0e3d4e53dc39047191f43808b87cca419b5e48e28ad3cbc686db7d301999fa57;;[{"layout":"linklist","uid":28225,"publicationDate":"01 Jul 14:50","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183667.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPRjevfYGAe4akzYD491W6A=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Are durable goods foreshadowing future disinflation?","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Released today, eurozone headline inflation for June accelerated to a fresh record high of 8.6% yoy (+0.5pp from May). Core inflation fell back slightly, easing by 0.1pp to 3.7% yoy, probably also reflecting temporary government measures in Germany to help households cope with surging transport costs. We expect eurozone core inflation to peak at above 4% yoy in the fall, before entering a clear downward trend next year. Our Chart of the Week shows that indicators of pipeline price pressure have started to signal a possible turning point (from extremely high levels), led by durable goods.<\/li><li> This might be an important indication, because prices of durable goods were the first to accelerate in early 2021, kickstarting the wave of price increases that eventually led to the strong and increasingly broad-based inflation surge we are currently witnessing. <\/li><li> There are good reasons why durable goods would be the first spending category for which price increases start to ease, both in the eurozone and globally. First, they are likely to be most vulnerable to households switching expenditure following the reopening of economies. Second, they are usually comparatively more sensitive to the interest-rate cycle. Third, they tend to suffer the most during times of uncertainty and low consumer confidence. <\/li><li> We expect that lower inflation for durable goods will eventually be followed by a deceleration in the other components of underlying inflation, with non-durable goods probably the next in line. The substantial easing of price increases of industrial raw materials is likely to support this process. However, the timing and the extent of future disinflation remains highly uncertain.<\/li><\/ul>","hash":"0e3d4e53dc39047191f43808b87cca419b5e48e28ad3cbc686db7d301999fa57","available":"0","settings":{"layout":"linklist","size":"default","showanalysts":"0","showcompanies":"0","showcountries":"0","showcurrencies":"0","synopsislength":"-1","synopsisexpand":"0","nodate":"0","nolinktitle":"0","notitle":"0","dateformat":"d M G:i","noproduct":"0","noflags":"0","shownav":"0","oldestedition":"","limit":"12"}},{"layout":"linklist","uid":28224,"publicationDate":"01 Jul 14:00","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183666.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPRjevfYGAe4tqLnbyr0sCE=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Italy\u00b4s inflation: up strongly due high energy prices and their effects","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> Italian consumer-price inflation rose to 8.0% in June, from 6.8% in May. While it is still a preliminary estimate, the June inflation print was higher than expected (UniCredit: 7.6%; consensus: 7.4%) and marked its highest level since 1986. <\/li><li> Energy prices have been the largest contributors to inflation, also in June, showing higher-than-expected increases, but core inflation (and, especially, services inflation) also rose. Food prices showed another strong increase, being up by 8.8% yoy in June. This increase was in line with our expectations.<\/li><li> In terms of rising energy prices, their main driver has been the impact on motor-fuel prices of increasing oil prices. The price of Brent rose to about USD 117 per barrel, on average, in June amid market reactions to the approval of oil sanctions by the EU and the OPEC\u00b4s inability to honor its production commitments. The government has recently allocated further resources to mitigate the increase in motor-fuel prices during the summer. Still, the volatility in oil prices induced by the Russia-Ukraine conflict leaves uncertainty regarding the future inflation path very high.<\/li><li> Electricity and gas prices were up in June, mainly due to price increases in the non-regulated market. For the third quarter, the Regulatory Authority for Energy announced yesterday a 0.4% increase in electricity tariffs and stabilization of gas tariffs. This came after the government allocated further resources to mitigate the impact of high gas prices on the market. This should help control price increases in the coming months. According to the Regulatory Authority, without government intervention, electricity prices for households could rise by 15% and gas prices by 45% in the third quarter. <\/li><li> With regard to other less-volatile components, there was another increase in prices for services in June. The main driver was a rise in prices in the hotel and restaurant categories and in air tariffs, which has proved stronger than we projected. This is mainly related to a positive impact on services spending of the lowering of pandemic restrictions during the spring. As a consequence, core inflation confirmed a strengthening of its path.