0e3d4e53dc39047191f43808b87cca419b5e48e28ad3cbc686db7d301999fa57;;[{"layout":"linklist","uid":27911,"publicationDate":"12 May 11:14","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183276.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJAYtfRRuP-QMG6KcSzQklc=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - US consumers only slowly normalizing their spending patterns","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> The expenditure-switching caused by the COVID-19 pandemic has contributed to the high inflationary pressure over the last year. Lockdowns and social distancing shifted consumer demand away from services and towards goods ' a shift in spending that was further reinforced by the increase in disposable income resulting from generous fiscal transfers. The rise in demand for goods was too abrupt for already constrained supply to adjust in time, thus pushing prices higher, while services firms facing reduced demand did not cut prices to the same extent as it would have done little to improve demand, leaving overall inflation higher. In other words, the sectoral Philips Curve was non-linear.<\/li><li> Our Chart of the Week shows that, despite the full reopening of the US economy, demand anomalies persist. The chart shows US personal consumption expenditure adjusted for inflation, using December 2019 as the baseline. Real consumer spending on both durable and non-durable goods remains around 10% and 20% higher, respectively, than before the pandemic ' with just marginal easing over the last nine months as prices rose steeply and the economy continued to reopen. Spending on services has now returned to pre-crisis levels but there are many categories that are still a long way away from their end-2019 levels. While real spending on accommodation is now back to roughly where it was two-and-a-half years ago, spending on recreational activities, travelling abroad and public transportation remains muted. <\/li><li> High goods price inflation, pent-up demand for travel-related services and a further easing of the direct effects of the pandemic will likely lead to further normalization of consumer spending patterns. But the adjustment process might be more gradual than originally thought with implications also for the re-allocation of labor across sectors, for spare capacity in the labor market and ultimately for the monetary policy stance itself. Continuing COVID-related bureaucratic burdens, such as testing for travelling or capacity constraints for public events, are weighing on demand for certain services. And in some cases, the change in consumption habits might be longer lasting. The spread of remote work, for example, is likely to continue to affect demand for public transportation and the consumption of food away from home, whereas new recreational habits might persist either for fear of contagion or because of structural changes in preferences.<\/li><li> The implication for overall inflation will depend on the balance between moderating core goods inflation on the one hand, and rising core services inflation on the other. The rebalancing of spending towards services could help ease overall inflation if the sectoral Phillips Curve continues to be non-linear. However, core goods inflation could prove stubbornly high amid ongoing supply bottlenecks for goods caused by the Russia-Ukraine conflict and COVID-19-related lockdowns in China, while rising core services inflation is likely to be reinforced by the tight labor market.<\/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":27905,"publicationDate":"11 May 18:03","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183269.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJAYtfRRuP-QVfQrwOMK2Ec=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US CPI: core services inflation picks up ","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> All-item CPI inflation decelerated to 8.3% yoy in April, down from 8.5% yoy in March, whereas core inflation eased to 6.2% yoy from 6.5% yoy. Looking at monthly changes, instead, the picture is more blurred. Headline inflation eased to 0.3% mom in April from 1.2% in March, thanks primarily to a decline in energy prices, whereas core inflation accelerated to 0.6% mom from 0.3% mom in the prior month. <\/li><li> Shelter, food, airfares, and new vehicles were the largest contributors to the monthly increase in CPI. Airfares, in particular, increased by a whopping 18.6% mom after a rise of 10.6% in the prior month. There are likely two reasons for the jump in airfares in April. First, ongoing expenditure-switching away from goods and towards services as the direct effects of the pandemic fade has pushed up prices for travel-related items. This is likely to last at least a few more months as pent-up demand for travel is absorbed. Second, the later timing of Easter this year compared to last year probably temporarily inflated airfares in April. When it comes to