Watch US inflation for the hidden price boost: the green week ahead

Photographer: Lisette Morales / Bloomberg

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A lot of US economic reports this week could signal the underlying strength of growth and inflationary pressures as a country the thaw from the coronavirus crisis is beginning to spread.

One of the most watched reports will be the consumer price index, with data from March likely showing a strong acceleration compared to last year’s pandemic conditions. However, economists can enter the monthly shift to assess the momentum, with a forecast of a gain of 0.5%.

Investors are looking at such figures to determine the chances of rising price pressures becoming self-sustaining, given the possible supply chain constraints, massive fiscal and monetary incentives and restrained consumer demand.

The March retail sales report is likely to support this demand theme, which prompted economists to raise their growth forecasts for this year. Their median estimate requires a 5.5% increase in purchases after a winter-affected February.

Meanwhile, industrial production at domestic factories, mines and utilities is projected to return strongly, driven by robust manufacturing. It is estimated that factory production will increase by 4%. While weak stocks and strong demand support producer order books, lack of materials, high entry prices and shipping delays complicate production efforts.

At the end of the week, the government will issue the report on the start of housing for March, which could have returned in February when winter storms delayed construction efforts. While home sales have shown signs of declining, builders’ arrears remain strong.

What Bloomberg Economics says:

“Narrow pockets of increased demand and localized supply chain disruptions will create price increases in a limited subgroup of categories. However, the more dominant factor containing inflation will come from the excessive weakness of the workforce and the resulting absence of rising wage pressures. ”

–Carl Riccadonna, Yelena Shulyatyeva, Andrew Husby and Eliza Winger. For a complete analysis, click here

Elsewhere, a number of officials from the Federal Reserve and the European Central Bank are scheduled to speak ahead of the two central banks’ quiet periods and the World Trade Organization is holding a meeting with vaccine manufacturers on export restrictions. Turkish observers will watch the interest rate decision on Thursday.

Click here for what happened last week and below we present what is happening in the global economy.

USA and Canada

Investors will watch a phalanx of Fed speakers this week before entering a quiet period ahead of the meeting. President Jerome Powell is addressing the Washington Economic Club on Wednesday and at least seven of his colleagues must make appearances. The Fed’s beige book – a collection of assessments of economic and business activity in each of the 12 central bank regions – is also due.

In Canada, the quarterly business sentiment survey will be the central bank’s latest data point ahead of its April 21 decision.

Asia

China’s trade data on Tuesday is expected to show a new rise in both exports and imports in March compared to a year earlier, when Covid restrictions were still reducing trade. On Friday, industrial production, retail sales and investment data for the same month and first-quarter GDP figures are expected to rise more for the same reason.

The central banks of New Zealand, Singapore and South Korea all have meetings, without expecting any change in key policy settings, according to survey responses by economists.

Europe, the Middle East, Africa

Data from the coming days will begin to suggest how the region fared in the first quarter, at a time of renewed deadlock and various efforts at vaccinations.

In the UK, gross domestic product probably rose in February, but too little to offset the 2.9% decline the previous month. In the meantime euro area industrial production is likely to decline in February, with data from national statistical offices indicating a decline in the sector so far.

Next week gives the ECB’s political decision-makers one last chance to convey their views before the start of a quiet period ahead of their April 22 meeting. President Christine Lagarde will be among the groups of speakers scheduled for the next few days. Executive Committee member Fabio Panetta said in an interview published on Sunday that it could have been two years of economic expansion in the eurozone permanently lost.

Elsewhere in Europe, Serbia’s central bank is likely to keep its interest rate unchanged, while Ukrainian monetary officials could continue to tighten policy, as rising inflation and an agreement with the International Monetary Fund remain far behind.

In Turkey, the new central bank governor, Sahap Kavcioglu, is expected to maintain the 19% reference rate at his first monetary policy meeting on Thursday. He struggled to win investors with a tight monetary policy commitment after his predecessor was fired after a 200 basis point increase last month.

Uganda could maintain its key rate for the fifth consecutive meeting on Wednesday, and on the same day, the Bank of Namibia is likely to leave its rate unchanged after its neighboring country, South Africa, took place in March. Namibia’s benchmark is 25 basis points higher than in South Africa, helping to protect the country’s reserves and currency.

Latin America

The hesitant nature of the recoveries in Colombia and Brazil should be revealed in their February retail reports, as the former again imposed restrictions on the virus, as the latter’s national health crisis deepened.

Job reports from Mexico, Brazil and Peru can also be expected to highlight the damage caused by the pandemic. Millions of workers in the region’s two largest economies remain in parallel, while the labor market in Peru’s capital, the mega-city of Lima, is out of last year’s lows, but still far from pre-pandemic.