0e3d4e53dc39047191f43808b87cca419b5e48e28ad3cbc686db7d301999fa57;;[{"layout":"linklist","uid":28512,"publicationDate":"02 Oct 13:19","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_184029.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJKZXH2GAVJvLhr7t4nTli7c=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li><strong> The UK: <\/strong> Lost in confusion. Period.<\/li><li><strong> Germany: <\/strong> Exercising its fiscal muscles ' unilaterally ' throwing national and EU fiscal rules out the window in the process.<\/li><li><strong> Italy: <\/strong> Impressive political discipline so far; the power of the EU' <\/li><li> The key lessons learned.<\/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":28500,"publicationDate":"28 Sep 16:33","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_184012.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJKZXH2GAVJvL78LWAPe4_o0=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Economics Chartbook - Central banks\u00b4 inflation fight raises recession odds (4Q22)","product":"The Unicredit Economics Chartbook","synopsis":"<ul class=\"ucrBullets\"><li><strong> Global: <\/strong> The growth outlook is deteriorating. After likely subdued growth of 2.7% this year, we forecast global GDP rising by only 1.9% next year. The weakening reflects tighter financial conditions, surging energy bills in Europe and reduced economic momentum across the US, Europe, and China. The manufacturing sector is under pressure, the boost to services from the reopening of the economy is fading, and consumer confidence is low. Supply constraints have eased but remain elevated compared to before the pandemic. High excess savings and the tight labor market should mean any recession is mild. We expect global inflation to ease next year amid negative base effects, lower demand, a further easing of supply constraints and lower commodities prices. The risks to growth are to the downside as central banks prioritize fighting inflation.<\/li><li><strong> US: <\/strong> We forecast GDP growth of 1.5% this year and -0.1% next year (previously +0.1%), with the economy teetering on the edge of recession. The weakness is concentrated in interest-rate-sensitive sectors, notably housing and durable goods. Monthly headline inflation will likely ease sustainably to levels consistent with the 2% target from the spring, while core inflation is likely to take longer to do so. The midterm elections seem likely to result in political gridlock. We now see the Fed raising interest rates to a peak of 4.50-4.75% (previously 3.75-4.00%) by early next year, followed by a first rate cut in late 2023.<\/li><li><strong> Eurozone: <\/strong> GDP growth is likely to average 3.1% this year and come to a standstill in 2023 (0.2%). The latest survey indicators point to a recession at the turn of the year, in line with our baseline scenario. Inflation is likely to hover at around 10% for the remainder of the year, before entering a downward trajectory that would take it towards 2.5% by the end of 2023. We are raising our forecast for the peak level of the deposit rate by 25bp to 2.25%, to be reached in 1Q23. As policy rates rise towards, or above, the upper end of the neutrality range, the ECB is likely to start looking at quantitative tightening (QT) as its next policy step.<\/li><li><strong> CEE: <\/strong> We forecast GDP growth to slow from 4.3% in 2022 to 0.8% in 2023 in EU-CEE and from 5.5% in 2022 to 3.2% in 2023 in Turkey. In Russia, we expect the economy to shrink by around 5% this year and 4% in 2023. We believe that CEE can avoid an energy crisis, but not a technical recession in 4Q22-1Q23 due to high energy prices, circumspect consumers, negative credit and fiscal impulses, destocking, imports outpacing exports, low EU fund inflows and falling public investment. A gradual recovery is possible in 2H23. Inflation is likely to peak this winter in all CEE countries and to remain well above target in 2023. We expect tightening cycles to end at 13% in Hungary, 7% in Czechia and Poland, 6% in Romania and 5% in Serbia. The CBRT is likely to cut its policy rate to single digits and the CBR to 7%. FX interventions will likely continue in Czechia, Poland, Romania, Serbia and Turkey.<\/li><li><strong> UK: <\/strong> We are revising our GDP growth forecasts down slightly to 3.3% for this year (previously 3.5%), and to -0.3% for next year (previously -0.1%). The economy is likely already in recession. The energy price cap means inflation will probably peak at just under 11% in October. Large and poorly targeted fiscal easing at a time of constrained supply will likely force the BoE to hike the bank rate sharply to 4.50% (previously 2.50%).<\/li><li><strong> China: <\/strong> We are reducing our GDP growth forecast for 2022 to 2.0% from 2.4%, and for 2023 to 3.4% from 4.0%. The combination of power shortages, sporadic lockdowns and a real estate sector in disarray is weighing on economic activity. However, contained inflationary pressure, both on the producer and consumer front, is allowing the government to use its monetary and fiscal policy levers to support the economy ahead of the party congress that will likely elevate Xi Jinping to a third term as president of the country. After hitting new lows since 2008, the CNY is set to remain weak against the USD, beyond 7.20. <\/li><\/ul>"},{"layout":"linklist","uid":28499,"publicationDate":"28 Sep 11:54","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2022_184011.