e2fda6f48f4beb7f2e9a16bde35b727c4d7cd8e0d73c422d49e7378ade652268;;[{"layout":"linklist","uid":26173,"publicationDate":"17 Sep 16:49","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181141.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPaG4-M9sZL7KHUqBs3IQBA=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Soaring wholesale electricity prices heat up debate on cost of green transition","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Eurozone wholesale market electricity prices have hit an all-time high this week. This is primarily due to the steady increase in the price of natural gas (used by power plants for electricity generation) amid persistent supply shortages and bottlenecks in alternative renewable energies. It also reflects, albeit to a lesser extent (EU Timmermans said by 20%), the rise in the price of greenhouse gas emission allowances related to Europe\u00b4s greater ambition for emission-reduction targets (by 55% compared to 1990 levels by 2030 from 40% previously). The latter has contributed to an increase in the cost of electricity generation for those plants using (more polluting) fossil-fuel technologies whose production is still needed to meet electricity demand. <\/li><li> Eventually, the increase in retail electricity prices is probably accounted for to only a small extent by the rising price of gas emission allowances via the pass-through of changes in wholesale electricity prices to retail ones (which, in turn, varies depending on each country\u00b4s price-setting mechanism). Still, the recent increase in wholesale electricity prices has sparked a heated debate across Europe about the cost that consumers will have to bear to support the green transition and how to avoid a backlash. It has also raised fears of a repeat of the yellow-vest protests that raged in France at the end of 2018, albeit they were not primarily about climate action. <\/li><li> The transition to a greener economy will inevitably imply an economic cost of adjustment. This is also the main reason why a shift in climate policies towards less-polluting energy sources has been postponed for so long. The main challenge for policymakers is to ensure that the cost of the adjustment is fairly redistributed and that the most vulnerable groups do not bear an excessive burden, which is a condition to make sacrifices more acceptable. In the face of the recent sharp rise in electricity prices, using part of the revenue derived from the emission trading system to help protect the purchasing power of low-income households represents an appropriate policy. The budgetary cost of these mitigation measures could eventually turn out to be relatively contained if inefficient government-sponsored bans and subsidies, which often concur in the formation of retail electricity prices, were financed in a more appropriate and visible way. This is also a proposal currently being debated in Italy.<\/li><\/ul>","hash":"e2fda6f48f4beb7f2e9a16bde35b727c4d7cd8e0d73c422d49e7378ade652268","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":26122,"publicationDate":"12 Sep 12:45","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181082.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadcPYqX0QrZsg=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181082.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadcPYqX0QrZsg=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181082.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadcPYqX0QrZsg=&T=1&T=1"},"title":"Chief Economist\u00b4s Comment - Sunday Wrap","product":"Chief Economist's Comment","synopsis":"<p><ul class=\"ucrBullets\"><li> The risk that growth is levelling off well before we reach post-pandemic cruising speed, and '<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> what it\u00b4ll mean for monetary policies. I suspect the peace at the ECB may be coming to an end.<\/p><\/li><\/ul>"},{"layout":"linklist","uid":26121,"publicationDate":"10 Sep 16:35","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181081.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadPgUmEhAJ06A=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Durable goods fuel price pressure in the eurozone","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Our Chart of the Week shows that in the eurozone pipeline price pressure in consumer goods is largely driven by durable goods, and there are no signs of a turning point yet. <\/li><li> The European Commission gauge for selling price expectations as reported by producers of durable goods has skyrocketed to record-high levels during the summer, while upward pressure is less intense for non-durable goods. We expect that this evidence will increasingly be reflected in PPI numbers, which show a tight correlation with the survey. <\/li><li> Supply bottlenecks probably explain most of the strong price increases, given that Italy is the only country among the four largest eurozone member states in which demand for durable goods has exceeded pre-crisis levels. <\/li><li> Retail prices of durable goods have been accelerating, and further pressure in the coming months is baked in the cake. Yesterday, the ECB revised up its inflation forecasts, assuming that supply disruption will last into 1H22, longer than previously expected. However, durable goods account for only about a third of total core goods in the HICP basket. This should help mitigate the effect on core and headline inflation.