HOME > Contacts >  Meet The Experts

Meet The Experts

779eb54a7df147dec4cfd43be3678bc7cd890e3a354c451010c231c405be5b88;;[{"layout":"detailed","uid":27911,"publicationDate":"12 May 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183276.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJAYtfRRuP-QMG6KcSzQklc=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - US consumers only slowly normalizing their spending patterns","titleDe":"","titleIt":"","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> The expenditure-switching caused by the COVID-19 pandemic has contributed to the high inflationary pressure over the last year. Lockdowns and social distancing shifted consumer demand away from services and towards goods ' a shift in spending that was further reinforced by the increase in disposable income resulting from generous fiscal transfers. The rise in demand for goods was too abrupt for already constrained supply to adjust in time, thus pushing prices higher, while services firms facing reduced demand did not cut prices to the same extent as it would have done little to improve demand, leaving overall inflation higher. In other words, the sectoral Philips Curve was non-linear.<\/li><li> Our Chart of the Week shows that, despite the full reopening of the US economy, demand anomalies persist. The chart shows US personal consumption expenditure adjusted for inflation, using December 2019 as the baseline. Real consumer spending on both durable and non-durable goods remains around 10% and 20% higher, respectively, than before the pandemic ' with just marginal easing over the last nine months as prices rose steeply and the economy continued to reopen. Spending on services has now returned to pre-crisis levels but there are many categories that are still a long way away from their end-2019 levels. While real spending on accommodation is now back to roughly where it was two-and-a-half years ago, spending on recreational activities, travelling abroad and public transportation remains muted. <\/li><li> High goods price inflation, pent-up demand for travel-related services and a further easing of the direct effects of the pandemic will likely lead to further normalization of consumer spending patterns. But the adjustment process might be more gradual than originally thought with implications also for the re-allocation of labor across sectors, for spare capacity in the labor market and ultimately for the monetary policy stance itself. Continuing COVID-related bureaucratic burdens, such as testing for travelling or capacity constraints for public events, are weighing on demand for certain services. And in some cases, the change in consumption habits might be longer lasting. The spread of remote work, for example, is likely to continue to affect demand for public transportation and the consumption of food away from home, whereas new recreational habits might persist either for fear of contagion or because of structural changes in preferences.<\/li><li> The implication for overall inflation will depend on the balance between moderating core goods inflation on the one hand, and rising core services inflation on the other. The rebalancing of spending towards services could help ease overall inflation if the sectoral Phillips Curve continues to be non-linear. However, core goods inflation could prove stubbornly high amid ongoing supply bottlenecks for goods caused by the Russia-Ukraine conflict and COVID-19-related lockdowns in China, while rising core services inflation is likely to be reinforced by the tight labor market.<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Edoardo","last":"Campanella","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=21&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=74c2d76d6c9952be40cf5647d027b739"}],"countries":[{"name":"United States","ticker":"US","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=42&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=7bc8e05d14fb73ad6fbafeda31d249b7"}],"hash":"779eb54a7df147dec4cfd43be3678bc7cd890e3a354c451010c231c405be5b88","available":"0","settings":{"layout":"detailed","size":"default","showanalysts":"2","showcompanies":"2","showcountries":"2","showcurrencies":"2","nodate":"0","notitle":"0","noproduct":"0","noflags":"0","dateformat":"d M y","nolinktitle":"0","synopsislength":"300","synopsisexpand":"1","shownav":"0","oldestedition":"","limit":"5"}},{"layout":"detailed","uid":27905,"publicationDate":"11 May 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183269.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJAYtfRRuP-QVfQrwOMK2Ec=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US CPI: core services inflation picks up ","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> All-item CPI inflation decelerated to 8.3% yoy in April, down from 8.5% yoy in March, whereas core inflation eased to 6.2% yoy from 6.5% yoy. Looking at monthly changes, instead, the picture is more blurred. Headline inflation eased to 0.3% mom in April from 1.2% in March, thanks primarily to a decline in energy prices, whereas core inflation accelerated to 0.6% mom from 0.3% mom in the prior month. <\/li><li> Shelter, food, airfares, and new vehicles were the largest contributors to the monthly increase in CPI. Airfares, in particular, increased by a whopping 18.6% mom after a rise of 10.6% in the prior month. There are likely two reasons for the jump in airfares in April. First, ongoing expenditure-switching away from goods and towards services as the direct effects of the pandemic fade has pushed up prices for travel-related items. This is likely to last at least a few more months as pent-up demand for travel is absorbed. Second, the later timing of Easter this year compared to last year probably temporarily inflated airfares in April. When it comes