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRoYLcQZAba8MpzoBozIhtkyg==&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"CEE Quarterly - Testing resilience ahead of the winter (4Q22)","product":"CEE Quarterly","synopsis":"<ul class=\"ucrBullets\"><li> Europe is heading into a difficult winter, but we believe that CEE can avoid an energy crisis, even if Russia halts all exports of natural gas to Europe. <\/li><li> We expect a technical recession in 4Q21-1Q23 caused by high energy prices, circumspect consumers, negative credit and fiscal impulses, destocking, imports outpacing exports, low EU fund inflows and falling public investment. A gradual recovery is possible in 2H23. <\/li><li> We forecast economic growth to slow from 4.3% in 2022 to 0.8% in 2023 in EU-CEE, with the Western Balkans lagging this year and outperforming in 2023. We see Turkey\u00b4s economy growing by 5.5% in 2022 and 3.2% in 2023. In Russia, we expect the economy to shrink by around 5% this year and 4% in 2023, with the overall contraction similar to our previous forecast.<\/li><li> Inflation is likely to peak this winter in all CEE countries, as inflation momentum is strengthening only in Hungary. We expect inflation to remain well above target in 2023 due to higher retail energy prices, resilient domestic demand and tight labor markets. <\/li><li> We believe that the CNB has ended its tightening cycle at 7% and the NBH at 13%. We expect the NBP to stop hiking at 7%, the NBR at 6% and the NBS at 5%. The CBRT is likely to cut its policy rate to single digits, hiking sharply in 2023 if the opposition wins the parliamentary election. We expect the CBR to end cuts at 7%. <\/li><li> We expect FX interventions to continue in Czechia, Poland, Romania, Serbia and Turkey. Only the CNB is considering phasing out its FX sales. <\/li><li> Besides a protracted conflict between Russia and Ukraine and its potential spillover to Europe, we highlight the following risks: 1. Russia\u00b4s inability to substitute imports from the West, 2. potential economic sanctions if Turkey continues to cooperate with Russia, 3. low EU transfers as the European Commission focuses on the rule of law, 4. pre-election populism affecting economic policies and ratings, 5. Hungary\u00b4s geopolitical isolation with possible repercussions on FDI, 6. Bulgaria\u00b4s protracted election cycle and the potential postponement of euro adoption and 7. Serbia\u00b4s political reshuffling to avoid choosing between Europe and Russia.<\/li><\/ul>"},{"layout":"linklist","uid":28481,"publicationDate":"23 Sep 15:35","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183987.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJI3owJG455DyBOr9iK-WXoA=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Household squeeze intensifies","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> The squeeze on real disposable income caused by surging inflation has taken a heavy toll on consumer sentiment globally, and the eurozone is no exception. The preliminary estimate for consumer confidence for September, published yesterday, recorded a drop to a new all-time low. <\/li><li> Our Chart of the Week shows the unprecedentedly large gap that has opened up between sentiment among households and retailers, with the latter displaying very good resilience so far. The main reason is probably the high pricing power of retailers as the economy rebounded from the slump caused by the pandemic. This has allowed them to pass on to consumers a meaningful share of their higher input costs, thus safeguarding profit margins. <\/li><li> We suspect that this trend will not prove sustainable as the economic outlook darkens and households become progressively less keen on spending the large savings accumulated during the pandemic. Despite a resilient labor market, in the eurozone this is likely to translate into a consumer-driven recession at the turn of the year and reduced profitability for retailers.<\/li><\/ul>"},{"layout":"linklist","uid":28480,"publicationDate":"23 Sep 14:54","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183986.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJI3owJG455DyBy89IMzqR5I=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_184003.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJKZXH2GAVJvL9gnqYNxBvNk=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183997.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJI3owJG455DypfGahZNyNl0=&T=1&T=1"},"title":"Oil Update - Five factors that might push Brent back up to USD 100\/bbl","product":"Oil Update","synopsis":"<p><ul class=\"ucrBullets\"><li>Demand concerns due to a weakening global outlook are weighing on oil prices. <\/li><li>We challenge the prevailing market view by highlighting five supply-side factors that might push Brent higher, back up to USD 100\/bbl.