<\/li><\/ul>"},{"layout":"linklist","uid":26085,"publicationDate":"03 Sep 16:16","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181021.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadecY8IMf9HXs=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181036.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadgo8XU8y71X8=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181032.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxadoIoyrbiyJ4I=&T=1&T=1"},"title":"Oil Update - A complicated balancing act for OPEC+: From under-supply to over-supply","product":"Oil Update","synopsis":"<ul class=\"ucrBullets\"><li> Despite the OPEC+ tapering of its output cuts, the oil market remains in deficit, with global supply struggling to absorb burgeoning demand. <\/li><li> However, in 2022, the market is likely to be in surplus if OPEC+ removes its output curbs at the planned pace and oil production recovers in other parts of the world. If supply exceeds demand, inventories will start rising again and, ceteris paribus, prices will decline.<\/li><li> Such a scenario is likely to force OPEC+ to reconsider its exit strategy from the output cuts and this might be a source of tensions within the cartel. In its September meeting, OPEC+ confirmed its intention to inject more barrels into the market through the end of 2022 at a monthly pace of 400kb\/d, with a thorough review to take place in December. With this move, the cartel shrugged off the uncertainty caused by the spread of the Delta variant across the world. Actually, and contrary to the current tendency to downwardly revise the demand forecast for 2022, as the International Energy Agency (IEA) did in its August issue of the Oil Market Report, the Joint Technical Committee revised it to 4.2mb\/d, up from a previous 3.3mb\/d. Unlike the messy July meeting, when the UAE blocked the agreement between Moscow and Riyadh to partially remove the output curbs due to disappointment over its assigned quota, this time around there were no major sources of tension among traditional producers. However, harmony within the group might not last long. In a few months, if the removal of the output curbs proceeds as planned, with a full lifting by the end of 2022, the oil market is likely to shift from a situation of under-supply to one of over-supply that would weigh on oil prices and force OPEC+ to reconsider its output strategy, creating fertile ground for renewed tensions among its key members. If they follow their usual playbook, Russia would probably press on and push for a quick tapering of cuts, whereas Saudi Arabia would pause and call for caution. With more than 5mb\/d of spare capacity within the cartel and after almost two years spent trying to contain financial losses, it will be complicated to keep members in their ranks while halting the normalization process. A compromise could be to partly scale back the lifting of the cuts and keep supply more in line with demand, albeit still probably in excess of it. As a result, Brent would be likely to stabilize below USD 70\/bbl. A market still in deficitAt the moment, supply is clearly struggling to absorb burgeoning global demand that surged by 3.8mb\/d mom in June, almost three times the seasonal average. This is clear when looking at OECD oil inventories that have come down sharply since January (Chart 1). If one takes the difference between the current level of inventories and the pre-shale-boom average, the indicator is back in line with its pre-COVID-19 level. The difference in the five-year moving average is even negative. But, as discussed in past notes, this metric should be taken with a pinch of salt. Before the pandemic broke out, when the cartel had to decide the extent of the production cuts, it used to give a false perception of a balanced market as it gave weight to recent years of overproduction and so of high inventories. Now, it signals an overly under-supplied market because it is biased by 1H20, when inventories reached historic highs and storage capacity was close to its limit.Preliminary estimates for demand in July point to a loss of momentum due to the spread of the Delta variant, particularly in China where the central government tightened containment measures to prevent localized outbreaks from spiralling out of control. Cases of the Delta variant spread from Nanjing