<\/li><li> We currently expect CPI inflation to be at 6.4% this year and 2.3% in 2023. The deceleration in energy prices that we project would start at the end of the year is still expected to prompt a decline in inflation in 2023.In greater detail:CPI inflation rose to 8.0% in June, from 6.8% in May. Headline CPI was up by a strong 1.2% mom, following a 0.8% mom increase in May. Core inflation rose to 3.8%, from 3.2% in May. CHART 1: CPI INFLATION IS STILL TRENDING HIGHER<\/li><\/ul>"},{"layout":"linklist","uid":28211,"publicationDate":"29 Jun 20:28","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2022_183652.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRo7cMxi1LPE4sL3kvvrrh5hQ==&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"CEE Quarterly - Demand resilience sapped by economic and geopolitical shocks (3Q22)","product":"CEE Quarterly","synopsis":"<ul class=\"ucrBullets\"><li> The Russia-Ukraine conflict is likely to be protracted, with long-term economic and political consequences in CEE.<\/li><li> Supply shocks spurred on inflation in 2Q22 and are likely to continue to do so by increasing food and energy prices in 2022 and 2023. <\/li><li> In our baseline scenario, the EU will reduce its dependence on Russian gas by two thirds compared to 2021 and to Russian oil by 90% before year-end, in line with plans. In this scenario, we expect the EU-CEE economies to grow on average by 3.6% in 2022 and 2.6% in 2023, with the Western Balkans lagging. Turkey could grow by 4.4% in 2022 and 3.3% in 2023. In Russia, the economy could shrink by around 10% this year and stall next year.<\/li><li> In a negative scenario, in which deliveries of Russian oil and gas stop suddenly, before the EU finds alternative energy sources, CEE could undergo a very negative growth shock in the first few quarters due to impaired production and falling exports, with its magnitude estimated at between -9pp in Turkey and Romania and -13pp in Slovakia and Slovenia. <\/li><li> The biggest direct impact from a lack of Russian energy imports would be in Hungary and Slovakia, followed by Bulgaria, Czechia and Serbia.<\/li><li> If the EU fails to reduce oil and gas purchases from Russia in line with plans, economic growth would be higher than in our baseline scenario, especially in Central Europe.<\/li><li> Inflation is likely to peak between August and December in most CEE countries, with the exception of Hungary and Poland, where the peak could be postponed to 2023. Inflation is expected to remain well above targets in 2023. There is a risk that fiscal profligacy might fuel inflation in most CEE countries. <\/li><li> We expect central banks to end rate hikes in the autumn at around 9.5% in Hungary, 7% in Poland and Czechia, 6% in Romania and 4% in Serbia. The scope for rate cuts in 2023 is very limited, with the CNB and the NBH most likely to cut. The CBR could cut the policy rate to 8% in 2022 and 7% in 2023. The CBRT might hike in 2023 if there is a change in government. <\/li><li> We expect FX interventions to be a suboptimal offset for insufficient rate hikes. <\/li><li> The protracted Russia-Ukraine conflict is testing hawkishness in the EU and the rule of law in CEE. In our view, the main political risks are: 1.\u00a0political instability and more populist policies in Poland; 2.\u00a0the lack of an overhaul of the energy strategy in Hungary; 3. stalling reforms in Czechia, Romania and Slovakia; 4. political volatility and wider economic imbalances in Turkey and 5. lower long-term growth and deindustrialization in Russia.<\/li><li> The EU should act more proactively to foster reforms in the Balkans and around the Black Sea, offering the prospect of a customs union and a common energy policy to candidate countries.<\/li><\/ul>"},{"layout":"linklist","uid":28210,"publicationDate":"29 Jun 16:23","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183650.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPRjevfYGAe4I4tua3mCuHw=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Economics Chartbook - Downside risks to growth building (3Q22)","product":"The Unicredit Economics Chartbook","synopsis":"<ul class=\"ucrBullets\"><li><strong> Global: <\/strong> GDP growth will probably slow to 3.0% this year (previously 3.3%) and 2.8% next year (from 3.4%). Headwinds from the Russia-Ukraine conflict have combined with COVID-19 lockdowns in China to push inflation up further and slow the pace of economic activity. Central banks have become even more hawkish. Tighter financial conditions, a squeeze in real incomes and a sharp downturn in consumer confidence will increasingly weigh on activity. Trade is weakening, also reflecting a switching of expenditure away from goods. Global inflation will probably peak soon, but the speed and extent of the subsequent decline remains highly uncertain. We think that central banks and markets are underestimating the downside risks to growth. If Russian energy imports suddenly stop, much of Europe will likely see negative GDP growth for 2023.