Econoday’s global Relative Performance Index (RPI) held unchanged in the week at a perfect zero score, perfect that is for Econoday’s consensus forecasts that on net are exactly matching actual outcomes. But there’s a separation at play between real economic activity which is missing forecasts and inflation which is exceeding forecasts. When excluding the latter, the Relative Performance Index less prices (RPI-P) is lagging at minus 12. It’s this bias toward inflation that’s pushing back market expectations for global rate cuts.

US data on net continued to improve last week, lifting this country’s RPI to plus 10 to indicate general outperformance. Less prices, however, the index eases only slightly to plus 7. With data beating estimates and inflation not cooling much, the Federal Reserve on Wednesday may not feel compelled to stress the need for rate cuts.

Canada, getting a boost from the week’s strong manufacturing sales as well as housing starts, extended the prior week’s gain to stand at 12 both overall and when excluding inflation. The results confirm the wisdom of the Bank of Canada’s decision earlier this month not to cut rates.

An unexpected nosedive in January industrial production trimmed the Eurozone RPI to 5 and the RPI-P to exactly zero to indicate that economic activity is essentially matching expectations. Focus now shifts to the services sector and whether stronger output here can keep first-quarter GDP out of the negative column.

In Switzerland, the RPI (7) and RPI-P (5) held above zero for a second week but still indicated just marginal outperformance versus forecasts. Thursday’s SNB meeting will be focused mainly on inflation and, given prior downside surprises, the door to a rate cut is certainly open.

A mixed week for the UK saw the RPI slip to minus 13 and the RPI-P to minus 10. However, with both measures above zero for much of the first quarter, the latest readings will not be weak enough for the Bank of England to announce a rate cut at its Thursday meeting.

Forecasters are split whether the Bank of Japan will finally abandon its ultra-loose monetary policy on Tuesday. At minus 32, the RPI-P shows the real economy falling well short of expectations in contrast, however, to upside surprises in key inflation updates which, when included in the calculation, lift the RPI to minus 9. Should policy be left on hold this month, interest rates are very likely to be hiked in April.

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