Economy in Brief

Financial markets have experienced heightened volatility in recent days, with investor sentiment rattled by rising US recession risks, escalating global trade tensions, and mounting geopolitical uncertainties. Sharp decline in US stocks, lower yields coupled with weaker confidence data reflect growing concerns that recent trade and economic policies from the US administration are sapping economic growth and increasing financial instability (chart 1). Beyond immediate market fluctuations, the long-term impact of these policies is also sparking a broader debate about the erosion of economic goodwill—the trust and stability that businesses and consumers historically associated with the United States (chart 2). Meanwhile, China and South Korea, two of the world’s most trade-dependent economies, are also feeling the strain with latest data from the latter suggesting sharply slower industrial production and weakening external demand (charts 3 and 4). The impact is also evident in Europe, where, having cut its key policy rates by 25bps this week, the ECB faces increasing challenges in calibrating monetary policy amid an uncertain economic landscape (chart 5). Finally, and looking at even broader issues, energy remains a critical variable in the global outlook. While the long-term energy transition continues, short-term concerns over trade-driven supply disruptions and geopolitical instability in energy markets add another layer of economic risk, reinforcing fears that persistent economic fragmentation could weigh on long-term growth across major economies (chart 6).

• Deficit is surprisingly large as petroleum imports surge.
• Goods deficit widens to record, while services surplus was little changed.
• Exports recover half of December’s decline and imports jump.

• Benchmark revisions showed upward adjustments to productivity for both 2023 and 2024.
• Little apparent influence from AI thus far.

• Initial claims reverse previous week’s increase.
• Insured unemployment rate still 1.2%.
• Continued claims up 42,000 in Feb. 22 week.

• Total index has trended higher since 2024 low.
• Employment leads upturn; new orders & supplier deliveries edge up.
• Prices Index moves higher.

• Employment increase is led by goods-sector hiring. Services hiring growth slows.
• Wage growth for “job stayers” is unchanged but diminished for “job changers.”
• Small business hiring declines while medium & large business employment moves up.

• Factory orders increased 1.7% m/m in January after having declined in four of the previous five months.
• Durable goods orders jumped 3.2%, led by a 94% monthly rebound in nondefense aircraft orders.
• Shipments increased 0.4% m/m, their third consecutive monthly gain.
• Inventories edged up 0.1% m/m, their third consecutive monthly increase.

• Applications for loans to purchase and refinance rose sharply in the latest week.
• Effective interest rates on all mortgage loans fell in the latest week.
• Average loan sizes rose for both loans to purchase and to refinance.