<\/li><li>Despite rising recessionary risks, we expect supply shortages to dominate the market narrative over demand destruction fears in the remainder of the year.The price of Brent oil is down by about 25% since the peak of last June when a barrel was trading close to USD 125\/bbl. Futures contracts for oil delivery in July 2023 change hands at close to USD 80\/bbl ' almost USD 15\/bbl below what the market was pricing in back in June. The balance of risks has clearly changed from fears of undersupply due to opportunistic behavior by OPEC+ to concerns about oversupply due to a weakening global economic outlook. Tighter monetary policies across advanced economies, the energy crisis in Europe, and a weakening real estate sector in China, along with that country\u00b4s zero-COVID policy, are dragging down world oil demand. If you take out demand increases due to gas-to-oil shifts (more below), the International Energy Agency expects global oil consumption in 4Q22 to be roughly 1% below pre-pandemic levels. In such a bearish market, where all the attention is on the growing risk of demand destruction, it is easy to overlook supply-side factors that might push oil prices upward in the short term. We identify at least five that could bring Brent prices back towards USD 100\/bbl in the next quarter or so. In our view, supply shortages are likely to dominate the market narrative over demand destruction concerns in the remainder of the year. Factor 1. Spare capacity is increasingly tightSpare capacity ' the volume of production that can be achieved within 30 days and sustained for at least 90 days ' is the oil sector\u00b4s ultimate shock absorber, going up and down depending on demand conditions and production strategies. Around 95% of the world\u00b4s spare capacity is in the hands of four OPEC+ countries: Saudi Arabia, Russia, the UAE and Kuwait, with Riyadh holding the lion\u00b4s share (around 30%). As shown in Chart 1, global spare capacity is, at around 1.9mb\/d, below its 2014-2019 average. Under normal circumstances, oil prices incorporate a risk premium when spare capacity is too low to allow the market to respond to demand shocks or to potential crises that reduce oil supplies, like a war or a terrorist attack. Therefore, a further decline in global spare capacity ' supply is expected to increase by 1mb\/d in 4Q22 ' is likely to exert upward pressure on prices. The only way for spare capacity to increase in the short term, as the activation of traditional wells might take years and massive investments, is if OPEC+ decided to cut production ' something that the market would perceive as bullish for oil prices. And this leads to factor 2. CHART 1. SHORT OF SPARE CAPACITY<\/p><\/li><\/ul>"},{"layout":"linklist","uid":28477,"publicationDate":"23 Sep 12:51","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183983.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJI3owJG455DyVznahqXk2sc=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Eurozone PMIs: monetary policy trade-off keeps worsening","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> Eurozone PMIs for September indicate a further weakening of growth momentum and rising likelihood of a recession at the turn of the year. The composite PMI dropped further into contraction territory, to 48.2 from 48.9, its lowest reading since early 2021 (UniCredit and consensus: 48.2). The manufacturing sector remains under pressure with no signs of a turnaround soon, while the deterioration in services activity gathers pace amid intensified erosion of purchasing power of households and the fading of the reopening effect. At a country level, France recorded a moderate acceleration in economic growth from a low level, while in Germany the downturn intensified. The press release signals that outside of these two countries, output contracted in September. Evidence that the latest surge in energy bills is already affecting firms\u00b4 input and output prices further worsens the trade-off faced by monetary policy. <\/li><li> The outlook for the manufacturing sector remains bleak, as both new orders and output indices declined further below the 50 threshold and the balance between new orders and inventories does not point to an improvement ahead. Ongoing weakness in demand, exacerbated by expenditure switching away from goods, continues to reduce stress on supply chains. In services, business expectations remain on a steep downward trajectory. <\/li><li> The PMIs indicate that the latest energy-price shock is already feeding through to pipeline price pressure. Input and output price indices inched higher both in manufacturing and in services, following some months of easing from the peaks. The labor market remains resilient, as firms\u00b4 hiring plans do not seem to be particularly affected by the deterioration in activity. The main uncertainty here is whether this simply reflects a lagged response of employment to output, or the frictions generated by the pandemic have led to a structurally tighter labor market. The jury is still out. <\/li><li> The ECB will take notice of the increased likelihood of recession (which, strangely, is not part of its baseline scenario), but PMI details regarding prices and employment will certainly not pass unnoticed in Frankfurt. The October rate decision remains a very close call between a hike of 50bp and 75bp. In greater detail: The composite PMI declined to 48.2 from 48.9, with the indices for the manufacturing and services sectors down to 48.5 and 48.9, respectively.CHART 1: RECESSION BECOMES INCREASINGLY LIKELY<\/li><\/ul>"},{"layout":"linklist","uid":28451,"publicationDate":"18 Sep 12:11","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183950.