to 40 other cities. Several places have restricted mobility and introduced localised lockdowns. This zero-tolerance approach led to a sizable drop in both land and air mobility. In some Chinese cities, local airports cancelled up to 80% of scheduled flights. Across the advanced world, however, demand remained resilient throughout the summer thanks to the removal of the most intrusive restrictions, the good weather and rising vaccination rates. Overall, the strength of global demand, which is expected to grow by at least 3mb\/d qoq in 3Q21, is unlikely to be matched by equally strong supply, which is likely to rise by around 2.2mb\/d qoq on the back of the end of Saudi Arabia\u00b4s voluntary cuts and OPEC+ tapering. <\/li><\/ul>"},{"layout":"linklist","uid":26056,"publicationDate":"02 Sep 16:12","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_181007.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEqTcTVirxaddf1E3ZpA8eE=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Eurozone inflation will rise further, but monetary policy should look through this","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> The August flash estimate of eurozone inflation published on Tuesday surprised to the upside, showing a sizeable acceleration in the headline rate to 3.0% yoy from 2.2%. This is its highest level since late 2011. Core inflation rose strongly, to 1.6% yoy from 0.7%, explaining most of the jump in headline inflation. Our Chart of the Week breaks down core inflation into its two main components: services and core goods. It shows that the August acceleration was almost totally driven by a huge spike in the prices of goods. The gap between services and goods inflation, which had always been positive in the two and a half decades before the pandemic, has turned negative by an unprecedented 1.6pp (services: 1.1%, core goods: 2.7%). <\/li><li> Several temporary factors explain this unusual pattern. First, goods inflation was artificially inflated by the late start last year of summer sales on apparel in France and Italy, among other eurozone member states. This is a purely statistical effect, which reversed weakness recorded in the yearly change in apparel prices for July and which should fade over the next one or two months. Second, it is highly likely that manufacturers have continued to pass on some of the cost increases caused by supply bottlenecks and rising commodity prices. To the extent that higher production costs largely reflect the global ramifications of the pandemic, this should also be considered as a temporary factor, although available indicators suggest that its effects will last longer than expected, most probably into 2022. Third, services inflation was dampened during the summer months by lower weights (compared to 2020) for travel, leisure and hospitality expenses in the HICP basket. This explains why the reopening of several tertiary activities and a rebound in demand have been accompanied by weak services inflation until now. This effect will likely reverse in the fall, when these price categories typically record large seasonal price declines. We expect services inflation to rise more meaningfully over the coming months. <\/li><li> Overall, transient factors have played a key role in driving inflation in the euro area, and we expect they will continue to do so at least until the end of the year. These factors also include a 15.4% yoy increase in energy prices (which alone accounted for half of the headline inflation rate in August) and changes in Germany\u00b4s VAT rate. We expect that headline and core inflation will rise further in the coming months, before probably peaking in November. A clear slowdown is likely to start at the beginning of 2022, helped by the fading of the VAT effect in Germany, and to continue in subsequent months. This deceleration might push headline inflation back below 1.5% in about a year\u00b4s time, amid a strong base effect on energy prices. Monetary policy should remain patient and persistent. <\/li><\/ul>"},{"layout":"linklist","uid":25935,"publicationDate":"29 Jul 15:11","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180844.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMbnchgdNKueNhOXGk6Ecd8=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Long-term inflation expectations in the US remain well-anchored ","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> In June, 12-month CPI inflation rose to 5.4% in the US, its highest level since 2008. Rising inflationary pressures are linked to the reopening of the economy and the associated release of pent-up demand amid strong support from fiscal policy, and to supply bottlenecks (due to shortages of labor, commodities, and key intermediate inputs). We expect these forces to be temporary as demand fades and supply adjusts. But the higher and longer actual inflation rises, the more inflation expectations could be affected, forcing central banks to intervene and tighten their monetary policy stance. Given the role played by inflation expectations in the wage and price setting process, they have the potential to become self-fulfilling. In other words, they can serve as an 'accelerator' for inflation of the effects of temporary demand and supply shocks. Our Chart of the Week\u00a0shows that while short-term inflation expectations have moved higher, longer-term inflation expectations remain in line with historical averages when inflation was around target.