FXTRADING Economic Data Summary (Asia-Pacific | 02/25)

Canadian consumption sees a temporary pullback

Canadas retail sales fell 0.4% month-on-month in December to around CAD 70 billion, a slightly smaller decline than market expectations. The data suggest a slowdown in year-end spending, with households turning more cautious, though the overall drop was limited and did not signal a broad demand breakdown. Seasonally, earlier front-loaded consumption and the impact of high interest rates likely weighed on spending toward the end of the year.

From a structural perspective, core sales excluding gasoline and autos declined 0.3%, mainly dragged down by a sharp drop in building materials and garden equipment. However, when only motor vehicles and parts dealers are excluded, sales edged up 0.1%, indicating that weakness was concentrated in specific durable goods segments while everyday consumption remained relatively resilient. Meanwhile, Statistics Canadas preliminary estimate points to a 1.5% month-on-month rebound in January, suggesting a potential recovery in early-year demand. FXTRADING believes that Canadian consumption is experiencing cyclical fluctuations rather than a clear downturn, and if the rebound materializes, it would help ease concerns about economic slowdown.

US personal income and spending grow in tandem

US personal income rose 0.3% month-on-month in December, supported mainly by wage growth and higher government transfers. With incomes improving, consumer spending also expanded by 0.4%, indicating that demand remains well supported. The current strength of the US economy continues to reflect a positive cycle in which employment and income growth reinforce household consumption.

In terms of composition, services spending rebounded strongly and became the primary driver, while goods spending declined slightly. This shift is consistent with the broader transition toward a service-led consumption structure. However, price pressures have edged higher, with both headline and core PCE rising 0.4% on the month and annual growth accelerating to 2.9% and 3.0% respectively, suggesting that the disinflation process remains uneven. FXTRADING believes that US consumption fundamentals remain solid, but persistent inflation will limit the pace of policy easing, keeping the Federal Reserve on a cautious path.

UK economy shows steady improvement

February PMI data indicate continued expansion in UK business activity, with the composite index rising to 53.9, near a two-year high. Manufacturing reached its strongest level in 18 months, while services eased slightly but remained firmly in expansion territory. Overall, improvements in orders and output point to a stronger start to the year than previously expected.

Based on current PMI levels, first-quarter GDP growth is likely to come in slightly above 0.3%, suggesting a modest recovery foundation. However, price pressures remain relatively contained, and the labor market continues to show signs of gradual softening, leaving policymakers facing a delicate balance. While the Bank of England welcomes stronger activity, it must also assess the sustainability of demand. FXTRADING believes that near-term stabilization should support market sentiment, but the combination of mild inflation and weakening employment suggests policy risks remain tilted toward gradual easing.

Signs of recovery emerge in Eurozone manufacturing

Eurozone manufacturing PMI rose to 50.8 in February, returning to expansion territory and reaching its highest level in nearly 44 months. Services and the composite index also improved, indicating that the recovery is broadening. After acting as a drag for nearly two years, the manufacturing sector is beginning to regain momentum, with stronger new orders providing support for future output.

Germany is playing a central role in the improving outlook, as increased infrastructure and defense spending, along with firmer external demand, are supporting industrial activity. However, compared with the fourth quarter, overall growth momentum remains moderate, suggesting the economy is in a recovery phase rather than entering a period of rapid expansion. FXTRADING believes that the Eurozone has moved into a phase of weak recovery, with manufacturing improvement helping to lift expectations, though overall momentum remains limited and unlikely to evolve into a strong growth cycle in the near term.