0e3d4e53dc39047191f43808b87cca419b5e48e28ad3cbc686db7d301999fa57;;[{"layout":"linklist","uid":28905,"publicationDate":"01 Feb 15:42","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184558.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-RggZYXSFTK7U=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Italian inflation starts to decline","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> Annual inflation in Italy declined to 10.1% in January, from 11.6% in December 2022, matching our expectations. January\u00b4s decline is likely the start of a descending path through 2023. Part of the easing in January was due to a base effect, following a strong uplift in electricity and gas prices in January 2022 during the first leg of the energy crisis in 2H21. The CPI was up by 0.2% on a monthly basis.<\/li><li> As expected, the deceleration in energy inflation intensified. The annual growth rate declined from about 65% in December to 43%. Energy prices were down by about 4% mom. This was mainly triggered by a correction in energy prices in the regulated market, electricity and, above all, gas tariffs, which are now adjusted on a monthly basis, and therefore more quickly mirror changes in the wholesale market, where the Dutch TTF benchmark fell below EUR 60\/MWh at the end of January. The downward correction in energy prices could have been even stronger if it were not for the increase in motor-fuel prices, which rose by about 5% mom. This impact was also expected and was a consequence of the end of discounts approved by the government since mid-2022 to mitigate the impact of tensions in the oil market.<\/li><li> The correction in energy inflation was amplified by the change in the weights of items in the consumer basket, which is usual at the beginning of the year. The changes include a 34% increase in the weight of electricity in the basket and a 20% increase for gas compared to 2022. This factor is likely to further support the disinflation we expect in Italy as energy prices normalize (see our Chart of the Week ' Italian inflation could fall rapidly as energy prices drop, 27 January). <\/li><li> Consistent with our expectation, core inflation (which excludes fresh food and energy) still did not provide any indication of a turnaround. Core inflation rose from 5.8% to 6.0% in January (up 0.5% mom). The rise was mainly related to an increase in services prices, largely driven by growth in housing services (excluding utilities) and in prices in the leisure and culture, and restaurant categories. In contrast, prices of transport services showed a downward correction, as expected, following the surge related to Christmas. As a whole, services prices increased by 0.4% mom. The rest of the impact came from prices of non-energy and non-food goods, which were up by 0.5% mom. We expect the increase in the goods prices to diminish in the coming quarters.<\/li><li> For the full year, our expectation is that the deceleration in energy-price inflation will drive headline inflation down quickly towards 2.5%, together with a stickier adjustment of core inflation, especially related to core services inflation. We forecast inflation will decline to about 6% this year (from 8.1% in 2022) and to slightly above 2% in 2024.CPI inflation declined to 10.1%, from 11.6% in December 2022, therefore it peaked in 4Q22. The reduction in headline inflation was mainly due to its more volatile components, especially energy, while core inflation proved stickier. CHART 1: DECELERATION IN ITALIAN HEADLINE INFLATION HAS STARTED, AS EXPECTED<\/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":28902,"publicationDate":"01 Feb 11:26","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184554.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-R2dA0S0ARARg=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Manufacturing PMIs suggest robust start to the year in CEE","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> January manufacturing PMIs published in CEE suggest that a deep recession is likely to be avoided. Output, orders and employment sub-indices underline this conclusion.<\/li><li> While activity continued to contract at the start of 2023, there has been an improvement since November, especially in orders, while supply-chain bottlenecks continue to ease. <\/li><li> Price pressure remains strong and companies continue to transfer cost increases to customers. This suggests that CEE central banks might be too optimistic about the pace of disinflation in 2023. January manufacturing PMIs released this morning in CEE alleviated concerns about a potential deep recession. In Central Europe and Turkey, manufacturing PMIs probably bottomed out in November, while in Russia the readings remain trendless. Manufacturing PMIs suggest that activity was shrinking in January in Czechia and Poland, was flat in Turkey and growing in Hungary and Russia. Hungary\u00b4s PMI readings are not perfectly comparable to the rest of the region because they come from the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM), while all other indices are compiled by S&P. TABLE 1: MANUFACTGURING PMIS STABILIZED AT THE START OF 2023<\/li><\/ul>"},{"layout":"linklist","uid":28899,"publicationDate":"31 Jan 13:34","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184547.