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We start the week with a fiscal update from the US where new stimulus will begin to give monthly data, both in the US and elsewhere, a visible lift. The extending tide of emergency stimulus is part of the reason that long-term interest rates are on the rise, a move perhaps foretelling a runaway spike in inflation but in the meantime is slowing the economic recovery. How central banks are handling the developing cross currents is beginning to play out with the European Central Bank, as we shall see, making the first move. We then turn to inflation, and how frightened we should be, then to employment, production, trade and all the rest!
 Voting strictly along party lines, Congress approved President Biden's $1.9 trillion American Rescue Plan. The plan includes payments of $1,400 for most Americans, extensions for unemployment benefits, and aid for child care, education and vaccine distribution. How the plan will be paid for -- yet higher Treasury issuance -- wasn't part of the headlines. Going into the new spending spree the Treasury's budget deficit in February came in at an unexpectedly deep $310.9 billion which is 32 percent greater than February last year. Five months into fiscal 2021, the deficit was running 68 percent deeper than the prior year. Outlays are up 25 percent so far this fiscal year to $2.5 trillion outpacing a 5 percent rise in receipts at $1.4 trillion. The prospect of yet heavier and heavier US debt issuance is no doubt a significant factor of its own behind the rise underway in long-term rates.
 In a move to stem the rate rise, the ECB said it will "significantly" accelerate asset purchases over the next quarter under its pandemic emergency purchase programme (PEPP). No amounts were specified but, for comparison, monthly purchases have averaged not quite $60 billion over the last three months and peaked in June at €120 billion. Going into March only €870 billion of the €1.85 trillion fund had been spent. The ECB made no other policy changes, holding rates steady and holding its other QE effort, the asset purchase programme (APP), at €20.0 billion per month. The step-up in PEPP buying should convince everyone that the ECB means business and should provide at least a partial cap on the rise in yields.
 The Bank of Canada left policy on hold in the week, keeping its benchmark overnight rate at 0.25 percent and net asset purchases at a minimum of C$4 billion per week. The BoC did acknowledge that recent economic data have been surprisingly robust, notably the 9.6 percent fourth-quarter rise in GDP, yet the central bank's view remained little changed, that the labour market was still a long way from recovery and that the spread of more transmissible variants of the virus is a potentially significant risk. Over coming months, CPI inflation is expected to move temporarily to around the top end of the bank's 1 to 3 percent target band, in part reflecting higher gasoline prices and also base effects from deep price declines a year ago. However, medium-term inflation is seen slowing again due to downward pressure from excess capacity. As this is absorbed, inflation is projected to return sustainably to the 2 percent target, but, according to the January forecast and in an echo of central banks everywhere, not before 2023.
 Let's check the latest on US consumer prices ahead of the coming week's FOMC meeting, data that have something for everyone. In line with expectations, consumer prices increased a monthly 0.4 percent overall in February, extending four months of acceleration. But the pressure has been narrowly tied to gasoline; when excluding energy and food the core CPI managed only a 0.1 percent gain, which was lower than expected. The two annual rates likewise tell different stories: jumping 3 tenths to 1.7 percent overall and sinking 1 tenth to 1.3 percent. When it comes to which is the more important, the core has the advantage of being less volatile, making it a more secure anchor for policy.
 Yet an advantage to watching the overall rate is that, though more volatile, it could very well send the first directional signal. And perhaps offering such a signal right now are producer prices across the global economy, including those from China which are jumping. The country's producer price index rose 1.7 percent on the year in February after increasing 0.3 percent in January to extend a run of strong gains. In contrast are consumer prices which are underwater in China, down 0.2 percent on the year in February with both food and non-food prices down at the steady 0.2 percent sub-zero pace. Whether and how fast consumer prices respond to the rise underway in producer prices will be something to watch for the textbooks.
 Jobs were lost but vacancies were up; that's the news from the Swiss labor report where the unemployment rate, reflecting a nearly 3,000 rise in joblessness to 166,355, edged 1 tenth higher to 3.6 percent in February. This is still less than 1 percentage point above where it was a year ago before the pandemic struck. And there was once again good news on vacancies which rose for a third successive month, at 32,250 they stand 1.4 percent above their mark in February 2020. Even so, the number of companies resorting to shorter working hours continued to rise slightly. February's report shows that Covid is still hitting the jobs market in a country where restrictions are beginning to be lifted but where the vaccine rollout has been slow.
