0e3d4e53dc39047191f43808b87cca419b5e48e28ad3cbc686db7d301999fa57;;[{"layout":"linklist","uid":29315,"publicationDate":"28 May 12:53","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185097.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5BFLxVEH_9pK8=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> I\u00b4ll argue that the euro has supported European growth during these past 25 years,<\/li><li> I\u00b4ll summarize the key policy adjustments made to narrow the gap between the original setup and a more appropriate economic setup for a currency union, and I\u00b4ll outline what still needs to be done to unleash European growth.<\/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":29306,"publicationDate":"25 May 13:09","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185086.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5B49r7sBWf9EE=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - China-Russia \"no limits\" trade relationship","product":"Chart of the Week","synopsis":"<p><ul class=\"ucrBullets\"><li>The war in Ukraine has not only strengthened the diplomatic ties between Russia and China, but also the trade relationship of the two countries. Beijing is buying large quantities of sanctioned Russian oil at a sizable discount to market prices, while Moscow is partially circumventing Western sanctions by significantly increasing imports from China. Our Chart of the Week shows that Chinese exports to Russia are now 30% higher than in early 2022; in April 2023, also thanks to some base effects, they increased by more than 150% yoy (compared to an 8% yoy rise in total Chinese exports). All of this is happening within Chinese law. In June 2021, Beijing passed the Anti-foreign Sanctions Law, which provides Chinese companies with a legal basis for bypassing international sanctions that have a detrimental impact on Chinese entities.<\/li><li>The sectoral breakdown highlights the areas where trade between the two countries is intensifying. Although the latest data available is from December 2022, the picture is clear. Last year, Chinese exports of machinery to Russia almost doubled, to USD 20bn, while sales of vehicles almost tripled, to USD 7bn. These are among the categories of goods that were hit hardest by Western sanctions and play an important role for Russia in sustaining its war effort; for example, heavy-duty trucks are vital for moving heavy military equipment (but no weapons have been provided). Chinese state-owned defense companies have provided technology, including navigation equipment, communication jamming technology and aircraft parts that Russia\u00b4s military needs. Also exports by chemical and plastic producers have risen substantially. <\/li><li>China\u00b4s economic support, both in terms of exports and imports, has been essential to keeping the Russian economy running. Also some goods are necessary to support Russia\u00b4s war effort. Looking at the broader picture, and beyond the contingencies of the war, the current trade dynamics between Russia and China are consistent with economic fragmentation that might increasingly undermine global value chains, leading to a reversal in the globalization process. Edoardo CampanellaEconomist+39 02 8862-0522edoardo.campanella@unicredit.euUniCredit Bank AGUniCredit ResearchPiazza Gae Aulenti, 4 - Tower CI-20154 Milan[#PersonalizedTracker #]<\/p><\/li><\/ul>"},{"layout":"linklist","uid":29299,"publicationDate":"24 May 13:34","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185080.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5B-beSnvkHmoQ=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - UK: Core inflation jump likely to force BoE\u00b4s hand","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> Headline CPI inflation fell to 8.7% yoy in April, down from 10.1% yoy in March. However, the fall was much smaller than expected (UniCredit and consensus 8.2% yoy). The print also came in 0.2pp above the Bank of England\u00b4s Monetary Policy Committee (MPC) forecast of 8.4%. While headline inflation is now well off its peak in October 2022, the move down has been entirely driven by energy prices. As expected, the main downward contribution to the yoy change in headline inflation between March and April 2023 came from electricity and gas prices, due to a large base effect. Specifically, the extension of the government\u00b4s Energy Price Guarantee meant electricity and gas prices were broadly unchanged in April 2023, compared to a surge of 47% mom in April 2022. Food price inflation eased marginally from its highest rate in over 45 years.<\/li><li> The main news in this morning\u00b4s April CPI release was that core CPI inflation (which excludes energy, food, alcohol and tobacco) surprisingly jumped to 6.8% yoy, up from 6.2% yoy in the prior month. It is the highest core inflation rate since March 1992. The main upward contributions came from recreation and culture (0.2pp), transportation and particularly second-hand car prices (0.1pp), communication (0.1pp), council tax (0.04pp), social landlord rents (0.03pp), and sewerage collection (0.03pp). Some of the upward contributions to core inflation are one-offs at the start of the tax year (e.g. council tax, social housing rents), but they reflect inertia from high past inflation. Recreation and cultural prices are notoriously volatile.