China Economics Vi e w p o i n t | 22 Feb 2026 19:17:18 ET │ 8 pages +852-2501-2754 xiangrong.yu@citi.com Yuanliu Hu AC +852-2501-2746 yuanliu.hu@citi.com See Appendix A-1 for Analyst Certification, Important Disclosures and Research Analyst Affiliations. Solid CNY Spend Sets the Stage; NPC Policy Catalysts Next CITI'S TAKE The Chinese New Year (CNY) holiday delivered a broadly firm demand signal, with upbeat retail sales, resilient mobility & travel and improved home sales. The slump in the box office is n ...

U.S. President Donald Trump gestures as he speaks during a press briefing at the White House, following the Supreme Court's ruling that Trump had exceeded his authority when he imposed tariffs, in Washington, D.C., U.S., January 20, 2026.The Supreme Court's decision Friday to throw out a large number of tariffs that President Donald Trump imposed on imports was widely expected. What's far less certain is the longer-run impacts as the economy and markets again adjust to a changed landscape.Trump and other Wh ...

GDP rose at an annualized rate of just 1.4 percent, according to the Commerce Department, well below the Dow Jones estimate for a 2.5 percent gain. MS NOW: My Source for News, Opinion, and the World. Same mission. New name. » Subscribe to MS NOW: https://www.youtube.com/@msnow MS NOW is the go-to destination for domestic and international breaking news, and best-in-class opinion journalism. For more context and news coverage of the most important stories of our day click here: https://www.ms.now/ #GDP #Econ ...

Economic Indicators - The number of Americans filing for initial jobless claims fell by 23,000 to 206,000, compared to the expected 223,000 [1] - The U.S. Philly Fed manufacturing index rose to a 5-month high of 16.3 in February, exceeding expectations of 7.5 [1] - The U.S. December trade deficit widened to $70.3 billion, worse than the expected $55.5 billion [1] - U.S. pending home sales unexpectedly fell by 0.8% month-over-month in January, contrary to expectations of a 1.4% increase [1] Stock Market Performance - Wall Street's major indexes ended in the red, with EPAM Systems dropping over 17% after issuing soft FY26 revenue growth guidance [2] - Chip stocks, including Microchip Technology and Texas Instruments, slid more than 2% [2] - Booking Holdings slumped over 6% after posting weaker-than-expected Q4 EPS [2] - Omnicom Group jumped over 15% after reporting better-than-expected Q4 revenue [2] Federal Reserve Insights - Minneapolis Fed President Neel Kashkari indicated that interest rates are likely near "neutral" [5] - San Francisco Fed President Mary Daly stated that monetary policy is "in a good place" [5] - U.S. rate futures show a 94% probability of no rate change and a 6% chance of a 25 basis point rate cut at the next central bank meeting in March [5] European Market Developments - The Euro Stoxx 50 Index rose by 0.47% due to stronger-than-expected PMI data from the region [8] - Luxury stocks outperformed, with Moncler Spa jumping over 12% after reporting better-than-expected Q4 revenue [8] - Eurozone business activity grew faster than expected in February, driven by a rebound in manufacturing [8] Corporate Earnings and Forecasts - Siegfried Holding AG slumped over 8% after posting weaker-than-expected annual revenue [9] - Opendoor Technologies jumped over 18% in pre-market trading after better-than-expected Q4 revenue [14] - Akamai Technologies plunged over 10% after issuing below-consensus Q1 and FY26 adjusted EPS guidance [15]

Trade Deficit Overview - The trade deficit surged to $70 billion in December, marking a 33% increase from November [1] - Despite this spike, the overall trend in trade has been positive, with trade deficits generally decreasing over time [2][3] Economic Impact - Net exports have been a significant positive contributor to GDP, which is currently running close to 3% [3] - The trade deficit remains largely unchanged year-over-year, indicating that tariffs have shifted trade rather than significantly altering the deficit [5] Inflation and Economic Projections - Current CPI stands at 2.4%, similar to levels seen in April, suggesting that inflation concerns may have been overstated [8] - The anticipated economic downturn related to trade and inflation has not materialized as expected over the past 10 months [7][9] Future Trade Trends - There are signs of reshoring occurring slowly, contributing positively to trade revenues and improving the budget deficit to GDP ratio, which is now at 5.7% [8] - Projections for the trade deficit suggest limited improvement, with some forecasts indicating a potential increase rather than a decrease [10][11] Treasury Management - The Treasury Secretary has successfully aimed to reduce the budget deficit, and future strategies regarding short-term versus long-term issuance could impact the deficit further [12][13]

