If inflation is coming it is going to have to overcome one yawning gulf in the global output gap. The US has the best chance. Goldman with the note:
Exhibit 5 presents our long-run output gaps for the US, Euro Area, Japan and UK. The appendix shows our country-by-country output gap and NAIRU estimates compared to official institutions. We estimate that the G4 economies have spent much of the past decade below potential, with the UK just about reaching potential before the pandemic while GDP in Japan (-½%), the US (-1%), and the Euro Area (-1½%) all remained somewhat below potential. However, there is now much more long-run spare capacity in 2021Q1 in the Euro Area (-8%) and especially the UK (-9½%) than in Japan (-4½%) and the US (-4%) as a result of larger falls in GDP last year in Europe.
Our Euro Area estimate of around -8% in 2021Q1 masks large differences across member states as deeper pandemic recessions in Southern Europe have widened the pre-pandemic gap with Germany further. Specifically, we estimate output gaps in2021Q1 of around –5½% in Germany, -7% in France, -10½% in Italy and as much as-12½% in Spain.