shelter, rents surged 0.6% mom and Owners\u00b4 Equivalent Rent (OER) was up 0.5% mom, a very strong pace. Considering that rents and OER tend to be sticky, and together they account for 31% of the CPI basket and 40% of the core CPI one, it will likely continue to remain a key driver of inflation going forward. <\/li><li> Core goods prices are showing some signs of easing (apparel -0.8% mom, used cars -0.4% mom, appliances -0.5% mom), but new vehicle prices (1.1% mom) were up strongly as supply bottlenecks continue and might intensify in the coming months as a result of negative spillovers from the Russia-Ukraine conflict and anti-COVID restrictions adopted in China. <\/li><li> All in all, today\u00b4s inflation report provides two key messages. First, energy-related inflation is losing steam as oil prices are stabilizing, albeit at high levels. Second, the lifting of restrictions and the reopening of the economy are being accompanied by a normalization in spending patterns, away from goods towards services. Consequently, core goods inflation is now moderating, while core services inflation is accelerating. The challenge facing the Fed in bringing inflation down towards the target is highlighted by the following. Rents and OER alone are currently contributing 0.2pp to monthly core inflation, and this is likely to continue for some time. It means that for monthly core inflation to moderate towards target-consistent levels, core goods inflation would likely have to turn negative (not only moderate, as it is now) in order to offset rising core services inflation driven by expenditure-switching and a very tight labor market. Therefore, today\u00b4s CPI report will give the Fed more reason to continue with its tightening plans. In greater detail,Both headline and core CPI inflation likely peaked in March in year-on-year terms (chart 1) but, for the time being, the 2% inflation target remain elusive for the Fed with monthly core CPI inflation accelerating. Consequently, the descent from a 40-year high for year-on-year inflation is likely to be slow. CHART 1. INFLATION HAS PEAKED IN ANNUAL TERMS<\/li><\/ul>"},{"layout":"linklist","uid":27870,"publicationDate":"08 May 13:32","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183219.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJAYtfRRuP-QLrAjz7h-qeI=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> I\u00b4ll suggest that while a rate hike in July is the most likely outcome, it\u00b4s not a given; and if they don\u00b4t lift-off in July, their entire 'normalisation' plan could be put on hold for some time. I\u00b4ll argue that the rationale for the ECB\u00b4s planned normalisation of policies is not being communicated persuasively.<\/li><li> The ECB\u00b4s desire to plough ahead will shift the burden of supporting the increasingly weak and nervous economy to fiscal policy. That is not a bad thing in itself ' so long as our elected officials act sufficiently forcefully. It\u00b4s still early days, but we have had some good news recently on that front: On the fiscal rules, a new ESM proposal for a fiscal stabilisation fund, and more talk of European federalism, if still all all vague.<\/li><\/ul>"},{"layout":"linklist","uid":27869,"publicationDate":"06 May 17:13","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183218.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJAYtfRRuP-QJKFYiZxui9M=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - A still very tight labor market; tentative wage growth moderation","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The US economy added 428k jobs in April, a robust pace of hiring. It leaves payrolls 1.2mn below their pre-pandemic level from February 2020, but at the current pace this gap would be made up in just three months\u00b4 time. Job gains in April were broad-based across industries.<\/li><li> The unemployment rate was unchanged at 3.6%, well below the rate that the Fed thinks is consistent with price stability (4%). The unemployment rate is computed using the household survey, while payrolls are computed from a different survey called the establishment survey. We note this difference because the household survey measure of employment fell 353k (in contrast to payroll employment rising 428k) and the reason why the unemployment rate didn\u00b4t rise in April is because labor force participation declined by 363k. Now, we wouldn\u00b4t put much weight on the fall in household employment, because it came after an outsized rise in the prior month and tends to be volatile, as well as being computed from a smaller sample than the payroll measure of employment. But what we do put weight on is the fall in participation, which is a disappointment, after six consecutive months of improvement. The lack of people actively participating in the labor force (-537k from pre-pandemic levels) is exacerbating the shortage of workers, which is contributing to wage pressure. The U6 measure of underemployment (a broader measure of labor underutilization than unemployment alone) rose, driven by a rise in marginally attached workers, who are not in the labor force because they didn\u00b4t actively seek a job but would like a job. It seems likely that the fall in participation is just a blip, perhaps caused by the survey week coinciding with Good Friday, and we expect to see a rebound in May.