When economics takes over

11 Mar 2025 2 min read

Daily update

Equity markets are not just about economics (equity analysts do not always listen to economists). However, shifting perceptions of economic risk seem to be behind recent US equity market moves. 2025 started with solid economic foundations in the US and other developed economies. The imbalances that typically trigger recessions were not evident. Consumers had low fear of unemployment and most consumer balance sheets were not under pressure.
Those fundamentals are still intact, but risks have risen. US consumers and companies are less certain about the future. The NFIB small business sentiment survey is due today. This is traditionally a Republican leaning survey, so any deterioration in sentiment would be a troubling sign (as having overcome partisan bias). There is also uncertainty about whether market moves might persuade US President Trump to change policy direction.
Japanese fourth quarter GDP was revised lower, with private consumption weaker. The effects are exaggerated by Japan鈥檚 habit of reporting annualized figures, but the data is a reminder that economic numbers are not terribly precise in real time.
The UK February BRC shop sales measure slowed (only three economists forecast this so there is no proper consensus).聽 Non-food sales dragged down the number, and this might just reflect price discounting.