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-RjIYTBwX15-A=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Italy\u00b4s GDP contracted in 4Q22 but less than feared","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> Italy\u00b4s real GDP declined by 0.1% qoq in 4Q22, thus showing a somewhat-better outcome than initially expected (UniCredit: -0.3%; consensus: -0.2%). Still, GDP data confirm a deceleration trend towards the end of the year. For 2022 as whole, real GDP grew by 3.9%, following expansion of 6.7% in 2021, thus closing two years of outstanding growth for the country, also compared to its main eurozone peers. <\/li><li> According to preliminary indications from the Italian National Institute of Statistics (Istat), the GDP decline mainly reflects a contraction in the value added (VA) of industry (including construction), which broadly accounts for about 25% of total VA, and an increase in activity in the services sector (73% of total VA). This picture is in line with our long-held expectation, with available monthly data indicating an intensification in manufacturing weakness towards the end of the year amid slowing global demand, still-high energy and input costs and a tightening of financing conditions. Activity in the services sector rose at a strong pace in the previous quarters and fully recovered the losses induced by the pandemic, especially in more-exposed sectors, like trade, transport and accommodation. As expected, this reduced the scope for further upside in 4Q22, especially in a high-inflation environment, although the slowdown in services\u00b4 activity was probably less severe than initially projected. <\/li><li> The slight 4Q22 GDP decline is also the result of a contraction in domestic demand (including the contribution from inventories), and this was partially offset by an increase in net exports. Monthly trade-balance data (in value) suggest some resilience in exports (especially to non-EU countries) and a contraction in imports, which likely captures both a decrease in energy prices and weaker domestic demand. Following two strong quarterly increases in 2Q22 and 3Q22 (by around 2.5% qoq), private-consumption growth is likely to have slowed significantly at the end of 2022. Households\u00b4 real disposable income growth moved further into negative territory already in 3Q22, with Italian households drawing on savings to fuel spending. Moreover, a slowdown in fixed-investment growth was in place, probably more due to investment in machinery and equipment rather than construction investment, which already showed some retracement in 3Q22 (-1.3% qoq). High uncertainty, slowing demand, weakening profitability and rising financing costs could explain a weakness in capex at the turn of the year.<\/li><li> The good news is that business-confidence data, especially in manufacturing, indicate a bottoming out, as the drag induced by Europe\u00b4s energy crisis eases. In addition, Italian inflation is likely to have peaked in 4Q22, while the deterioration expected in the labor market is likely to remain manageable. We expect real GDP growth to remain weak in the first quarter, while economic growth is projected to pick up from 2Q23, also boosted by spending related to the Recovery and Resilience Plan. At face value, this picture is consistent with an upgrade to our annual GDP-growth forecast for 2023, so that it now reflects modest growth, compared to our previous call for a 0.1% decline. In greater detail: Real GDP in Italy declined by 0.1% qoq in 4Q22, slowing from 0.5% and 1.1% qoq growth in the previous two quarters. In 4Q22, real GDP remained 1.8pp above its pre-pandemic level (4Q19). Thus, Italy appears to be well ahead of its other main eurozone peers in the recovery process.CHART 1: DESPITE THE SLOWDOWN, ITALY IS PERFORMING WELL<\/li><\/ul>"},{"layout":"linklist","uid":28898,"publicationDate":"31 Jan 13:01","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184545.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-RpOY-y2SMe_k=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - GDP contraction in Austria at year-end 2022 ","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> Following the slowdown in economic growth to 0.2% qoq in 3Q22, the Austrian economy contracted at the end of last year. GDP fell by 0.7% qoq in 4Q22. The main factor was the negative development in the services sector, in particular the significant decline in the trade, transport, accommodation and catering sector. Higher energy costs and their pass-through to goods and services prices led to spending cuts by consumers in real terms. As in the previous quarter, the construction sector experienced a decline again, while industry expanded slightly. <\/li><li> Despite the global economic slowdown and a sharp drop in new orders, Austrian companies were able to increase their exports by 2.9% qoq, thanks in part to the completion and delivery of old orders supported by the easing of supply-chain problems. This resulted in a small positive contribution of net exports to GDP at year-end, as import growth was somewhat lower. On the one hand, the relatively significant increase in investment ensured high import demand, while, on the other hand, import growth was dampened by the sharp decline in consumer demand. Private consumption contracted by 2.4% qoq, the third quarter in a row.