<\/li><li> Average hourly earnings (AHE) rose 0.3% mom (3.8% annualized), down from an upward-revised 0.5% mom in March. Looking through the monthly volatility, there are tentative signs that pay growth is moderating. The annualized growth rate of AHE over the last three months is 3.7%, down from 5.5% in the 12-month period before this. Taken at face value, average earnings growth of around 4% would be consistent with the 2% inflation target, assuming trend labor productivity growth of around 2%. One caveat here is that average hourly earnings are influenced by so-called selection effects (for example, if below-average pay sectors see larger increases in employment it would lower the average wage), but recently payroll gains have been broad-based, so this is unlikely to be the main explanation for the easing. Rather, we think the prior several months of improvement in labor force participation has eased labor shortages somewhat, easing wage pressures, but time will tell. <\/li><li> The April employment report will likely do nothing to change the hawkishness of the Fed, but equally it\u00b4s unlikely to add to the hawkish tones, given the AHE news discussed above. As Fed Chair Jerome Powell said in the FOMC press conference earlier this week, he does not currently see any tension between the Fed\u00b4s dual objectives for price stability and maximum employment, and that\u00b4s because the labor market is, in his words, 'extremely tight' and 'too hot'. By this he means that the unemployment rate is below the (equilibrium) rate consistent with price stability, and wage growth is growing strongly. In other words, while high inflation today is mostly driven by external factors (commodity prices, supply bottlenecks), labor market tightness is contributing to high inflation, and while the Fed would normally look through much of the externally-driven inflation, it cannot ignore the tight labor market and domestically-generated inflation, particularly at a time when headline inflation is so high that the tight labor market risks generating a wage-price spiral (or so-called second round effects).Chart 1 shows that nonfarm payrolls rose 428k jobs in April, which matched the gain in the prior month. Payrolls in the prior two months were revised down slightly (by a net 39k).CHART 1: A ROBUST PACE OF HIRING<\/li><\/ul>"},{"layout":"linklist","uid":27853,"publicationDate":"05 May 14:32","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183202.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJAYtfRRuP-QLTUBMUApBX0=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Fragmentation or not? Yes, and the ECB should not dismiss it","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> The spread between the GDP-weighted sovereign yields and the OIS curve has been frequently used by the ECB during the pandemic to assess the degree of market fragmentation. The PEPP was launched based on this indicator and the central bank used to monitor it closely. As our chart shows, the GDP-weighted 10Y yield spread vs. OIS has moved sideways so far this year. On the surface, this suggests that everything is fine in the fragmentation camp.<\/li><li> However, such an average indicator hinders a tremendous heterogeneity at the country level. In the current risk-off environment, core EGBs have outperformed OIS, while traditional high-beta issuers (Italy for example) have widened versus OIS. This is reflected in a meaningful widening in the BTP-Bund spread, which has approached 200bp at the 10Y. Notably, BTP underperformance does not seem to be related to idiosyncratic issues (higher deficit or political uncertainty), as in past episodes, but mainly to the effect of a less supportive monetary-policy stance at a time when the Russia-Ukraine conflict is weighing on growth prospects.<\/li><li> Widening in spreads to Bunds should be a flashing signal for the ECB because it is a stark reminder that sovereigns, banks and corporates in various jurisdictions are facing increasingly different funding costs. A one-size-fits-all approach is not appropriate in the current environment, and the ECB should not dismiss the latest developments in fragmentation.<\/li><li> We are probably in for some more volatility in BTPs in the short term. First, the ECB may take some complacency from the fact that BTP widening versus OIS has been more limited than versus Bunds. Secondly, the ECB may be reluctant to abandon the gauge of fragmentation it endorsed during the pandemic. Lastly, the ECB is likely to be in a difficult position because sovereign risk repricing is not widespread, which would be a straightforward reason for intervening, but focused on a small subset of countries.