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJI3owJG455DyaB7YeeTCcA8=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<p class=\"ucrIndent\">Happy Sunday from Venice,As I mentioned in my note last weekend, I have traveled to Italy to get a better sense of what people think ahead of the election on 25 September.\u00a0Last weekend, the far right captured about 20% of the votes in the election in Sweden, thereby bringing a majority to the right side of the aisle, although a very slim one. In contrast, here in Italy, if the opinion polls are correct, the right and far right will win a big majority next weekend and form the next government with Brothers of Italy leader Giorgia Meloni as the next prime minister ...<\/p>"},{"layout":"linklist","uid":28444,"publicationDate":"15 Sep 11:15","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183939.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJI3owJG455DyrubGq9bgR1Q=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - The concerning surge in UK long-term sickness and inactivity","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> The UK has seen a huge rise in economic inactivity (those neither in nor looking for work) since the onset of the pandemic1, which has contributed to labor shortages. To be sure, over the same period the working age population rose only modestly,2 implying that at least half a million people went from being economically active (either employed or unemployed) to inactive. Most of the rise in inactivity is accounted for by male, older workers.<\/li><li> Our Chart of the Week shows the striking rise in inactivity for males aged 16-64 since the onset of the pandemic in March 2020. Fortunately, the UK Office for National Statistics is one of the few national statistics offices to provide a timely breakdown of the economically inactive by the 'main reason' for inactivity.3 The official statistics show that around half of the rise in inactivity is accounted for by a rise in the long-term sick. Importantly, however, this likely understates the role of long-term sickness.<\/li><li> New research by the BoE\u00b4s Jonathan Haskel and Josh Martin4 has shown that long-term sickness can explain almost all (88%) of the pandemic-era rise in inactivity if one accounts for those people for whom long-term sickness is not their 'main reason' for being inactive but nonetheless limits their ability to do paid work. Moreover, the proportion of those either employed or unemployed that report they are long-term sick has also risen more steeply since the pandemic. This is important because the employed long-term sick tend to work fewer hours than the employed non-sick, and the unemployed long-term sick have lower job finding rates than the unemployed non-sick. <\/li><li> We cannot know for sure what has driven the sharp rise in long-term sickness during the pandemic, but at least part of it is likely to be explained by long-covid, longer NHS waiting times and, possibly, mental health issues exacerbated by lockdowns.1The rise in inactivity for people aged 16-64 was 640k from February 2020 until July 2022. Over the same period, the rise in inactivity for those aged 16 and over was more than 900k.2The working age population 16-64 rose 149k from February 2020 until July 2022, a slower pace of increase than in prior years, likely reflecting reduced net immigration.3The reasons given are 'long-term sickness', 'retirement', 'student', 'temporary sickness', 'looking after family\/home', 'discouraged workers', and 'other'.4See Haskel, Jonathan and Josh Martin (2022), 'Economic inactivity and the labour market experience of the long-term sick', unpublished manuscript, Imperial College Business School, July.<\/li><\/ul>"},{"layout":"linklist","uid":28436,"publicationDate":"13 Sep 17:01","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183929.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJI3owJG455DyX0nkEBOBfdw=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US inflation still widespread","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> US CPI rose 0.1% mom in August after a flat reading in July. The headline was dragged down by a more than 10% mom fall in gasoline prices, which shaved off 0.5pp from headline mom inflation. The main news, however, it that high inflation is still widespread, with core CPI (i.e. excluding energy and food) rising by 0.6% mom, double the consensus forecast. In year-on-year terms, headline CPI inflation eased to 8.3%, down from 8.5% in July, while core CPI inflation rose to 6.3% from 5.9% and is not far from a 40-year high. <\/li><li> Both core goods inflation and core services inflation accelerated. In advance of the report, we had expected core goods inflation to ease due to slowing aggregate demand, expenditure-switching away from goods, the strong US dollar, and an easing of supply-chain constraints. Instead, new car prices and apparel prices rose, while used car prices only fell marginally. We still expect core goods prices to fall, and there is plenty of scope for them to fall given the outsized price rises last year, but it looks like it will take longer than expected.