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Highly anticipated US GDP data will finally be reported on Friday after weeks of delays owing to the protracted government shutdown last year.
Investors will look closely for any signs of weakness in the world’s largest economy. Economists polled by Bloomberg expect GDP growth to have slowed to an annualised rate of 2.8 per cent in the fourth quarter of 2025, down from 4.4 per cent in the previous quarter.
If confirmed, this would imply a softer but still resilient economy, despite pessimism over the effect of Donald Trump’s tariffs on trade and consumption. Economists have revised their forecasts upwards following the release of strong data on international trade, jobs and consumer spending.
“Just a few months ago, people were saying growth numbers were going to be awful or even in the negatives,” said James Knightley, chief international economist at ING. “The US economy is definitely a lot more robust than what was feared.”
Trump has repeatedly touted the strength of the economy, often citing a previous forecast by the Federal Reserve Bank of Atlanta that put fourth-quarter GDP growth at an annualised 5.4 per cent. The forecast was revised to 3.7 per cent on February 10.
Knightley cautioned that data collected during the government shutdown might not be as reliable as it should be.
“We have to be cognisant of the risk of more revisions coming through,” he said. Michelle Chan
Will Germany finally overcome four years of recession?
Four years after it fell into a protracted economic slump, many economists predict that Germany will finally return to meaningful growth in 2026, mainly thanks to the government’s debt-funded spending spree.
After some recent positive surprises — in particular, a strong increase in new orders for the country’s all-important manufacturing sector — analysts and investors will keep a close eye on the ZEW index, due to be released on Tuesday.
Economists polled by Reuters expect that the indicator, which is an important gauge of investor morale and historically has been a good bellwether for the broader economy, will rise to its highest level since June 2021. On average, they expect an increase to 65 points from 59.6 in January in what would be the third increase in a row. Current conditions are also expected to improve but, at -65.7 points, are expected to remain in negative territory below historic levels.
The German economics ministry, which lowered its growth forecast for 2026 last month, on Friday struck a cautiously optimistic tone, pointing to “increasing signs” that the “previously fragile economic recovery” was “gaining stability” after real GDP increased by 0.3 per cent in the fourth quarter, a tad more than expected by economists.
But Bank of America economists, who raised their 2026 growth forecast last week to 1 per cent, warned this week that Germany may face a “sugar rush” scenario in which fiscal policy leads to “more growth sooner, less growth later” as the composition of the debt-funded spending programme “isn’t great”.
Economics think-tanks have pointed out in recent months that a large part of the country’s additional debt is not being spent on investment but on welfare programmes and tax benefits. Olaf Storbeck
Is UK inflation coming under control?
Investors will watch a slew of UK data this week for any indication of when — and by how much — the Bank of England might cut interest rates this year.
Figures on employment and wages are due on Tuesday, followed by consumer price inflation on Wednesday. Clear evidence of any easing in price pressures would sharpen expectations of rate cuts. That case could be reinforced by additional data on retail sales, public finances and business activity, due on Friday.
The BoE held its policy rate at 3.75 per cent at its February meeting. Financial markets are pricing a 60 per cent chance of a 0.25 percentage point cut at the next meeting on March 19, with a higher probability that policymakers will hold fire until April.
Education costs, airfares and energy prices will have contributed to a slowing of inflation in January, according to Elliott Jordan-Doak, economist at consultancy Pantheon Macroeconomics. Economists polled by Reuters expect the annual rate to have fallen to 3 per cent in January, from 3.4 per cent in December.
The BoE expects annual inflation of 2.9 per cent in January, starting a rapid decline to 2.1 per cent in April, in part thanks to measures addressing energy prices in last November’s Budget.
It expects price growth at its 2 per cent target or below from the third quarter of 2026 until the end of its forecast period at the start of 2029, reflecting the impact of elevated interest rates, subdued economic growth and slowing pay growth.
The number of payrolled employees in the UK is expected to continue to decline as it has for the past year. Analysts expect annual wage growth in the final quarter of 2025 to have softened slightly to 4.6 per cent, from 4.7 per cent in the three months to November. Valentina Romei