to shelter, rents surged 0.6% mom and Owners\u00b4 Equivalent Rent (OER) was up 0.5% mom, a very strong pace. Considering that rents and OER tend to be sticky, and together they account for 31% of the CPI basket and 40% of the core CPI one, it will likely continue to remain a key driver of inflation going forward. <\/li><li> Core goods prices are showing some signs of easing (apparel -0.8% mom, used cars -0.4% mom, appliances -0.5% mom), but new vehicle prices (1.1% mom) were up strongly as supply bottlenecks continue and might intensify in the coming months as a result of negative spillovers from the Russia-Ukraine conflict and anti-COVID restrictions adopted in China. <\/li><li> All in all, today\u00b4s inflation report provides two key messages. First, energy-related inflation is losing steam as oil prices are stabilizing, albeit at high levels. Second, the lifting of restrictions and the reopening of the economy are being accompanied by a normalization in spending patterns, away from goods towards services. Consequently, core goods inflation is now moderating, while core services inflation is accelerating. The challenge facing the Fed in bringing inflation down towards the target is highlighted by the following. Rents and OER alone are currently contributing 0.2pp to monthly core inflation, and this is likely to continue for some time. It means that for monthly core inflation to moderate towards target-consistent levels, core goods inflation would likely have to turn negative (not only moderate, as it is now) in order to offset rising core services inflation driven by expenditure-switching and a very tight labor market. Therefore, today\u00b4s CPI report will give the Fed more reason to continue with its tightening plans. In greater detail,Both headline and core CPI inflation likely peaked in March in year-on-year terms (chart 1) but, for the time being, the 2% inflation target remain elusive for the Fed with monthly core CPI inflation accelerating. Consequently, the descent from a 40-year high for year-on-year inflation is likely to be slow. CHART 1. INFLATION HAS PEAKED IN ANNUAL TERMS<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Edoardo","last":"Campanella","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=21&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=74c2d76d6c9952be40cf5647d027b739"}],"countries":[{"name":"United States","ticker":"US","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=42&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=7bc8e05d14fb73ad6fbafeda31d249b7"}]},{"layout":"detailed","uid":27870,"publicationDate":"08 May 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183219.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJAYtfRRuP-QLrAjz7h-qeI=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","titleDe":"","titleIt":"","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> I\u00b4ll suggest that while a rate hike in July is the most likely outcome, it\u00b4s not a given; and if they don\u00b4t lift-off in July, their entire 'normalisation' plan could be put on hold for some time. I\u00b4ll argue that the rationale for the ECB\u00b4s planned normalisation of policies is not being communicated persuasively.<\/li><li> The ECB\u00b4s desire to plough ahead will shift the burden of supporting the increasingly weak and nervous economy to fiscal policy. That is not a bad thing in itself ' so long as our elected officials act sufficiently forcefully. It\u00b4s still early days, but we have had some good news recently on that front: On the fiscal rules, a new ESM proposal for a fiscal stabilisation fund, and more talk of European federalism, if still all all vague.<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Erik F.","last":"Nielsen","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=20&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=03e9947fb9ddfc6c0ef8ad3e2ff8aed1"}]},{"layout":"detailed","uid":27869,"publicationDate":"06 May 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183218.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJAYtfRRuP-QJKFYiZxui9M=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - A still very tight labor market; tentative wage growth moderation","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The US economy added 428k jobs in April, a robust pace of hiring. It leaves payrolls 1.2mn below their pre-pandemic level from February 2020, but at the current pace this gap would be made up in just three months\u00b4 time. Job gains in April were broad-based across industries.<\/li><li> The unemployment rate was unchanged at 3.6%, well below the rate that the Fed thinks is consistent with price stability (4%). The unemployment rate is computed using the household survey, while payrolls are computed from a different survey called the establishment survey. We note this difference because the household survey measure of employment fell 353k (in contrast to payroll employment rising 428k) and the reason why the unemployment rate didn\u00b4t rise in April is because labor force participation declined by 363k. Now, we wouldn\u00b4t put much weight on the fall in household employment, because it came after an outsized rise in the prior month and tends to be volatile, as well as being computed from a smaller sample than the payroll measure of employment. But what we do put weight on is the fall in participation, which is a disappointment, after six consecutive months of improvement. The lack of people actively participating in the labor force (-537k from pre-pandemic levels) is exacerbating the shortage of workers, which is contributing to wage pressure. The U6 measure of underemployment (a broader measure of labor underutilization than unemployment alone) rose, driven by a rise in marginally attached workers, who are not in the labor force because they didn\u00b4t actively seek a job but would like a job. It seems likely that the fall in participation is just a blip, perhaps caused by the survey week coinciding with Good Friday, and we expect to see a rebound in May.