Economic Analysis: February Review and March Snapshot

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The authors are economists from Shinhan Investment Corp. They can be contacted at [email protected] — Ed.

February review: US GDP growth of 7% in 4Q21; BOK decides to keep base rate unchanged at February MPB meeting

[Issue] After declaring war on Ukraine, Russia launched attacks on major cities, including the capital Kiev. Geopolitical risks have intensified, with Ukraine ordering a full military mobilization to counter the invasion, and Western countries warning that tough economic sanctions could be imposed on Russia.

[US] Updated reports show the US economy grew at an annual rate of 7.0% in 4Q21, slightly beating the prior estimate. Contributions from personal consumption expenditure declined with downward adjustments from service consumption expenditure, but non-residential fixed investment was revised up by 0.2%p and led to higher GDP growth than expected for the quarter.

[Europe] The Eurozone manufacturing PMI remained well oriented in February despite a slight decline compared to the previous month (-0.3p MoM). Services PMI recorded a surprise jump of 4.7p MoM on easing uncertainties with the region entering the endemic phase of COVID-19.

[Korea] The Bank of Korea (BOK) decided to keep its key rate unchanged at the February Monetary Policy Board meeting, while raising its inflation forecast for 2022 from 2.0% to 3.1%. The BOK governor said in his press conference after the meeting that the board would consider both inflation and financial stability in its future policy decisions, confirming the shift to a less hawkish stance.

March Snapshot: Upcoming February US Jobs Report, ISM Manufacturing PMI and Korea Export Data in January

[Issue] Western countries should significantly increase the level of economic sanctions against Russia in response to the invasion of Ukraine. Potential sanctions on exports to Russia are expected to increase uncertainty for Korean companies in the future. In China, the focus will be on the scale of economic recovery discussed at the two sessions of the National People’s Congress and the Chinese People’s Political Consultative Conference on March 4-5.

[US] February’s jobs report is expected to show the MoM’s increase in US nonfarm payrolls was in the range of 400,000 jobs, as the economically active population ratio picks up on the back of slowing economic growth. spread of COVID-19. The ISM manufacturing PMI should have continued to rise in February.

[Europe] Consumer price inflation likely accelerated in February, driven by higher global oil and grain prices, as well as higher prices for services and industrial goods. January retail sales should have picked up month on month, driven by growth in non-food sales.

[Korea] Korea’s trade deficit is estimated to have narrowed in January, with year-on-year growth reaching 16% for exports and slowing to around 20% for imports. Consumer price inflation should be slightly lower on an annual basis.

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