<\/li><\/ul>"},{"layout":"linklist","uid":27814,"publicationDate":"01 May 12:17","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183163.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHlYjR85eD_wUnkSxo9xFZ4=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> I\u00b4ll summarize the Mayday calls coming from European households and businesses ' which are still not being heard by policymakers.<\/li><li> I\u00b4ll argue that the combination of the outlook and of the stance of policymakers means that markets quite likely get it wrong in several aspects: Changes are that US long yields will move still higher and stocks still lower; the Fed and the ECB won\u00b4t tighten as much as is priced in ' and EUR\/USD will likely go through parity.<\/li><li><strong> But I\u00b4ll end with a glimmer of hope: <\/strong> The two key criteria for bold European policy action are now in place: A crisis (sad to say) and political leadership with vision and courage to act, very much boosted by Macron\u00b4s victory last Sunday.<\/li><\/ul>"},{"layout":"linklist","uid":27812,"publicationDate":"29 Apr 15:26","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183161.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHlYjR85eD_wZmfA_Qt9ZnY=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Italy: inflation eases in April, but the outlook is highly uncertain","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> According to preliminary estimates, Italian consumer price inflation declined to 6.2% in April, from a downwardly revised 6.5% in March. April\u00b4s decline interrupts a nine-month period of consecutive increases. CPI was up by 0.2% mom in April, from a 1.0% mom increase in March. The easing of inflation in April has been primarily driven by lower prices in energy products in both non-regulated and regulated markets. <\/li><li> Following the increase in motor-fuel prices in March triggered by the surge in oil prices at the onset of the Russia-Ukraine conflict, a downward correction in April has been prompted by government intervention to reduce motor-fuel prices by EUR 0.25 per liter from 22 March. This factor mainly contributed to a decline in prices in the transport category. While it has still not been formally approved, it is likely that the reduction in motor-fuel prices will be extended until the end of 1H22.<\/li><li> For 2Q22, the Regulatory Authority for Energy announced a 10% cut in electricity and gas tariffs, after a strong increase had been penciled in for 1Q22 (+55% and +42%, respectively). This was also partly due to the measures approved by the government to mitigate the increase in energy costs for the private sector. While the effect of the cut will be felt throughout the second quarter, due to potential spillover to non-regulated gas and electricity prices, the bulk of it materialized in April, with the prices of energy products in regulated markets down by 8.8%, compared to March.<\/li><li> The April inflation report also shows further increases in food prices, which proved to be much stronger than expected. As we have argued in the past, this reflects indirect effects of high energy costs and the Russia-Ukraine conflict on food commodity prices. The indirect effects of higher commodity prices are also affecting prices of goods other than energy and food. Moreover, there has been a strong increase in services prices, mainly driven by a rise in air tariffs caused by the Easter holiday season. This upward movement in services prices related to transport is likely to correct in May. Overall, core CPI inflation rose above 2% for the first time in a decade to 2.5% in April from 1.9% in the previous month.<\/li><li> We confirm our expectation of an increase in headline inflation to 5.8% in 2022, from 1.9% last year. Still, inflation projections for the coming months remain subject to uncertainty related to oil and gas supplies, especially after this week\u00b4s news concerning Poland and Bulgaria.In greater detail: Motor fuel prices were down by 9.5% mom in April, compared to March, when they rose by 8.1% mom amid a surge in oil prices. CHART 1: BIG CORRECTION IN MOTOR FUEL PRICES<\/li><\/ul>"},{"layout":"linklist","uid":27810,"publicationDate":"29 Apr 12:33","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183159.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHlYjR85eD_wruyOF8HW5cA=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Austria\u00b4s 1Q22 GDP: strong recovery from lockdown","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> According to the flash estimate by the Austrian Institute of Economic Research (WIFO), Austrian GDP grew by 2.5% qoq in 1Q22. After the slump in 4Q21 caused by a fourth lockdown to prevent the spread of COVID-19, the Austrian economy has made a very strong comeback in terms of growth. Austrian GDP is now 1.3% above its pre-crisis level of 4Q19. This also represents a significant year-on-year increase in GDP of 8.7% compared to 1Q21, when restrictive measures to contain the COVID-19 pandemic (third lockdown) weighed on the economy.