<\/li><li> The Austrian economy contracted somewhat more sharply at the end of last year than we originally expected. High inflation, which climbed to an average of 10.6% year-on-year in the fourth quarter, was particularly harmful to developments in retail trade and tourism. In view of the multiple crises, however, the Austrian economy proved very resilient overall. In particular, the labor market showed positive signs at the turn of the year with the lowest unemployment rate in 15 years. Sentiment indicators also improved slightly toward the end of the year, but the Austrian economy is starting 2023 on a weak footing. Following the decline in GDP in 4Q22, we continue to expect a technical recession over the winter, but there are signs that this is already easing. In detail: With a negative contribution to GDP growth of 0.7 percentage points in 4Q22, the services sector had by far the strongest impact on economic development. The positive contribution from industry of 0.1 percentage points was offset by a similarly high negative contribution from construction.<\/li><\/ul>"},{"layout":"linklist","uid":28897,"publicationDate":"31 Jan 11:37","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184543.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-R9L3VvFkFg2c=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - French GDP growth holds up","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> France is among the eurozone countries that avoided a contraction in GDP growth at the end of last year. GDP rose 0.1% qoq in 4Q22 (after rising 0.2% qoq in 3Q22), coming in broadly in line with expectations (UniCredit: 0.0%; consensus: 0.0%). The outcome brings 2022 average annual GDP growth to 2.6%, after 6.8% in 2021. The quarterly deceleration in GDP growth mainly reflects a further slowdown in commercial services, largely due to a decline in retail trade, as the boost from reopening faded and cost-of-living concerns weighed on demand. The contribution from industrial activity was marginally positive as a rebound in energy production offset a contraction in manufacturing, driven by a sharp drop in refinery output because of the October strikes, but also a decline in the production of transport equipment.<\/li><li> On the demand side, domestic demand, which is usually the main growth engine, cut 0.2pp from GDP growth, due to a decline in final consumption. Households sharply reduced spending on goods while slightly increasing spending on services, with spending on transportation largely offsetting a cut in retail trade. Gross fixed investment growth slowed, although the expected partial correction in spending by non-financial corporates was milder than expected, pointing to resilience despite an increase in energy and borrowing costs. In contrast, households continued to cut housing investment for the third consecutive quarter, possibly reflecting concerns about an increase in financing conditions. Net export added 0.5pp to GDP growth as the decline in import growth outpaced the decline in exports, which was mitigated by a rebound in energy exports and an increase in spending by non-resident tourists. Inventories cut 0.2pp from GDP growth.<\/li><li> Today\u00b4s reading brings encouraging news as it confirms the economy\u00b4s resilience against the headwinds weighing on the outlook. Looking ahead, while weakness in economic activity remained largely widespread, the latest PMI data for January indicated that the economy continued to hold up at the beginning of the year, with businesses viewing the current soft patch as short-lived and expecting demand conditions to recover. In greater detail: A positive contribution from net exports (adding 0.5pp to GDP growth), gross fixed investment (+0.2pp) and, to a lesser extent, public consumption (+0.1pp) more than offset a drag from private consumption (-0.5pp) and inventories (-0.2pp). <\/li><\/ul>"},{"layout":"linklist","uid":28889,"publicationDate":"29 Jan 12:38","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184525.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-Rc0Cu8wTd9hs=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> I estimate the needs for additional public money at about 2.5% of GDP, or EUR 360bn, per year for the next ten years or so!<\/li><li> I argue that the national budgets may have some fiscal space available if the fiscal rules were properly adjusted, but not nearly enough for the needs.<\/li><li> I discuss the challenges of financing.<\/li><\/ul>"},{"layout":"linklist","uid":28884,"publicationDate":"27 Jan 11:55","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184522.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-RWa-zdr0s2Co=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Italian inflation could fall rapidly as energy prices drop","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Natural-gas prices have continued to fall in January and the Dutch TTF benchmark is currently below EUR 60\/MWh. While uncertainty on the energy market remains elevated, recent movements play a crucial role in supporting expectations of a deceleration in headline inflation in the euro area this year, with some countries likely to benefit more than others.