<\/li><li><strong> US: <\/strong> We forecast GDP growth of 2.4% this year and below-potential growth of 1.3% next year. Economic momentum is slowing, particularly for interest-rate-sensitive sectors such as housing and durable goods. CPI inflation will likely peak at about 9% yoy in 3Q22, with monthly inflation prints likely easing to levels consistent with target by around the turn of the year. Longer-run measures of inflation expectations are still well anchored and average hourly earnings growth is moderating. We expect the Fed to raise the target range for the federal funds rate into restrictive territory by the end of the year, to 3.25-3.50%, which we see as the peak. Rate cuts could start in late 2023.<\/li><li><strong> Eurozone: <\/strong> GDP is likely to expand by 2.8% this year and by 1.3% in 2023. Survey indicators signal a weakening of growth momentum in the spring and downside risks for economic activity in 2H22. Headline and core inflation have further to rise, although we see initial signs that pipeline price pressure might start easing soon from extremely high levels. Weak growth and slowing inflation will probably force the ECB to stop hiking in 1Q23 once the depo rate reaches 1.25%, i.e. the lower end of the 1-2% range the central bank regards as 'neutral'. We expect the announcement of a credible anti-fragmentation facility featuring potentially unlimited purchases and light conditionality.<\/li><li><strong> CEE: <\/strong> The EU-CEE economies will likely grow on average by 3.6% in 2022 and 2.6% in 2023, with the Western Balkans lagging. Turkey could grow by 4.4% in 2022 and 3.3% in 2023. In Russia, the economy could shrink by around 10% this year and stall next year. Hungary and Slovakia would experience the biggest direct impact from a lack of Russian energy imports, followed by Bulgaria, Czechia and Serbia. Inflation is likely to peak this year in most CEE countries, except for Hungary and Poland, where the peak could be postponed to 2023. Inflation is expected to remain well above targets in 2023. We think that central banks will end rate hikes in the autumn, but the scope for rate cuts in 2023 is very limited. The CBR could cut the policy rate to 8% in 2022 and to 7% in 2023. The CBRT might hike in 2023 if there is a change in government.<\/li><li><strong> UK: <\/strong> We forecast GDP growth of 3.4% this year and 0.6% next year. The economy will be skating on the edge of recession for the next few quarters amid a big squeeze in real disposable income. Inflation is set to stay higher for longer in the UK compared to peers, peaking at above 9% yoy in 4Q22, but should fall quickly to below 2% by end-2023. The BoE will probably stop raising the bank rate after a final 25bp hike to 1.50% in August.<\/li><li><strong> China: <\/strong> GDP will likely grow by 4.0% in 2022 and by 4.2% in 2023. While most COVID-19-related restrictions were lifted at the beginning of June, the supply side of the economy is recovering faster than the demand side as Chinese consumers continue their cautious behavior to avoid quarantines. The central government is stepping up efforts to support the economy and reduce the negative impact of future waves of contagion on the domestic economy through a combination of monetary and fiscal policy measures. The PBoC might tolerate further weakening of the CNY towards 7.00 against the USD to support exports. <\/li><\/ul>"},{"layout":"linklist","uid":28184,"publicationDate":"24 Jun 15:56","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183617.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPRjevfYGAe48b4Sw0UGeBI=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Little or no sign of a wage-price spiral in the US","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> In the US, amid rampant inflation and a very tight labor market, many are concerned that the economy could experience a 1970s-style wage-price spiral, which would likely require a much more aggressive tightening of monetary policy. Our Chart of the Week decomposes US wage growth into the contributions made by fundamentals: inflation expectations (red bars), labor market slack (dark grey bars) and underlying productivity growth (light red bars). These contributions are estimated from a simple model that relies on pre-pandemic relationships1. Wage growth (here measured by the Employment Cost Index, ECI) rose to an annualized rate of 5.6% in 1Q22, 3.3pp above pre-pandemic 4Q19 levels. According to the model, rising long-term inflation expectations2 accounts for 0.4pp of the rise, labor market 'slack' accounts for only 0.1pp, while trend productivity growth has had a negligible effect.3 Evidence of a wage-price spiral would come from high inflation leading to rising inflation expectations and higher wages via the wage and price setting process, but the model-estimated contribution to rising wage growth from inflation expectations is currently small.