Econoday Unplugged

A major earthquake in Japan's manufacturing region is certain to lower the economy's near-term performance following what was negative fourth-quarter GDP. The outlook for Europe, Brexit aside, is less ominous with slow but steady growth expected to continue, getting a boost by increased lending tied to ECB liquidity actions. A slow outlook is also the call for the U.S. where, despite favorable weather, growth has been soft, specifically spending by consumers who are not getting much of a lift from wages.

Inflation is showing traction in Europe in strength however that could be tied to Easter calendar effects during March. But prices in the U.S., at least for fuel, are showing sudden traction while the CPI and PPI for China have been on the upswing so far this year.

Soft growth and new central-bank stimulus are the international themes as slowing Chinese growth remains the global economy's central question mark. In the U.S., focus is on exports and whether they are beginning to get a lift from this year's dip in the dollar.

Highlights of this week's edition include a dovish sounding Yellen, the outlook for sterling and Brexit, and the latest on economic policy out of Asia.

Steady stimulus from the Fed together with heavy stimulus from other central banks should help keep the global economy in place.

Markets expect the Fed, facing soft conditions, to hold off withdrawing stimulus at this week's FOMC and they were disappointed that the European Central Bank, despite last week's heavy run of stimulus efforts, isn't planning to lower rates even further.

There's weakness aplenty in the Japanese economy where, in what could be a new negative for the yen, a deeper turn for central bank policy is expected, similar to Europe where the ECB is fighting to lift inflation and improve growth and is expected to cut rates and perhaps add further to its quantitative easing program. Quite different is the outlook for the Fed which is likely to refrain from raising rates despite signs of inflation and despite strength in the labor market.

"Deflation" is the watchword as most global price measures continue to sink, raising frustration among policy makers and raising questions whether central bank stimulus is working. But these questions don't quite apply, at least yet, to the U.S. where key inflation readings, though still moderate, are on the rise.

Brexit may be more than a UK issue, threatening to affect the rest of Europe. Growth in Asia is already soft as it is in the U.S. despite an unexpected rise in U.S. inflation.

The U.S. economy, supported by a solid labor market, may still be sound but recession worries are emerging and interest rates are dropping. In Europe, the economy is flat with ECB stimulus policies still not showing any traction while in Asia, the bias is toward over exaggerating the weakness of economic data.