<\/li><li> Measures of inflation expectations, at least in the US, come in a great variety. Some look at the short term, others at the long term. Some are based on surveys of households, firms or professional forecasters that are conducted by several institutions; others are derived directly from prices of financial securities. Regardless of the type, inflation expectations five years ahead and beyond look consistently well-anchored; in 2Q21, they were roughly in line with past averages. <\/li><li> Short-term inflation expectations, particularly of consumers compiled in surveys like those of the Conference Board and the University of Michigan, have been affected somewhat by the current inflationary spike ' but, historically, short-term inflation expectations have always been higher than long-term ones. Professional forecasters, instead, are looking through today\u00b4s volatility. This rise in short-term inflation expectations for households is not particularly surprising or concerning. Most people use simple rules of thumb to determine what they feel is the evolution of prices, such as the cost of food or petrol ' things they purchase frequently ' or their views about inflation are influenced by the media reporting information about current prices. That is why short-term inflation expectations of households tend to follow actual inflation higher (so-called 'adaptive' expectations). Importantly, however, households do not expect rising inflation to be lasting.<\/li><\/ul>"},{"layout":"linklist","uid":25841,"publicationDate":"18 Jul 13:53","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180738.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHjzm7tW87Ye4eNNQ_bVVzs=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180738.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHjzm7tW87Ye4eNNQ_bVVzs=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180738.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHjzm7tW87Ye4eNNQ_bVVzs=&T=1&T=1"},"title":"Chief Economist\u00b4s Comment - Sunday Wrap","product":"Chief Economist's Comment","synopsis":"<ul class=\"ucrBullets\"><li> I\u00b4ll revisit the ECB\u00b4s post-strategy-publication media blitz to explain and persuade the public ahead of Thursday\u00b4s Governing Council meeting that they\u00b4ll act 'forcefully and persistently' to achieve the revised inflation target ' raising expectations in the process. And I note the decision to take the digital euro project a step further.<\/li><li> As summer rolls in and most of the OECD economies show strong growth, the debate about the withdrawal of policy stimulus is picking up on both sides of the Atlantic. Yet, there is still a long way back for a full recovery in Europe and the list of unanswered questions about the strength and sustainability of the path back to recovery is long. I\u00b4ll summarize my seven key questions ' and, as a summer-special, I\u00b4ll illustrate them with a set of attached charts. To me the conclusion is clear: Any reduction in European policy stimulus would be a mistake. If you disagree after having read my note and looked at the charts, do write to me!<\/li><\/ul>"},{"layout":"linklist","uid":25821,"publicationDate":"14 Jul 15:55","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180711.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHjzm7tW87YeLMLSmjPLpDw=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Owner-occupied housing in eurozone HICP: Implications and challenges","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> With its strategy review, the ECB confirmed that the Harmonized Index of Consumer Prices (HICP) remains the appropriate measure for assessing the achievement of the central bank\u00b4s new price-stability objective (a symmetric target of 2% inflation over the medium term). However, the Governing Council (GC) acknowledged that 'the inclusion of the costs related to owner-occupied housing in the HICP would better represent the inflation rate that is relevant for households'. Therefore, it recommended a roadmap to include owner-occupied housing (OOH) in the HICP. <\/li><li> Our Chart of the Week shows an attempt to quantify the effects of including OOH in the eurozone HICP. We make a (possibly conservative) assumption that the weight of OOH in the basket would be 10%. Over the last decade, the