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1484d589a7b5d102c8a29713342d512113e176b231cd48f2a2057c32c788faa1;;[{"layout":"detailed","uid":29011,"publicationDate":"02 Mar 23","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184706.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJGlpiFwyM1XCuLZUjdwg2ak=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Italy: inflation deceleration continues despite a sustained increase in food prices","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> CPI inflation in Italy declined to 9.2% yoy in February, stronger than expected (UniCredit and consensus: 8.9%). This implies an 0.8pp reduction compared to January and is 2.6pp below the peak hit in October last year. The downward adjustment in February was mainly due to a base effect, with the CPI increasing by 0.3% on a monthly basis compared to a surge of about 1% in February last year. <\/li><li> A further significant reduction in the prices of energy products contributed to a moderation in the dynamic of headline inflation. Energy prices now explain 'only' 30% of it, down from about 55% during the October peak. The annual growth rate of energy prices decelerated to 28.2% (from 42.5% in January) amid 1. a reduction of gas tariffs in the regulated market ' reflecting an additional 17% mom decline in gas prices for the European benchmark ' and 2. a decline of electricity and gas tariffs in the non-regulated market, with energy providers in this segment gradually catching up with the price reduction observed in the regulated market in recent months. We expect a downward adjustment in energy prices to continue for both the regulated and the non-regulated market in the coming months.<\/li><li> In contrast, food prices continued to rise at a strong pace. This category now accounts for about 25% of Italy\u00b4s inflation rate. In particular, prices of unprocessed food rose by 2.2% mom, interrupting the downward trend observed in the previous months. This partly explains today\u00b4s positive surprise. Moreover, prices of processed food were up by 1.5% mom, higher than our expectation of a sustained increase due to the stickiness observed so far for this component.<\/li><li> Core inflation (which excludes energy and fresh food) rose further in February (to 6.4% yoy from 6.0% in January), as expected, while its counterpart which mainly excludes energy and all food (as is typical for eurozone inflation) was up to 4.9% yoy. There was an increase in prices of both non-energy and non-food goods and services. For the latter, the acceleration was mainly due to a rise in transport prices, prices of services related to recreation and housing services. We expect housing services to be characterized by a sustained price increase in the coming months, albeit it explains less than 15% of inflation for all services.<\/li><li> Following today\u00b4s inflation reading, we continue to expect the inflation rate in Italy to decline to around 6.0% in 2023 (2022: 8.1%) and to 2.2% in 2024. Risks to our forecast mainly depend on: 1. the gas-price dynamic going forward after the very fast decline observed at the beginning of the year, and 2. the pace of adjustment in some determinants of core inflation, primarily related to services inflation, which might turn out to be slower than expected. In greater detail:CPI inflation fell to 9.2% yoy in February from 10% in January (slightly revised downward from the 10.1% initially estimated). We are now back close to the level reached at the end of 3Q22. While the deceleration in headline inflation is now well rooted, core inflation was up further in February (by 0.6% mom and 6.4% yoy), lagging the adjustment in the headline, as expected. CHART 1: INFLATION: HEADLINE VS. CORE ADJUSTMENT<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Loredana","last":"Federico","link":"https:\/\/unicreditresearch.de\/index.php?id=analyst&L=N3tsp4rk3rRef&tx_research_piedition%5Banalyst%5D=14&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=f79e47dce659611d0660b0c3359f171b"}],"countries":[{"name":"Italy","ticker":"IT","link":"https:\/\/unicreditresearch.de\/index.php?id=country&L=N3tsp4rk3rRef&tx_research_piedition%5Bcountry%5D=5&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=39d7224c0452f3251d42f8f8656acb2b"}],"hash":"1484d589a7b5d102c8a29713342d512113e176b231cd48f2a2057c32c788faa1","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":29007,"publicationDate":"01 Mar 23","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2023_184701.