 ECB pushes back against rising yields, while Fed signals acceptance  EM high yielders turn to tighten but most others to stay low-for-long  Next week: Soft Feb. US and China data; FOMC to show 2023 hike The whole is the sum of its parts The steady upward revisions to our 2021 growth and inflation forecasts continue.

On growth, recent Asian trade reports have delivered upside surprises and point to impressive global demand momentum for tech and other goods as we move through the current quarter. The outsized strength in China’s exports and imports is at odds with our forecast for a slowdown to a 6% ar GDP gain this quarter—as flagged by the jump in our China nowcaster this week to 10.7% ar. We expect next week’s January/February readings on domestic activity to show softening, tempering this signal. Next week also should deliver a February decline in US retail sales and a soft IP report. But weather drags loom large and the US has led the rapid recovery in our global mobility (GAI) measure into early March.

We have also been raising our inflation forecasts. However, our global forecast revision indices (FRI) show inflation revisions have been modest so far in relation to growth (Figure 1). While incorporating upside surprises that push global CPI gains to a 4% ar in the three months ending in February, inflation forecasts for the coming quarters largely have been unchanged.

The unusually large sectoral and regional growth divide during this recovery is playing an important role in inflation dynamics. Global goods activity has already moved above its pre-pandemic path. With growth in consumer goods spending and capex likely to remain elevated, we project global manufacturing to stand more than 2% above its pre-crisis path at midyear (Figure 2). It is thus no surprise that pressures on goods prices are on the rise. Along with a surge in commodity prices, global core goods CPI has averaged a roughly 2.5% ar since mid-2020, its fastest pace in two decades (Figure 3).

At the same time that goods-sector activity and prices are surging, the pandemic continues to weigh heavily on the services sector. According to our estimates, service-sector activity remained 5% below its pre-pandemic path at the end of last year and looks to be on track to edge lower this quarter in response to the second wave. This shortfall is translating into subdued pricing