<\/li><li> Our Chart of the Week shows the annual rates of change of the energy component of the Harmonized Index of Consumer Prices (HICP) for the main eurozone countries. This price category primarily captures the evolution of prices of gas and electricity markets (regulated and non-regulated) and of liquid-fuel prices (gasoline, diesel and heating oil). The surge in energy inflation in the eurozone started in 3Q21 and intensified in the aftermath of the Ukraine conflict, moving close to 40% yoy. Our chart shows a significant increase in dispersion across countries in 2H22, which was mainly related to: 1. their relative dependence on natural gas, which is also used for electricity production; 2. the time lag with which changes in gas and electricity prices in the wholesale market showed up in the retail segment; and 3. the respective government\u00b4s response to the energy crisis. <\/li><li> At one extreme there is Spain, where energy inflation has just moved into negative territory following a deceleration trend that started last July. In Spain, electricity prices increased earlier than in other eurozone countries and, in June 2022, the government introduced a cap on the cost of gas used to generate electricity. At the other extreme, in Italy, energy inflation peaked in October, at above 70%, mainly due to jumps in electricity and gas tariffs, and despite the government\u00b4s intervention to mitigate their impact. <\/li><li> Mostly due to the dynamic in energy indices, in December headline HICP inflation stood at 5.5% in Spain, 6.7% in France, 9.2% in the euro area, 9.6% in Germany, and 12.3% in Italy. The good news for Italy is that, barring any new major shock in the oil and gas markets, the deceleration in energy inflation will drive down inflation quickly this year. <\/li><li> For Italy, given that the weight of the energy index is around 10% of the HICP basket, a decline in energy inflation from 65% in December to close to zero, for example, would directly subtract about 6pp from the headline inflation rate. It would take headline inflation down to around 6%, as is currently the case in Spain. A similar calculation would lead to smaller drops in other countries: about 3pp for Germany and the euro area, and slightly above 1.5pp for France. Due to the annual revision of the weights in the HICP basket at the beginning of the year, which is likely to show an increase in the weighting of the energy component, the estimated declines might prove even larger. Of course, this calculation only considers the direct effects of lower energy prices, but there will also be substantial indirect effects on inflation for other categories of goods and services, particularly energy-intensive ones.<\/li><\/ul>"},{"layout":"linklist","uid":28883,"publicationDate":"27 Jan 11:25","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184521.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-Rzpkfl5sjPoA=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184535.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-R44PWhknaBI4=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184538.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-RuDsP9mEww3k=&T=1&T=1"},"title":"Oil Update - Supply shortages to already start weighing on the oil market in the spring","product":"Oil Update","synopsis":"<ul class=\"ucrBullets\"><li> Despite widespread supply weakness, demand concerns related to a deteriorating macroeconomic outlook have prevailed in the minds of investors in recent months, weighing on oil prices. <\/li><li> Starting in 2Q23, global oil demand is expected to rebound, primarily driven by the reopening of the Chinese economy. <\/li><li> Given the tight supply, Brent prices are likely to remain below USD 100\/bbl only if OPEC+ winds down its output cuts next summer. Brent prices have been trading at around USD 85\/bbl for quite some time, down almost 30% from their June peak. Demand concerns due to the global slowdown have prevailed in the minds of investors over possible supply shortages due to OPEC+ cuts, the price cap on Russian oil and the EU insurance ban that translated into extremely low OECD inventories. In addition, the reopening of the Chinese economy, rather than creating expectations of strengthening demand in the medium term, has reinforced short-term fears. On top of this, the mild weather has led to lower consumption of natural gas, thus offsetting possible negative spillover effects from the gas to the oil market. Currently, Brent futures remain in backwardation, with oil prices twelve months out trading at around USD 80\/bbl. With all the limitations in terms of the predictive power of futures, these contracts seem to suggest that, going forward, the oil market will face risks of oversupply that will drag prices down. In this report, we challenge this view, arguing that, especially in the second half of 2023, supply constraints will become increasingly binding in the wake of stronger demand due to China\u00b4s full reopening from COVID-19 restrictions, a weak recovery in 2H23, and pent-up summer travel demand. Therefore, Brent prices will likely keep rising in 2Q23 towards USD 95\/bbl. For oil prices to