inclusion of OOH would have raised inflation by an average of 0.1pp per year, although the impact would have differed meaningfully over time. In 2011-13, amid weakness in the housing market, OOH subtracted from the inflation rate, while the opposite holds true in the following years, when inflation would have been 0.2pp higher, on average. This suggests two things. First, the slight increase in the target for inflation, under the new definition of price stability (to 2% from 'below, but close to 2%') changes very little in practice when OOH is taken into account. Second, inflation that includes OOH might become more pro-cyclical. Using a larger weight for OOH does not materially alter the average results, but obviously increases the cyclicality of inflation. <\/li><li> OOH is a tricky concept, as it reflects the costs of purchasing, maintaining and living in one\u00b4s own home. Currently, housing costs in the eurozone mainly enter the HICP through actual rents, with a weight of 6.5%, while the costs of OOH are not included. The perception by eurozone households, which we share, is that the weight of the cost of housing in the HICP basket is too low. Several advanced countries already include OOH in their inflation gauges. As a reference, in US CPI, the weight of actual rents is about 8%, while OOH accounts for most housing costs through the so-called owners\u00b4 equivalent rent, with a weight of about 24%. In the UK, the weight of costs of OOH in the CPI basket is about 16%. The main obstacle for OOH inclusion in the eurozone HICP is measurement issues, including differences in data availability and methodology in the way OOH is calculated by member states\u00b4 national statistics offices. Also, OOH data are currently published with a relatively long lag ' numbers for 1Q21 have only been recently published.<\/li><li> The ECB\u00b4s roadmap foresees four main stages for moving to an HICP including OOH costs as the main index for monetary policy purposes: 1. The construction of an analytical index for internal purposes, which includes OOH with approximated weights; 2 Eurostat to carry out further work on the statistical compilation of OOH weights, with the aim of publishing an experimental quarterly HICP including OOH costs in 2023; 3. An official quarterly index to be available by 2026; 4. OOH costs to be included in the HICP at a monthly frequency and in a timely manner (the ECB does not provide a timetable for this). During the transition period until stage 4 is accomplished, the main reference index for monetary policy will remain the current HICP, although 'the quarterly OOH index will play an important supplementary role in assessing the impact of housing costs on inflation and will thus inform the GC\u00b4s monetary policy assessments'.<\/li><\/ul>"},{"layout":"linklist","uid":25788,"publicationDate":"11 Jul 12:38","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180671.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJFXNmya2TWN3FxbVPMU3H1o=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180671.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJFXNmya2TWN3FxbVPMU3H1o=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180671.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJFXNmya2TWN3FxbVPMU3H1o=&T=1&T=1"},"title":"Chief Economist\u00b4s Comment - Sunday Wrap","product":"Chief Economist's Comment","synopsis":"<ul class=\"ucrBullets\"><li><strong> The ECB\u00b4s new strategy: <\/strong> The disappointment, the worrying central outlook - and the (distant) hope.<\/li><li> The flat ECB strategy raises the bar for fiscal policy, for which the 2022 budgets and the future shape of the EU\u00b4s fiscal rules will be key. There\u00b4ll be no clarity on EU fiscal rules until we have the next German government in place. I\u00b4ll discuss the outlook for German politics.<\/li><\/ul>"},{"layout":"linklist","uid":25760,"publicationDate":"07 Jul 11:47","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180640.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJFXNmya2TWN38myvSDvtQLQ=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - OPEC+: Why the UAE has blocked a deal","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> After days of tense diplomatic negotiations, last Monday OPEC+ failed to strike an agreement on the tapering of its oil curbs. Russia and Saudi Arabia had proposed to raise output collectively by 400,000 b\/d each month, between August and December 2021, while extending the existing deal (of around 3mb\/d in production curbs) from April 2022 until December 2022. However, the UAE blocked the deal, deeming it unfair. The UAE supported the easing of the collective production cuts through the end of the year but wanted the extension of the agreement to be discussed at a separate occasion because its quota is calculated according to outdated production capacity figures that impose