Look at US Inflation for Hidden Price Momentum: Eco Week Ahead

Photographer: Lisette Morales / Bloomberg

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A flood of US economic reports this week could indicate the underlying strength of growth and inflationary pressure as the country thawing of the coronavirus crisis begins to spread.

One of the most viewed reports is the Consumer Price Index, with March data likely to show a rapid acceleration due to last year’s pandemic conditions. However, economists can take advantage of the monthly change to measure momentum, with a forecast of 0.5%.

Investors are watching such figures to determine how likely the increased price pressure will be self-sustaining supply chain constraints, massive fiscal and monetary stimulus and pent-up consumer demand.

The March retail sales report is likely to confirm the demand theme, prompting economists to make growth forecasts for this year. Their average estimate calls for a 5.5% increase in purchases after a winter-depressive February.

Meanwhile, industrial production at the factories, mines and utilities in the country will recover strongly, led by strong manufacturing. The factory’s production is expected to increase by 4%. While scarce inventory and strong demand strengthen order books at manufacturers, the shortage of materials, increased input prices and delays in shipping are hampering production efforts.

At the end of the week, the government will release its housing report for March, which may have recovered from February when the winter storms delayed construction efforts. While home sales are showing signs of declining, the backlog of builders remains large.

What Bloomberg Economics says:

“Narrow bags with increased demand and localized disruptions in the supply chain will cause price increases in a limited subgroup of categories. However, the more dominant factor contained in inflation will be the result of excessive labor depreciation and the consequent absence of rising wage pressures.

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

Elsewhere, there are a number of officials from the Federal Reserve and the European Central Bank who spoke before the quiet periods of the two central banks were instituted and the World Trade Organization held a meeting with vaccine manufacturers on export restrictions. Turkey viewers are closely watching the interest rate decision on Thursday.

Click here for what happened last week and below is our breakdown of what’s going on in the world economy.

USA and Canada

Investors will look at a phalanx of Fed speakers this week before going into a quiet period before the meeting. President Jerome Powell addresses the Washington Economic Club on Wednesday and at least seven of his colleagues are expected to perform. The Fed’s Beige Book – a collection of economic and business activities within each of the central bank’s 12 regions – is also indebted.

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

Asia

China’s trade data on Tuesday showed another increase in both exports and imports in March of a year earlier, when Covid restrictions continued to restrict trade. On Friday, industrial production, retail sales and investment data for the same month and GDP figures for the first quarter are expected to be higher for the same reason.

Central banks in New Zealand, Singapore and South Korea all have meetings, with no changes to their main policy institutions, according to early responses from economists.

Europe, Middle East, Africa

The data in the coming days will indicate that the region performed in the first quarter in a time of renewed closures and various attempts to vaccinations.

In the UK, gross domestic product was likely to rise in February, but with too small an amount to offset the 2.9% drop in the previous month. Meantime eurozone industrial production is likely to decline in February, with data from the National Bureau of Statistics indicating a downturn in the sector so far.

The coming week offers ECB policymakers a final chance to air their views before a quiet period begins ahead of the April 22 meeting. President Christine Lagarde will be part of a speaking team for the coming days. Board member Fabio Panetta said in an interview on Sunday that two years of economic expansion in the eurozone were possible permanently lost.

Elsewhere in Europe, Serbia’s central bank is likely to keep its interest rate unchanged, while monetary officials in Ukraine may continue to tighten policies as inflation rises and an agreement with the International Monetary Fund remains far away.

In Turkey, the new governor of the central bank, Sahap Kavcioglu, is expected to keep the reference rate at 19% on Thursday. He is fighting to win over investors with a commitment to strict monetary policy after his predecessor was sacked after an increase of 200 basis points last month.

Uganda may hold its interest rate for a fifth consecutive meeting on Wednesday and the same day. The Bank of Namibia is also likely to leave its rate unchanged after its neighbor South Africa was held in March. Namibia’s benchmark is 25 basis points higher than that of South Africa, which helps protect the country’s reserves and currency point.

Latin America

The faltering nature of recovery in Colombia and Brazil must be exposed by their reports on retail sales in February, as the former again imposed restrictions to curb the virus, while the national health crisis worsened.

Work reports in Mexico, Brazil and Peru can also be expected to underline the damage caused by the pandemic. Millions of workers in the region’s two largest economies remain on the sidelines, while the labor market in the capital of Peru, Lima’s large capacity, is lower than last year but still far removed from the pre-pandemic form.