Watch US inflation for hidden price momentum: Eco Week Ahead

Photographer: Lisette Morales / Bloomberg

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A wave of US economic reports this week could point to the underlying strength of growth and inflationary pressures like the country’s thaw of the coronavirus crisis is starting to spread.

One of the most watched reports will be the consumer price index, with March data likely to show a significant acceleration from last year’s pandemic conditions. Economists can focus on the monthly change to measure momentum, with an expected gain of 0.5%.

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Consumer prices in the US are rising at a faster pace as the nation leaves the pandemic behind

Sources: US Bureau of Labor Statistics, Bloomberg survey

Investors look to such numbers to determine the likelihood that increased price pressures could sustain themselves, amid the possibility supply chain constraints, massive fiscal and monetary stimulus and pent-up consumer demand.

The March retail report is likely to confirm that demand theme, prompting economists to raise growth forecasts for this year. Their median estimate calls for a 5.5% increase in purchases after a cold winter in February.

Meanwhile, industrial production in the country’s factories, mines and utilities is expected to rebound sharply, led by robust manufacturing. Factory production is expected to increase by 4%. While lean inventories and solid demand bolster manufacturers’ order books, material shortages, high input prices and shipping delays complicate manufacturing efforts.

At the end of the week, the government will release its March housing report, which may have recovered from February when winter storms slowed construction efforts. While home sales are showing signs of leveling off, construction companies lag behind.

What Bloomberg Economics Says:

“Tight spaces with increased demand and local supply chain disruptions will cause price spikes in a limited subset of categories. However, the most dominant factor driving inflation will be the result of an excessive slack in the labor market and the resulting absence of rising wage pressures. “

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

Elsewhere, a slew of officials from the Federal Reserve and the European Central Bank will speak before the two central banks’ quiet periods and the World Trade Organization hold a meeting with vaccine makers on export restrictions. Turkey watchers will keep a close eye on the interest rate decision on Thursday.

Central bank rate decisions this week

Click here for what happened last week and below is our summary of what’s going to happen in the global economy.

USA and Canada

Investors will be looking at a phalanx of Fed speakers this week before entering a quiet period before the meeting. Chairman Jerome Powell addresses the Economic Club of Washington on Wednesday, and at least seven of his colleagues will perform. The Fed’s Beige Book – a collection of reviews of economic and business activity within each of the central bank’s 12 regions – is also planned.

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

Asia

China’s trade figures as of Tuesday will show a fresh increase in both exports and imports in March from a year earlier, when Covid restrictions continued to curtail trade. On Friday, industrial production, retail sales and investment data for the same month and GDP numbers for the first quarter are all expected to race higher for the same reason.

Central banks in New Zealand, Singapore and South Korea all have meetings, and early answers from economists do not expect changes in their main policy settings.

Europe, Middle East, Africa

The data in the coming days will hint at how the region fared in the first quarter at a time of renewed lockdowns and mixed efforts on vaccinations.

In the UK, gross domestic product is likely to have increased in February, but at too small a magnitude to offset the previous month’s 2.9% decline. Meanwhile eurozone Industrial production is likely to decline in February, with data from national statistical offices so far pointing to a downturn in the sector.

This week will offer ECB policymakers one last chance to broadcast positions before a quiet period begins ahead of their April 22 meeting. President Christine Lagarde will be one of the speakers scheduled for the coming days. Executive Board member Fabio Panetta said in an interview published Sunday that two years of economic expansion in the eurozone could have been permanently lost.

Elsewhere in Europe, Serbia’s central bank is likely to keep its interest rate unchanged, while monetary officials in Ukraine can continue to tighten policies as inflation rises and a deal with the International Monetary Fund is still a long way off.

In Turkey, new central bank governor Sahap Kavcioglu is expected to keep the benchmark interest rate at 19% at his first monetary policy meeting on Thursday. He has fought to win over investors committed to tight monetary policy after his predecessor was fired after a 200 basis point hike last month.

Uganda may maintain its base rate for a fifth consecutive meeting on Wednesday and the same day, but the Bank of Namibia is also likely to leave its course unchanged after its neighbor South Africa in March. Namibia’s benchmark is 25 basis points higher than South Africa’s, protecting the country’s reserves and currency peg.

Latin America

The faltering nature of the recovery in Colombia and Brazil must be exposed by their February sales reports as the former has again imposed restrictions on controlling the virus while the latter’s national health crisis has worsened.

Job reports in Mexico, Brazil and Peru are also expected to highlight the damage from the pandemic. Millions of workers in the region’s two largest economies remain sidelined, while the labor market in Peru’s capital, the megacity of Lima, is lower than last year, but still far from its pre-pandemic shape.

Laid low

The labor market in Peru’s capital, Lima, is nowhere near pre-pandemic levels

Source: National Institute for Statistics and Information