German Elections Signal Stability!?: 26 February 2025
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Market Mood
The latest February flash PMI data reveals a significant slowdown in U.S. business growth, with the country now trailing Japan and the UK and barely outperforming the struggling eurozone. The decline is primarily due to a contraction in the service sector, making the U.S. the only major economy experiencing a downturn in services. Businesses attribute this weakness to uncertainty surrounding government policies, including federal spending cuts and tariffs, which are dampening confidence and demand. Additionally, U.S. manufacturers report the highest input cost inflation in two years, with analysts warning that any short-term boost in manufacturing may stem from companies accelerating orders ahead of potential tariff hikes rather than genuine economic strength. Globally, growth remains sluggish, with the eurozone and the UK nearing stagnation, while Japan stands out with a relatively stronger outlook. Investors and policymakers will closely watch upcoming industrial production and retail sales data to determine if Japan’s momentum can be sustained.