The world economy has entered the second quarter in good shape. Business surveys edged higher in March and point to strong global growth in Q1. Consumer confidence in advanced economies has risen to a ten-year high, consistent with a big increase in household spending growth. Headline inflation has rebounded sharply in every major economy, though in many cases core inflation remains low. Only in the US do rising wage pressures look set to push underlying inflation significantly higher. Meanwhile, the recovery in emerging economies is broadening out. Higher prices are helping major commodity exporters, including Brazil and Russia, return to growth. And activity in India is recovering from last year’s demonetisation shock. The major exception is China, where the latest rebound in growth is likely to fade as policymakers focus on credit risks.
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