<\/li><li> The Bank of England\u00b4s Monetary Policy Committee (MPC) has stated that, 'if there were to be evidence of more persistent [inflationary] pressures [from the tightness of the labor market, wage growth and services price inflation], then further tightening in monetary policy would be required'. Services price inflation printed higher than the MPC expected. As a result, we are revising our MPC forecast and now expect another 25bp increase in the bank rate to 4.75% at the MPC\u00b4s next monetary policy announcement on 22 June (previously we had expected no change). The MPC will receive another monthly labor market report (due on 13 June) and the May CPI report (21 June) before then, but we doubt this will materially change things. We expect bank rate at 4.75% to be the peak and for the MPC to start cutting rates in early 2024. By the time of the following MPC meeting on 3 August, headline inflation will be falling rapidly (largely due to lower electricity and gas prices ' the regulator Ofgem is due to announce its price cap for 3Q23 tomorrow) and we expect core inflation to show clear signs of easing, as it tends to lag the fall in headline inflation by one or two quarters.Chart 1 shows headline inflation fell to 8.7% yoy in April, down from 10.1% yoy in the prior month and a recent peak of 11.1% in October 2022. Core inflation rose to 6.8% yoy, up from 6.2% yoy in the prior month, and its highest rate since March 1992.CHART 1: HEADLINE INFLATION DOWN, CORE UP<\/li><\/ul>"},{"layout":"linklist","uid":29294,"publicationDate":"23 May 13:41","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185073.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5BHSLhuvsgE2w=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Eurozone PMIs: Moderate growth amid intensifying sector divergence","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The eurozone composite PMI eased from 54.1 to 53.3 in May, broadly in line with expectations (consensus: 53.5; UniCredit: 54.1). This is the first decline since October 2022 and leaves the PMI at a level consistent with decent growth midway through the second quarter. However, and most importantly, the divergence between manufacturing and services widened further, with the former under severe pressure and the latter continuing to be supported by solid pent-up demand, although new business growth has started to moderate from high levels. This heterogeneous pattern makes the eurozone recovery vulnerable to a weakening of demand conditions as the pass-through of interest rate hikes accelerates. <\/li><li> In manufacturing, the contraction in output intensified amid further weakness in new orders and falling backlogs orders. Soft demand prospects induced businesses to accelerate inventory depletion and reduce purchases of intermediate inputs. In services, activity remained at solid levels. However, outstanding business slowed while business expectations declined further, albeit from high levels.<\/li><li> Price indicators fully reflect the heterogeneous recovery pattern. Input and output prices eased further in manufacturing, with the output price index dropping below 50 for the first time since September 2020. In services, selling prices accelerated somewhat from already high levels despite a slight deceleration in input price growth. Wages continue to be reported as the main source of upward pressure for firms\u00b4 costs.<\/li><li> The labor market continued to show an impressive resilience, with employment increasing strongly in services and more moderately in manufacturing. Compared to the previous month, the pace of new hiring slowed only slightly in both sectors. Overall, the PMIs leave the ECB on track for two more 25bp hikes.In greater detail:The composite PMI declined from 54.1 to 53.3. The index for manufacturing declined from 45.8 to 44.6 while that for services eased from 56.2 to 55.9. The outperformance of services relative to manufacturing reached a new record high.CHART 1: DIVERGENCE BETWEEN SECTORS WIDENED FURTHER<\/li><\/ul>"},{"layout":"linklist","uid":29289,"publicationDate":"22 May 16:33","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185065.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5BvshcYzvHS00=&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185074.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5ByYMrOOzHmQs=&T=1&T=1","protectedFileLinkIt":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185069.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5BX7F5gBSzG0k=&T=1&T=1"},"title":"Natural Gas Update - How different demand scenarios can affect natural gas prices ","product":"Natural Gas Update","synopsis":"<ul class=\"ucrBullets\"><li> Europe will need adequate gas demand reduction to navigate next winter. Although today\u00b4s demand situation is more benign than we had predicted two months ago, there remains a lot of uncertainty about how demand might evolve in the coming months. <\/li><li> Our baseline scenario assumes an increase in demand compared to 2022, but below 2021 levels, on the back of normal weather conditions and of a partial return of the curtailed production that was recorded last year.