THINK Ahead: Green Shoots or Just Weeds? What This Week’s Data Signals
•February 13, 2026
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Why It Matters
These developments shape monetary‑policy trajectories and growth expectations across major economies, influencing investment and fiscal decisions.
Key Takeaways
- •US private payrolls rise, but job quality weakens.
- •Fed likely cuts rates in June and September.
- •Germany defence spending surge boosts local production.
- •UK inflation expected near 1.8% by April.
- •Poland industrial output spikes, but January outlook dim.
Pulse Analysis
The United States labor market is showing a modest rebound, driven primarily by a surge in private payrolls and a slight uptick in the six‑month moving average of job growth. However, the recovery is uneven, with most new jobs concentrated in government, leisure, hospitality, and private education‑healthcare sectors, while other industries remain stagnant. This mixed picture reinforces expectations that the Federal Reserve will adopt a cautious stance, delivering two 25‑basis‑point rate cuts—projected for June and September—to sustain growth without reigniting inflation pressures.
Across the Atlantic, Germany’s defence budget has risen sharply, adding roughly €10 billion above 2024 levels and prompting a rapid expansion of domestic production capacity. Economists argue this spending could act as a multiplier, stimulating ancillary industries and bolstering overall economic momentum. At the same time, the United Kingdom is witnessing a pronounced decline in headline inflation, projected to dip to around 1.8% by April, which may pave the way for an additional Bank of England rate cut. These trends suggest a tentative but tangible shift from the bleak outlook that dominated much of 2025, offering a more optimistic backdrop for European investors.
In Central and Eastern Europe, Poland delivered an unexpectedly strong industrial output reading in December, outpacing forecasts. Yet analysts caution that January’s outlook is muted due to harsh weather, a calendar effect, and tepid external demand. Wage growth, which had briefly surged thanks to bonuses in mining, is expected to resume its downward trajectory, and employment is forecast to contract modestly. The divergent signals from Poland underscore the broader challenges facing the Eurozone’s periphery, where sector‑specific booms may not translate into sustained macro‑economic recovery without supportive policy measures.
THINK Ahead: Green shoots or just weeds? What this week’s data signals
Sorting the green shoots from the weeds
In case it had escaped your notice, we economists love a good cliché. True aficionados will tell you every cliché has its season: hot inflation summers, dark economic winters, and the ever‑reliable sports metaphors. I’ll spare you the comparison between US GDP and the luge doubles at the Winter Olympics (who came up with that, by the way?)
So it was a great delight to see the absolute classic‑of‑the‑genre “green shoots” metaphor spring up in US commentary again this week. A little early, sure, but you know, global warming and all that…
True, an economy growing at 3‑4 % hardly screams “fragile seedlings”. But the argument goes that this is now finally spilling into the long‑embattled jobs market. Cue those other cliché bingo terms: “turning a corner”, “underlying momentum” and dare we even say, “robust fundamentals”?
Private payrolls growth surged last month. The six‑month moving average of jobs growth is picking up, hinting that the worst of the hiring drought is behind us. The unemployment rate is down – red meat for the hawks that argue lower immigration is the driving force of the labour market right now.
Markets responded by pushing the next Fed cut back to July, and with inflation running a little hotter in January, expect more people to ask whether cuts are needed at all. “Soft landing” and all that…
We don’t really buy it. I pointed out last week that nearly all the jobs in 2025 were created by private healthcare. Virtually all other sectors shed workers. That dispersion has only become more extreme after the latest revisions.
Sure, that light pink “other” bar has become a little less negative. But it’s partly thanks to a construction‑worker boom in January, which probably has more to do with unseasonably warm weather than new “tailwinds”. Remember: job openings are falling, layoff announcements are trending up, and consumers are still downbeat about their job prospects.
None of this means the US can’t continue growing above‑trend for now, dominated by AI capex and wealth effects. But we’re sticking to our call for two Fed cuts this year – in June and September.
In Europe, there does appear to be genuine signs of metaphorical spring. Germany’s fiscal story has been a rollercoaster; optimism 12 months ago quickly gave way to pessimism as it became clear that infrastructure doesn’t get built overnight. Add in a hint of creative accounting to the budget, and it looked like more brown leaves than green shoots.
That seems to be changing. Defence spending, though below the government’s target last year, came in some €10 bn above 2024 levels – and more so if you include borrowing in the special funds. Much of that gap opened up very late in the year, shortly before the German parliament finally approved the budget for 2026 – an announcement that coincided with the approval of a raft of new defence contracts.
The real surprise, though, is that more of this defence spending is going to get spent locally; production capacity is ramping up quickly, it seems. Carsten Brzeski is getting more optimistic about the multiplier effect of defence spending – economist‑speak for “this might actually do something to growth”.