<\/li><li> Average hourly earnings (AHE) rose 0.3% mom (3.8% annualized), down from an upward-revised 0.5% mom in March. Looking through the monthly volatility, there are tentative signs that pay growth is moderating. The annualized growth rate of AHE over the last three months is 3.7%, down from 5.5% in the 12-month period before this. Taken at face value, average earnings growth of around 4% would be consistent with the 2% inflation target, assuming trend labor productivity growth of around 2%. One caveat here is that average hourly earnings are influenced by so-called selection effects (for example, if below-average pay sectors see larger increases in employment it would lower the average wage), but recently payroll gains have been broad-based, so this is unlikely to be the main explanation for the easing. Rather, we think the prior several months of improvement in labor force participation has eased labor shortages somewhat, easing wage pressures, but time will tell. <\/li><li> The April employment report will likely do nothing to change the hawkishness of the Fed, but equally it\u00b4s unlikely to add to the hawkish tones, given the AHE news discussed above. As Fed Chair Jerome Powell said in the FOMC press conference earlier this week, he does not currently see any tension between the Fed\u00b4s dual objectives for price stability and maximum employment, and that\u00b4s because the labor market is, in his words, 'extremely tight' and 'too hot'. By this he means that the unemployment rate is below the (equilibrium) rate consistent with price stability, and wage growth is growing strongly. In other words, while high inflation today is mostly driven by external factors (commodity prices, supply bottlenecks), labor market tightness is contributing to high inflation, and while the Fed would normally look through much of the externally-driven inflation, it cannot ignore the tight labor market and domestically-generated inflation, particularly at a time when headline inflation is so high that the tight labor market risks generating a wage-price spiral (or so-called second round effects).Chart 1 shows that nonfarm payrolls rose 428k jobs in April, which matched the gain in the prior month. Payrolls in the prior two months were revised down slightly (by a net 39k).CHART 1: A ROBUST PACE OF HIRING<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Daniel","last":"Vernazza","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=36&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=9cd2c54b797ddd33a22d9a5ea50fac10"}],"countries":[{"name":"United States","ticker":"US","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=42&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=7bc8e05d14fb73ad6fbafeda31d249b7"}]},{"layout":"detailed","uid":27853,"publicationDate":"05 May 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183202.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJAYtfRRuP-QLTUBMUApBX0=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Fragmentation or not? Yes, and the ECB should not dismiss it","titleDe":"","titleIt":"","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> The spread between the GDP-weighted sovereign yields and the OIS curve has been frequently used by the ECB during the pandemic to assess the degree of market fragmentation. The PEPP was launched based on this indicator and the central bank used to monitor it closely. As our chart shows, the GDP-weighted 10Y yield spread vs. OIS has moved sideways so far this year. On the surface, this suggests that everything is fine in the fragmentation camp.<\/li><li> However, such an average indicator hinders a tremendous heterogeneity at the country level. In the current risk-off environment, core EGBs have outperformed OIS, while traditional high-beta issuers (Italy for example) have widened versus OIS. This is reflected in a meaningful widening in the BTP-Bund spread, which has approached 200bp at the 10Y. Notably, BTP underperformance does not seem to be related to idiosyncratic issues (higher deficit or political uncertainty), as in past episodes, but mainly to the effect of a less supportive monetary-policy stance at a time when the Russia-Ukraine conflict is weighing on growth prospects.<\/li><li> Widening in spreads to Bunds should be a flashing signal for the ECB because it is a stark reminder that sovereigns, banks and corporates in various jurisdictions are facing increasingly different funding costs. A one-size-fits-all approach is not appropriate in the current environment, and the ECB should not dismiss the latest developments in fragmentation.<\/li><li> We are probably in for some more volatility in BTPs in the short term. First, the ECB may take some complacency from the fact that BTP widening versus OIS has been more limited than versus Bunds. Secondly, the ECB may be reluctant to abandon the gauge of fragmentation it endorsed during the pandemic. Lastly, the ECB is likely to be in a difficult position because sovereign risk repricing is not widespread, which would be a straightforward reason for intervening, but focused on a small subset of countries.<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Luca","last":"Cazzulani","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=39&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=44e3fa0de8cdd1ffaea59e3843112f22"}]}]

Loading...

French presidential elections: Can Macron still lose?
25 March 2022
Click to play video

View PDF

ECB seeks optionality as uncertainty rises
29 November 2021
Click to play video

View PDF

All Research