remain below USD 100\/bbl, as we expect, OPEC+ would have to start to unleash part of its spare production capacity, lifting its output curbs already in late 1H23. Rebounding demand In its latest monthly update, the International Energy Agency lifted its forecast for global oil-demand growth this year by nearly 200kb\/d to 1.9mb\/d. Thanks to these revisions, global demand will average 101.7mb\/d in 2023 and will hit around 103mb\/d in 4Q23 ' a historic high (more than 3% above pre-Covid levels), which does not bode well for a smooth transition towards a sustainable net-zero path. A strong increase in demand for aircraft fuels as international travel recovers will account for almost half of this year\u00b4s increase in oil demand. Pent-up summer travel demand is expected to be solid and air travel is seen returning close to pre-pandemic levels, with many airports and airlines having addressed the labor shortages and operational issues that plagued their supply chains in 2022. At the country level, the main driver of demand growth will be China. However, the reopening of the Chinese economy is unlikely to lead to an immediate rebound. Although the underreporting of cases has masked the scale of the ongoing COVID-19 outbreak, the lifting of restrictions has led to the spread of the virus throughout the country, straining the health care system, with hospitals and their intensive care units struggling to cope with a flood of patients amid shortages of drugs. In December, Chinese consumers avoided crowded places such as shopping centers, while factories struggled to keep their activity going with acute staff shortages. As reported by Bloomberg, city-level congestion calculated from Baidu data showed a substantial slump in mobility, approaching levels last seen during the spring 2022 Omicron-related outbreak that sent Shanghai into lockdown. Traffic gradually normalized the final week of the year.In the next few weeks, partly as a result of the Lunar New Year celebrations, with millions of citizens traveling across the country, thus facilitating the spread of the virus, the reopening of the Chinese economy is likely to remain bumpy. For this reason, and considering the generalized weakness of the global economy in this phase, global demand growth is likely to contract in 1Q23 before reaccelerating the following quarter (Chart 1). Chinese oil demand will not only benefit from a return to a new post-pandemic normal but also the plans of the central government to expand fiscal spending to aid the economic recovery are likely to support oil demand in manufacturing, construction and transportation. A recovering Chinese economy will lift oil demand in other Asian economies as well. From 2007-2019, annual oil deliveries in India, Indonesia, Thailand and Korea were about 90% correlated with China\u00b4s economy.<\/li><\/ul>"},{"layout":"linklist","uid":28879,"publicationDate":"26 Jan 17:05","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184517.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-RZIPE42Et1QI=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US 4Q22 GDP boosted by inventories and trade; contraction likely in 1H23","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The US economy expanded a strong 2.9% qoq annualized in the final quarter of last year, after 3.2% growth in 3Q22. It completes a roller-coaster ride in 2022, with output falling in the first half of that year and then rebounding in the second half. This volatility was largely driven by changes in inventories and trade flows, which tend not to be enduring sources of growth. Looking through this volatility, growth slowed through last year, reflecting the effects of high inflation (on real incomes) and tighter monetary policy. Most of the effect of the latter on economic activity is still to come, given the lags.<\/li><li> GDP in 4Q22 is a case in point, with the change in inventories and net exports together contributing more than 2.1pp of annualized GDP growth of 2.9%. Real final sales to domestic purchasers, which is GDP excluding net exports and the change in inventories, rose just 0.8% annualized in 4Q22, a slower rate of increase than the 1.5% in 3Q22 and less than half our estimate for potential growth of around 1.8%. The rise in inventories will weigh on GDP growth in the first half of this year, with retail inventory-to-sales ratios well above pre-pandemic levels for many goods.<\/li><li> It\u00b4s true that personal consumption rose a decent 2.1% annualized in 4Q22, only slightly slower than the 2.3% rise in 3Q22. But this largely reflects a run-down of the stock of excess savings, with the personal savings rate, at 2.9% in 4Q22, at historically low levels. The excess savings of those in the lowest quintile of the income distribution have now been exhausted, so it seems likely that spending will falter soon, and the sharp decline in retail sales for December is consistent with this. In 4Q22, personal spending on goods and services rose, but more so for services, with higher interest rates weighing on the purchases of durable goods (in a separate report today, durable goods orders excluding transportation goods fell 0.1% mom in December). Fixed investment fell sharply in 4Q22, driven by a 27% annualized drop in residential investment amid a slump in housing market activity. Non-residential investment (essentially business investment) rose just 0.7% annualized, with spending on equipment falling (in a separate release today, capital goods orders ex. defense and aircraft fell 0.2% mom in December, which is a good proxy for spending on equipment). Government consumption rose strongly in 4Q22, largely driven by non-defense federal spending.