<\/li><li> Positive growth impulses in 1Q22 came primarily from a very strong recovery in construction and industrial activity. Construction activity grew by 2.6% qoq in 1Q22 after three negative quarters in a row. It benefitted above all from strong order growth from the public sector. After posting a slight decline towards the end of 2021 (-0.3% qoq), industrial activity grew by 4.0% qoq in 1Q22. Strong new business, especially from abroad, and the interim easing of supply bottlenecks supported the recovery. Due to the easing of measures to contain the pandemic, consumer-related services were also able to grow strongly again at the beginning of the year. Value added in trade, accommodation and transport increased by 3.1% qoq. In other services, which include personal services, arts, entertainment and recreation, the increase in value added was even 9.7% qoq. Overall, services grew at the same rate as the economy as a whole, at 2.5% qoq, reaching pre-crisis levels for the first time. <\/li><li> On the demand side, 1Q22 data show somewhat surprisingly only stagnation in consumer demand, despite good development in the labor market, with record employment caused by increasing uncertainty due to accelerating inflation. There was also no further expansion in public consumption after three consecutive quarters of growth ' after the partial expiration of pandemic-related support. Investment activity, on the other hand, rose sharply, by 4.2% qoq, after a pause in the previous quarters as a result of the good order situation in industry and construction, which pushed this area to its capacity limits. Due to the high demand for capital goods, imports increased by 5.5% qoq. Exports increased by 4.1% qoq, so that a negative net-export contribution dampened economic growth in Austria in 1Q22.<\/li><li> Data for 1Q22 still show hardly any dampening effects from the Russia-Ukraine crisis. However, its negative impact on the Austrian economy should be reflected in 2Q22. While the UniCredit Bank Austria Purchasing Managers\u00b4 Index for April still shows strong growth in industry despite a decline, output expectations for the year have dropped abruptly to spring 2020 levels, when the first wave of the corona pandemic affected Austrian industry. The lifting of pandemic restrictions has improved the framework for many service sectors, particularly retail trade and hospitality. The WIFO business climate index for the services sector therefore rose in April ' as did the mood in the construction sector. However, the development of private consumption in 1Q22 has already shown that rising inflation is weighing on consumer spending and that higher costs are reducing willingness to invest. In combination with the uncertainty caused by the Russia-Ukraine crisis, we therefore expect a clear weakening of economic momentum in Austria for the coming quarters after this strong start to the year, despite the lifting of the pandemic-related restrictions in all sectors of the economy.Chart 1 shows the strong rebound by the Austrian economy in 1Q22. This more than compensated for the slump caused by the lockdown towards the end of 2021. CHART 1: STRONG START TO THE YEAR<\/li><\/ul>"},{"layout":"linklist","uid":27809,"publicationDate":"29 Apr 12:01","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183158.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHlYjR85eD_weDmA4MRRrys=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Italy\u00b4s GDP dragged down by high energy costs and COVID-19 restrictions","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> According to the preliminary estimate, Italy\u00b4s real GDP declined by 0.2% qoq in 1Q22, showing a deterioration compared to 4Q21, when it rose by 0.7% qoq (revised slightly upward compared to 0.6% previously). Real GDP remains below its pre-pandemic level of 4Q19 (-0.4%). Today\u00b4s outcome seems to hint at some resilience of industry in March, after the start of the Russia-Ukraine conflict.<\/li><li> The weak GDP reading in 1Q22 was mainly triggered by a stabilization in activity in industry (including construction) and a decline in services. For the former, this probably reflects some weakness in manufacturing output, which has been affected by high energy costs, and the intensification of supply-side constraints, while construction activity held up relatively well, also thanks to fiscal support. The decline in services activity was probably largely due to the spread of the Omicron variant, which was already weighing, for example, on food and accommodation service activity in 4Q21.