<\/li><li> The unexplained (or 'residual') portion of the rise in wage growth has been unusually large recently, as indicated by the blue bars. To be sure, the model relies on pre-pandemic relationships. It\u00b4s possible that something may have changed structurally in the post-pandemic era, and high wage growth could persist, for example driven by a rise in the equilibrium rate of unemployment, a steeper slope of the Phillips curve, and\/or uncertainty about inflation expectations.<\/li><li> However, our baseline is that high wage growth will be temporary, not structural, as the pre-pandemic forces have not gone away. In the pre-pandemic period, the unexplained component (blue bars) was mean zero and akin to white noise, whereby upward effects tended to be followed by downward effects. There are tentative signs that wage growth is already easing, as 3M\/3M growth in average hourly earnings (an alternative and more timely measure of wage growth than the ECI) fell to 3.8% in May, down from 7.0% in January. ________________________<\/li><li> The wage growth model is loosely based on that in Yellen, Janet L. (2017). 'Inflation, Uncertainty, and Monetary Policy,' speech delivered at 'Prospects for Growth: Reassessing the Fundamentals,' 59th Annual Meeting of the National Association for Business Economics, held in Cleveland, Ohio, 26 September 2017. The estimated equation for the employment cost index (ECI) is:ECIt = -1.16 + 0.99*'et-1 - 0.30*SLACKt - 0.45*'SLACKt + 0.66*PRODt + 'twhere ECI is the annualized log difference of the Employment Cost Index (ECI) for hourly compensation of private industry workers; 'e is the University of Michigan five-year ahead consumer inflation expectations; SLACK is the unemployment rate less the Congressional Budget Office\u00b4s (CBO) estimate for the equilibrium unemployment rate; 'SLACK is the first-difference of SLACK; PROD is an estimate of trend hourly labor productivity growth for the business sector; ' is an error term and t denotes time. Trend labor productivity is derived using the method detailed in Yellen (2017). The estimation sample is the pre-pandemic period 3Q90-4Q19 and the coefficients are estimated using ordinary least squares regression. All coefficients are statistically significant and the adjusted R-squared is 0.42. The pre-pandemic period, not the whole sample, is used for the estimation because we want to estimate the performance of the model in explaining recent (post-pandemic) wage growth. The estimated coefficients are used to produce out-of-sample forecasts for 1Q20-1Q22.<\/li><li> In the model, inflation expectations are proxied by the University of Michigan five-year ahead consumer inflation expectations, for reasons of goodness-of-fit and because it is a long-running survey. It performed better than the Survey of Professional Forecasters (SPF). We also tested short-term (one-year ahead) measures of inflation expectations, both from the University of Michigan consumer survey and the SPF, and both were found to be not statistically significant. This is important because one-year ahead inflation expectations have moved materially higher, while the rise in longer-run measures has been much more muted.<\/li><li> More recently, the preliminary estimate for June of University of Michigan five-year ahead consumer inflation expectations jumped to 3.3%, up from 3.0% in May, something which Fed Chair Jerome Powell called 'eye-catching' and one of the reasons why the FOMC chose to raise interest rates by 75bp instead of 50bp at its meeting earlier this month. It would have been consistent with a 0.3pp rise in the model\u00b4s prediction for wage growth, taking it to 3.4%, all else equal. But in the final release of the University of Michigan June survey, published today, the preliminary reading was revised down significantly, to 3.1%.<\/li><\/ul>"},{"layout":"linklist","uid":28171,"publicationDate":"23 Jun 13:06","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183604.