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.
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.”
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.”
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.
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.”
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.
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 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.
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.
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.”
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.
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.
New Zealand’s ANZ Business Confidence rose from 54.4 to 58.4 in February. However, the Own Activity Outlook, slipped slightly from 45.8 to 45.1, highlighting that while sentiment is improving, actual activity remains uncertain.
Pricing and cost indicators painted a mixed picture. Inflation expectations for the next year eased from 2.67% to 2.53% and cost expectations fell from 73.6 to 71.3. But wage expectations remained elevated at 79.2 despite fall from 83.1, and pricing intentions ticked up from 45.7 to 46.2.
ANZ noted that the economy is on the “path to recovery,” supported by lower interest rates and stronger-than-expected commodity export prices. However, the bank cautioned that the next phase of growth remains “a point of debate.”
The pace of expansion will depend on how households perceive current interest rates, the extent to which global uncertainty influences business investment, and whether firms push forward despite challenges. Additionally, potential labor shortages could emerge as a key constraint on further growth.
BoE MPC member Swati Dhingra suggested that the inflationary impact of rising global tariffs could be tempered by weaker economic growth.
She added that if the global economy undergoes a “fragmentation in an orderly way,” monetary policy might not need to react immediately as prices readjust to new geopolitical shifts.
However, she cautioned that in an “extreme scenario” where multiple major economies erect significant trade barriers similar to those proposed by the US, “severe strain on a few sources of supply” could lead to sharp price spikes, reminiscent of those seen following Russia’s 2022 invasion of Ukraine.
Despite the risks, Dhingra downplayed the likelihood of a severe disruption, noting that “the world economy seems to be moving closer to an orderly fragmentation.”
Germany’s GfK Consumer Sentiment Index for March declined further from -22.6 to -24.7, missing expectations of -21.1.
February data showed income expectations plunging -4.3 points to -5.4, marking a 13-month low, while the economic outlook for the next 12 months improved slightly by 2.8 points to 1.2.
According to Rolf Bürkl, consumer expert at NIM, the data highlights that “no signs of a recovery” are visible in German consumer sentiment. He noted that headline index has been stuck at a low level since mid-2024, with “great deal of uncertainty among consumers and a lack of planning security”.
Australia’s monthly CPI was unchanged at 2.5% yoy in January, falling short of expectations for a slight uptick to 2.6%.
However, underlying inflation pressures showed signs of persistence, with CPI excluding volatile items and holiday travel rising from 2.7% yoy to 2.9% yoy. Trimmed mean CPI edged up from 2.7% yoy to 2.8% yoy.
These figures suggest that while headline inflation appears stable, core price pressures are still lingering, reinforcing RBA’s cautious stance on further easing.
The largest contributors to annual inflation included food and non-alcoholic beverages (+3.3% yoy), housing (+2.1% yoy), and alcohol and tobacco (+6.4% yoy).This was partly offset by a notable decline in electricity prices, which fell -11.5% yoy.
Richmond Fed President Tom Barkin highlighted the need for a “modestly restrictive” monetary policy stance until there is greater confidence that inflation is firmly returning to the 2% target.
Speaking in a speech overnight, Barkin emphasized the importance of remaining “steadfast” in tackling inflation, warning that history has shown the risks of easing policy too soon.
“We learned in the ’70s that if you back off inflation too soon, you can allow it to reemerge. No one wants to pay that price,” he cautioned.
Barkin acknowledged the high level of uncertainty surrounding economic policy changes, geopolitical tensions, and natural disasters, all of which could influence inflation dynamics.
He noted that tariffs imposed during Donald Trump’s first administration in 2018 added about 30 basis points to inflation. However, he cautioned that the effect of the latest round of trade policies is harder to predict, as firms may either pass costs onto consumers or absorb them.
Beyond trade policies, Barkin also flagged uncertainties around deregulation, tax policies, government spending, and immigration reforms, all of which could shape labor market dynamics and broader economic conditions.
Given these unknowns, he prefers to “wait and see how this uncertainty plays out” before advocating any adjustments to monetary policy.
US. Conference Board Consumer Confidence tumbled from 104.1 to 98.3 in February, marking the largest monthly decline since August 2021 and falling well short of expectations at 103.3. The deterioration was broad-based, with Present Situation Index dropping -3.4 points to 136.5, while Expectations Index sank -9.3 points to 72.9. This is the first time since June 2024 that the Expectations Index has fallen below the critical threshold of 80, which historically signals elevated recession risk.
Stephanie Guichard, Senior Economist at The Conference Board, highlighted that consumer sentiment has now declined for three consecutive months, pushing the index to the bottom of its two-year range. She pointed out that pessimism about future business conditions, income, and employment prospects has worsened, with job market expectations hitting a ten-month low.
A key concern is the sharp rise in inflation expectations, which surged from 5.2% to 6% in February. Guichard attributed this to a combination of sticky inflation and a spike in household staple prices, as well as the anticipated impact of new trade tariffs. Notably, mentions of trade and tariffs in consumer surveys have surged to levels not seen since 2019.
German ECB Governing Council member Joachim Nagel indicated that incoming data suggests the central bank is on track to achieve its inflation target this year, opening the door for further rate cuts.
Speaking today, Nagel stated, “This would allow us on the Governing Council to lower the key interest rates further,” reinforcing expectations that ECB will continue its gradual easing cycle.
However, Nagel also cautioned against premature optimism, highlighting “persistently elevated core inflation and the undiminished strength of services inflation.”
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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.