Behold the U.S. Economy’s Recovery as Fed Stays Course: Eco Week

(Bloomberg) --

News of the U.S. economy’s accelerating pace of recovery may prove a highlight this coming week, with data likely to show output approaching its pre-pandemic level just as the Federal Reserve delivers its third policy decision of the year.

Gross domestic product probably increased at a 6.9% annualized pace from January through March after a more moderate 4.3% rate in the previous quarter. Other reports may show stronger orders for durable goods, a pickup in consumer confidence and robust personal spending.

A fresh injection of fiscal relief, rising Covid-19 vaccination rates and fewer pandemic-related restrictions are providing a larger tailwind for economic activity that is projected to strengthen further into 2022.

Fed Chair Jerome Powell and his fellow policy makers are taking upbeat data in their stride. He has primed investors to fear no surprises from the central bank’s two-day meeting ending Wednesday, when officials are expected to keep interest rates near zero and signal no change in their $120 billion-a-month pace of bond purchases.

Powell, who’ll hold a press conference after the decision, has balanced optimism by warning the economy remains at risk from Covid-19 globally. Officials in March signaled they expect to hold rates steady through 2023.

What Bloomberg Economics Says:

“BE expects the Fed policy statement to acknowledge continued acceleration in the economic recovery, but communications -- including the post-meeting press conference -- will stop well short of providing further guidance on the conditions which would warrant a tapering of QE.”

--For full analysis, click here

Elsewhere, central bankers in Japan, Sweden and Colombia are among a throng of monetary authorities holding meetings, and euro-area GDP data is set to show how the economy fared during renewed lockdowns across the region in the first quarter.

Click here for what happened last week and below is our wrap of what is coming up in the global economy.

Asia

The Bank of Japan is expected to nudge up some of its growth projections, and possibly lower its price view for the current year when it updates its economic forecasts on Tuesday. The BOJ is widely seen standing pat following its policy framework tweaks last month.

South Korea GDP figures also out Tuesday will be closely watched to see if the economy is maintaining recovery momentum with the help of strengthening global trade. Japan jobs, retail sales and production figures will offer some final clues on how its economy fared in the first quarter under a state of emergency that is likely to be reimposed next week in some cities.

Australia’s consumer price inflation likely remain subdued in the first quarter, data Wednesday will show. Investors will scrutinize China’s PMI reports for April on Friday to see whether the economy’s strong first-quarter momentum carried into the second.

Economists are also keeping a close eye on India, which has added more than a million new cases in the past three days.

• For more, read Bloomberg Economics’ full Week Ahead for Asia

Europe, Middle East, Africa

Confirmation of the euro area’s final quarter of contraction during an agonizingly long pandemic crisis will probably arrive on Friday among a flurry of GDP releases for the first three months of the year from around the continent.

During a four-hour frenzy, the region’s biggest economies will all report output data along with the aggregate number for the currency zone, with a clean sweep of numbers likely to show shrinkage amid renewed lockdowns and a stuttering vaccination drive that is only now starting to make serious progress in immunizing citizens.

The European Central Bank affirmed last week that the economy will turn a corner in the current quarter, an outlook policy makers may expand on in coming days with multiple appearances. Their meeting on Thursday presaged what officials now anticipate to be a difficult discussion in June on whether to start slowing their emergency bond-buying.

Elsewhere in Europe, the Riksbank is expected to keep interest rates and its asset-purchase program unchanged on Tuesday, throwing the focus of investors on its outlook statement for indications of how soon policy could be tightened. Policy makers in Hungary will probably prolong their wait-and-see position on rates.

Further afield in the region, Botswana’s central bank will likely keep its benchmark rate at a record low on Thursday even with inflation picking up, while the same day in Egypt, policy makers are predicted to stay on hold despite having room to cut.

Turkey’s central bank governor will address investors in his inflation report the same day. Markets will be looking for signs that he’s willing to risk the ire of President Recep Tayyip Erdogan, an opponent of higher borrowing costs, by raising interest rates after inflation reached 16.2% in March.

• For more, read Bloomberg Economics’ full Week Ahead for EMEA

Latin America

Reports out Monday should show that Brazil’s current account gap narrowed in March while foreign direct investment slowed from February’s 19-month high.

Monetary policy in the time of Covid finds Brazil’s central bank staring down some uncomfortably warm inflation figures. The mid-month and wholesale readings out Tuesday and Thursday may cement bets that a short, sharp, front-loaded tightening cycle is on the cards. Data on hiring, unemployment, lending, government data and budget balances will round out the week.

Look to Mexico’s GDP output report posted Friday for evidence that Latin America’s No. 2 economy lost some momentum in the first quarter even as it’s on track for a strong finish to 2021.

Chile’s end-of-month data barrage features unemployment, retail sales, manufacturing and copper production. Chile is the world’s No. 1 producer of the metal.

Though Colombia’s recovery stalled at the start of the year and inflation is testing lows last seen in the 1950s, odds are that the central bank will keep its key rate at 1.75% on Friday.

• For more, read Bloomberg Economics’ full Week Ahead for Latin America

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