New orders are rising rapidly. Next week’s purchasing‑managers indices (PMIs) should give us a better steer. The hope is that production will increasingly follow as we move through the year – and particularly in 2027. Carsten’s 1.9 % growth forecast for next year is above consensus.
None of that subtracts from the multitude of structural challenges Germany faces. But for now, it does seem the green shoots are genuine.
Britain, rain‑sodden as ever, also shows flickers of optimism. Not on growth, which rounded out 2025 weaker than expected. Nor politics, which is a major banana skin for markets. But on inflation, there’s a growing sense that the Bank of England could go further with its cutting cycle than previously thought. That’s the message from various investors I’ve seen in London this week.
We agree that inflation is set to drop dramatically over the next few months, even if the January data is unlikely to drastically change next week. The jobs market has cooled a lot and hiring surveys are still getting worse. Private‑sector wage growth is falling like a stone.
But the Bank itself is cautious, albeit divided. Staunch resistance from the hawks is the main reason we’re reluctant to pencil more than two rate cuts in for this year, even if there’s a decent economic case to be made for more.
So yes, the green shoots are there if you want to find them. And if they turn out to be weeds, fear not – economists are always ready with the next seasonal metaphor. Easter bunny, prepare for battle…
THINK Ahead in developed markets
United States (James Knightley)
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Labour Market: Financial markets continue to favour two 25 bp Federal Reserve interest‑rate cuts this year and we agree. While the jobs numbers look OK, the details are more concerning, showing zero employment growth in three years outside of government, leisure & hospitality and private education & healthcare services.
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PCE (Fri): The weekly ADP numbers this coming week will tell a similar story with a clear slowdown in hiring shown in the data. Durable goods orders will be depressed by a swing downwards in Boeing aircraft orders, while the trade balance will see more elevated deficits as the pre‑tariff inventory build is exhausted. The key data point will likely be the Fed’s favoured measure of inflation – the core PCE deflator – which we expect to post a 0.3 % increase, limiting any further near‑term momentum behind the Fed being more aggressive on policy easing.
Eurozone (Bert Colijn)
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Industrial production (Mon): The eurozone has seen a cautious increase in industrial production in the autumn of last year and December is likely to pour some cold water on imminent rebound hopes. Germany and Italy saw a tick down in production, making an overall increase less likely. Optimism is returning to manufacturing due to improving domestic demand, and we do expect a more sustained increase in 2026.
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PMI (Fri): The January sentiment data by the European Commission was very upbeat. Across countries and across sectors, a jump was noted. This leaves us intrigued for February survey data. The PMI had not been exuberant in January, although still reflecting decent output growth. A sign of acceleration here may give more weight to the rosy EC survey of last month.
United Kingdom (James Smith)
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Inflation (Wed): Headline inflation is set to dip back on airfare noise, lower food‑price pressure and the fading of last year’s private‑school tax hike. But we aren’t expecting any drastic changes in “core services” inflation, the Bank of England’s main preoccupation. The bigger fall in inflation will come in April, when we expect headline CPI to dip back to 1.8 %.
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Jobs report (Tue): Expect further signs of cooling in the UK jobs market and a further drop in annual wage growth. Assuming those trends continue into the next round of data in March, we expect a rate cut at next month’s Bank of England meeting.
THINK Ahead in Central and Eastern Europe
Poland (Adam Antoniak)
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Industrial output (Thu): December’s industrial production reading was well above market expectations, but this performance is unlikely to be repeated in January. External demand remains lacklustre, the calendar effect is negative (with one fewer working day compared with January 2025), and weather conditions were harsh. Average temperatures in January 2026 were below the multi‑year average, with severe frosts particularly in the eastern part of the country, which could potentially disrupt transport and cause delays to delivery times, with adverse consequences for production plans. Producers’ prices continue to decline, and deflation in PPI persists as manufacturers face competition from cheap imported goods from China.
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Labour market (Thu): Wage growth in enterprises surprised to the upside in late 2025, but the stronger figures were largely attributable to annual bonus payments in certain sectors, predominantly mining. We believe that the downward trend in wage dynamics resumed in January and is likely to continue over the coming months. The minimum wage was increased by 3 % at the start of 2026, compared with a 9.2 % rise in 2025.
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As for employment, we forecast a 0.6 % YoY decline. Employment levels in enterprises fell throughout 2025, so we expect a negative statistical effect from the update of the statistical sample (the data cover businesses employing 10 or more people). However, its magnitude should be similar to that observed in January 2025. An insufficient supply of labour remains a key challenge for enterprises in several sectors of the economy.
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