 As US begins its bounce, China is set to downshift  Vaccination pickup is the key for Europe to join US by midyear  Core inflation is moving higher across EM  Next week: China 1Q GDP slows; US March RS, IP, and CPI jump Calling out around the world, are you ready for a brand new beat March activity readings continue to impress and support our view that the global economy is entering a phase of boomy growth and accelerating inflation.

We forecast global GDP to jump 7% ar this quarter (a marked acceleration from 2.5% ar in 1Q21), and look for global CPI inflation to rise above 3%oya before midyear—the highest pace in a decade. The coming rise in over-year-ago inflation, flattered by last year’s COVID-19-related pothole, will overstate what we still expect to be a constructive reflationary dynamic.

Specifically, we look for global headline and core CPI to both increase at a roughly 2.5% ar this quarter, a step above their average paces in recent years.

We expect the global growth rebound to be accompanied by a rotation between the two largest economies. Even after adjusting for volatility related to weather, last week’s US employment gains and next week’s retail sales and IP reports point to the US as a dominant driver of the step up in global growth.

But at the same time that we expect the US to surge to 9% ar GDP growth this quarter, we look for China to downshift toward a trend-like pace as last year’s fiscal and credit policy supports are removed. China’s 1Q21 GDP report next week, alongside March activity readings, should signal this downshift even as its over-year-ago comparisons surge from last year’s trough.

An expected bounce in DM consumption outside the US will sustain the robust expansion to year-end. March news for Europe and Japan has been upbeat, with PMIs moving up alongside our measures of mobility. However, the gap between the US, the Euro area, and Japan service-sector PMIs speaks to the continued drag from the second COVID wave (Figure 1). Indeed, the recent virus spread appears to be tightening restrictions and flattening mobility.

France and Italy have recently taken significant measures and Japan has imposed emergency business restrictions. Next week, Germany looks set to propose federal legislation to force state and local leaders to apply existing restrictions.

With a set of EM economies facing similar difficulties, we have been lowering current-quarter forecasts for GDP growth outside the US.