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPRjevfYGAe45Uv3TjrnECM=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Eurozone PMIs sound an alarm bell","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The eurozone PMIs for June sound an alarm bell. The composite PMI declined more than expected, from 54.8 to 51.9 (UniCredit: 54.3; consensus: 54.0), the lowest level since February 2021. The deterioration was broad-based across sectors, suggesting that growth momentum might be weakening sooner and more quickly than expected. <\/li><li> Manufacturing seems to be already in a downturn, with the output index falling below 50 for the first time in two years and new orders contracting at a faster pace. This has led to the largest buildup of inventories of unsold goods since June 2020. Services held up better, but the trend is one of a clear slowdown as firms report that the reopening boost is already fading, with high prices accelerating the exhaustion of pent-up demand. Tighter financial conditions appear to have contributed to the slowdown in demand. <\/li><li> Output prices confirm recent signs of easing from peaks, validating the view of a turning point in underlying price pressures from extremely high levels. Perhaps unsurprisingly, this trend is more pronounced in the manufacturing sector, whereas it is more contained in services, where input prices hold around record-high levels. In the manufacturing sector, there is evidence that a gradual improvement in supply-chain bottlenecks keeps unfolding, although the situation remains far from pre-pandemic conditions. According to the survey, weaker demand for inputs amid rising inventories has played a role here. <\/li><li> Employment growth eased both in the manufacturing and the services sectors but remains at healthy levels for now.In greater detail: In manufacturing, the output index declined from 51.3 to 49.3, whereas the new orders index fell from 48.7 to 44.7, signaling the sharpest pace of contraction since May 2020.<\/li><\/ul>"},{"layout":"linklist","uid":28142,"publicationDate":"19 Jun 13:28","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183566.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJIfTZUMx2FS4pUMLFRj3ZyE=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li><strong> The ECB and the promise to fight fragmentation: <\/strong> The risk is clearly one of under-delivery, but I\u00b4m moderately optimistic.<\/li><li> The EU\u00b4s granting of candidate status to Ukraine. The decision was inevitable, given the zeitgeist on the back of the horrific attack on the country, but I\u00b4ll argue that there is a major risk that this will backfire in a nasty way.<\/li><\/ul>"},{"layout":"linklist","uid":28105,"publicationDate":"12 Jun 13:31","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183516.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJIfTZUMx2FS4XigRldRYceM=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> Discuss the three areas where I think the ECB goes wrong.<\/li><li> Outline why I think you need to dig in for a rough ride for growth and asset prices.<\/li><\/ul>"},{"layout":"linklist","uid":28103,"publicationDate":"10 Jun 16:43","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183514.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJIfTZUMx2FS4rnTgvsAeCCA=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US CPI: Inflationary pressures are not easing, increasing odds of a 50bp Fed hike in September","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> US CPI inflation accelerated to 8.6% yoy in May, up from 8.3% yoy in April. It is the highest year-on-year rate since December 1981. Core CPI (that is, excluding energy and food) inflation eased slightly in year-on-year terms, to 6.0% from 6.2% in the prior month. Since base effects influence year-on-year rates, a clearer picture of underlying inflation dynamics can be seen by looking at the monthly seasonally-adjusted inflation rates. On a monthly basis, headline CPI rose a rapid 1.0% mom in May, up from 0.3% mom in April, while core CPI rose a strong 0.6% mom, the same rate as in April and three times the rate consistent with the Fed\u00b4s inflation target. Price rises were broad-based, with the largest upward contributions to monthly inflation coming from shelter, energy and food.<\/li><li> The rise in energy and food prices was widely expected, although the magnitude of the rise was a bit larger than we had expected, notably for utility gas prices. Energy prices rose 3.9% mom, with gasoline prices up 4.1% mom and utility gas prices up a huge 8.0% mom, reflecting recent movements in crude oil and natural gas prices, respectively. Food price inflation accelerated to 1.2% mom in May, with the food at home index rising 1.4% mom. This largely reflects the increase in food commodity prices, with the UN FAO Food and Agricultural World Food Price Index up almost 20% since the end of last year.