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a758dd3af422a997c29879387b142a7cbbb55acdc2b3508b77437c08c16e11b8;;[{"layout":"detailed","uid":28210,"publicationDate":"29 Jun 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183650.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPRjevfYGAe4I4tua3mCuHw=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Economics Chartbook - Downside risks to growth building (3Q22)","titleDe":"","titleIt":"","product":"The Unicredit Economics Chartbook","synopsis":"<ul class=\"ucrBullets\"><li><strong> Global: <\/strong> GDP growth will probably slow to 3.0% this year (previously 3.3%) and 2.8% next year (from 3.4%). Headwinds from the Russia-Ukraine conflict have combined with COVID-19 lockdowns in China to push inflation up further and slow the pace of economic activity. Central banks have become even more hawkish. Tighter financial conditions, a squeeze in real incomes and a sharp downturn in consumer confidence will increasingly weigh on activity. Trade is weakening, also reflecting a switching of expenditure away from goods. Global inflation will probably peak soon, but the speed and extent of the subsequent decline remains highly uncertain. We think that central banks and markets are underestimating the downside risks to growth. If Russian energy imports suddenly stop, much of Europe will likely see negative GDP growth for 2023.<\/li><li><strong> US: <\/strong> We forecast GDP growth of 2.4% this year and below-potential growth of 1.3% next year. Economic momentum is slowing, particularly for interest-rate-sensitive sectors such as housing and durable goods. CPI inflation will likely peak at about 9% yoy in 3Q22, with monthly inflation prints likely easing to levels consistent with target by around the turn of the year. Longer-run measures of inflation expectations are still well anchored and average hourly earnings growth is moderating. We expect the Fed to raise the target range for the federal funds rate into restrictive territory by the end of the year, to 3.25-3.50%, which we see as the peak. Rate cuts could start in late 2023.<\/li><li><strong> Eurozone: <\/strong> GDP is likely to expand by 2.8% this year and by 1.3% in 2023. Survey indicators signal a weakening of growth momentum in the spring and downside risks for economic activity in 2H22. Headline and core inflation have further to rise, although we see initial signs that pipeline price pressure might start easing soon from extremely high levels. Weak growth and slowing inflation will probably force the ECB to stop hiking in 1Q23 once the depo rate reaches 1.25%, i.e. the lower end of the 1-2% range the central bank regards as 'neutral'. We expect the announcement of a credible anti-fragmentation facility featuring potentially unlimited purchases and light conditionality.<\/li><li><strong> CEE: <\/strong> The EU-CEE economies will likely grow on average by 3.6% in 2022 and 2.6% in 2023, with the Western Balkans lagging. Turkey could grow by 4.4% in 2022 and 3.3% in 2023. In Russia, the economy could shrink by around 10% this year and stall next year. Hungary and Slovakia would experience the biggest direct impact from a lack of Russian energy imports, followed by Bulgaria, Czechia and Serbia. Inflation is likely to peak this year in most CEE countries, except for Hungary and Poland, where the peak could be postponed to 2023. Inflation is expected to remain well above targets in 2023. We think that central banks will end rate hikes in the autumn, but the scope for rate cuts in 2023 is very limited. The CBR could cut the policy rate to 8% in 2022 and to 7% in 2023. The CBRT might hike in 2023 if there is a change in government.<\/li><li><strong> UK: <\/strong> We forecast GDP growth of 3.4% this year and 0.6% next year. The economy will be skating on the edge of recession for the next few quarters amid a big squeeze in real disposable income. Inflation is set to stay higher for longer in the UK compared to peers, peaking at above 9% yoy in 4Q22, but should fall quickly to below 2% by end-2023. The BoE will probably stop raising the bank rate after a final 25bp hike to 1.50% in August.<\/li><li><strong> China: <\/strong> GDP will likely grow by 4.0% in 2022 and by 4.2% in 2023. While most COVID-19-related restrictions were lifted at the beginning of June, the supply side of the economy is recovering faster than the demand side as Chinese consumers continue their cautious behavior to avoid quarantines. The central government is stepping up efforts to support the economy and reduce the negative impact of future waves of contagion on the domestic economy through a combination of monetary and fiscal policy measures. The PBoC might tolerate further weakening of the CNY towards 7.00 against the USD to support exports. <\/li><\/ul>","synopsisDe":"","synopsisIt":"","hash":"a758dd3af422a997c29879387b142a7cbbb55acdc2b3508b77437c08c16e11b8","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":27810,"publicationDate":"29 Apr 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183159.