core PCE eased to 2.6% yoy from 2.9% yoy, reinforcing the view that disinflation remains on track despite persistent price pressures in some sectors.

                However, the consumer sector showed signs of strain. Personal income surged 0.9% mom, far exceeding expectations of 0.3%, but personal spending unexpectedly declined by -0.2%, missing the anticipated 0.2% gain.

                Full US Personal Income and Outlays release here.

                Canada’s GDP grows 0.2% mom in Dec, misses expectations

                  Canada’s GDP expanded by 0.2% mom in December, falling short of the expected 0.3% growth. Both services-producing (+0.2%) and goods-producing industries (+0.3%) contributed to the increase, marking the fifth gain in the past six months. A total of 11 out of 20 industrial sectors posted growth.

                  Looking ahead, preliminary data suggests GDP grew by 0.3% mom in January, with gains led by mining, quarrying, oil and gas extraction, wholesale trade, and transportation. However, retail trade remained a weak spot, partially offsetting the overall growth.

                  Full Canada GDP release here.

                  Swiss KOF falls to 101.7, manufacturing and services under pressure

                    Switzerland’s KOF Economic Barometer declined from 103.0 to 101.7 in February, missing expectations of 102.1.

                    The data suggests weakening momentum in the economy, with most production-side sectors facing increasing pressure. According to KOF, manufacturing and services sectors saw the most notable deterioration.

                    However, the report also pointed to some stabilizing factors, as foreign demand and private consumption showed resilience, helping to offset some of the negative trends.

                    Full Swiss KOF release here.

                    BoE’s Ramsden sees inflation risks two-sided

                      BoE Deputy Governor Dave Ramsden indicated a shift in his inflation outlook, stating that he no longer views risks to achieving the 2% target as skewed to the downside. Instead, he now sees inflation risks as “two-sided,” acknowledging the potential for “more inflationary as well as disinflationary scenarios”.

                      Ramsden also raised concerns about the UK’s sluggish economic growth, highlighting the possibility that the economy’s supply capacity might be “even weaker” than previously assessed by BoE.

                      If this proves true, the UK’s “speed limit” for growth would be lower, leading to prolonged tightness in the labor market and sustained wage pressures. That would result in “greater persistence in domestic inflationary pressures.”

                      BoJ’s Uchida: Yield rise reflects market’s views on economic and global developments

                        Speaking in parliament today, BoJ Deputy Governor Shinichi Uchida said recent rise in JGB yields “reflects the market’s view on the economic and price outlook, as well as overseas developments.”

                        “There’s no change to our stance on short-term policy rates and government bond operations,” he emphasized, adding that the bond holdings “continue to exert a strong monetary easing effect” on the economy.

                        When asked whether the prospect of further rate hikes and tapering would continue to drive yields higher, Uchida responded that it is ultimately “up to markets to decide.”

                        Japan’s Tokyo CPI slows to 2.2% yoy in Feb, industrial production down -1.1% mom in Jan

                          Tokyo’s core CPI (ex-food) slowed to 2.2% yoy in February, down from 2.5% yoy and below market expectations of 2.3% yoy. This marks the first decline in four months, largely due to the reintroduction of energy subsidies. Meanwhile, core-core CPI (ex-food and energy) held steady at 1.9% yoy. Headline CPI slowed from 3.4% yoy to 2.9% yoy.

                          In the industrial sector, production contracted by -1.1% mom in January, a sharper decline than the expected -0.9%. Manufacturers surveyed by Japan’s Ministry of Economy, Trade, and Industry anticipate a strong 5.0% mom rebound in February, followed by a -2.0% mom drop in March.

                          On the consumer front, retail sales grew 3.9% yoy in January, slightly missing the 4.0% yoy forecast, but still pointing to resilient domestic demand.

                          Fed’s Harker says one inflation report shouldn’t sway policy in either direction

                            Philadelphia Fed President Patrick Harker noted in a speech overnight that recent inflation data continues to show an uneven path toward the 2% target. He acknowledged that January’s consumer price data came in hotter than expected, marking the fastest increase in 18 months.

                            However, he stressed that policymakers should “not be moved to act, in either direction” based on a single month’s data.

                            Harker reaffirmed his stance that the Fed’s current policy rate remains sufficiently restrictive to keep inflation in check without undermining overall economic stability.

                            Despite inflation’s persistence, Harker remains optimistic about the economic outlook. He stated, “I am of a position that we let monetary policy continue to work.”

                             

                            Fed’s Hammack signals cautious approach, stresses policy patience

                              Cleveland Fed President Beth Hammack said Fed has the “luxury of being patient” given the strength of the labor market and the uneven progress in reducing inflation.