<\/li><li> The big news in the May CPI report is the stickiness of monthly core inflation. It was hoped that, as expenditure-switching away from goods and towards services continued, rising core services price inflation would be offset by a decline in core goods inflation. But in fact, only the first part of this was true in May. Core services inflation (0.6% mom) remained strong, reflecting an acceleration in rents (0.6% mom) as well as rapid price rises for travel-related items. The strength in rents reflect the high demand for housing, tight labor market and strong wage growth. Rents tend to be sticky as rental agreements are set periodically. As the direct effects of the pandemic fade and pent-up demand for services is unleashed, the price of travel-related services surged (airfares up 12.6% mom after 18.6% mom in April). The surprise, however, was that core goods inflation accelerated to 0.7% mom in May, reversing the trend of the previous three months of deceleration. We suspect this is due to supply bottlenecks, particularly in China during the past couple of months as well as from the Russia-Ukraine conflict, and still strong demand for goods, as evident in the US retail sales figures. Notably, used and new car prices rose strongly.<\/li><li> For the Fed, the May CPI report is precisely the kind of report that could cause it to lean towards a 50bp rate hike in September, in addition to the likely 50bp hikes on 15 June and on 27 July. Indeed, as Fed Vice Chair Lael Brainard recently said, 'if we don\u00b4t see the kind of deceleration in monthly inflation prints' then it may be appropriate to hike by 50bp in September too.Chart 1 shows that, in year-on-year terms, CPI inflation is at a 40-year high, at 8.6%, while core CPI inflation is at 6.0%.CHART 1: CPI INFLATION AT A 40-YEAR HIGH<\/li><\/ul>"},{"layout":"linklist","uid":28075,"publicationDate":"07 Jun 13:08","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183480.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJCPfcVzTSO54AubO3iR-kKA=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - OPEC+ unlikely to deliver on its promises","product":"Chart of the Week","synopsis":"<p><ul class=\"ucrBullets\"><li>Last week, during its regular monthly review meeting, OPEC+ committed to increasing its July production quota by 648kb\/d instead of the expected 430kb\/d. With the oil market being extremely tight, the surprise extra-output was cheered by investors with a temporary drop in Brent and WTI prices that has already been more than reversed. Our Chart of the Week, which reports the gap between the promised OPEC+ output in July and what is likely achievable under current quotas and Western sanctions of Russian oil, shows that the production pledges made by the cartel are not realistic and that the market will continue to be heavily under-supplied at a time of resurging post-pandemic demand for oil. <\/li><li>OPEC+ lifted its overall production target for July to 43.2mb\/d from around 42.5mb\/d in June. The increase is split across the members of the cartel according to their quotas in the deal. However, the commitments clash with the reality on the ground. In order to meet the target, countries such as Algeria, Angola, Congo, Nigeria, Azerbaijan and a few others are supposed to produce above their sustainable capacity (production that can be activated within 90 days). Overall, they are expected to pump 900kb\/d more than what their fields allow to do. In addition, Russia is expected to increase its production by 600kb\/d. Unlike other members, Moscow has substantial spare capacity. But its output is already dropping as a result of Western sanctions, and it is expected to decline by 2mb\/d more between now and July, according to estimates by the International Energy Agency (IEA). Overall, the market is likely to be short of 3.5mb\/d in July compared to what OPEC+ has promised (equivalent to 3.5% of pre-pandemic global supply). And the shortfall could be even higher if one considers that traditional producers are already producing below their official quotas due to logistical issues related to years of underinvestment. <\/li><li>Looking at traditional producers only, there are ways to mitigate the lack of supply. While most OPEC+ members are close to their production capacity, countries such as Saudi Arabia or the United Arab Emirates could inject enough barrels of oil into the market to compensate for other producers\u00b4 shortfalls. For this to happen, the system of national quotas that underpins the current production deal would need to be scrapped. However, such a move would undermine the stability of the cartel itself, as many producers would see their output remaining the same while prices would go down. Alternatively, the West could allow sanctioned Iranian oil (at least 1.5mb\/d available) to enter global markets, possibly even without the signing of a new nuclear deal, albeit not easy to implement and not enough to offset the gap in OPEC+ production.<\/p><\/li><\/ul>"},{"layout":"linklist","uid":28041,"publicationDate":"01 Jun 16:31","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183443.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJCPfcVzTSO54s1-MbFJDJiQ=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183453.