The Big Three
ISM manufacturing prices paid exploded to 70.5 in February — up 11.5 points from 59.0 and the highest reading since June 2022. The headline PMI held at 52.4, beating the 51.8 estimate, but the tariff-fueled cost surge is the real story: Section 122 duties are now embedded in the supply chain, and ISM Chair Spence said she would not be surprised to see prices rise again in March.
Operation Epic Fury — the US-Israeli strike campaign that killed Iran’s Supreme Leader — triggered the Strait of Hormuz crisis. Tanker traffic dropped 70%, WTI crude surged 8.4% to $72.74, Brent jumped 9% to $79.45, and gold hit $5,408. The IRGC declared the Strait closed and threatened to fire on any ship attempting passage. Wall Street staged a remarkable buy-the-dip reversal, erasing a 1.2% intraday loss.
Eurozone manufacturing PMI hit a 44-month high of 50.8, with Germany crossing back above 50 for the first time since June 2022 at 50.9. Italy (50.6) and France (50.1) also returned to expansion. New orders rose at the fastest pace since April 2022, driven by infrastructure and defense spending. Six of eight monitored countries are now in growth territory.
Economic Dashboard
| Indicator | Actual | Expected | Prior | Verdict |
| US ISM Manufacturing PMI (Feb) | 52.4 | 51.8 | 52.6 | ▲ Beat |
| US ISM Prices Paid (Feb) | 70.5 | 59.5 | 59.0 | ▲ Hot |
| US ISM New Orders (Feb) | 55.8 | — | 57.1 | ▲ Expanding |
| US ISM Employment (Feb) | 48.8 | — | 48.1 | ▼ Contraction |
| US S&P Manufacturing PMI (Feb) | 51.6 | 51.2 | 51.2 | ▲ Beat |
| Eurozone Manufacturing PMI (Feb) | 50.8 | 50.8 | 49.5 | ● In-line |
| German Manufacturing PMI (Feb) | 50.9 | 50.7 | 49.1 | ▲ Beat |
| German Retail Sales MoM (Jan) | −0.9% | −0.2% | 1.2% | ▼ Miss |
| UK Manufacturing PMI (Feb) | 51.7 | 52.0 | 52.0 | ▼ Miss |
| UK Mortgage Approvals (Jan) | 60.0K | 62.0K | 61.0K | ▼ Miss |
| India Manufacturing PMI (Feb) | 56.9 | 57.5 | 55.4 | ● Solid |
| Japan Unemployment Rate (Jan) | 2.7% | 2.6% | 2.6% | ▼ Miss |
| Japan Capital Spending YoY (Q4) | 6.5% | 3.0% | 2.9% | ▲ Beat |
| India Industrial Production (Jan) | 4.8% | 6.5% | 7.8% | ▼ Miss |
| Brazil Manufacturing PMI (Feb) | 47.3 | — | 47.0 | ▼ Contraction |
Europe
Manufacturing renaissance meets consumer fatigue
The eurozone manufacturing PMI confirmed its flash estimate at 50.8, crossing back above the expansion threshold for the first time since August. Germany led the charge at 50.9 — its first growth reading in three and a half years — propelled by rising new orders and government infrastructure and defense spending. Italy posted 50.6, with optimism at multi-year highs.
Meanwhile, France barely clung to the expansion line at 50.1, while Spain printed exactly at 50.0. French private sector demand remains weak, and export orders continued to decline. Input cost inflation accelerated to a 38-month high across the bloc — a signal that the factory recovery comes at a price.
German retail sales undercut the factory optimism, falling 0.9% MoM in January — far worse than the −0.2% decline expected. Non-food sales dropped 1.7%, suggesting the consumer is not yet matching industry’s tentative recovery. The YoY rate decelerated from 2.5% to just 1.2%.
ECB President Lagarde spoke Monday but offered no new policy signals. The UK manufacturing PMI slipped to 51.7 from 52.0, missing the estimate. Mortgage approvals dropped to 60K versus 62K expected, while consumer credit surprised higher at £1.81 billion. The BRC shop price index cooled to 1.1% YoY, down from 1.5%.
Verdict
Constructive. The broad-based manufacturing recovery is the strongest signal in years that European industry is turning — but rising input costs and weak consumer spending suggest the recovery will be uneven. The Iran oil shock adds a fresh headwind.
United States
Factories hum, prices scream
The ISM manufacturing PMI eased 0.2 points to 52.4 but beat the 51.8 consensus, marking the second consecutive month of expansion after 10 months of contraction. New orders remained strong at 55.8, and production held at 53.5. But the headline masked the real alarm: prices paid surged 11.5 points to 70.5, the sharpest single-month jump since March 2022.