                              In a speech overnight, she noted that while inflation has moderated, it remains above the 2% target, and policymakers are not yet confident that price pressures will fully subside. As a result, she expects the federal funds rate to stay steady “for some time”.

                              Hammack acknowledged that the current policy stance has helped ease inflation, but she warned that risks remain. While Fed anticipates a gradual return to 2% inflation over the medium term, she stressed that this is “far from a certainty.”

                              She suggested Fed will need to take a “patient approach” in monitoring how inflation and the labor market adjust before making any policy changes.

                               

                              Fed’s Schmid: Inflation risks rising, but growth concerns loom

                                Kansas City Federal Reserve President Jeff Schmid cautioned in a speech today there were “sharp upward movement” in some measures of expected inflation in the past two months.

                                While acknowledging the imperfections and volatility of survey-based inflation expectations, Schmid emphasized that now is “not the time to let down our guard,” given inflation’s recent history of reaching a four-decade high.

                                He expressed reluctance to dismiss the recent uptick in expectations as a “one-off transitory developments”, stressing that Fed must remain vigilant against a resurgence in inflationary pressures.

                                At the same time, Schmid noted that the economic outlook is highly uncertain. Feedback from businesses in his district, along with some recent economic data, indicates that Fed might need to carefully “balance inflation risks against growth concerns.”

                                US initial jobless claims jump to 242k, above expectation 220k

                                  US initial jobless claims rose 22k to 242k in the week ending February 22, above expectation of 220k. Four-week moving average of initial claims rose 8.5k to 224k.

                                  Continuing claims fell -5k to 1862k in the week ending February 15. Four-week moving average of continuing claims rose 3k to 1865k.

                                  Full US jobless claims release here.

                                  US durable goods orders rise 3.1% mom, led by transportation equipment

                                    US durable goods orders rose 3.1% mom to USD 286.0B in January, well above expectation of 2.0% mom. Transportation equipment led the increase by 9.8% to USD 96.5B.

                                    Ex-transport orders was flat at 189.5B, below expectation of 0.4% mom. Ex-defense orders rose 3.5% mom to USD 268.7B.

                                    Full US durable goods orders release here.

                                    ECB Minutes: No room for forward guidance as caution prevails

                                      ECB’s January 29-30 meeting account revealed that policymakers saw a “clear case” for a 25bps rate cut. Members agreed that disinflation is “well on track”, and confidence in inflation converging to target has grown.

                                      However, the accounts highlighted several lingering uncertainties that warranted a cautious approach going forward. Policymakers emphasized the need to maintain a data-dependent stance, with “no room for forward guidance” at this stage.

                                      Upside risks to inflation remained from elevated energy and food prices, strong wage growth, and persistent services inflation.

                                      ECB also flagged geopolitical tensions, fiscal policy concerns within Eurozone, and global trade uncertainties as downside risks to growth, “which typically also implied downside risks to inflation over longer horizons.”

                                      Full ECB meeting accounts here.

                                      Swiss GDP expands 0.2% qoq in Q4, driven by domestic demand

                                        Switzerland’s economy maintained steady growth in Q4, with GDP expanding 0.5% qoq when adjusted for sporting events. Without the adjustment, GDP rose 0.2% qoq, in-line with expectations.

                                        Private consumption increased by 0.5%, supported by higher spending on health, recreation, and culture. Government consumption also grew at the same pace, slightly exceeding historical trends.

                                        Investment in equipment rebounded 1.0%, breaking a two-quarter decline, largely due to higher spending on aircraft and other volatile categories.

                                        The increase in domestic demand also led to a 0.9% rise in imports of goods and services, with foreign trade contributing positively to GDP growth.

                                        Full Swiss GDP release here.

                                        RBA’s Hauser: Global uncertainty justifies rate cut, but more easing depends on disnflation evidence

                                          RBA Deputy Governor Andrew Hauser told the parliament today that mounting global uncertainty had a chilling effect on economic activity, which played a role in the board’s decision to cut the cash rate by 25 bps this month.

                                          He noted that businesses are becoming increasingly cautious, delaying investment projects and expansion plans as they wait for clearer economic signals, “just to see how things pan out.”

                                          This hesitation, he suggested, made a slight easing of monetary policy a “sensible” response to support economic stability.

                                          However, Hauser emphasized that further rate cuts are not guaranteed and will depend on incoming inflation data. Policymakers remain optimistic about further disinflation but need to see clear evidence before committing to additional policy easing.