<\/li><li> The strength of core services inflation is not a big surprise, as it tends to be stickier and the labor market remains very tight, but the further acceleration is concerning. Within core services, rents rose another 0.7% mom, as did Owners\u00b4 Equivalent Rent (OER). Although the housing market is weakening and wage growth is showing some signs of moderating, rents\/OER inflation is likely to remain elevated for some time. This is in part because increases in asking rents take time to be reflected in average rents as new rental contracts are agreed. In addition, each month the Bureau of Labor Statistics samples one-sixth of the total housing units in its full sample and computes the average change in rents over the previous six months. Core services inflation excluding shelter accelerated to 0.4% mom in August from 0.1% mom in July, showing that price rises are widespread. Within this group, prices of medical care services rose strongly and tend to be persistent. The prices of travel-related items were weak, led by an almost 5% mom fall in airfares. Airfares typically fall in August, but this year\u00b4s drop was steeper than normal following the unusually high growth in fares during spring and early summer.<\/li><li> The Fed will be concerned by the August CPI report, no doubt. Price rises are simply too fast and too widespread. Whilst we judge that inflation will cool fairly rapidly next year in part as tight monetary policy pushes down on aggregate demand, time is not something the Fed feels it has right now. Indeed, it is focused on reducing the probability of the worst-case outcome, which is a risk scenario where high inflation becomes entrenched via wage and price expectations. The Fed judges that this risk is higher the longer inflation remains high, and the broader inflation is. In order to feel confident that this risk has subsided, the Fed needs to see both a weakening of the labor market and convincing evidence that inflation is sustainably moving down towards its target. Neither of these have happened, so the Fed will have no hesitation in hiking interest rates by another 75bp next week, and the probability of another large move in November has increased (our base case remains a 50bp hike in November, now with upside risks).Chart 1 shows that the low 0.1% mom print for headline CPI inflation was largely driven by a large negative contribution from energy prices, specifically gasoline. Core inflation accelerated.CHART 1: HEADLINE INFLATION DRAGGED DOWN BY ENERGY PRICES<\/li><\/ul>"},{"layout":"linklist","uid":28422,"publicationDate":"11 Sep 12:41","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183913.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJI3owJG455Dy8gBg24vmWq0=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> I\u00b4ll reflect on the likely consequences of the completion of the hawks\u00b4 takeover of the ECB.<\/li><li><strong> I\u00b4ll discuss the real damage of Brexit: <\/strong> the economic fallout has been bad, but the more severe casualty is the body politic.<\/li><li> And I\u00b4ll summarize the way I see the likely outlook of the Italian election in two weeks.<\/li><\/ul>"},{"layout":"linklist","uid":28410,"publicationDate":"07 Sep 10:34","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183898.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJAK3tdK5Bz78WUuqWtynlhw=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Boosting labor supply to cool down a hot US labor market","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Labor market tightness in the US remains intense, with almost two job openings for every unemployed person in July (the latest available figure). This is the result of both demand and supply factors. Vacancies for jobs that could start within 30 days remain at exceptionally high levels ' almost two times higher than the 2015-2019 average. On the other hand, the labor force participation rate, which has been on a structural downward trend for two decades, has not recovered its pre-pandemic levels. In August, it rose to 62.4% from 62.1%, but it remains a full percentage point below its February 2020 level. Most of the burden to contain the inflationary pressures stemming from a hot labor market lies with the Fed through tighter monetary policy aimed at taming labor demand to avoid a wage-price spiral. <\/li><li> Our Chart of the Week shows that supply-side policies aimed at bringing Americans back into the labor force would partly shift the burden of the adjustment away from the central bank. A larger pool of workers would increase job searches, fill up vacancies and lower the wage pressures due to labor shortages, reducing the need of creating slack in the economy. The chart shows that, if the labor force participation jumped to 63.4% (the February 2020 level), the vacancy-to-unemployment ratio would return to its pre-pandemic levels ' that