<\/li><li> We still expect TTF prices to move up from current levels, but we now see them averaging EUR 70-80\/MWh in 2H23, rather than EUR 80-90MWh. Significant gas demand reduction allowed Europe to comfortably navigate last winter despite the curtailment of most Russian imports following the war in Ukraine. A combination of mandated and voluntary measures to curb demand, along with unseasonably warm weather, prevented rationing and a more pronounced economic slowdown. With TTF prices trading at around EUR 30\/MWh, there is a sense of comfort among market participants about next winter too. Certainly, the price cap adopted by the EU, the introduction of a European LNG benchmark, collective purchases of natural gas at the European level and measures to diversify supply are contributing to limiting price volatility.However, low prices are also reducing incentives for both households and firms to tame their gas consumption, and this might be even more the case if weather conditions turn out to be less favorable than they were last year. Without adequately low demand, Europe will need to import more LNG, which is in short supply amid high demand globally. Furthermore, even if supply was sufficient, the continent would likely lack adequate regassification capacity. This note will show that, although the demand outlook looks more benign than it did two months ago, demand is reaccelerating. We still expect TTF prices to move up from current levels, but we now see them averaging EUR 70-80\/MWh in 2H23, rather than EUR 80-90\/MWh.Sharp demand destructionBesides the measures adopted by governments, firms and households to reduce demand, favorable weather conditions played a key role in taming natural gas consumption last winter. According to the National Weather Service of the University of Maryland, in 2022 the northern hemisphere experienced the fifth-warmest winter recorded in the last 30 years, and the warmest January on record for that period. Chart 1 shows that European gas demand was outside the 2015-2021 range for most of late 2022 and early 2023. For the last six months, consumption in Europe has remained close to the voluntary 15% demand-reduction target that the European Commission set last August and that was recently extended by one year until March 2024.CHART 1. LAST WINTER\u00b4S GAS CONSUMPTION WAS OUTSIDE THE 2015-21 RANGE<\/li><\/ul>"},{"layout":"linklist","uid":29283,"publicationDate":"21 May 12:21","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185057.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5ButZPTcKqT-c=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> First, a few broad predictions with 'very high probability'.<\/li><li> Then some more specific policy-related predictions with 'reasonably high probability', including the likely impact on the economy and markets.<\/li><\/ul>"},{"layout":"linklist","uid":29280,"publicationDate":"19 May 11:51","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185054.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5BizyymMoK7Ao=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Eurozone food inflation at a turning point","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Food inflation in the euro area has peaked and a downward trend lies ahead. This week, Eurostat reported that processed-food inflation (excluding alcohol and tobacco) eased in April for the first time in almost two years, from 18.8% yoy to 17.1%. Our Chart of the Week shows that the slowdown still has a long way to go. <\/li><li> The chart plots the yearly percentage change in the price of processed food along with selling-price expectations of food manufacturers, as reported by the European Commission\u00b4s monthly business survey. The two series display a tight correlation, with the latter consistently leading the former by six months, hence providing important forward-looking information. <\/li><li> The significant decline in the gauge for selling-price expectations from record-high levels points to a clear slowdown in processed-food inflation ' to well below 10% before the end of the year, if the statistical relationship holds. This reflects reduced pipeline pressure as prices of food commodities and energy have declined. At this stage, however, it is not clear if margin compression in the food industry will also play a role. <\/li><li> It is important to consider that the food component of inflation includes both processed and unprocessed food. In the eurozone, the latter accounts for 25-30% of overall food inflation and displays much higher volatility than the former (it is actually one of the most volatile items in the whole HICP basket), as it tends to be meaningfully affected by weather conditions. Swings in unprocessed-food prices can lead to volatility in overall food inflation, but the trend for the latter clearly points south.<\/li><\/ul>"},{"layout":"linklist","uid":29264,"publicationDate":"12 May 13:45","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185034.