 One of the best performances of the week was industrial production from France, which helped lift the country's consensus divergence index by more than 20 points to minus 9 to indicate that data from the country are still missing expectations but only modestly. Production's 3.3 percent monthly jump was more than six times the market consensus and the largest since last July. Annual growth was still negative at minus 0.2 percent but this was up sharply from December's minus 3.2 percent. Output is now only 1.7 percent below February's pre-pandemic level. January's details showed standout gains for both construction and manufacturing, the latter led by machinery. January's bounce put industrial production 2.6 percent above its average level in the fourth quarter when it rose a quarterly 3.3 percent.
 One of the week's most revealing reports was UK merchandise trade that showed huge contractions in both sides of the balance sheet. Exports were down 24.8 percent on the year with imports down 12.6 percent; monthly declines, at roughly 20 percent each, were the worst on record. Exports of UK goods to the EU -- in an early Brexit measure -- slumped a remarkable 40.5 percent; imports were down 28.9 percent. Coronavirus effects no doubt played their part but the magnitudes point the finger of blame at Brexit, or at least corporate pre-planning for Brexit. Consistent with this view, exports to non-EU countries actually rose 3.6 percent on the month. The dramatic declines in both EU exports and imports support earlier anecdotal evidence that Brexit has companies on both sides of the Channel struggling with the new terms.
 In a base effect that's about to express itself in coming economic data, year-over-year gains in the stock markets are now soaring as comparisons lap the great lockdown that shook down the economy this time last year. For those who had the courage to buy Italian stocks in mid-March 2020, your return based on the FTSE MIB would be 62 percent! Gains for some Asian indexes are also in the 60s but not the Shanghai which held in better during last year's rout and is up only 18 percent on the year. The Shanghai fell sharply on Monday after the government’s modest 6 percent growth target for 2021, compared to expectations for 8 percent, raised concern that tighter Chinese fiscal and monetary policy may be coming. Markets reacted negatively, paradoxically, to passage of the US stimulus package on concern it will pull forward monetary restraint in China. European markets were boosted in the week on vaccine progress and prospects of further reopenings, as well as from better-than-expected economic data including French industrial production which gave the CAC a 1.1 percent lift on Wednesday. Upbeat reports on diplomatic and business efforts to restore US-Chinese relations were Thursday's headlines while Friday's headlines returned to the extending backdrop: rising interest rates that saw the US 10-year yield gain 8 basis points to 1.62 percent and lift its climb over the last four weeks to 48 basis points. How central banks adjust to this spike, one that will slow the recovery and perhaps necessitate additional stimulus, is the drama that's now playing out.
Best performance of the week comes from France which added 20 points to its consensus divergence score on the strong lift from industrial production. Yet at an index of minus 9, France is nevertheless at the bottom of the sample followed now by Germany which lost ground from the low double digits to minus 7. Switzerland, at minus 4, has been tracking back and forth along the zero line to indicate that forecasters are for the most part correctly calling the country's numbers. UK data have been consistently beating forecaster estimates with this index at 14, as have data from Italy, at 28, and Canada at 22. And now the US is emerging among their ranks at 25. How quickly and accurately forecasters begin building in stimulus effects for US data will be tracked here in the coming weeks.
**Contributing to this article were Jeremy Hawkins in London, Brian Jackson in Sydney, and Mace News in New York
The biggest news in the week will be what the Federal Reserve does or doesn't do to stem the spike underway in long-term interest rates, whether it targets long-end buying as the ECB did in the prior week or tries to jawbone rates lower with new warnings or wording. The Fed's meeting is on Wednesday and will be followed Thursday by the Bank of Japan and Bank of England where policy moves are also an option. Machinery orders from Japan will open the week on Monday with Japan to post merchandise trade data on Wednesday and February's CPI on Friday. Chinese data will be headlined by industrial production and retail sales on Tuesday, both for the combined months of January/February and both likely to be scrambled by comparison distortions tied to the lunar new year not to mention Covid effects. Thursday will see Australia's labour force survey followed on Friday by retail sales. European data will be light in the week, led by Germany where the ZEW sentiment survey will be posted on Tuesday and producer prices on Friday. In North America, Canada will post manufacturing sales on Monday and the CPI on Wednesday with US industrial production and retail sales to be two of Tuesday's highlights. Housing starts and permits for the US will follow on Wednesday and US jobless claims, which have been slowly improving, on Thursday. Revisions for French and Italian CPIs will be posted Tuesday and a revision to Eurozone HICP on Wednesday. Also note that clocks in the US and Canada will be moving forward before the week opens, on March 14.