<\/li><li> The 4Q22 GDP report is unlikely to change the Fed\u00b4s thinking. It will likely read the report as further evidence that underlying growth is slowing, and this is likely to lead to a further softening in labor demand. In another release today, continuing jobless claims continued their gradual rise, while initial jobless claims fell again to 186k in the week ending 21 January, which is below pre-pandemic levels. It suggests, and in line with other surveys, that hiring has eased but firms remain very reluctant to lay off workers. Ahead, we continue to expect a mild contraction in GDP in 1H23. The build-up of inventories, coupled with the sharp decline in the ISM services new orders index for December and a weak Beige Book for January, have increased our conviction somewhat. Chart 1 shows quarterly GDP growth was on a roller-coaster ride in 2022, with output falling in 1H22 and then rebounding in 2H22. Ahead, we expect a mild technical recession in 1H23. CHART 1: WE STILL SEE A MILD RECESSION AHEAD<\/li><\/ul>"},{"layout":"linklist","uid":28869,"publicationDate":"24 Jan 13:00","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184504.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPTZqM8tbM-Rig4yOotGh5Y=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Eurozone PMIs exit contraction territory ","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The eurozone composite PMI exited contraction territory in January, rising from 49.3 to 50.2, beating expectations for a more moderate improvement (UniCredit: 49.3; consensus: 49.8). This is the highest reading since June and suggests that downside risks are receding. Therefore, any contraction in activity at the turn of the year is likely to prove shallow. The improvement in the composite PMI was explained by an increase of the services sector back to growth (led by Germany) and, to a lesser extent, a further easing in the pace of contraction in the manufacturing sector (led by France). The rest of the eurozone performed well, especially in services.<\/li><li> In manufacturing, demand conditions remained weak, although new orders and export orders figures point to a trend of improvement. The pace of contraction in output continued to ease ' output fell at the softest pace since June - most likely reflecting backlog orders spilling over to production. Importantly, the ratio of new orders to inventories ' which usually leads developments in the headline PMI ' improved for the third time in a row, signaling that the downturn is moderating. Surveyed firms cited the normalization of supply chains and reduced energy security concerns as the main factors supporting the outlook. The improved availability of intermediate inputs led businesses to reduce the pace at which they had so far accumulated inventories of raw materials and finished products, with the corresponding indexes dropping below 50 for the first time in sixteen and eight months respectively. In services, expectations continued to be revised up (to an eight-month high) indicating that businesses consider ongoing demand weakness as short-lived. This was also reflected in hiring plans steadily supporting employment growth.<\/li><li> Today\u00b4s report contains important news in regard to price developments. In an environment of still-weak demand and easing input prices, indices for selling prices rose both in manufacturing and services for the first time since September as businesses try to pass on higher costs to customers. The press release cites wage costs as one of the most pressing concern for businesses. The labor market continued to show resilience across sectors. The employment subcomponent of the composite index further increased, reaching a three-month high<\/li><li> Fading recession fears, firms\u00b4 strong pricing power and a tight labor market will the keep the ECB on a steep tightening path. Next week, we expect another 50bp hike and hawkish rhetoric consistent with a peak deposit rate in the 3.50% area. In greater detail:The composite PMI increased from 49.3 to 50.2. The index for manufacturing increased from 47.8 to 48.8 while that for services rose from 49.8 to 50.7.<\/li><\/ul>"},{"layout":"linklist","uid":28860,"publicationDate":"22 Jan 12:27","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184493.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJBvimKyO_G2ivqeUDtyIodQ=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> The unmistakably clear statement on Thursday by ECB President Christine Lagarde: She told markets that they were wrong to price in an earlier end to the rate hikes than what had been communicated in December.<\/li><li> US Treasury Secretary Janet Yellen announcement also on Thursday that the US government has hit its debt ceiling. While this has happened before, the risk of a default by the US government later this year is real this time.