Household spending has picked up sharply in response to the collapse in oil prices. In January, the growth rate of underlying retail sales in advanced economies reached its highest level since 2006. Even consumers in the euro-zone are participating in the upturn, though Japanese households are not. Business surveys suggest that broader economic activity has also rebounded. For example, the global composite PMI increased for a second successive month in February. However, the recovery remains highly uneven. The threat of deflation continues to hang over the euro-zone while Japan is yet to get back to its pre-tax-hike levels of consumption or GDP. Accordingly, both the Bank of Japan and ECB are likely to continue easing policy for some time to come, while several other central banks are likely to cut rates.
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