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5BSKLrWbxUk4E=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - US: Tighter credit conditions to drag on investment and hiring","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Last week, the Fed signaled that it could be done with rate hikes. Chair Powell called the change to the post-meeting statement (which omitted the previous wording that 'the Committee anticipates that some additional policy firming may be appropriate') a 'meaningful' one. Our Chart of the Week shows why, in our view, the Fed is now in wait-and-see mode. It shows the substantial tightening of credit conditions due to the tightening of monetary policy and recent developments in the banking system. It also shows that such a tightening of credit conditions tends to lead declines in business investment and payrolls by around two quarters.<\/li><li> The net tightening in credit standards reported in Monday\u00b4s release of the 1Q23 Senior Loan Officer Opinion Survey (SLOOS) was more than the substantial tightening already recorded in 4Q22. For example, a net 47% of banks tightened standards on commercial and industrial (C&I) loans to small firms in 1Q23, up from 44% in 4Q22. However, and crucially, in a special question the SLOOS reported that 'major net shares of banks reported expecting to tighten standards for C&I loans to firms of all sizes' over the remainder of 2023. Given the lags in the effects of tighter credit standards, if banks\u00b4 expectations were to materialize then it could lead to weak business investment and hiring well into 2024.<\/li><\/ul>"},{"layout":"linklist","uid":29253,"publicationDate":"10 May 17:09","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_185018.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHyBWK2HVX5BOG9WntQjTmQ=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US April CPI: Better than it may seem ","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The disinflationary process in the US halted in April, when looking at month-on-month (mom) inflation rates, but there are reasons for cautious optimism. Headline CPI inflation reaccelerated in April to 0.4% mom, from 0.1% in March, in line with expectations. In year-on-year terms, it declined slightly to 4.9% from 5.0% in the prior month. The contribution to headline mom inflation from the two most volatile components, prices for food and energy, was almost nil. The food index was unchanged in April, and a decline is likely in the coming months thanks to a fall in global food prices. The energy index, on the other hand, was up by 0.6% mom (contributing less than 0.1pp to headline mom inflation) because of higher gasoline prices following the OPEC+ announcement that it will cut production further. The intensification in inflationary pressure has primarily been driven by core inflation, which remained stuck at 0.4% mom, or almost 5% in annualized terms. <\/li><li> Given their differing sensitivity to rate hikes and post-pandemic distortions, it is useful to look at the different core subcomponents. Inflation among prices for core goods accelerated sharply to 0.6% mom, from 0.2%. Prices for core goods were a key driver of disinflation between October 2022 and February 2023 as a result of normalizing spending patterns away from goods and the substantial improvement in supply-chain constraints. However, this trend came to an end in April, even if a single category of goods is primarily responsible for it. Prices for used cars and trucks jumped 4.4% mom ' reversing nine straight months of declines. The good news is that the Manheim index of auction prices of used vehicles fell back in April and it tends to lead the CPI used car price index by around one month. The CPI index for new car prices fell slightly in April.<\/li><li> The shelter-price index was the largest contributor to the monthly increase across all items, but the shelter-price index decelerated to 0.4% mom from 0.6% in March and 0.8% in February. Given that it makes up 34% of the CPI basket, and more than 40% of the core CPI basket, this downward trend is good news for the Fed. The monthly pace of primary-rent and owner-equivalent-rent (OER) inflation should continue to decelerate from its recent peak. However, PCE inflation, which is what the Fed\u00b4s 2% target is on, should be less positively affected by this downward trend due to the lower weight of the housing component in the PCE basket. <\/li><li> Finally, core services inflation excluding rent of shelter was broadly unchanged at 0.2% mom in April ' or about 2.5% in annualized terms. This is probably the most important bit of information from today\u00b4s report. Fed chair Jerome Powell has repeatedly emphasized the importance of this CPI category in determining the future direction of monetary policy. Being labor intensive, the services sector is the industry where the price-wage link is stronger and higher interest rates take longer to produce their effects. Within this category, airfares provided a downward contribution in April after rising in February and March ' but prices in this category are notoriously volatile ' while the index for motor-vehicle insurance increased 1.4% mom.