Global Economy Briefing For Wednesday Morning
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Today’s global economy briefing for February 18, 2026 covers UK unemployment hitting a five-year high at 5.2% with wages cooling sharply, German ZEW investor sentiment unexpectedly falling to 58.3 as the recovery falters, and Canada’s inflation easing to 2.3% with core measures dropping to multi-year lows. Here’s what moved markets on Tuesday.
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\nUK unemployment rose to 5.2% — the highest in five years — while total wages growth dropped to 4.2%, undershooting the 4.6% consensus. Payrolled employment fell for 10 of the last 14 months and youth unemployment hit 14.0%. The data strengthens the case for Bank of England rate cuts.
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\nGermany’s ZEW Economic Sentiment fell unexpectedly to 58.3 in February, missing the 65.8 consensus by a wide margin. However, the current conditions index improved sharply to −65.9 from −72.7. ZEW President Wambach described a “fragile recovery” with structural challenges persisting in industry.
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\nCanada’s CPI cooled to 2.3% YoY in January, below the 2.4% consensus. Trimmed-mean core dropped to 2.4% from 2.7% — the lowest since April 2021 — while shelter inflation fell below 2% for the first time in five years. The data gives the BoC flexibility to resume cutting if tariff shocks hit growth.
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| INDICATOR | ACT | EST | PREV | VERDICT |
|---|---|---|---|---|
| UK Unemployment Rate (Dec) | 5.2% | 5.2% | 5.1% | FIVE-YEAR HIGH |
| UK Avg Earnings +Bonus (Dec) | 4.2% | 4.6% | 4.6% | BIG MISS |
| UK Claimant Count Change (Jan) | 28.6K | 22.8K | 2.7K | MISS |
| German CPI YoY Final (Jan) | 2.1% | 2.1% | 1.8% | AS EXPECTED |
| German ZEW Sentiment (Feb) | 58.3 | 65.8 | 59.6 | MISS |
| EZ ZEW Sentiment (Feb) | 39.4 | 45.7 | 40.8 | MISS |
| Italy Trade Balance (Dec) | €6.04B | €4.75B | €5.06B | BEAT |
| South Africa Unemployment (Q4) | 31.4% | — | 31.9% | IMPROVING |
| US NY Empire Mfg (Feb) | 7.10 | 6.40 | 7.70 | MARGINAL BEAT |
| US NAHB Housing Index (Feb) | 36 | 38 | 37 | MISS |
| Canada CPI YoY (Jan) | 2.3% | 2.4% | 2.4% | DOVISH BEAT |
| Canada Trimmed CPI (Jan) | 2.4% | 2.6% | 2.7% | DOVISH BEAT |
| Japan Exports YoY (Jan) | 16.8% | 12.0% | 5.1% | BLOWOUT BEAT |
| Japan Trade Balance (Jan) | −¥1,153B | −¥2,142B | ¥114B | MUCH BETTER |
| German Schatz Auction (2Y) | 2.020% | — | 2.140% | LOWER YIELD |
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Europe
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UK labour market weakens, ZEW disappoints, Italy trade shines
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The UK labour market delivered a grim set of prints. ONS data showed unemployment at 5.2% — the highest since early 2021 — while total earnings growth slowed to 4.2%, well below the 4.6% consensus. Payrolled employment has fallen for 10 of the last 14 months, with retail and hospitality shedding over 120,000 jobs since January 2025.
This is part of The Rio Times’ daily global economic intelligence for the Latin American financial community.
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Youth unemployment surged to 14.0%, the worst in five years, with nearly 40% of unemployed 18–24 year olds out of work for over six months. The claimant count jumped 28.6K versus 22.8K expected. However, UK labour productivity surprised to the upside at 1.1% YoY in Q3, after two consecutive quarterly declines — GVA rising faster than hours worked.
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German ZEW economic sentiment fell unexpectedly to 58.3 from 59.6, badly missing the 65.8 consensus. Reuters noted the reading shows Europe’s largest economy is in a “fragile recovery.” The Eurozone-wide ZEW also missed at 39.4 versus 45.7 expected. As a result, ZEW President Wambach warned of “considerable structural challenges, especially for industry and private investment.” On the positive side, the current conditions gauge improved sharply to −65.9 from −72.7, and export-oriented sectors showed improving prospects.
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German final CPI confirmed January inflation at 2.1% YoY — up from 1.8% in December — entirely in line with the preliminary reading. Meanwhile, Italy’s trade surplus surged to €6.04B in December, beating the €4.75B consensus, powered by a 4.9% jump in exports. Full-year 2025 surplus reached €50.75B, up from €48.3B in 2024. Italian exports to the US rose 7.2% despite 15% tariffs. The 2-year Schatz auction priced at 2.020%, down 12bps from the prior 2.140%. European equities were mixed: the CAC 40 rose 0.54%, the FTSE MIB gained 0.72%, while the DAX fell 0.46%.
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\nVerdict
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The UK is hurtling toward a labour market crisis. Wages cooling sharply below consensus removes a key obstacle for BoE cuts — expect pricing for May easing to firm up. Germany’s ZEW miss underscores that the turning-point narrative for 2026 is premature; investor sentiment has decoupled from current conditions improvement. Italy remains the Eurozone bright spot on trade.