a heavy cost on the country in terms of lost government revenues. For Saudi Arabia and Russia, instead, the two issues were linked and could not be separated. At the moment, the cartel does not envisage boosting output in August, and no details have been released about a possible new date to finalize a deal. <\/li><li> Our Chart of the Week, which reports spare production capacity as a percent of total capacity under the current deal, shows that the UAE has a valid argument. When, in spring 2020, OPEC+ agreed to cut production by 9.7mn b\/d, national quotas were tied to 2018 production levels ' except for Russia, which was assigned a baseline that was some 600,000 b\/d higher and thus could cut less, in percentage terms, than it was supposed to. The UAE was heavily penalized by the choice, because, in 2018, its production capacity was around 3.2mn b\/d, as opposed to around 3.8mn b\/d now. The expansion in production capacity is a result of a series of investments that are expected to increase output to around 5mn b\/d by 2030. As a result, the UAE is now sacrificing 31% of its capacity ' the highest such percentage among OPEC+ members, even though it is only a mid-sized producer. If the 2018 baseline for production capacity were used instead, the country would just be forgoing 17% of its capacity ' roughly in line with other countries. <\/li><li> The chart highlights the overall unevenness of the deal. Not all countries are expected to give up the same percentage of production capacity. Among the largest producers, Russia is sacrificing less than 10% of its overall output, as opposed to 30% for Saudi Arabia. Even if Russia and Saudi Arabia are both producing 9.5mn b\/d, the relative cost of the agreement is higher for the latter. For the other members of the cartel, the percentages range from 4% for Angola to 22% for Nigeria. The chart also shows that there is room to rebalance the UAE\u00b4s quota, but it would require other members to contribute more to the deal. For the UAE to have a percentage of unused production capacity similar to Kuwait or Iraq (two other mid-sized producers), its production should be increased by 400,000 b\/d (which is the amount of additional production for the whole group that was planned for August).<\/li><li> Defusing the diplomatic impasse and finding common ground is unlikely to be easy. The current stalemate is rooted in disagreement over the way quotas are calculated. The UAE see this as an opportunity to reassert itself from its long-standing but dominant ally Saudi Arabia. Moreover, the two countries are currently distant on a number of regional issues. In 2019, the UAE withdrew most of its military forces from Yemen, while Saudi Arabia remained to fight Iran-backed Houthi rebels. Among many issues, the two countries have different positions with regard to the normalization of relations with Israel and Qatar. Despite the heightened competition between the UAE and Saudi Arabia, we expect an agreement to be reached in the coming weeks ' even if its shape is hard to predict. Otherwise, the costs would be too high for the cartel itself. Without an injection of some extra barrels of oil by the middle of the summer, and given the tightness of the market, Brent might cross the threshold of USD 80\/bbl, risking endangering global demand. However, if tensions were to escalate, inducing producers to pump freely, prices would move sharply in the opposite direction, paving the way for a price war reminiscent of the one that occurred last year. <\/li><\/ul>"},{"layout":"linklist","uid":25727,"publicationDate":"04 Jul 12:45","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180596.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJELjWQr-cDcAGx3T0Am-PZc=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180596.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJELjWQr-cDcAGx3T0Am-PZc=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180596.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJELjWQr-cDcAGx3T0Am-PZc=&T=1&T=1"},"title":"Chief Economist\u00b4s Comment - Sunday Wrap","product":"Chief Economist's Comment","synopsis":"<ul class=\"ucrBullets\"><li> The outlook for strong ' but diverging - growth in the second half of the year, and the teeing up of the withdrawal of policy stimulus in Europe.<\/li><li> My two key questions for European policymakers.<\/li><li> What this is likely to mean for markets during the next six months.<\/li><\/ul>"},{"layout":"linklist","uid":25726,"publicationDate":"02 Jul 16:37","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2021_180595.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJELjWQr-cDcADT8hnFz8mpQ=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - US labor market: Progress, but not substantial","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> In the US, non-farm payrolls rose a better than expected 850k in June, after an upward-revised 583k in the prior month. Payrolls are still 6.8 million (or 4.4%) below their pre-COVID level in February 2020. Despite the acceleration in payroll gains in June, the headline unemployment rate actually rose 0.1pp to 5.9%, and the labor force participation rate was unchanged at 61.6%.