Economic Overview - The economy is experiencing a nearly six-year expansion but is showing mixed signals recently [3] - Economic growth is expected to be soft in the first half of the year due to gloomy consumer sentiment and weak new orders for manufactured goods [7] Labor Market - Unemployment decreased by 0.1 percentage point to 4.3%, with employers adding 130,000 jobs, surpassing expectations [4] - Initial claims for unemployment insurance fell by 23,000 to 206,000, marking the largest decline since November [4] - The labor market is described as resilient, though softer than in previous years [5][6] Inflation Trends - Inflation, as measured by the consumer price index, slowed to 2.4% from 2.7% in December [5] - Core inflation, excluding food and energy prices, decreased to 2.5% from 2.6% [6] - The Federal Reserve aims to balance inflation at 2% while maximizing employment, indicating a trade-off may be necessary [6] Economic Indicators - The Leading Economic Index (LEI) fell by 0.2% in December, marking its fifth consecutive monthly decline, despite positive signals in equity markets and building permits [7] - The Conference Board forecasts a 2.1% economic growth for the year, reflecting concerns over rising unemployment claims and reduced average weekly hours in manufacturing [7]

Group 1 - The article discusses the market from various perspectives, focusing on AI disruption, economic growth, and cyclical recovery that have positively impacted investment portfolios [1] - Leo Nelissen is identified as a long-term investor and macro-focused strategist, emphasizing dividend growth and high-quality compounders [1] - The approach combines macro analysis with stock research to identify businesses with strong cash-flow potential [1] Group 2 - The article does not provide specific financial data or performance metrics related to companies or industries [2][3]

Core Viewpoint - Inflation is easing, job markets are stable, and economic growth remains solid, but declaring victory over these issues may be premature due to the emergence of new risks [1] Group 1 - Inflation rates are showing signs of easing, indicating a potential stabilization in the economy [1] - Job markets are holding up well, suggesting resilience in employment despite previous economic challenges [1] - Economic growth is described as solid, reflecting a positive outlook for the overall economic environment [1] Group 2 - The article highlights that after years of high prices, the current situation may still pose risks that could affect future economic stability [1] - New risks are emerging that could impact the economic landscape, warranting caution in interpreting current economic indicators as a sign of complete recovery [1]

Group 1: Tariff Costs and Impact - A Federal Reserve Bank of New York study found that nearly 90% of the cost of President Trump's 2025 tariffs was borne by US firms and consumers, contradicting claims that foreign countries were responsible for the costs [1][4][9] - In the first eight months of 2025, 94% of tariff costs were absorbed by American businesses and consumers, with this share decreasing to 92% in September and October, and further to 86% in November as foreign exporters began to take on more costs [1][2][9] Group 2: Revenue and Economic Effects - The US collected $30 billion in customs duties in January alone, leading to a fiscal year-to-date total of $124 billion, which represents a 304% increase from the same period a year earlier [10] - For the calendar year 2025, tariff collections reached $287 billion, nearly tripling the previous year's total, with projections indicating that levies will raise $171.1 billion in 2026, marking the largest tax increase since 1993 [10] Group 3: Domestic Investment and Supply Chain Diversification - Tariffs have reportedly spurred domestic investment and supply-chain diversification, with companies like Stellantis pledging $13 billion, Toyota $10 billion, and Apple announcing $600 billion in US investment [12] - China's share of US imports has decreased to below 10% in 2025, down from nearly 25% in 2017, as Mexico and Vietnam have gained market share, which advocates argue reduces dependence on a single foreign supplier [13]

Economic Outlook - The overall economy is perceived to be weaker than widely anticipated, with job creation effectively flatlining and retail sales remaining stagnant [4][14][20] - Inflation is still considered high, particularly for necessities, but is not expected to rise further, with CPI inflation year-over-year closer to 3% rather than the reported 2% [3][11] Tariff Policy - There are no plans to reduce steel and aluminum tariffs, as stated by Peter Navarro, despite complaints from manufacturers about high tariffs impacting consumer prices [6][8] - The complexity of the current tariff system has caused confusion among manufacturers, with reports of inconsistent tariff rates on similar products [9][10] Federal Reserve and Monetary Policy - The Federal Reserve may be forced to ease monetary policy due to stagnant job creation and rising unemployment duration, which is currently around half a year [15][19] - There is a belief that easing measures are already in effect, contributing to a shift in market leadership towards small caps, value stocks, and cyclical sectors [18][19] GDP and Economic Growth - Real GDP growth is reported at 1.8%, with personal consumption and investment spending barely exceeding 2%, indicating a potential stall speed for the economy [19][20] - The fiscal deficit to GDP has contracted from over 7% to 5%, suggesting some room for fiscal easing [16]