US

A closely watched reading on U.S. consumer price inflation edged up modestly in the month of January, according to a report released by the Commerce Department. The Commerce Department said its personal consumption expenditures (PCE) price index rose by 0.3% in January, matching the increase seen in December. The monthly price growth came as prices for goods climbed by 0.5% in January after inching up by 0.1% in December, while prices for services rose by 0.2% in January after increasing by 0.4% in December. The annual rate of growth by the PCE price index slowed to 2.5% in January from 2.6% in December.

Federal Reserve Chair Jerome Powell delivered his semiannual monetary policy testimony before the Senate Banking Committee, stating that the central bank does "not need to be in a hurry" to adjust its policy stance. Powell noted interest rates have been lowered by a full percentage point since last September, describing the Fed~s current policy stance as "significantly less restrictive as it had been."

A report released by the Commerce Department showed the U.S. economy grew in line with its preliminary estimate in the fourth quarter of 2024. The Commerce Department said gross domestic product jumped by 2.3% in the fourth quarter, unchanged from the previous estimate. The report said upward revisions to government spending and exports were offset by downward revisions to consumer spending and investment. The fourth quarter GDP growth reflects a notable slowdown compared to the 3.1% surge seen in the third quarter of 2024.

A report released by the Conference Board showed a significant deterioration by U.S. consumer confidence in the month of February. The Conference Board said its consumer confidence index tumbled to 98.3 in February from an upwardly revised 105.3 in January. The report also said the present situation index, which is based on consumers' assessment of current business and labor market conditions, fell to 136.5 in February from 139.9 in January. The expectations index, which is based on consumers' short-term outlook for income, business, and labor market conditions, also slumped to 72.9 in February from 82.2 in January.

Eurozone

The HCOB Eurozone Manufacturing PMI rose to 47.6 in February from 46.6 in January, marking the mildest contraction since early 2023. Germany, France, Italy, and Austria saw softer declines, while the Netherlands stabilized and Ireland expanded. However, Spain's factory activity shrank for the first time in over a year. Output and new orders fell at slower rates, though job cuts accelerated to the fastest pace in over four years.

The Eurozone economy expanded at modest pace in the fourth quarter, official data showed. Gross domestic product rose by revised 0.1 % sequentially, flash estimate from Eurostat revealed. This follows 0.4 % growth in the third quarter. The preliminary flash estimate initially showed flat growth for the fourth quarter. On a yearly basis, GDP growth was steady at 0.9 %, as initially estimated, in the fourth quarter. 

Eurozone industrial production saw a large decline in December on sharp falls in capital and intermediate goods output, figures from Eurostat showed Industrial output fell 1.1% in December from November. The fall also reversed the 0.4% increase in November.

Eurozone inflation rose slightly in January, as initially estimated, driven by higher energy prices, final data from Eurostat showed. Inflation edged up to 2.5% in January from 2.4% in December. Core inflation that strips out prices of energy, food, alcohol and tobacco, held steady at 2.7% in January. The acceleration in overall inflation was driven by the jump in energy prices to 1.9% from a marginal 0.1% rise in December.

Eurozone economic confidence jumped to a five-month high in February on improving confidence among industrial managers and consumers, a survey revealed. The economic confidence index came in at 96.3 in February, up from 95.3 in the previous month, survey data from the European Commission revealed. The industrial sentiment index rose to -11.4 from -12.7 a month ago. This was the second consecutive rise and also hit a three-month high.

German economy contracted in the fourth quarter, in line with estimate, as the sharp decline in exports offset the improvement in consumption. Gross domestic product declined 0.2% from a quarter ago, reversing a 0.1% sequential growth in the third quarter, detailed report from Destatis showed. On a yearly basis, GDP dropped by calendar-adjusted 0.2%, as estimated, after falling 0.3% a quarter ago.

Germany's Manufacturing PMI rose to 46.5 in February from 45 in January, signaling the softest contraction in nearly two years. Declines in output, new orders, and exports slowed, while purchasing and backlogs also eased.

