German Ifo unchanged at 85.2, businesses waiting to see how things develop

    Germany’s Ifo Business Climate Index was unchanged at 85.2 in February, falling short of expectations for a rise to 85.8. The data reflects that businesses are still “skeptical” about the outlook, “waiting to see how things develop”, according to the Ifo Institute.

    Current Assessment Index dropped from 86.0 to 85.0, missing the forecasted 86.5. However, Expectations Index showed slight improvement, rising from 84.3 to 85.4, exceeding the consensus of 85.2.

    Sector-wise, the manufacturing index improved from -24.8 to -22.1, and trade sentiment rebounded from -29.5 to -26.2. The construction sector also saw a marginal improvement, rising from -28.1 to -27.6. However, services weakened, falling from -2.2 to -4.3.

    Full German Ifo release here.

    ECB’s Escriva advises caution; Villeroy sees rate at 2% by summer

      Spanish ECB Governing Council member Jose Luis Escriva stressed caution in an interview published Sunday, highlighting uncertainty in the economic outlook. He stated that it is “very difficult to gauge the impact of events that are unfolding”, emphasizing the need to “wait for doubts around certain issues to be cleared” before making monetary policy adjustments.

      Escriva reinforced ECB’s meeting-by-meeting approach, stating there “isn’t a pre-established future path for interest rates.” He also noted that Eurozone demand remains weak, with “notable differences among countries.”

      Separately, French ECB Governing Council member Francois Villeroy de Galhau offered a more direct outlook on interest rate, stating that “seen from where we are today, we could be at 2% by the coming summer.”

       

       

      New Zealand retail sales rises 0.9% qoq in Q4, ex-auto sales jumps 1.4% qoq

        New Zealand’s Q4 retail sales volume rose 0.9% qoq to NZD 25B, surpassing expectations of 0.6% qoq. Excluding autos, sales jumped 1.4% qoq, well above the 0.3% qoq forecast.

        Sales volume growth was broad-based, with 10 of 15 industries posting gains. The largest increases came from electrical and electronic goods (+5.1%), department stores (+4.2%), and accommodation (+7.6%). Meanwhile, food and beverage services rose 2.3%, but pharmaceutical and other retailing declined -3.4%.

        Retail sales value climbed 1.4% qoq to NZD 30B, with 11 of 15 sectors reporting gains. Price effects were evident, particularly in accommodation (+11%), food and beverage services (+3.3%), and department stores (+2.9%).

        Full New Zealand retail sales release here.

        US PMI services slumps into contraction, growth outlook dims

          US Manufacturing PMI rose from 51.2 to 51.6, an eight-month high. However, Services PMI dropped sharply from 52.9 to 49.7, marking a 25-month low. As a result, Composite PMI fell from 52.7 to 50.4, its lowest level in 17 months, signaling a broad slowdown in overall business activity.

          Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, highlighted the dramatic shift in sentiment, stating that the “upbeat mood seen among US businesses at the start of the year has evaporated,” replaced by a “darkening picture of heightened uncertainty, stalling business activity, and rising prices.”

          Optimism for the year ahead, which had been near a three-year high, has now dropped to “one of the gloomiest since the pandemic.”

          Companies are increasingly concerned about the impact of federal government policies, citing spending cuts, tariffs, and geopolitical risks as key headwinds. Sales growth is reportedly slowing amid political uncertainty, while tariff-related cost increases are pushing prices higher.

          Williamson added that while the PMI data last year suggested strong economic growth above 2%, February’s report signals a sharp slowdown, with annualized GDP growth now estimated at just 0.6%.

          Full US PMI flash release here.

          Canada’s retail sales surge in 2.5% mom Dec, but Jan set for pullback

            Canada’s retail sales jumped 2.5% mom to CAD 69.6B in December, far surpassing market expectations of 1.6% mom. Sales increased across all nine subsectors, with the strongest contributions from food and beverage retailers and motor vehicle and parts dealers.

            In volume terms, retail sales also rose 2.5% mom, indicating that the increase was not solely due to price effects.