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHlYjR85eD_wruyOF8HW5cA=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Austria\u00b4s 1Q22 GDP: strong recovery from lockdown","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> According to the flash estimate by the Austrian Institute of Economic Research (WIFO), Austrian GDP grew by 2.5% qoq in 1Q22. After the slump in 4Q21 caused by a fourth lockdown to prevent the spread of COVID-19, the Austrian economy has made a very strong comeback in terms of growth. Austrian GDP is now 1.3% above its pre-crisis level of 4Q19. This also represents a significant year-on-year increase in GDP of 8.7% compared to 1Q21, when restrictive measures to contain the COVID-19 pandemic (third lockdown) weighed on the economy.<\/li><li> Positive growth impulses in 1Q22 came primarily from a very strong recovery in construction and industrial activity. Construction activity grew by 2.6% qoq in 1Q22 after three negative quarters in a row. It benefitted above all from strong order growth from the public sector. After posting a slight decline towards the end of 2021 (-0.3% qoq), industrial activity grew by 4.0% qoq in 1Q22. Strong new business, especially from abroad, and the interim easing of supply bottlenecks supported the recovery. Due to the easing of measures to contain the pandemic, consumer-related services were also able to grow strongly again at the beginning of the year. Value added in trade, accommodation and transport increased by 3.1% qoq. In other services, which include personal services, arts, entertainment and recreation, the increase in value added was even 9.7% qoq. Overall, services grew at the same rate as the economy as a whole, at 2.5% qoq, reaching pre-crisis levels for the first time. <\/li><li> On the demand side, 1Q22 data show somewhat surprisingly only stagnation in consumer demand, despite good development in the labor market, with record employment caused by increasing uncertainty due to accelerating inflation. There was also no further expansion in public consumption after three consecutive quarters of growth ' after the partial expiration of pandemic-related support. Investment activity, on the other hand, rose sharply, by 4.2% qoq, after a pause in the previous quarters as a result of the good order situation in industry and construction, which pushed this area to its capacity limits. Due to the high demand for capital goods, imports increased by 5.5% qoq. Exports increased by 4.1% qoq, so that a negative net-export contribution dampened economic growth in Austria in 1Q22.<\/li><li> Data for 1Q22 still show hardly any dampening effects from the Russia-Ukraine crisis. However, its negative impact on the Austrian economy should be reflected in 2Q22. While the UniCredit Bank Austria Purchasing Managers\u00b4 Index for April still shows strong growth in industry despite a decline, output expectations for the year have dropped abruptly to spring 2020 levels, when the first wave of the corona pandemic affected Austrian industry. The lifting of pandemic restrictions has improved the framework for many service sectors, particularly retail trade and hospitality. The WIFO business climate index for the services sector therefore rose in April ' as did the mood in the construction sector. However, the development of private consumption in 1Q22 has already shown that rising inflation is weighing on consumer spending and that higher costs are reducing willingness to invest. In combination with the uncertainty caused by the Russia-Ukraine crisis, we therefore expect a clear weakening of economic momentum in Austria for the coming quarters after this strong start to the year, despite the lifting of the pandemic-related restrictions in all sectors of the economy.Chart 1 shows the strong rebound by the Austrian economy in 1Q22. This more than compensated for the slump caused by the lockdown towards the end of 2021. CHART 1: STRONG START TO THE YEAR<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Walter","last":"Pudschedl","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=58&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=3fd57c090b77786eca006d6117d313af"},{"first":"Stefan","last":"Bruckbauer","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=103&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=af53d3daf995c2318755dc3e468357c2"}],"countries":[{"name":"Austria","ticker":"AT","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=16&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=efbbe7292dbde4ead0ac1e0ffba0a524"}]},{"layout":"detailed","uid":27797,"publicationDate":"28 Apr 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183145.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHlYjR85eD_wL-6SFWkbSJw=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - \u00b4Friend-shoring\u00b4 supply chains won\u00b4t be easy","titleDe":"","titleIt":"","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> In a speech on 13 April, US Secretary of State Janet L. Yellen spoke of \u00b4friend-shoring\u00b4, a term that has been gaining importance for some time in connection with supply chain issues and especially in connection with strategies to improve the sustainability of the supply of strategically important goods.