<\/li><li> Net exports were a drag on economic activity, while domestic demand (including inventories) provided a positive contribution. When more details are made available at the end of May, we expect to see a quarterly contraction in private consumption and a slowdown in fixed investment, as COVID-19 restrictions limited spending on services and high energy costs started to dent household purchasing power and firms\u00b4 profits. The household savings rate stopped declining in 4Q21 (close to 13%), remaining well above its pre-pandemic level. Sharp deterioration in consumer sentiment induced by the Russia-Ukraine conflict might have further discouraged households\u00b4 propensity to consume, despite the availability of large excess savings. A worsening of firms\u00b4 profit margins and liquidity had already started at the end of 2021 and is likely to have continued in 1Q22. <\/li><li> Looking ahead, we expect another weak reading in 2Q22, as the Russia-Ukraine crisis will take its toll on business activity and demand, as suggested by the latest confidence indicators. Services activity is likely to partly benefit from a lower Omicron-variant infection rate and the reopening of the economy that started at the end of 1Q22, which has already supported tourism activity in April. A constructive picture remains dependent on a stabilization in market prices for natural gas. As seen recently, this trend might swiftly shift as a result of negative news regarding oil and gas supply, increasing uncertainty.In greater detail: Industrial production (excluding construction) was down by 1.6% in the period January-February, compared to 4Q21. The output reduction was widespread among almost all sectors (including energy).CHART 1: CONTRACTION IN INDUSTRIAL PRODUCTION DUE TO HIGH ENERGY COSTS<\/li><\/ul>"},{"layout":"linklist","uid":27805,"publicationDate":"29 Apr 9:19","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183154.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHlYjR85eD_wwwGf-at81cU=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - France: GDP stagnates as Omicron weighs on services activity","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> French GDP stagnated in 1Q22 (0.0% qoq after 0.8% qoq in 4Q21), coming in weaker than expected (UniCredit: 0.2%; consensus: 0.3%). The deceleration reflects a further slowdown in services activity, especially in-person services, due to government restrictions and voluntary distancing following the spread of the Omicron variant. The recovery in the hospitality sector marked a pause after three consecutive quarters of growth. Conversely, manufacturing activity accelerated significantly but its positive contribution to GDP growth was offset by a decline in energy production. <\/li><li> Domestic demand weighed on GDP growth (-0.6pp) due a significant contraction in private consumption whereas gross fixed investment remained resilient. Private consumption contracted for the first time in a year, probably reflecting the worsening of the health situation and the surge in inflation. Households cut their spending, not only on services but also on manufactured goods, notably clothing. Investment held up reasonably well, mainly driven by investment in information and communication services and equipment goods. Net exports added 0.1pp to GDP as growth in exports outpaced growth in imports. The INSEE reports that the healthy performance of exports is explained by the delivery of a cruise ship. Inventories added 0.4pp to GDP growth.<\/li><li> The effects of the Russia-Ukraine conflict on French economic activity will become clearer with 2Q22 GDP data. April PMI data have pointed to resilient activity two months since the start of the conflict, driven by the reopening of many sectors as pandemic restrictions were lifted. Manufacturing activity has also fared relatively well as companies reported an increase in orders, although some of these were placed in anticipation of higher prices. Overall, risks to the growth outlook remain skewed to the downside as the combination of rising prices and uncertainty is heavily weighing on consumer confidence and supply-side disruptions and pipeline price pressure appear far from abating in the manufacturing sector. GDP growth will likely be affected once the impulse from the reopening fades.The stagnation in 1Q22 GDP growth was largely driven by a contraction in private consumption (down by 1.3% qoq in 1Q22 after +0.6% in 4Q21).<\/li><\/ul>"},{"layout":"linklist","uid":27799,"publicationDate":"28 Apr 17:12","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183148.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHlYjR85eD_wgMNrB2XtLJw=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US 1Q22 GDP: Not as bad as it looks","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The US economy contracted 1.4% qoq annualized in 1Q22 (-0.4% qoq non-annualized). It\u00b4s the first quarterly fall in GDP since 2Q20, when part of the economy was shutdown to contain the spread of COVID-19. Importantly, the fall in GDP is not nearly as bad as it looks. This is because the big detractors from GDP in 1Q22, net exports and inventories, are also the most volatile components and are likely to improve in coming quarters. Real\u00a0final sales\u00a0to domestic purchasers, a measure of expenditure that removes the volatile net trade and inventories components of GDP, rose 2.6% annualized, an acceleration from the 1.7% pace in 4Q21.