            For Q4, retail sales climbed 2.4% qoq, marking the second consecutive quarterly gain. Adjusted for inflation, sales volumes rose 1.8% qoq.

            However, momentum may have slowed at the start of 2025. Advance estimate for January suggests retail sales declined by -0.4% mom.

            Full Canada retail sales release here.

            UK PMI composite dips to 50.5, stagflation dilemma for BoE

              UK’s PMI Manufacturing dropped from 48.3 to 46.4 in February, a 14-month low. PMI Services edged up slightly to 51.1 from 50.8, while Composite PMI dipped to 50.5 from 50.6, indicating minimal overall growth.

              Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that business activity remained “largely stalled” for the fourth straight month, with job losses accelerating amid declining sales and rising costs. He cautioned that the combination of stagnant growth and mounting price pressures is creating a “stagflationary environment,” presenting a “growing dilemma” for BoE.

              A primary driver of inflationary pressure is the increase in firms raising prices to offset rising staff costs tied to the National Insurance hike and minimum wage increase announced in the autumn Budget. However, these same fiscal measures have also exacerbated job cuts, with employment falling at its fastest pace since the global financial crisis, excluding the pandemic period.

              Full UK PMI flash release here.

              Eurozone PMI manufacturing rises to 47.3, but services falls to 50.7

                Eurozone Manufacturing PMI improved from 46.6 to 47.3 in February, a nine-month high. However, Services PMI declined to 50.7 from 51.3, dragging Composite PMI flat at 50.2, indicating near stagnant overall growth.

                Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, highlighted that services sector price pressures remain elevated, creating complications for the ECB ahead of its next meeting. Persistent wage growth and rising input costs in manufacturing, driven by energy prices, add to inflationary risks.

                Regionally, France’s services sector led the slowdown, with business activity deteriorating at an accelerated pace since September. In contrast, Germany maintained modest growth, supported by expectations of greater political stability ahead of its federal elections.

                Full Eurozone PMI flash release here.

                UK retail sales rebound sharply by 1.7% mom in Jan

                  UK retail sales volumes surged 1.7% mom in January, far exceeding market expectations of 0.3% m/m, marking a strong recovery from December’s -0.6% mom decline.

                  This sharp rebound pushed monthly sales index levels to their highest since August 2024.

                  However, the broader trend remains mixed. Over the three months to January 2025, sales volumes declined by -0.6% compared to the previous three months. On a year-over-year basis, sales volumes rose 1.4%, showing some improvement in spending patterns compared to early 2024.

                  Despite the monthly rebound, UK retail sales volumes remain -1.3% below pre-pandemic levels from February 2020.

                  Full UK retail sales release here.

                  RBNZ’s Conway: 50bps cut the clear choice, signs of economic turnaround emerging

                    RBNZ Chief Economist Paul Conway revealed in a Reuters interview that the central bank considered both 25bps and 75bps rate cuts ahead of this week’s policy decision. But the bank ultimately concluded that a 50bps reduction “was the way to go” given the state of the economy and inflation.

                    Conway pointed to recent data in manufacturing and services, indicating that some businesses may already be “starting to feel a bit of a turnaround.” However, he acknowledged that companies remain cautious.

                    Regarding the labor market, Conway noted that employment trends typically lag economic activity. He added that”businesses need to have confidence that growth is returning and that growth will be sustained into the future before they start to think about employing someone.”

                    RBA’s Bullock: More rate cuts possible, but patience needed

                      At a parliamentary committee hearing today, RBA Governor Michele Bullock explained that this week’s 25bps rate cut was based on better-than-expected inflation data, weaker private demand, and wage growth aligning with forecasts.

                      Also, she acknowledged that the board is mindful of timing, stating, “What’s also playing on the board’s mind is that the board also doesn’t want to be late, and arguably we were late raising interest rates on the way up.”

                      While further easing remains on the table, Bullock emphasized the need for caution. “We are not pre-committed. We’re going to be data-driven on this and I think people just have to be patient,” she added.