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJCPfcVzTSO54F6Cn9ac9boI=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183467.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJCPfcVzTSO54pMappIm8ttA=&T=1&T=1"},"title":"Oil Update - Oil prices likely to stay high for long","product":"Oil Update","synopsis":"<p><ul class=\"ucrBullets\"><li>The oil market remains extremely tight. Sanctions on Russian oil, OPEC+ production constraints and the stalled negotiations for an Iranian nuclear deal are likely to prolong the market tightness at a time of resurging post-pandemic mobility. <\/li><li>Only the scrapping of OPEC+ quotas and the signing of an Iran deal would bring lasting price relief to the market. However, neither scenario looks politically realistic ' at least for the moment. <\/li><li>Upside risks to our forecast of oil prices declining in 2H22 towards USD 110\/bbl have increased substantially. Brent might remain in the USD 115-125\/bbl trading range for longer than originally expected, with potential spikes to USD 130\/bbl.Brent is again hovering around USD 120\/bbl. The easing of anti-virus lockdowns in China, along with the partial embargo of Russian oil that was just announced by the European Union, has pushed oil prices to a two month-high. These factors add to the tightness of an already tight oil market (Chart 1). The expected shift from a situation of under-supply to one of over-supply by mid-year is now becoming increasingly unlikely ' and not just because of the uncertainty caused by the Russia-Ukraine conflict. In its latest Short-Term Energy Outlook, the Energy Information Agency predicted that the oil market would remain broadly balanced for the next few months, but that supply would no longer exceed demand as it was forecasting until a couple of months ago. However, as we discuss below, this is a rather optimistic assumption at the moment.Even if the degree of uncertainty remains extraordinarily high and there are several mitigating factors at play, such a tight market implies that upside risks to our forecast of oil prices declining in 2H22 towards USD 110\/bbl have increased substantially. Regardless of mandated and voluntary sanctions on Russian oil, actual supply from OPEC+ producers is substantially lower than formal production commitments would suggest as a result of years of underinvestment and poor maintenance of existing infrastructure. Exempting Russia from the OPEC+ output deal and allowing other producers such as Saudi Arabia to pump more might bring some temporary relief to the market, but the lack of sufficient spare capacity represents an increasingly binding constraint at a time of resurging post-pandemic mobility. As a result, the probability of Brent remaining in the USD 115-125\/bbl trading range for longer than originally expected, at least throughout the summer, has increased considerably, with potential spikes to USD 130\/bbl.<\/p><\/li><\/ul>"},{"layout":"linklist","uid":27988,"publicationDate":"24 May 14:31","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183381.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHzbeXiHo2MFeKYSnTCNkdk=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Still no signs of a wage-price spiral in eurozone","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Today\u00b4s release of negotiated wages in the eurozone showed a rise to 2.8% yoy in the first quarter of 2022 (4Q21: +1.6%). It was the strongest increase since 2009 and seemingly confirms what some economists and central bankers feared for quite some time: wage inflation has started to accelerate markedly in the eurozone. Resolute action by the ECB would be needed now to avoid a wage-price spiral, the sooner the better and maybe even a hike by 50bp. <\/li><li> A second more careful look reveals a different and subtle picture. The latest pick-up in eurozone wages was largely caused by Germany where negotiated wages jumped to 4.3% yoy from 1.5%. And here is the catch: As the methodology in capturing negotiated wages is somewhat different across eurozone countries, the German figure includes special payments and is far more volatile than the eurozone data (see also the spike in 2019). In yesterday\u00b4s release of its monthly report, the Bundesbank already noted that the pay hike was 'mainly due to high special payments and corona bonuses. By contrast, basic compensation adjusted for such special payments increased by only 1.6%.' <\/li><li> In other words, there are still no signs of excessive and wide-spread wage increases in the eurozone. For the record, negotiated wages in Italy were still below 1% yoy in 1Q22 and about 2\u00bd% for Spain and the Netherlands, while the French figure is not available yet. Typically, the ECB sees eurozone wage growth of 3% as consistent with 2% inflation over the medium term. The