Friday, March 6, 2026

Germany's sticky services inflation (3.5% yoy) is primarily driven by wage growth, making future wage trajectory critical to the inflation outlook. The report's forward-looking wage tracker—based on 44 collective agreements covering 42% of German employees—projects negotiated wage growth of 2.7-3.0% through mid-2027, with significant contract renewals occurring in 2026 across chemicals, retail, and metals sectors. Absent a large persistent energy shock, wage drift is expected to remain near zero as labor market tightness eases, suggesting wage growth should moderate and help bring services inflation down. ---

Greece's solid economic growth and resilient macroeconomic fundamentals are creating favorable conditions for sustained investment recovery, driven by strong credit expansion in both the non-financial corporate and household sectors. While business investment has already returned to pre-financial crisis levels, residential construction remains the lagging sector but is showing renewed momentum with rising property prices and positive household credit growth for the first time in three years. The Greek government's fiscal space and lower exposure to energy shocks position the economy well to maintain this investment-led growth trajectory, supported by credit's notably stronger responsiveness to economic growth in Greece compared to the broader Eurozone. ---

China's 2026 growth target was lowered to 4.5-5% with unchanged fiscal support, while PBOC officials signaled no intent to devalue the currency for trade advantage. Higher oil prices pose only modest downside risks to Chinese growth (0-0.1pp) due to the country's economic resilience and low inflation backdrop, in contrast to other emerging Asian economies. Despite soft official PMI readings in February distorted by late Lunar New Year timing, unofficial PMI indicators showed solid underlying growth momentum, suggesting economic activity remains on track. ---

Persian Gulf oil exports through the Strait of Hormuz have plummeted 18mb/d (18% below normal), far exceeding the analyst's 15% base case assumption, with alternative routing through pipelines and regional ports capturing only 0.9mb/d of the theoretical 3.6mb/d potential due to strikes and fuel shortages. The supply disruption of 17.1mb/d is unprecedented in scale (17 times larger than Russia's 2022 peak disruption), and with shippers in wait-and-see mode and physical risks remaining high, demand destruction pricing may accelerate at higher inventory levels than historical precedent suggests. If no resolution emerges within days, the analysts expect Brent oil to exceed $100/barrel next week and potentially surpass 2008-2022 peak prices if the disruption persists through March. ---

Global equity fund flows weakened significantly to $12bn from $38bn the prior week, with US equities experiencing net outflows despite strong Euro area inflows from foreign investors. Bond funds showed robust demand with aggregate bond fund inflows rising to $20bn, supported by firm inflows across both long and short-duration securities despite softer inflation-protected security demand. Energy sector funds led equity inflows, driven by the week's oil price rally, while emerging market equities saw mixed results with strength in mainland China and Taiwan offset by softer Korean demand. ---

Vietnam's industrial activity contracted 5.2% month-on-month in February due to Lunar New Year seasonal disruptions, while exports fell short of expectations at 5.7% year-on-year growth, with agricultural products accounting for 60% of the decline. Despite industrial softness, retail sales remained resilient with a third consecutive monthly gain of 2.0%, buoyed by accelerating goods sales and rebounding tourism, and inflation stayed contained at 3.3% headline and 3.7% core—both well below the 4.5% target—though state investment continued to underperform its 35% annual growth target at only 13.9% for the first two months. ---

February nonfarm payrolls fell 92k—well below expectations—driven by striking workers (31k drag), weather effects (40k weakness), and methodological changes, with the unemployment rate rising to 4.44%. The estimated underlying job growth pace of 37k now falls below the 60-70k breakeven needed to stabilize unemployment, signaling weakening labor demand. Core retail sales met expectations at +0.3% in January, though real retail sales are declining at a 0.9% annualized rate, suggesting consumer spending momentum is softening across the economy. ---

The BLS's new birth-death methodology, implemented in January 2026, estimates business formation contributions to payroll growth based on surveyed payroll data rather than historical patterns, resulting in a 50k higher January estimate than prior years. The new approach will likely increase monthly payroll volatility, with the birth-death contribution expected to normalize to 60-70k jobs in February before falling below trend in subsequent months as the model incorporates 2025 data, though actual business formation contributions may be running closer to 50k jobs given recent declines in business applications. The January boost appears partly attributable to unusual industry composition effects and potentially unsustainable seasonal pattern changes from 2024-2025, suggesting some mean reversion is likely ahead.