 Early 1Q GDP releases delivered upside surprises as March looks strong  Inflation forecast bias is upward for DM services and EM food prices  G-3 CBs remain patient but picture more mixed elsewhere  Next week: Big April with global PMI and US job gains; BCB hikes Conscious bias training Early first-quarter GDP reports have surprised to the upside—repeating a pattern from the previous two quarters in which downward GDP revisions as the quarter began were subsequently reversed (Figure 1). Upside surprises from the US, Korea, and Taiwan this week—as well as upgrades to projections elsewhere—boost our tracking of 1Q21 global GDP growth to 3.2% ar. While this outcome represents a marked downshift from the boomy 7.5% ar gain in 4Q20, it is 2%-pts higher than our forecast at the start of the quarter. Part of last quarter’s upside surprise can be attributed to a bigger-than-expected US fiscal policy package in March. But it is the interaction of two other related forces that explains broadbased strength. First, fears about a second-wave pandemic drag as we turned into the new year were calmed by effective targeted restrictions. Second, business spending proved resilient. Consistent with the signal from our capex nowcaster for a 15% ar gain, economies that have reported expenditure details (i.e., the US, Korea, and Taiwan) marked double-digit capex increases in 1Q21.

This forecasting experience provides context for tracking the current quarter.

Although we expect growth to bounce back to a 5.9% ar on the heels of a consumer rebound, we have lowered our sights on 2Q21 GDP sharply in recent weeks as a result of pandemic drags in Europe and EM. But the news on March consumption has been stronger than expected, punctuated by the 3.6%m/m US gain reported this week. At the same, April business surveys have been impressive and our capex nowcaster continues to track double-digit annualized growth. With mobility holding stable and vaccine rollouts gathering pace in Europe, the bias is once again for current-quarter growth forecasts to move higher as activity is reported. Next week’s April readings should reinforce this point. We look for the global PMI to rise to its highest level in seven years (55.4) and US payrolls to surge another million.

Upside surprises are not confined to GDP. Inflation also surprised to the upside last quarter, with the global CPI marking its fastest quarterly gain in over a decade. Our analysis highlights a set of transitory factors contributing to the gain—notably services price increases in Europe and Japan.

Consequently, inflation is likely to moderate this quarter, underscored by this week’s Euro area flash and Japan’s Tokyo readings for April. But a combination of boomy global growth and significant bottleneck price pressures should limit any deceleration, keeping over-year-ago headline and core inflation on an upward trajectory. Our bottom-up forecast sees the global CPI rising 2.7% this year, a dramatic acceleration from its 1.2% rise in 2021.