<\/li><li> Specifically, Ms. Yellen said, \u00b4Favoring the friend-shoring of supply chains to a large number of trusted countries, so we can continue to securely extend market access, will lower the risks to our economy as well as to our trusted trade partners.\u00b4<\/li><li> Our Chart of the Week shows that, whatever preferential trade measures are taken, and assuming those countries that supported the UN resolution to suspend Russia from the Human Rights Council on April 7th, 2022, are deemed \u00b4friendly\u00b4, some large exporting countries will not be party to it. The share of OECD imports from countries that voted against the UN resolution to suspend Russia from the Human Rights Council was 19%. If we add to this the countries that abstained, we arrive at a total of around 35% of OECD imports. Strikingly, this share has more than doubled from below 15% in the late 1980s. Of course, the share of imported goods is only a first picture, as imports from an 'unfriendly' country can also contain value added from a 'friendly' country, and vice versa. Since many of the countries that abstained or voted against the UN resolution are emerging markets, their share of OECD imports is likely larger than their share of value added in producing these imported goods. Still, the chart highlights that global supply chains have become increasingly integrated over time.<\/li><li> If imports from these countries were to be partially restricted in the future, this would certainly have an impact on economic developments in the OECD countries, especially on price development, as these countries include, for example, China, India, Brazil and Mexico. The integration of these countries into global supply chains has likely significantly contributed to the low inflation in industrialized countries over the past 30 years. It also includes many major commodity exporters, especially of energy.<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Stefan","last":"Bruckbauer","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=103&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=af53d3daf995c2318755dc3e468357c2"}],"countries":[{"name":"Russia","ticker":"RU","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=30&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=ed735453b9ff6756327c127bdc30f85e"}]},{"layout":"detailed","uid":27588,"publicationDate":"30 Mar 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_182906.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJJW4PBk9_ILJawJy3UT8KTA=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Economics Chartbook - Central banks walk a thin line (2Q22) ","titleDe":"","titleIt":"","product":"The Unicredit Economics Chartbook","synopsis":"<ul class=\"ucrBullets\"><li><strong> Global: <\/strong> The economic outlook has worsened. We see global GDP growth of 3.3% this year (from 4.2%) and 3.4% next year (from 3.7%). The Russia-Ukraine crisis has caused a sharp rise in commodities prices and inflationary pressure, further global supply-chain disruption, a tightening of financial conditions, heightened uncertainty and a sharp drop in consumer confidence. Rising COVID-19 cases, notably in China, pose additional risks. Global central banks will walk a thin line as the growth-inflation trade-off deteriorates.<\/li><li><strong> US: <\/strong> We expect GDP growth of 3.0% this year and 2.2% next year, which includes a cumulative 0.3pp reduction in growth due to the Russia-Ukraine crisis. US trade and financial linkages with Russia and Ukraine are relatively small and the US economy entered the crisis in a good place, with strong household balance sheets and a very tight labor market. After likely peaking at about 8.5% yoy in the coming months, we see headline CPI inflation declining to moderately above 2% in 2023 due to base effects, lower energy prices, demand moderation and some improvement in supply bottlenecks. We now expect the Fed to hike by 125bp in the remainder of this year, up from 100bp previously, but still see the peak for the federal funds rate at 2-2.25% next year.<\/li><li><strong> Eurozone: <\/strong> Assuming that Russia continues to export oil and gas to Europe, we forecast GDP in the eurozone to expand by 3.1% this year and 2.5% in 2023. This growth trajectory is about 1pp lower than before the Russia-Ukraine conflict started. An easing of pandemic restrictions, still large amounts of excess savings for households and targeted fiscal stimulus are important mitigating factors. Our inflation forecast for 2022 has surged to close to 7%, followed by a decline to an average rate of about 2% in 2023. Facing a worsened trade-off between lower growth and higher inflation, the ECB confirmed its hawkish pivot and announced a plan to speed up the reduction of net asset purchases in 2Q22, aiming to end QE in 3Q22. We still expect two 25bp hikes in 1H23, although risks have shifted toward a first move taking place already before year-end.