Japanese Machinery Orders for January (Sun 23:50 GMT; Mon 08:50 JST; Sun 19:50 EDT)
Consensus Forecast, Month over Month: -5.3%
Consensus Forecast, Year over Year: -0.2%
Machinery orders are expected to fall 5.3 percent on the month and fall 0.2 percent on the year in January following an unexpected 5.2 percent jump in December that lifted annual change to 11.8 percent growth.
Canadian Manufacturing Sales for January (Mon 12:30 GMT; Mon 08:30 EDT)
Consensus Forecast, Month over Month: 2.5%
Manufacturing sales are expected to increase a monthly 2.5 percent in January after rising 0.9 percent in December in a result that hit the consensus forecast. Sales on a year-over-year basis were down 3.9 percent in December.
Chinese Industrial Production for January/February (Tue 02:00 GMT; Tue 10:00 CST; Mon 22:00 EDT)
Consensus Forecast, Year over Year: 30%
Consensus for the January/February combined report, skewed by Covid and new year calendar effects, is an increase of 30 percent. The pace of recovery in industrial production, boosted by strong exports, accelerated 3 tenths in December to a better-than-expected 7.3 percent annual pace.
Chinese Retail Sales for January/February (Tue 02:00 GMT; Tue 10:00 CST; Mon 22:00 EDT)
Consensus Forecast, Year over Year: 32%
Year-over-year growth of 32 percent is expected for Chinese retail sales in the months of January and February combined, a Covid skewed result that would compare with 4.6 percent growth in December.
Germany: ZEW Survey for March (Tue 10:00 GMT; Tue 11:00 CET; Tue 06:00 EDT)
Consensus Forecast, Current Conditions: -62.0
Consensus Forecast, Economic Sentiment: 75.0
Separation between current conditions (minus 67.2 and depressed by Covid effects) and economic sentiment (plus 71.2 and lifted by vaccine prospects) continued to widen in February. Expectations for March look for further widening, to minus 62.0 for current conditions and at plus 75.0 for sentiment.
US Retail Sales for February (Tue12:30 GMT; Tue 08:30 EDT)
Consensus Forecast, Month over Month: -0.5%
Consensus Forecast, Ex-Vehicles & Gas: -1.1%
Consensus Forecast, Control Group: -1.7%
After far surpassing expectations in January, retail sales in February are expected to fall back 0.5 percent following January's 5.3 percent surge. For ex-vehicles and ex-gasoline a 1.1 percent dip is the call, with the control group, which removes volatile items, seen falling 1.7 percent.
US Industrial Production for February (Tue 13:15 GMT; Tue 09:15 EDT)
Consensus Forecast, Month over Month: 0.5%
US Manufacturing Output
Consensus Forecast, Month over Month: 0.6%
A 0.5 percent rise is expected for industrial production in February with manufacturing seen up 0.6 percent. This report beat high-end expectations in January with respective gains of 0.9 and 1.0 percent.
Japanese Merchandise Trade for February (Tue 23:50 GMT; Wed 08:50 JST; Tue 19:50 EDT)
Consensus Forecast: ¥420 billion
Consensus Forecast, Imports Y/Y: -1.0%
Consensus Forecast, Exports Y/Y: 11.9%
Imports have been in deep contraction while exports, in contrast, posted a 6.4 percent year-over-year rise in January. Annual exports in February are expected to be up11.9 percent with imports seen down 1.0 percent, making for an expected net surplus of ¥420.0 billion.
US Housing Starts for February (Wed 12:30 GMT; Wed 08:30 EDT)
Consensus Forecast, Annual Rate: 1.579 million
US Building Permits
Consensus Forecast: 1.725 million
Fueled by low interest rates and strong demand for housing, residential construction has been climbing sharply. A 1.579 million annual pace is expected for February starts versus January's 1.580 million while permits, which have been soaring, are seen at 1.725 million versus 1.886 million (revised from 1.881 million).