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United States
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Empire State holds, builders sour, Fed hawks circle
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With US markets reopening after Presidents’ Day, the NY Empire State Manufacturing Index edged down to 7.10 from 7.70, but beat the 6.40 consensus. Manufacturing activity continued to expand modestly in New York State. New orders dipped slightly while unfilled orders surged to 9.1 from −8.2. Employment swung positive at 4.0 after last month’s −9.0, though input price pressures accelerated to 49.1 from 42.8.
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The NAHB Housing Market Index fell to 36 in February from 37, missing the 38 consensus and marking the 22nd consecutive month below the 50 threshold. NAHB chief economist Robert Dietz called affordability an “ongoing challenge,” noting that easing inflation should eventually allow lower mortgage rates. Current sales held at 41, but prospective buyer traffic fell to 22 and six-month sales expectations dropped to 46.
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Fed Governor Barr delivered a significant speech on AI and the labour market. On policy, he was explicit: rates should stay steady “for some time” until goods inflation sustainably retreats. He pushed back on incoming Fed Chair nominee Warsh’s view that AI could justify rate cuts, saying the boom is “unlikely to be a reason for lowering policy rates.” SF Fed President Daly echoed caution on AI’s economic impact from San Jose. T-bills priced flat — 3M at 3.600%, 6M at 3.500%.
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\nVerdict
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The Barr-Warsh split on AI and rates is the day’s most consequential development. With Powell departing in May, the intellectual battle over neutral rates and AI productivity is shaping up as the key fault line for 2026 policy. Housing continues to deteriorate — 22 months sub-50 is structural, not cyclical. Empire State shows US manufacturing barely expanding amid rising cost pressures.
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Asia-Pacific
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Japan exports surge 16.8%, Reuters Tankan jumps, Australia wages steady
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Japan’s January trade data was a standout. Exports surged 16.8% YoY — the fastest pace since November 2022 — crushing the 12.0% consensus. Shipments to China jumped 32%, and exports to Asia broadly rose nearly 26%. Conversely, US-bound exports fell 5%, reflecting ongoing tariff headwinds despite last year’s trade deal that cut duties to 15%. Imports dropped 2.5% versus expectations of a 3% rise.
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As a result, the trade deficit narrowed sharply to ¥1,153B from the expected ¥2,142B shortfall. The adjusted trade balance swung to a ¥0.46T surplus versus a ¥0.18T deficit consensus. The Reuters Tankan manufacturing index jumped to 13 from 7, indicating improving business conditions. However, China and South Korea remained closed for Lunar New Year and Korean New Year respectively.
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In Australia, the Wage Price Index held steady at 0.8% QoQ in Q4 2025, matching expectations. The YoY reading ticked up to 3.4% from 3.3%. Westpac’s Leading Index slowed to −0.1% MoM in January from +0.1%, suggesting growth has eased back toward trend.
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\nVerdict
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Japan’s export surge is the best Asian data point in months. The Lunar New Year front-loading to China is likely a factor, so the February print will test sustainability. The key structural story is that Asian intra-regional trade is booming while US-bound shipments are falling — a preview of the bifurcated trade landscape under tariffs. Australian wages remain non-threatening to the RBA.
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Latin America & Africa
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Canada inflation cools, South Africa unemployment dips, Carnival continues
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Canada’s CPI cooled to 2.3% YoY in January from 2.4%, undershooting the consensus. Gasoline prices fell 16.7% year-on-year, dragging the headline lower. Excluding gas, the CPI rose 3.0%, matching December. Critically, the BoC’s preferred core measures all softened: trimmed-mean dropped to 2.4% from 2.7%, median to 2.5% from 2.6%, and common held at 2.7%. Shelter inflation fell below 2.0% for the first time in five years.
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BMO’s Douglas Porter called the result “encouraging” but noted the BoC has made the bar for further cuts “quite high.” Desjardins’ Royce Mendes was more forceful: the BoC has been “too concerned” about upside inflation risks and “should be squarely focused on supporting the economy.” Meanwhile, Canadian foreign securities purchases swung to −$5.57B in December from $15.96B — a dramatic reversal. Wholesale sales recovered 2.0% MoM.
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South Africa’s unemployment rate dropped to 31.4% in Q4 2025 from 31.9%, as 44,000 jobs were added and 172,000 exited the unemployed count. Formal sector employment jumped by 320,000. However, discouraged job-seekers rose by 233,000 and youth unemployment remained staggering at 43.8%. Colombia’s December trade deficit narrowed to −$1.178B from −$1.546B in November, with imports rising 7.1% YoY. Argentina, Brazil, Venezuela, and Ecuador remained closed for Carnival.
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\nVerdict
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Canada’s inflation print is unambiguously dovish. Core measures collapsing toward 2% gives the BoC ammunition to restart cutting if tariff-related growth shocks materialise. The foreign capital outflow in December is a yellow flag worth monitoring. South Africa’s unemployment improvement is marginal and flattered by seasonal effects and rising discouraged workers — the structural crisis persists.
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Related: Latin American Pulse | Brazil Morning Call