U.S. GDP, PCE Price Deflator, and the Preliminary February Purchasing Manager Surveys Top Friday’s Menu
February 20, 2026
The dollar was narrowly mixed just prior to the eagerly awaited twin-bill of U.S. economic data releases, unchanged against the euro and loonie, 0.3% higher relative to New Zealand’s currency, 0.3% stronger against the Mexican peso, and 0.1% firmer relative to the yen and Swiss franc.
Ten-year sovereign debt yields had fallen overnight by three basis points in Japan, two bps in the U.K. and one basis point in the U.S., Germany, Switzerland, France and Italy. Spain’s 10-year yield was an exception with an overnight 4-basis point advance.
There had been another jump in the price of silver, up 3.8%, and the costs of Bitcoin and gold were 0.5% and 0.6% firmer, but oil had given back 0.3%.
Equities had closed down 1.1% in Japan and Hong Kong but up 2.3% in South Korea. Major European stock exchange indices had firmed as much as 1.0% in Italy and as little as 0.1% in Germany.
Today’s U.S. economic data releases accentuate the concern of the FOMC majority that “with inflation having remained above 2 percent since early 2021, a salient risk was that inflation would prove to be more persistent than the staff anticipated.” December’s personal consumption price deflator went up 0.4% in December, their biggest monthly increase in 14 months and resulting in a higher-than-forecast 2.9% year-on-year advance. The core PCE price deflator in December also rose 0.4%, and the associated 3.0% 12-month rate of rise also exceeded expectations, was the most in a year, and exceeded the Fed’s goal by a full percentage point. Likewise, fourth-quarter GDP data put the annualized rises between 3Q and 4Q of the total and core PCE price deflator at 2.9% and 2.7%, respectively. Like the third quarter, their upward momentum was faster than in the second half of 2024. Year-on-year PCE price inflation was 2.8% overall versus 2.6% between the final quarters of 2023 and 2024 and 2.9% when excluding food and energy.
Today’s data also highlighted a pronounced slowdown of real U.S. economic growth. GDP had expanded at annualized rates of 3.8% and then 4.4% in the middle quarters of 2025 but only 1.4% in the year’s final quarter. Along with a GDP contraction of 0.6% in the first quarter of the year, GDP ended up growing just 2.2% both between the final quarter of 2024 and last quarter and on average during all of 2025 and the average of the prior year. Combining last year’s 2.2% GDP with a contraction of 2.1% in the final year of President Trump’s first term, i.e. 2020, yields a two-year period of 0.1% percent average annual economic growth. The comparison of the pace to the four-year average 3.5% per annum growth during Joe Biden’s four-year stewardship belies the vast improvement that Trump claims to have made versus his predecesor.
Drilling more deeply into today’s U.S. December and 4Q statistics, one sees that personal consumption and non-residential business investment accounted for 2.1 percentage points of real GDP growth last quarter, that is 50% more than the total. Partly reflecting the federal government shutdown, government expenditures exerted a 0.9 percentage point drag on GDP growth during 4Q, and residential construction and net exports combined to exert nil effect on the economy’s growth rate. Even with the shutdown, analysts had been forecasting a fourth quarter growth rate that was twice the actual figure. In December, personal consumption expenditures rose 0.4% in nominal terms but only 0.1% when inflation adjusted.
The preliminary purchasing manager surveys released today for the month of February also cast U.S. economic momentum in a vulnerable light. The S&P Global-compiled U.S. composite, manufacturing and service sector PMI readings were each lower-than-forecast and below final January scores, with the composite index (52.3) and service sector PMI (also 52.3) at 10-month lows and manufacturing (51.2) dropping to a 7-month low.
By contrast, the Euroland, British, Japanese and Indian PMI readings for this month exceeded their January scores. Euroland’s composite PMI of 51.8 was at a 3-month high. Britain’s composite 53.9 represents a 22-month high, and Japan’s 53.3 reading in February was its best in 33 months. India’s 59.3 composite PMI was at a 3-month high, 0.9 points higher than in January, and in very robust growth territory. Australia’s composite PMI had jumped 4.7 points in January but then dropped 3.7 points to 52.0 this month.
According to the U. Michigan/Reuters monthly survey of U.S. consumer sentiment, confidence remains historically weak. The February reading was revised 0.7 index points lower to 56.6. Although above the November low of 51.0 and the highest score in a half year, the reading had been as high as 79.4 in March 2024 and 101.0 in February 2020 when Covid first struck. Yet another U.S. data release showed a 1.7% drop in U.S. new home sales during December.
Among other data reports around the world this Friday,
- German producer prices fell 0.6% on month in January, resulting in the lowest year-on-year reading (-3.0%) in 21 months.
- Latvian and Serbian producer price inflation in January respectively rose a half percentage point to 1.2% and moved down to an 8-month low of negative 0.3% from +1.7% in December and a 10-month high of 2.1% in November.
- Swedish total and core consumer price inflation was only 0.5% and 2.0% in January.
- Despite advancing 1.8% on month in January, British retail sales volume over the three months through January was just 0.1% above the mean in the previous three-month period.
- Danish real GDP growth slowed more sharply than expected last quarter to 0.2%, which trimmed year-on-year growth that quarter to 3.0% from 3.9% in 3Q and 4.3% in the final quarter of 2024.
- Mexican retail sales slid only 0.1% in December after a 1.0% increase in November. Sales exceeded their year-earlier level by 4.3%.
- Turkish business confidence improved to an 11-month high this month.
- Indonesia’s current account surplus shrank over 80% last year to $1.45 billion, equivalent to 0.1% of GDP.
- Canadian producer price inflation accelerated to 5.4% last month.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: German PPI, preliminary purchasing manager survey results February 2026, U.S. GDP and PCE price deflator, U.S. new home sales and consumer confidence
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