<\/li><li> The huge downward contribution from net exports reflects a surge in imports (17.7% annualized) and a fall in exports (-5.9% annualized). The fall in exports comes after a rapid rise in 4Q21 (22.4% annualized), while the ongoing rapid growth of imports in part reflects the relative strength of the US economy. Some improvement in net exports is likely in 2Q22. The downward contribution from the change in inventories comes after they added a whopping 5.3pp to outsized GDP growth of 6.9% in 4Q21. To be sure, inventories rose in 1Q22, but not as fast as they did in 4Q21, which results in a drag on GDP growth. Separately, government spending fell again in 1Q22 (down 2.7% annualized) reflecting the fiscal drag, but an increase in defense spending (related to Ukraine) should reverse this in coming quarters.<\/li><li> The more enduring drivers of GDP growth, personal consumption and fixed investment actually grew faster in 1Q22 than in 4Q21. Personal consumption rose 2.7% annualized in 1Q22, slightly faster than the 2.5% pace in 4Q21. Fixed investment rose a rapid 7.3%, driven by investment in equipment. However, for personal consumption, the quarterly average likely hides a sharp deceleration in momentum. Monthly data shows a jump in real personal consumption of 2.1% mom in January but then a fall of 0.4% mom in February. Today\u00b4s release for 1Q22 would imply a 0.6% mom fall in real personal consumption for March, with the data due for release tomorrow. It reflects the impact of higher prices and the squeeze in real personal disposable income (which was down 2% annualized in 1Q22) on consumer spending. Spending was propped up by a fall in the personal savings rate, to 6.6% from 7.7% in 4Q21.<\/li><li> The Fed is likely to look through the contraction in 1Q22 GDP, for the reasons outlined above. While real consumption slowed meaningfully in February and likely in March too, this is due to the very high inflation weighing on incomes and spending, which the Fed will argue is why it needs to expeditiously raise rates to neutral by the end of this year, in order to rein in rampant inflation. The US economy is not in in any real danger of entering a recession (two consecutive quarters of negative growth) in the near term. GDP will likely rebound in 2Q22, also as inflation probably begins to ease gradually. Also released today was weekly initial jobless claims data, which fell to a historically-low 180k, a good sign that the labor market and the wider economy are still in pretty good shape. Chart 1 shows that net exports subtracted 3.2pp from GDP growth and the change in inventories subtracted 0.8pp from GDP growth in 1Q22.<\/li><\/ul>"},{"layout":"linklist","uid":27797,"publicationDate":"28 Apr 15:04","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183145.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHlYjR85eD_wL-6SFWkbSJw=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - \u00b4Friend-shoring\u00b4 supply chains won\u00b4t be easy","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> In a speech on 13 April, US Secretary of State Janet L. Yellen spoke of \u00b4friend-shoring\u00b4, a term that has been gaining importance for some time in connection with supply chain issues and especially in connection with strategies to improve the sustainability of the supply of strategically important goods.<\/li><li> Specifically, Ms. Yellen said, \u00b4Favoring the friend-shoring of supply chains to a large number of trusted countries, so we can continue to securely extend market access, will lower the risks to our economy as well as to our trusted trade partners.\u00b4<\/li><li> Our Chart of the Week shows that, whatever preferential trade measures are taken, and assuming those countries that supported the UN resolution to suspend Russia from the Human Rights Council on April 7th, 2022, are deemed \u00b4friendly\u00b4, some large exporting countries will not be party to it. The share of OECD imports from countries that voted against the UN resolution to suspend Russia from the Human Rights Council was 19%. If we add to this the countries that abstained, we arrive at a total of around 35% of OECD imports. Strikingly, this share has more than doubled from below 15% in the late 1980s. Of course, the share of imported goods is only a first picture, as imports from an 'unfriendly' country can also contain value added from a 'friendly' country, and vice versa. Since many of the countries that abstained or voted against the UN resolution are emerging markets, their share of OECD imports is likely larger than their share of value added in producing these imported goods. Still, the chart highlights that global supply chains have become increasingly integrated over time.<\/li><li> If imports from these countries were to be partially restricted in the future, this would certainly have an impact on economic developments in the OECD countries, especially on price development, as these countries include, for example, China, India, Brazil and Mexico. The integration of these countries into global supply chains has likely significantly contributed to the low inflation in industrialized countries over the past 30 years. It also includes many major commodity exporters, especially of energy.<\/li><\/ul>"}]