<\/li><li> Today\u00b4s CPI report, which was broadly in line with consensus, did not move markets much and is unlikely to change the Fed\u00b4s plans to pause in June. Putting the pieces together, housing disinflation is in train; core goods inflation accelerated primarily because of the idiosyncratic (and likely temporary) jump in used vehicle prices; core services inflation, excluding housing, was broadly in line with pre-pandemic levels in mom terms. However, since overall core inflation remains too high for the Fed to feel comfortable, we reiterate our view that the Fed will keep interest rates on hold throughout the rest of the year and any interest rate cut will not take place before 2024. More in detail: Both headline and core inflation are on a downward path in year-on-year terms. The pace of the deceleration is rather slow but should quicken in the coming months in part due to base effects. CHART 1. DECELERATING AT A SLOW PACE<\/li><\/ul>"},{"layout":"linklist","uid":29237,"publicationDate":"07 May 12:31","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184991.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEMIeq_2xHJcCtShkKVDkSY=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> This past week provided the latest examples of the sharply diverging US and European economies. I\u00b4ll discuss the paradox of the Fed and ECB reacting virtually identically to what are clearly fundamentally different economic shocks.<\/li><li> And here in Denmark, Friday\u00b4s 'Store Bededag' holiday was the last time we got to celebrate this wonderful 337-year old public holiday. It\u00b4ll be sacrificed on the altar of symbolism ' disguising a set of confused policy priorities. <\/li><\/ul>"},{"layout":"linklist","uid":29235,"publicationDate":"05 May 16:39","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184989.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEMIeq_2xHJcDprHmIhKkZg=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US jobs report: Strong, but not enough for the Fed to change its plans","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The US economy added a robust 253k jobs in April after a downward-revised 165k in the prior month. The April gain was larger than expected, but large downward revisions to February and March totaling 149k took some of the shine off. Just one of fourteen major sectors (wholesale trade) saw payrolls fall in April. Gains were driven by education and health, professional and business services, and leisure and hospitality.<\/li><li> The unemployment rate fell 0.1pp to 3.4%, equaling its lowest level since May 1969. This is because household employment (an alternative measure of employment used to compile the unemployment rate) surged 577k, while the labor force participation rate was unchanged.<\/li><li> The main news and surprise in today\u00b4s employment report was that average hourly earnings jumped 0.5% mom in April, an acceleration from the 0.3% growth in each of the prior three months. As a result, the year-on-year rate for average hourly earnings rose to 4.4% from an upward-revised 4.3% in the prior month. This is above the 3-3.5% range that would be broadly consistent with the Fed\u00b4s 2% inflation target (assuming trend labor productivity growth of around 1-1.5%).<\/li><li> In our view, today\u00b4s jobs report will not be enough for the Fed to hike in June, but equally it also suggests market expectations for rate cuts in the second half of this year are likely misplaced. The labor market remains very tight, and while it is softening, so far this has been gradual. Pay growth remains too high for the Fed\u00b4s liking. And the Fed will now want to wait to see the effects of its substantial cumulative monetary policy tightening to date on output and inflation, most of which has yet to materialize. This, along with the effects of an additional tightening of credit conditions due to recent banking sector developments, will take time.Chart 1 shows non-farm payrolls rose 253k in April after a downward-revised gain of 165k in the prior month. Looking through the monthly volatility, both the three-month average change and the six-month average change fell in April, suggesting the labor market continues to soften gradually.CHART 1: PAYROLLS ACCELERATED IN APRIL, BUT THE TREND IS DOWN<\/li><\/ul>"},{"layout":"linklist","uid":29233,"publicationDate":"05 May 12:06","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184987.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJEMIeq_2xHJcThVv53_MxCA=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - US: Housing inflation has peaked, but mind the CPI-PCE gap","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> In the US, core inflation has yet to show a clear downward trend. Core PCE inflation, at 4.6% yoy in March, is unchanged from its end-2022 level. Similarly, core CPI inflation has moved sideways at around 5.6% yoy over the same period. However, our Chart of the Week shows that housing rents will act as an important disinflationary force going forward.