Federal Reserve Bank Chairman Jay Powell was right to observe that the US economy is at an “inflection point”. In fact, there are several inflection points approaching — in global economic activity, in how the pandemic is being managed, in important policies which affect markets and companies and in geopolitics. The next few months are likely to be turbulent, to say the least. Economic prospects are likely to brighten, underpinned by a growing likelihood that the economic damage caused by the pandemic is reversing. But, changes in policy and geopolitical developments could unnerve financial markets, particularly emerging markets.

1. Global economic activity set to blow past expectations
There are tantalising data points which hint that the world economy could soon surprise strongly on the upside. The New York Fed’s Weekly Economic Indicator points to US economic growth being much stronger than the consensus believes. Chinese exports surged in March, after robust numbers for January–February. This is not simply because of a low base in the first quarter of 2020 when the Chinese economy tanked and Covid infections were at their worst. What is stunning is that Chinese exports in March 2021 were about 21% bigger than those for March 2019.

South Korea’s exports for the first 10 days of April also sizzled — up almost by a quarter over the year ago. Encouragingly, Korean export growth is not just being driven by semiconductors as previously, but exports of automotive as well as of chemicals are also growing rapidly. This tells us that the global economic recovery is broadening out.

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