The cost explosion is directly tied to Section 122 tariffs, now fully embedded in supply chains. Steel and aluminum prices are being driven up the entire value chain. ISM Chair Susan Spence warned she expects prices to rise again in March. Historically, readings above 70 presage CPI spikes three to six months out — pointing to a potentially painful summer for consumers.
Geopolitics dominated equity price action. The S&P 500 opened down 1.2% on the US-Iran strikes but staged a furious reversal to close up 0.04% at 6,881.62. The Nasdaq gained 0.36% as cash-rich tech leaders like Nvidia (+2.9%) and Microsoft (+1.5%) attracted dip buyers. Defense stocks rallied hard — Northrop Grumman gained 5%, Palantir surged 5.8%. The Dow closed down 73 points, or 0.15%.
The 10-year Treasury yield rose 8 basis points to 4.04%, a notable move given that geopolitical crises usually drive safe-haven buying. Instead, inflation fears from rising oil and the ISM data trumped the flight-to-quality bid. The Atlanta Fed GDPNow held at 3.0% for Q1. Fed funds futures now price a 53% chance of no cuts through June.
Verdict
Stagflation watch. The combination of 70.5 prices paid, rising oil, and still-contracting manufacturing employment (48.8) is the textbook setup that forces the Fed’s hand. The buy-the-dip instinct held Monday, but the inflation data is poison for rate-cut hopes.
Asia-Pacific
Japan capex surges, India slows, Hormuz threatens Asian energy
Japan’s Q4 capital spending surged 6.5% YoY, more than doubling the 3.0% consensus and up sharply from 2.9% prior. The blowout reading supports the BOJ’s normalization narrative and gives Governor Ueda ammunition for further rate hikes. Monetary base continued contracting at −10.6% YoY — deeper than the −9.8% expected — as the BOJ unwinds its massive balance sheet.
However, Japan’s labor market softened. Unemployment ticked up to 2.7% from 2.6%, missing the consensus for an unchanged reading. The jobs-to-applicants ratio slipped to 1.18 from 1.20. The 10-year JGB auction cleared at 2.122%, down sharply from 2.249% prior, as geopolitical risk drove safe-haven demand into Japanese government bonds.
India’s manufacturing PMI remained robust at 56.9 but missed the 57.5 forecast. The bigger concern was industrial production growth decelerating to 4.8% in January from 7.8%, badly missing the 6.5% estimate. India’s current account deficit widened to −$13.2 billion in Q4, while the overall balance of payments swung to −$24.4 billion from +$4.5 billion — a dramatic deterioration.
Australia’s current account deficit blew out to −A$21.1 billion versus −A$16.8 billion expected, while building approvals collapsed 7.2% MoM — far below the 5.4% gain forecast. South Korea’s manufacturing PMI eased marginally to 51.1 from 51.2. The Strait of Hormuz crisis poses an acute energy security threat to Asia’s import-dependent economies, with India and China most exposed to crude and LNG disruptions.
Verdict
Mixed with severe downside risk. Japan’s capex is bullish for the BOJ, but the Strait of Hormuz crisis threatens to cascade across Asian energy security. India’s twin deterioration in industrial output and external accounts deserves close monitoring.
Latin America & Africa
Chile contracts, Brazil stays in the red, South Africa wobbles
Chile’s economic activity contracted 0.1% YoY in January, a jarring miss against the 1.1% growth expected and a sharp reversal from 1.7% in December. The reading is the first outright contraction in months and raises questions about whether copper-fueled growth is stalling as China’s demand outlook dims amid the geopolitical turmoil.
Brazil’s manufacturing PMI inched up to 47.3 from 47.0 but remains firmly in contraction territory. The central bank‘s BCB Focus Market Readout provided no fresh surprises. Mexico’s manufacturing PMI improved to 47.1 from 46.3 — still deep in contraction but showing some moderation. Mexico’s fiscal balance came in at −19.3 billion pesos in January, a massive improvement from December’s −414.4 billion.
South Africa’s manufacturing PMI deteriorated to 47.4 from 48.7, extending the contraction. Vehicle sales were a bright spot at 53.46K units, up 11.4% YoY. Argentina’s tax revenue came in at 16.23 trillion pesos, down from 18.34 trillion in January — a nominal decline that suggests fiscal pressures are building even as the peso-dollar gap narrows.
Verdict
Weak. Manufacturing remains in contraction across Brazil, Mexico, and South Africa. Chile’s surprise output drop is the freshest warning sign. Rising oil prices from the Hormuz crisis add a cost-of-living headwind across the region.