                      Deputy Governor Andrew Hauser echoed this sentiment, reinforcing the RBA’s wait-and-see approach. He remarked, “If we’re wrong and inflation moves more quickly downwards, you could celebrate that fact and policy will need to respond, but we’d rather wait and see than assume that’s what’s going to happen.”

                      Australia’s PMI composite hits 6-month high, but business confidence dips

                        Australia’s PMI data for February showed continued expansion in private sector activity, with Manufacturing PMI rising to from 50.2 to 50.6, its highest level in 27 months. Meanwhile, Services PMI edged up from 51.2 to 51.4, and Composite PMI ticked up from 51.1 to 51.2, both reaching six-month highs.

                        According to Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, the latest figures indicate a “modest” but steady improvement in economic conditions, while growth was broad-based.

                        However, business sentiment weakened to its lowest level since October 2024. This caution also affected pricing strategies, with businesses reluctant to fully pass on cost increases, leading to a slowdown in selling price inflation.

                        Full Australia PMI flash release here.

                        BoJ’s Ueda pledges action against sharp JGB yield rise, Yen tumbles

                          Yen pulled back sharply from its recent rally, along with steep fall in 10-year JGB yield from its 15-year high. The move came after BoJ Governor Kazuo Ueda reminded markets of the central bank’s commitment to curbing excessive yield volatility.

                          In parliamentary comments, Ueda stated, “We expect long-term interest rates to fluctuate to some extent.”

                          However, he cautioned that “when markets make abnormal moves and lead to a sharp rise in yields, we are ready to respond nimbly to stabilize markets.”

                          The pledge to increase bond purchases, if necessary, knocked the 10-year JGB yield off its 15-year high

                          Ueda declined to specify when BoJ might conduct emergency bond market operations, stating only that the central bank would closely monitor the market for signs of destabilization.

                          Japan’s PMI improves, but business confidence hits lowest since 2021

                            Japan’s PMI data for February showed slight improvements, with PMI Manufacturing rising from 48.7 to 48.9. Meanwhile, PMI Services edged up from 53.0 to 53.1. Composite PMI increased from 51.1 to 51.6, the highest in five months.

                            According to Usamah Bhatti, Economist at S&P Global Market Intelligence, the “modest improvement” was driven by sustained growth in services, with firms crediting business expansion plans and improved sales.

                            However, optimism about future business activity weakened, with confidence dropping to its lowest level since January 2021. Companies cited labor shortages, persistent inflation, and weak domestic economic conditions as major concerns.

                            Employment growth slowed to its weakest pace in over a year, reflecting businesses’ caution about hiring amid economic uncertainty. Additionally, input price inflation remained elevated, similar to January’s historically high levels.

                            Full Japan PMI flash release here.

                            Japan’s core CPI jumps to 3.2% in Jan, above expectations

                              Japan’s inflation accelerated in January, with core CPI (ex-food) rising from 3.0% yoy to 3.2% yoy, surpassing expectations of 3.1% yoy and marking the fastest pace in 19 months, driven by higher rice and energy costs.

                              This was also the third consecutive month of acceleration, with core CPI rebounding sharply from 2.3% yoy in October. Inflation has now remained at or above BoJ’s 2% target since April 2022.

                              Core-core CPI (ex-food and energy) climbed to 2.5% yoy, up from 2.4% yoy, signaling broader price pressures beyond energy and food. Food prices, excluding perishables, surged 5.1% yoy, up from 4.4% yoy, driven by a 70.9% yoy spike in rice prices, the largest increase since data collection began in 1971. This sharp rise was attributed to supply shortages and higher production and transportation costs.

                              Energy prices also saw a notable increase of 10.8% yoy, up from 10.1% yoy in December, as gasoline costs rose following government subsidy reductions. Meanwhile, services inflation slowed slightly to 1.4% yoy from 1.6% yoy.

                              Headline CPI surged from 3.6% yoy to 4.0% yoy, a two-year high.

