FXTRADING Economic Data Summary (Asia-Pacific | 03/03)

Eurozone manufacturing returns to expansion

The final reading of the Eurozone manufacturing PMI for February rose to 50.8, not only well above Januarys 49.5 but also marking the highest level in nearly four years. The index moving back above the 50 threshold signals that manufacturing activity has emerged from contraction, with overall business conditions beginning to improve. Sub-indices show gains in both output and new orders, alongside a recovery in business confidence, suggesting that the earlier period of weak demand is gradually easing.

From a regional perspective, the recovery is not limited to a single country. Germanys manufacturing index climbed to 50.9, entering expansion territory for the first time in more than three years and becoming a key driver of the broader improvement. Greece and Ireland recorded relatively stronger growth, while France, Spain, Italy, and the Netherlands hovered around the breakeven level. Austria was the only economy still in contraction. Overall, most economies are improving in tandem, although firms continue to face rising input costs, which have been increasing for several consecutive months and are still putting pressure on profit margins.

FXTRADING analysis suggests that the most difficult phase for Eurozone manufacturing may be over, but cost pressures will be crucial in determining how sustainable the recovery proves to be. In the near term, economic improvement is likely to coexist with ongoing pressure on corporate profitability.

Japans manufacturing expansion accelerates

Japan‘s manufacturing PMI rose to 53.0 in February, a notable increase from the previous 51.5 and the highest level in nearly three years. The data indicate that production momentum is accelerating, with a clear improvement in new orders and a broadly based expansion across manufacturing activity. Judging from early-quarter performance, the recovery in Japan’s industrial sector appears to be gaining traction rather than reflecting a short-lived rebound.

Corporate feedback shows faster growth across output, orders, employment, and purchasing activity, while assessments of future demand have turned more optimistic. The recovery in the global technology cycle and a rebound in automotive orders have been key supports for improved sentiment. Although raw material costs remain elevated and a weaker yen continues to push up import prices, stronger demand has improved firms‘ ability to pass costs through, helping to stabilize profit expectations. FXTRADING analysis indicates that Japan’s manufacturing sector is entering a demand-driven recovery phase, which, if external demand remains stable, could provide a firmer foundation for economic normalization and policy adjustment.

Swiss economic sentiment indicators strengthen

Switzerlands KOF Economic Barometer rose to 104.2 in February, beating both the previous reading and market expectations, and extending its earlier upward trend. Remaining consistently above the long-term average of 100, the index points to an economy operating in a zone of moderate expansion. Recent improvements have been driven mainly by stronger consumption and external demand, suggesting that the underlying growth foundation is becoming more secure.

However, the recovery remains uneven across sectors. Demand-side indicators are relatively strong, while the pace of recovery in the industrial sector continues to lag. Some manufacturing industries still face insufficient orders and subdued growth momentum.. FXTRADING analysis suggests that while Switzerlands overall economic environment is stabilizing, the strength of future growth will depend on whether manufacturing activity can align more closely with the recovery in demand.

U.S. producer-side inflation strengthens again

The U.S. producer price index rose 0.5% month on month in January, significantly exceeding market expectations. The increase was driven mainly by the services sector, where related costs posted a sharp rise, while goods prices edged slightly lower. From a structural perspective, the stickiness of service-sector costs has become the core source of current inflation pressure.

On a year-on-year basis, PPI growth eased marginally to 2.9% but remained above market estimates. More importantly, the core measure excluding food, energy, and trade services has now risen for nine consecutive months, with a cumulative increase of 3.4% over the past year, indicating that upstream price pressures have not meaningfully abated. FXTRADING analysis believes that the disinflation process in the U.S. remains uneven, and persistent resilience in upstream prices may prolong a high-rate environment, providing support for market interest rate expectations.