UK

The UK economy expanded in the fourth quarter, underpinned by services and construction output, the Office for National Statistics said. Gross domestic product rose 0.1% from the third quarter following nil growth in the third quarter. The services sector expanded 0.2% and construction output grew 0.5% in the fourth quarter. Partially offsetting these gains, industrial production dropped 0.8 %. On a yearly basis, the fourth quarter growth in GDP came in at 1.4% compared to 1.0% in the third quarter. Real annual GDP in 2024 was estimated to have increased 0.9%, following growth of 0.4% in 2023.

UK house prices grew 3.9% year-over-year in February, slightly easing from January’s 4.1% but beating forecasts of 3.3%. On a monthly basis, prices climbed 0.4%, accelerating from 0.1% in January. Nationwide’s Chief Economist Robert Gardner noted the housing market remained resilient despite affordability challenges, with total transactions up 14% in late 2024. The upcoming stamp duty changes in April are expected to fuel a surge in transactions in March, followed by a slowdown in the following months.

Japan

Japan's manufacturing activity continued to contract in February albeit at a slower pace, final survey data from S&P Global revealed. The au Jibun Bank manufacturing Purchasing Managers' Index rose to 49.0 in February from 48.7 in January. The flash reading was 48.9. However, a reading below 50.0 indicates contraction. Operating conditions deteriorated for eighth straight month. Factory output fell for the sixth successive month during February but at a slower pace. New orders dropped further. Manufacturers cited demand retrenchment and weak client confidence as the key factors behind the fall.

Japan's leading index improved less than initially estimated at the end of the year, final data from the Cabinet Office showed. The leading index, which measures future economic activity, rose to 108.3 in December from a 3-month low of 107.8 in November. In the flash estimate, the score was 108.9. Likewise, the coincident index that measures the current economic situation came in at 116.4, up from 115.4 in the previous month

Asia-Ex Japan

China’s manufacturing economy expanded at a faster rate in February, supported by concurrent rises in both output and new orders amid evidence of improved market conditions. Purchasing activity growth also picked up, whilst confidence in the outlook strengthened to a three-month high. A reduction in employment was recorded, but at a noticeably slower rate than at the start of the year. The headline seasonally adjusted Purchasing Managers’ Index (PMI) improved to a three-month high of 50.8 in February. That was up from January’s 50.1 and, although indicative of only a marginal improvement in operating conditions, represented the best outcome for the headline index since last November.

China’s consumer inflation rose faster in January, driven by a surging demand for travel, dining and shopping during the Spring Festival holiday, the country’s most celebrated festival. China’s consumer price index (CPI), a main inflation gauge, was up 0.5% year on year in January, up from a 0.1% increase in December, the National Bureau of Statistics (NBS) said.

The Bank of Korea cut its benchmark interest rate by a quarter-point. The monetary policy board, governed by Rhee Chang Yong, decided to lower the Base Rate by 25 basis points to 2.75%. The board noted that it is appropriate to further cut the interest rate to mitigate downward pressure on the economy. The central bank also downgraded its growth outlook for this year to 1.5% from 1.9% as deteriorating economic sentiment and US tariff policies dampen the domestic demand recovery and export growth.

Outlook: 

Kristalina Georgieva, IMF Managing Director has noted that trade is no longer the engine of global growth it used to be. In a speech titled Asia’s Next Growth Frontier, she opined that we are in the midst of massive transformations, from rapid advances in AI to changing patterns of capital flows and trade.  The world is changing; many countries face weaker growth prospects and are saddled with high public debt. The COVID-19 pandemic and recent geopolitical developments have brought into focus the importance of security of supplies. Trade is no longer the engine of global growth it used to be. And we are in the midst of massive transformations, from rapid advances in AI to changing patterns of capital flows and trade. Against this background, governments worldwide are shifting their priorities. The new US administration is rapidly reshaping its policies on trade, taxation, public spending, deregulation, and digital assets. And other governments are also recalibrating their approaches and adjusting their policies, she highlighted.