was already high by historical standards. <\/li><li> Given the high level of vacancies, many of the new joiners would likely find employment. If they all remained without a job though, which is the assumption made in the chart, the unemployment rate would jump to 5.1% from 3.5% currently. Clearly, the downward impact on wage growth from higher participation is likely to be greater if Americans move from inactivity into employment rather than unemployment because it means they possess the skills that firms are looking for. As a purely illustrative scenario, the chart also shows what would happen to the vacancy-to-unemployment ratio if participation rose of about 66% ' the rate recorded in 2007. <\/li><li> Admittedly, boosting labor force participation at a speed that is sufficiently fast to tame inflation in the short term is challenging. First, there are structural factors, such as the early retirement of many baby boomers, a decline in net immigration flows, and the drop in the youth participation (partly due to longer educational paths) that cannot be easily reversed. Moreover, recent research from Brookings shows that long Covid is keeping as many as four million people out of work. However, policies such as targeted training programs for detached workers (especially older and less educated ones), family-friendly policies for female workers, more widespread use of telework arrangements for less mobile workers and a relaxation in immigration policies could improve the job-matching process and alleviate labor market tightness in a reasonable amount of time, bringing some relief to the Fed. <\/li><\/ul>"},{"layout":"linklist","uid":28397,"publicationDate":"04 Sep 12:32","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183883.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJAK3tdK5Bz78QeqOXsUqo44=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> I\u00b4ll elaborate on this critical observation that European inflation is predominantly, if not exclusively, the result of a permanent energy price shock, which stands to cost the EU economy more than 3% of GDP per year. This calls for bold strategic and fiscal policy action with a more careful role to be played by monetary tightening. <\/li><li> Bold action requires great political courage. Mikhail Gorbachev, who died this past week, certainly had that in spades. I\u00b4ll summarize what I think he unleashed, why and how it shapes today\u00b4s world.<\/li><\/ul>"}]

fca5774f669803887558f1f8bf49f8ba6cbad35f9de48a9f1720f5619f212128;;[{"layout":"linklist","uid":28499,"publicationDate":"28 Sep 11:54","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2022_184011.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRoYLcQZAba8MpzoBozIhtkyg==&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"CEE Quarterly - Testing resilience ahead of the winter (4Q22)","product":"CEE Quarterly","synopsis":"<ul class=\"ucrBullets\"><li> Europe is heading into a difficult winter, but we believe that CEE can avoid an energy crisis, even if Russia halts all exports of natural gas to Europe. <\/li><li> We expect a technical recession in 4Q21-1Q23 caused by high energy prices, circumspect consumers, negative credit and fiscal impulses, destocking, imports outpacing exports, low EU fund inflows and falling public investment. A gradual recovery is possible in 2H23. <\/li><li> We forecast economic growth to slow from 4.3% in 2022 to 0.8% in 2023 in EU-CEE, with the Western Balkans lagging this year and outperforming in 2023. We see Turkey\u00b4s economy growing by 5.5% in 2022 and 3.2% in 2023. In Russia, we expect the economy to shrink by around 5% this year and 4% in 2023, with the overall contraction similar to our previous forecast.<\/li><li> Inflation is likely to peak this winter in all CEE countries, as inflation momentum is strengthening only in Hungary. We expect inflation to remain well above target in 2023 due to higher retail energy prices, resilient domestic demand and tight labor markets. <\/li><li> We believe that the CNB has ended its tightening cycle at 7% and the NBH at 13%. We expect the NBP to stop hiking at 7%, the NBR at 6% and the NBS at 5%. The CBRT is likely to cut its policy rate to single digits, hiking sharply in 2023 if the opposition wins the parliamentary election. We expect the CBR to end cuts at 7%. <\/li><li> We expect FX interventions to continue in Czechia, Poland, Romania, Serbia and Turkey. Only the CNB is considering phasing out its FX sales. <\/li><li> Besides a protracted conflict between Russia and Ukraine and its potential spillover to Europe, we highlight the following risks: 1. Russia\u00b4s inability to substitute imports from the West, 2. potential economic sanctions if Turkey continues to cooperate with Russia, 3. low EU transfers as the European Commission focuses on the rule of law, 4. pre-election populism affecting economic policies and ratings, 5. Hungary\u00b4s geopolitical isolation with possible repercussions on FDI, 6. Bulgaria\u00b4s protracted election cycle and the potential postponement of euro adoption and 7. Serbia\u00b4s political reshuffling to avoid choosing between Europe and Russia.<\/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"}}]