<\/li><li> We can be confident of this because private surveys of new rents, such as that constructed by the Cleveland Fed or Zillow, reliably lead the official consumer housing rents series by around 12 months. This lag is stable and predictable, both because rental contracts are typically fixed for either 6 or 12 months (so it takes time for new rental agreements to affect the average), and because the national statistics office\u00b4s methodology uses a six-month average of rents to increase the sample size. Exploiting this lead-lag relationship, the substantial actual disinflation in private surveys of new rents means the expected contribution of official rents to housing inflation will fall rapidly over the next couple of years. <\/li><li> Importantly, however, the disinflationary effect will be much larger for core CPI inflation than the Fed\u00b4s preferred core PCE measure of inflation. The housing contribution to core CPI inflation would fall from about 3.5pp currently to around 1pp by the end of next year, on its own enough to take core CPI inflation down from 5.6% to just over 3%. The downward contribution from housing to core PCE inflation over this period would be much more moderate, at a little less than 1pp. This difference is almost entirely explained by the larger weight of housing in the core CPI basket (41%) than in the core PCE basket (17%). The bottom line is that housing will likely be an important driver of core disinflation, possibly starting as soon as the April CPI report (due on Wednesday) and beyond. But the Fed\u00b4s focus is on core PCE inflation, and it will take more than housing to bring it back to the 2% target. Therefore, the Fed is closely looking at non-housing core services inflation.<\/li><\/ul>"}]

fca5774f669803887558f1f8bf49f8ba6cbad35f9de48a9f1720f5619f212128;;[{"layout":"linklist","uid":29113,"publicationDate":"29 Mar 16:14","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2023_184832.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRockNs3hFoaK-H67WodFfQjA==&T=1&T=1","protectedFileLinkDe":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2023_184913.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRogcY2wKDB1287Jqur4pkD_A==&T=1&T=1","protectedFileLinkIt":""},"title":"CEE Quarterly - Preparing for a turnaround (2Q23)","product":"CEE Quarterly","synopsis":"<p><ul class=\"ucrBullets\"><li>We expect the economies in EU-CEE to grow by around 0.9% in 2023 and 3.6% in 2024, with most countries avoiding a technical recession this year. The Western Balkans could grow slightly faster than EU-CEE in 2023 and slower in 2024. <\/li><li>Stronger global trade, fewer supply-chain bottlenecks, resilient consumers and more public and private investment will support economic growth. Tight financial conditions at home and abroad and destocking will weigh on growth this year, with negative fiscal impulses slowing the recovery next year. <\/li><li>In Turkey, we expect economic growth of 2.9% in 2023 and 3.7% in 2024, with capital inflows partly offsetting the tightening of monetary conditions if the opposition wins the elections scheduled for 14 May (as we expect). In Russia, we forecast an economic contraction of 2.5% in 2023, followed by a small rebound of around 1.7% in 2024, provided exports do not fall sharply, import substitution improves and public spending does not tighten too much. <\/li><li>Inflation has peaked throughout CEE but is likely to miss targets in 2023-24 as disinflation could be slowed by rising energy prices and taxes, the gradual removal of price caps, FX pass-through and backward-looking wage indexation supporting consumer demand.<\/li><li>Monetary policy has started to loosen through laxer liquidity conditions. In 2023, we expect rates to be cut to 12% in Hungary and to 6.50% in Czechia. In 2024, we expect rates to be cut to 4.50% in Czechia, 5% in Romania, 5.50% in Poland and Serbia, 7% in Russia and 25% in Turkey (following rate hikes to 40% in 2023).<\/li><li>CEE banks are well capitalized and profitable, but central banks need to manage any episode of risk aversion proactively. The Polish banking system would benefit from a blanket solution to end the lawsuits related to CHF mortgage loans.<\/li><li>The risk of funding higher budget deficits in 2023 has been mitigated by bumper issuance in 1Q23. Private and public borrowing from abroad will cover the C\/A deficit not financed through FDI and EU funds. <\/li><li>Gradual European integration for Serbia, following an agreement with Kosovo, could be used as a blueprint for Ukraine. The EU would benefit from investing in the energy infrastructure of the Western Balkans.<\/li><li><strong>In our view, the main risks are: <\/strong> 1. Europe\u00b4s lack of a common vision on how to end the war in Ukraine, which we expect to continue in 2024 without escalating to other countries or non-conventional weapons; 2. war fatigue in CEE; 3. the European Commission\u00b4s more flexible approach to observing whether EU countries respect the rule of law; 4. the growing popularity of Euroskepticism in EU-CEE; 5. Poland and Hungary\u00b4s missing EU funds; 6. political uncertainty if the opposition wins the elections in Poland and Turkey; and 7. Europe\u00b4s lack of a common natural-gas strategy.<\/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"}}]