<\/li><li> Our Chart of the Week shows that, while the pace of job growth is accelerating, there remains plenty of slack in the labor market, once one adjusts for the misclassification of workers and, in particular, the large number of Americans that have left the labor force since the onset of the pandemic in February 2020. Once these adjustments are made, the real unemployment rate was 8.9% in June, unchanged from May, and well above the pre-COVID level of 3.5%. The Fed is likely to judge ' rightly ' that it has made progress towards its maximum employment goal, but not the 'substantial further progress' it has set before tapering the pace of asset purchases. We expect the Fed to announce in December that tapering will start in January 2022.<\/li><\/ul>"}]

fca5774f669803887558f1f8bf49f8ba6cbad35f9de48a9f1720f5619f212128;;[{"layout":"linklist","uid":25701,"publicationDate":"30 Jun 17:05","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2021_180566.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRoSIN084bMP6FuoAhlg8moqA==&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2021_180834.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRowVR_C5Bsx474E54GL3660g==&T=1&T=1","protectedFileLinkIt":""},"title":"CEE Quarterly - The reopening (3Q21)","product":"CEE Quarterly","synopsis":"<p><ul class=\"ucrBullets\"><li> We expect economies in EU-CEE and in the Western Balkans, to grow by around 5% in 2021 and 4.5% in 2022 after slumping by close to 4% in 2020. We see Hungary, Poland, Romania and Serbia returning to pre-pandemic levels of activity already in 2021, with the other countries following in 2022.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> Pent-up demand could drive the recovery, as consumers and companies increased their savings in 2020. Government transfers will further support household finances. Pre-funding from the EU\u00b4s Recovery and Resilience Facility (RRF) might start arriving in 3Q21, further boosting investment.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> Turkey\u00b4s economy could grow by 7.5% in 2021, the fastest in CEE, after avoiding a recession in 2020. In 2022, growth might slow to 3.5% if financial conditions remain tight.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> The Russian economy is expected to grow by around 3.4% this year and 2.6% next year, recouping all pandemic losses. Domestic demand could increase as households reduce their savings and companies start investing again.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> In 2021, the summer rebound will be driven by services, which suffered the most during lockdowns. The subsequent recovery could be bumpy, as all sectors face labor shortages. Manufacturing, which led the economic rebound since last summer, and construction also face supply-chain bottlenecks that will slow their growth.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> Throughout CEE, the main risk to growth is another spike in COVID-19 cases and deaths later in 2021 as the speed of vaccination has slowed since May. Bulgaria, Russia and Romania face bigger threats in this respect than Czechia, Turkey, Poland, Hungary, Slovenia and Slovakia.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> Supply shocks and stronger demand are expected to push inflation higher. The momentum in cyclical inflation continues to rise, while commodity prices may contribute less to inflation from here on. Czechia and Serbia are the only countries likely to hit inflation targets this year. Next year, stronger domestic demand will keep inflation outside or close to the top of target ranges.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> We expect additional rate hikes this year, to 1.35% in Hungary, 1.00% in Czechia and 6.5% in Russia. The NBP could start raising rates in 4Q21 or 1Q22, taking the policy rate to 1.5%. The NBR could take the key rate to 1.75-2% in 2022. The CBRT could cut the policy rate by 2.5pp this year and 3pp next year, to 13.5%, with the CBR cutting as well, to 5.5%.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li> The main risks are domestic and mostly related to politics. Elections in Bulgaria and Czechia could result in fragile majorities. Infighting among Slovakia\u00b4s governing parties could delay reforms. A leadership contest in the Liberal party could reshape the Romanian government. Political interference remains the biggest risk for monetary policy in Turkey. In 3Q21, the geopolitical risk premium on Russian financial assets could diminish.<\/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"}}]