<\/li><li><strong> CEE: <\/strong> We expect the Russian economy to shrink by around 12% this year (peak-to-trough of around 20%), with a muted rebound in 2023 akin to stagnation. In EU-CEE and in the Western Balkans, GDP is expected to grow by around 2.3% in 2022 and by 3.6% in 2023. For this group, we estimate the direct impact of the conflict on GDP growth at 1.5-3pp in 2022 and up to 1.5pp in 2023. Turkey could grow by around 4% this year and 3.8% in 2023. If the EU stops importing oil and gas from Russia, the Russian economy could shrink by around 20% this year and fail to rebound in 2023. In such a scenario, EU-CEE and the Western Balkans would probably fall into recession. Inflation could reach 30-year highs due to rapidly rising commodity prices and supply-chain bottlenecks, prompting additional rate hikes and FX interventions.<\/li><li><strong> UK: <\/strong> We forecast GDP growth of 3.4% this year and 1.8% next year, after revising down growth by a cumulative 0.6pp due to the Russia-Ukraine crisis. The UK imports little from Russia but, as a net importer of commodities, it faces a substantial terms-of-trade shock. Inflation will likely peak at about 8.5% yoy in April and stay high through 3Q23 before falling below 2% in 4Q23. The MPC will likely raise the bank rate to 1.25% by August and then stop.<\/li><li><strong> China: <\/strong> We expect GDP to grow 4.7% in both 2022 and 2023. New outbreaks of COVID-19 that are forcing millions of Chinese into new lockdowns will likely weigh on economic performance in 1H22, adding to headwinds from the Russia-Ukraine conflict, rising commodity prices and real estate vulnerabilities. However, the government has signaled it will deploy further policy support to ensure stable economic performance and mitigate domestic and external growth headwinds. An easing in fiscal and monetary policy is likely.<\/li><\/ul>","synopsisDe":"","synopsisIt":""},{"layout":"detailed","uid":27377,"publicationDate":"03 Mar 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_182668.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJG_IvE8eWs1LzZJkLmgvyyo=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Europe\u00b4s vulnerability to Russian gas","titleDe":"","titleIt":"","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Russia\u00b4s invasion of Ukraine has driven energy costs higher and exposed Europe\u00b4s reliance on Russian energy, particularly natural gas. In addition to the negative effects of higher prices, the security of supply has come into sharper focus. Our Chart of the Week indicates the exposure of European countries to Russian gas supply, proxied by the share of Russian gas in gross energy consumption. It gives an indication of how European countries would be affected if Russia were to cut gas supplies.<\/li><li> Overall, Russian natural gas accounts for around 8% of gross inland energy consumption in the EU and the euro area. Italy has a high share of gas in gross energy consumption, but it sources a lot of its gas from outside Russia, notably from North Africa, so its dependency on Russian gas is about the same as in Germany, at around 14% of gross energy consumption. France, due to its high share of nuclear power and gas sourced from Norway and LNG (liquefied natural gas), is hardly dependent on Russian gas supplies, and Spain not at all because it gets gas from other sources (LNG and North Africa). Austria has a lower share of gas in gross energy consumption, but with 80% coming from Russia, its dependency on Russian gas is relatively high. Some countries in CEE have a high share of Russian gas in gross energy consumption, especially Hungary with 26% and Slovakia with 17%. <\/li><li> A sudden stop of Russian gas to Europe (not our baseline) would represent a measurable shock, although the impact would be mitigated by a seasonal decline in demand. Alternative sources of gas and energy, and possibly some redistribution within the EU of gas in storage might also help to reduce the impact. But the most exposed countries are unlikely to be able to fully substitute for the loss of supply of Russian gas, probably requiring some rationing. Higher gas prices will deliver some of the adjustment in demand, but not all.<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Stefan","last":"Bruckbauer","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=103&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=af53d3daf995c2318755dc3e468357c2"}]}]

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Stefan Bruckbauer
Chief Austrian Economist
Bank Austria
Schottengasse 6-8 -
A-1010 Vienna
Austria
+43 50505-41951

Stefan Bruckbauer has a master’s in economics from Johannes Kepler Universität Linz (JKU). Before joining Bank Austria, he worked as an assistant at the Institute of Economic Theory at JKU and a...

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