                               

                              Fed’s Kugler supports holding rates for some time

                                Fed Governor Adriana Kugler said overnight that it’s “appropriate to hold the federal funds rate in place for some time”, citing the current balance of risks in the economy.

                                Kugler acknowledged that inflation still has “some way to go” before reaching 2% target. She highlighted that while the labor market remains strong and risks of a downturn have eased, “upside risks to inflation remain.”

                                Regarding the potential impact of new tariffs, Kugler stated that while they could contribute to higher prices, the extent of their effect remains uncertain. She emphasized that policymakers will need to “wait” for more data to assess how trade policy shifts might influence inflation and broader economic conditions.

                                Fed’s Musalem warns of inflation expectations unanchoring

                                  St. Louis Fed President Alberto Musalem raised concerns overnight about inflation expectations becoming “unanchored”, emphasizing that the risk is higher when the economy is running without slack and after a period of elevated inflation.

                                  Musalem pointed out that market and survey data show a notable rise in near-term inflation expectations over the past three months, reinforcing worries that inflation might remain above the Fed’s 2% target for longer than anticipated.

                                  He warned that if inflation remains stuck at elevated levels or expectations continue to rise, “a more restrictive path of monetary policy relative to the baseline path might be appropriate.”

                                  Fed’s Bostic sees two rate cuts in 2025 but flags significant uncertainty

                                    Atlanta Fed President Raphael Bostic noted his baseline expectation for two 25bps rate cuts later this year, but cautioned that “the uncertainty around that is pretty significant”, with multiple factors that could shift the outlook in either direction.

                                    He acknowledged growing concerns from businesses regarding the potential impact of new tariffs, immigration policies, and regulatory changes on economic conditions.

                                    He noted that there is both enthusiasm and “widespread apprehension” among business contacts regarding these policy shifts. Specifically, he warned that tariffs could push up costs, adding, “Many feel confident that if that happens, then they can pass along higher costs in their prices.”

                                    US initial jobless claims rise to 219k vs exp 216k

                                      US initial jobless claims rose 5k to 219k in the week ending February 15, above expectation of 216k. Four-week moving average of initial claims fell -1k to 215k.

                                      Continuing claims rose 24k to 1869k in the week ending February 8. Four-week moving average of continuing claims fell -8k to 1863k.

                                      Full US jobless claims release here.

                                      RBA’s Hauser: Rate cut justified, but inflation fight not a done deal

                                        RBA Deputy Governor Andrew Hauser explained the 25bps rate cut to 4.10% earlier this week, highlighting that the decision was influenced by an “alternative version” of the inflation forecast. Under a scenario where rates remained unchanged, inflation would have undershot inflation target midpoint, albeit slightly. This factor played a key role in the board’s decision to ease policy.

                                        However, Hauser struck a cautious tone on further cuts, emphasizing that core inflation at 3.2% remains above target. He reinforced that RBA’s remains “rigorously” focused on controlling price pressures, stating that the battle against inflation is “not a done deal” . He explained that RBA is not “whamming down on the accelerator”, but has simply “eased back on the brake a little bit”.

                                        Regarding the strong January employment report release today, Hauser welcomed the figures, calling them part of a “striking employment growth” trend in Australia. He noted that Australia’s labor market performance stands out internationally, with strong participation rates and employment growth exceeding many other developed economies.

                                        Australia’s employment grows 44k in Jan, outpacing population growth rate

                                          Australia’s employment surged by 44k in January, more than double the expected 20k gain. The increase was driven by a 54.1k rise in full-time jobs, while part-time employment declined by -10.1k. However, the number of unemployed people also grew by 23k.

                                          Employment growth at 0.3% mom matched 2024 monthly average, but outpacing population growth of 0.2%.

                                          Unemployment rate edged up from 4.0% to 4.1%, in line with expectations, as the participation rate hit a record high of 67.3%, up from 67.2% in December. Meanwhile, monthly hours worked fell by -0.4% mom.

                                          Full Australia employment release here.