<\/li><li> The meeting in Paris today between French President Emmanuel Macron and German Chancellor Olaf Scholz. We are moving rapidly towards a new European industrial policy. Hopefully, today\u00b4s meeting will reach agreement on some of the general components.<\/li><\/ul>"},{"layout":"linklist","uid":28859,"publicationDate":"20 Jan 16:35","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184492.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJBvimKyO_G2i95sRNqcwUK4=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - US core services inflation: it\u00b4s about more than wages","product":"Chart of the Week","synopsis":"<p><ul class=\"ucrBullets\"><li>Many Fed officials, including Chair Jerome Powell, have said that they are paying particular attention to one category of prices, namely 'non-housing core services'. There are three main reasons for this. First, price inflation for this category has tended to be stickier than that of other categories. Second, it has the largest weighting in the core PCE basket. Third, the other categories of core inflation are either already showing clear disinflation (core goods) or shortly will (average rents, with new rents falling for four consecutive months according to Apartment List). Therefore, the development of non-housing core services inflation could hold the key to determine the time when the Fed may stop hiking interest rates.<\/li><li>Our Chart of the Week shows that non-housing core services inflation (solid black line) has yet to show a clear downward trend. The chart plots two potential drivers of non-housing core services inflation: productivity-adjusted wages or unit labor costs (red line), and producer prices for goods including energy and food (dashed black line). Fed officials have in recent weeks highlighted the importance of the former, and hence labor market tightness, for the outlook for non-housing core services inflation. This is because wages are typically the largest cost for firms providing these services. However, the chart shows that rising non-housing core services inflation has closely followed that of PPI goods inflation. It suggests the indirect effects of rising prices for energy, food and other goods were an important driver. Given ongoing disinflation for PPI goods, we might see a somewhat faster descent in non-housing core services inflation than the Fed is expecting.<\/p><\/li><\/ul>"}]

fca5774f669803887558f1f8bf49f8ba6cbad35f9de48a9f1720f5619f212128;;[{"layout":"linklist","uid":28820,"publicationDate":"09 Jan 12:33","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2023_184441.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRo7oSiWTU9yyA8K_ZQ8Wb5BQ==&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2023_184511.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRo1VsaZ7M0QsRKPBOMsgOvsg==&T=1&T=1","protectedFileLinkIt":""},"title":"CEE Quarterly - Weathering geopolitical and economic shocks (1Q23)","product":"CEE Quarterly","synopsis":"<p><ul class=\"ucrBullets\"><li>We forecast a technical recession throughout CEE over the winter due to falling purchasing power and foreign demand, tighter financial conditions and lower fiscal spending. A rebound is likely from 2H23 onwards if the eurozone economy recovers as well.<\/li><li>We expect the economies in EU-CEE to grow by around 0.5% in 2023 and 3.3% in 2024, slowing from 4.4% in 2022. The Western Balkans might trail the EU-CEE recovery.<\/li><li>In Turkey, we expect economic growth of 2.9% in 2023 and 3.6% in 2024, with growth improving in 2024 only if financial risks are addressed after the 2023 elections. In Russia, the recession could accelerate to -5% in 2023, followed by a small rebound to around 2.5% in 2024 if import substitution improves, underpinning a gradual recovery in aggregate supply. <\/li><li>We forecast inflation to peak in 1Q23 in both EU-CEE and the Western Balkans. Thereafter, fiscal transfers, tight labor-market conditions and higher energy and food prices could keep inflation outside target ranges in 2023-24.<\/li><li>As a result, we see the scope for rate cuts in EU-CEE as being limited to 4.5-7% by 2024, while in Turkey we expect rates to be hiked to 45% this year if the opposition wins the elections. In Russia, cuts to 6.5% are possible if inflation returns to target in 2024.<\/li><li>All CEE central banks will continue to intervene in FX markets, with those in Romania and Serbia being more successful. The CBR could allow the RUB to depreciate gradually.<\/li><li>We assume that the Russia-Ukraine war will continue into 2024, without escalating to the use of non-conventional weapons and\/or spilling over to the rest of Europe.<\/li><li>Besides a more damaging conflict, the main risks for CEE in 2023 are the lack of a common European energy policy, a standoff between the European Commission and Hungary and Poland due to weak adherence to the rule of law, low reform appetite ahead of elections in Bulgaria, Poland, Slovakia and Turkey, a financial crisis in Turkey if monetary and fiscal policies are not tightened after the elections, nationalist tensions in the Western Balkans, and Russia\u00b4s deepening economic isolation.<\/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"}}]