latest figure might support calls for gradual policy normalization by the majority of the Governing Council of the ECB but does not justify a 50bp hike. <\/li><li> Yesterday, Bundesbank President Nagel stated for Germany that 'when wage negotiations start in the second half of the year, we will see higher numbers'. We agree but how much it will be and whether it really requires monetary tightening is impossible to say at this stage. After all, there is a lot of uncertainty about how the economy will perform, especially in the manufacturing sector which is facing substantial downside risks in the form of lower growth dynamics in China and persistent supply shortages. Going forward, there are two important collective bargaining rounds in the pipeline for Germany. In the metal industry with nearly 4mn employees, the labor union will publish its wage demand at the end of June with negotiations starting in mid-September at the latest. In the chemical sector (0.6mn employees), the negotiations about a regular pay hike will be continued in October after the agreement on a one-off payment in April. <\/li><\/ul>"}]

fca5774f669803887558f1f8bf49f8ba6cbad35f9de48a9f1720f5619f212128;;[{"layout":"linklist","uid":28211,"publicationDate":"29 Jun 20:28","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2022_183652.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRo7cMxi1LPE4sL3kvvrrh5hQ==&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"CEE Quarterly - Demand resilience sapped by economic and geopolitical shocks (3Q22)","product":"CEE Quarterly","synopsis":"<ul class=\"ucrBullets\"><li> The Russia-Ukraine conflict is likely to be protracted, with long-term economic and political consequences in CEE.<\/li><li> Supply shocks spurred on inflation in 2Q22 and are likely to continue to do so by increasing food and energy prices in 2022 and 2023. <\/li><li> In our baseline scenario, the EU will reduce its dependence on Russian gas by two thirds compared to 2021 and to Russian oil by 90% before year-end, in line with plans. In this scenario, we expect the EU-CEE economies to grow on average by 3.6% in 2022 and 2.6% in 2023, with the Western Balkans lagging. Turkey could grow by 4.4% in 2022 and 3.3% in 2023. In Russia, the economy could shrink by around 10% this year and stall next year.<\/li><li> In a negative scenario, in which deliveries of Russian oil and gas stop suddenly, before the EU finds alternative energy sources, CEE could undergo a very negative growth shock in the first few quarters due to impaired production and falling exports, with its magnitude estimated at between -9pp in Turkey and Romania and -13pp in Slovakia and Slovenia. <\/li><li> The biggest direct impact from a lack of Russian energy imports would be in Hungary and Slovakia, followed by Bulgaria, Czechia and Serbia.<\/li><li> If the EU fails to reduce oil and gas purchases from Russia in line with plans, economic growth would be higher than in our baseline scenario, especially in Central Europe.<\/li><li> Inflation is likely to peak between August and December in most CEE countries, with the exception of Hungary and Poland, where the peak could be postponed to 2023. Inflation is expected to remain well above targets in 2023. There is a risk that fiscal profligacy might fuel inflation in most CEE countries. <\/li><li> We expect central banks to end rate hikes in the autumn at around 9.5% in Hungary, 7% in Poland and Czechia, 6% in Romania and 4% in Serbia. The scope for rate cuts in 2023 is very limited, with the CNB and the NBH most likely to cut. The CBR could cut the policy rate to 8% in 2022 and 7% in 2023. The CBRT might hike in 2023 if there is a change in government. <\/li><li> We expect FX interventions to be a suboptimal offset for insufficient rate hikes. <\/li><li> The protracted Russia-Ukraine conflict is testing hawkishness in the EU and the rule of law in CEE. In our view, the main political risks are: 1.\u00a0political instability and more populist policies in Poland; 2.\u00a0the lack of an overhaul of the energy strategy in Hungary; 3. stalling reforms in Czechia, Romania and Slovakia; 4. political volatility and wider economic imbalances in Turkey and 5. lower long-term growth and deindustrialization in Russia.<\/li><li> The EU should act more proactively to foster reforms in the Balkans and around the Black Sea, offering the prospect of a customs union and a common energy policy to candidate countries.<\/li><\/ul>","hash":"fca5774f669803887558f1f8bf49f8ba6cbad35f9de48a9f1720f5619f212128","available":"0","settings":{"layout":"linklist","size":"default","showanalysts":"-1","showcompanies":"-1","synopsislength":"-1","showcountries":"-1","showcurrencies":"-1","synopsisexpand":"0","nodate":"0","notitle":"0","dateformat":"d M G:i","nolinktitle":"0","noproduct":"0","noflags":"0","shownav":"0","oldestedition":"","limit":"1"}}]