fca5774f669803887558f1f8bf49f8ba6cbad35f9de48a9f1720f5619f212128;;[{"layout":"linklist","uid":27589,"publicationDate":"30 Mar 17:51","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2022_182907.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRooLgAZTPWCLUSnFz7GhBRew==&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2022_183204.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRowzPsxhSxJZfjfaWjJHQarQ==&T=1&T=1","protectedFileLinkIt":""},"title":"CEE Quarterly - Turmoil in Europe: The impact of the Russia-Ukraine conflict on CEE (2Q22)","product":"CEE Quarterly","synopsis":"<p><ul class=\"ucrBullets\"><li> Russia\u00b4s invasion of Ukraine could be a watershed moment for Europe\u00b4s political and economic landscape.<\/li><li> Comprehensive sanctions could affect CEE\u00b4s trade with Russia and also domestic sectors in which Russian investment is important, such as energy and metals. Sanctions are already leading to higher commodity prices and lower commodity imports from Russia<\/li><li> Russian countersanctions and other measures are likely to impact CEE through the ban on food exports (with Turkey hardest hit), RUB payments for Russian gas (with the Balkans the most at risk), potential spillovers on risk appetite from Russia\u00b4s capital controls.<\/li><li> If Russia continues to export oil and gas to Europe, we expect its economy to shrink by around 12% this year (peak-to-trough of around 20%), with a muted rebound in 2023 akin to stagnation. In EU-CEE1) and in the Western Balkans, GDP is expected to grow by around 2.3% in 2022 and by 3.6% in 2023. The direct impact of the conflict on GDP growth is estimated at 1.5-3pp in 2022 and up to 1.5pp in 2023. Turkey could grow by around 4% this year and 3.8% in 2023.<\/li><li>We expect CEE to gradually reduce its dependency on Russian hydrocarbons with help from NextGenerationEU (NGEU). CEE governments might help households and companies weather higher commodity prices by incurring larger budget deficits. However, a new common EU fund might be needed to fight rapid price increases.<\/li><li>If the EU stops importing oil and gas from Russia, the Russian economy could shrink by around 20% this year and fail to rebound in 2023. In such a scenario, EU-CEE and the Western Balkans would probably fall into recession.<\/li><li>Inflation could reach 30-year highs due to rapidly rising commodity and food prices, and supply-chain bottlenecks. We expect inflation to end this year at or above 10% in Central Europe, at around 35% in Russia and at close to 60% in Turkey. Inflation targets could be missed again in 2023 amid persistent supply shocks.<\/li><li>We expect rates to be hiked to 6% in Hungary and Poland, 4.75% in Czechia, 4% in Romania and 2% in Serbia. Central banks are likely to intervene in FX markets to avoid depreciation above EUR-HUF 380, EUR-PLN 4.80 and EUR-RON 5.00 (with the NBR probably relaxing this stance if the conflict in Ukraine ends). <\/li><li>Liquidity management and FX interventions could keep interbank interest rates above 5% and push forward implied interest rates into double digits in times of stress. Thus, we see little scope for positioning against CEE currencies, especially in Romania and Serbia. <\/li><li>In our view, the main political consequences of the conflict in Ukraine are the following: 1. Russia is likely to drift further away from the West, both economically and politically; 2. Relations between Turkey and NATO are likely to improve; 3. Poland could become more engaged in European affairs and regional politics, moving closer to the EU. NGEU money could be unblocked for both Poland and Hungary; 4. Hungary could become more isolated in the EU and in the Visegrad group; 5. Serbia might be forced to choose between the EU and Russia; 6. The EU could increase its involvement in the political crisis affecting Bosnia-Herzegovina; 7. Economic shocks might fuel political instability in Slovenia and Romania; 8. Despite support from EU-CEE, Ukraine is unlikely to become an EU member any time soon.1) EU-CEE refers to CEE countries that are members of the EU: Bulgaria, Croatia, Czechia, Hungary, Poland, Romania, Slovakia and Slovenia.<\/p><\/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"}}]