Canadian CPI for February (Wed 12:30 GMT; Wed 08:30 EDT)
Consensus Forecast, Month over Month: 0.7%
Consensus Forecast, Year over Year: 1.2%
Headline consumer prices in February are expected to rise 0.7 percent on the month for an annual increase of 1.2 percent that would compare with January's 0.6 percent monthly rise and 1.0 percent annual rate.
US Federal Reserve Announcement (Wed 18:00 GMT; Wed 14:00 EDT)
Consensus Forecast, Change: 0 basis points
Consensus Forecast, Policy Range: 0.0% to 0.25%
How the FOMC responds to the jump in long-term interest rates will be the story of the March meeting. The Fed could target long-end buying as the ECB did in the prior week or it could try to jawbone rates lower with new warnings or wording. With rates at the lower bound and negative rates ruled out, there are no expectations for a change in the funds target centered at 0.125 percent between a zero and 0.25 percent corridor. The Fed is committed to aggressive quantitative easing ($120 billion per month) until "substantial" improvement is made toward its employment and inflation goals.
Bank of Japan Announcement (Anytime Thursday)
Consensus Forecast, Change: 0 basis points
Consensus Forecast, Level: -0.1%
The Bank of Japan is committed to aggressive stimulus and since early 2016 has kept its policy rate unchanged at minus 0.1 percent. Yet the sharp rise underway in long-term interest rates adds a new uncertainty and could result in a policy response.
Australian Labour Force Survey for February (Thu 00:30 GMT; Thu 11:30 AEDT; Wed 20:30 EDT)
Consensus Forecast, Unemployment Rate: 6.3%
Consensus Forecast, Employment: 33,000
February’s consensus forecasts are 6.3 percent for unemployment, down from 6.4 percent in January, and an increase of 33,000 in employment following January's moderate 29,100 rise.
Swiss Producer and Import Price Index for February (Thu 07:30 GMT; Thu 08:30 CET: Thu 03:30 EDT)
Consensus Forecast, Month over Month: -0.6%
Consensus Forecast, Year over Year: -1.7%
A 0.6 percent decline is expected for February following a 0.3 percent monthly increase in January. The yearly rate for February is expected at minus 1.7 percent versus minus 2.1 percent in January.
Bank of England Announcement (Thu 12:00 GMT; Thu 08:00 EDT)
Consensus Forecast, Change: 0 basis points
Consensus Forecast, Level: 0.10%
Consensus Forecast: Asset Purchase Level: £895 billion
Mostly better-than-expected economic data increase the likelihood that the Bank of England will keep policy steady at their March meeting. Bank Rate is expected to hold at 0.10 percent with QE holding at £895 billion (gilts accounting for £875 billion).
US Initial Jobless Claims for the March 13 week (Thu 12:30 GMT; Thu 08:30 EDT)
Consensus Forecast: 718,000
Jobless claims for the March 13 week are expected to come in at 718,000 versus 712,000 in the March 13 week. Initial filings are still roughly three times higher than they were before the pandemic.
Japanese Consumer Price Index for February (Thu 23:30 GMT; Fri 08:30 JST; Thu 19:30 EDT)
Consensus Forecast Ex-Food, Year over Year: -0.5%
Price pressures at the consumer level are expected to hold well below zero, at an expected minus 0.5 percent for February's ex-food year-over-year rate versus January's minus 0.6 percent.
Australian Retail Sales for February (Fri 00:30 GMT; Fri 11:30 AEDT; Thu 20:30 EDT)
Consensus Forecast, Month over Month: 0.5%
Retail sales in Australia are expected to increase 0.5 percent on the month in February following a solid January rise of 0.6 percent. Year-over-year growth was at 10.7 percent in January.
German PPI for February (Fri 07:00 GMT; Fri 08:00 CET; Fri 03:00 EDT)
Consensus Forecast, Month over Month: 0.6%
Consensus Forecast, Year over Year: 2.0%
Producer prices rose much more sharply than expected in January, up 1.4 percent on the month and up 0.9 percent on the year. February's consensus estimates are a 0.6 percent rise for the monthly rate and plus 2.0 percent for the annual rate.
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