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJGlpiFwyM1XC1_QjB1xyYlk=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Italy\u00b4s 2022: strong growth, a high budget deficit and a declining public debt\/GDP ratio","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> Data on GDP and public-finance indicators for 2022 were released by the Italian National Institute of Statistics (Istat) today. In terms of economic growth, nominal GDP rose by 6.8% yoy in 2022, showing another very strong reading (2021: 7.6%). This was a result of significant increases in both real GDP (around 3.7% for the unadjusted data) and the GDP deflator (+3.0%). Private consumption, fixed investment and exports all provided a strongly positive contribution to real GDP growth in 2022 (to the order of 2-3pp each), but this was partly offset by a negative contribution from imports (about -4pp). GDP-deflator growth was less than half of that observed in consumer prices (8.1%), as expected, with this gap likely to narrow this year. <\/li><li> Istat revised upward its estimate of the budget deficit (calculated on an accrual basis according to the Maastricht definition) for 2021 and 2022, to 9.0% of GDP (from 7.2% previously) and 8.0% of GDP (from 5.6% forecast by the government). This is a sizeable revision, and it is explained by a methodological change recently communicated by Eurostat concerning the recording of tax credits. This has frontloaded most of the impact on the budget deficit from tax credits linked to building renovation (including the so-called Superbonus 110%), which were mainly approved by the government since 2020. Today\u00b4s revision increases the chances that there will be a limited impact to the government\u00b4s budget-deficit figures for this year; the budget deficit was estimated by the government to equal 4.5% of GDP in late autumn. The final outcome will depend on how demand for tax credits linked to building renovations evolves this year, after the implementation of government intervention aimed at making them less appealing. <\/li><li> The public-debt-to-GDP ratio declined to 144.7% of GDP in 2022, from 149.8% in 2021. This was about 10pp below the level hit in 2020, at 154.9%, thus halving the increase induced by the pandemic crisis. We highlight that public debt is affected by changes in the budget deficit that occur on a cash basis, rather than on an accrual basis. Therefore, its evolution was not impacted by the methodology change introduced in the recording of tax credits. The downward adjustment in 2022 public debt\/GDP was enabled by a strong, positive contribution from nominal GDP growth and the resulting improvement in fiscal revenue since the previous year. <\/li><li> We expect the public-debt-to-GDP ratio to decline slightly this year amid lower nominal GDP growth and still-high interest expenditure (estimated to remain around 4% of GDP in 2023). While we expect real GDP to expand by 0.5% this year, nominal GDP growth is likely to be supported by an acceleration in GDP-deflator growth. Indeed, the observed easing in energy prices will prompt a fast deceleration in import-price-deflator growth, while the annual increase in the consumer-price deflator is expected to remain high, but to decline, supporting acceleration in GDP-deflator growth in 2023.In greater detail:Nominal GDP growth was 6.8% in 2022. Real GDP growth decelerated from 7.0% in 2021 to a still-high 3.7% in 2022. This compares with a 9% decline in 2020, induced by the COVID-19 crisis. The nominal GDP reading in 2022 was also boosted by an acceleration in GDP-deflator growth (to 3.0% from 0.6% in 2021). One would need to go back to 2003 to see such a high rate of price growth. CHART 1: THE DRIVERS OF STRONG NOMINAL GDP GROWTH<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Loredana","last":"Federico","link":"https:\/\/unicreditresearch.de\/index.php?id=analyst&L=N3tsp4rk3rRef&tx_research_piedition%5Banalyst%5D=14&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=f79e47dce659611d0660b0c3359f171b"}],"countries":[{"name":"Italy","ticker":"IT","link":"https:\/\/unicreditresearch.de\/index.php?id=country&L=N3tsp4rk3rRef&tx_research_piedition%5Bcountry%5D=5&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=39d7224c0452f3251d42f8f8656acb2b"}]},{"layout":"detailed","uid":28905,"publicationDate":"01 Feb 23","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","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<p><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.<\/p><\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Loredana","last":"Federico","link":"https:\/\/unicreditresearch.de\/index.php?id=analyst&L=N3tsp4rk3rRef&tx_research_piedition%5Banalyst%5D=14&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=f79e47dce659611d0660b0c3359f171b"}],"countries":[{"name":"Italy","ticker":"IT","link":"https:\/\/unicreditresearch.de\/index.php?id=country&L=N3tsp4rk3rRef&tx_research_piedition%5Bcountry%5D=5&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=39d7224c0452f3251d42f8f8656acb2b"}]},{"layout":"detailed","uid":28899,"publicationDate":"31 Jan 23","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","titleDe":"","titleIt":"","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>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Loredana","last":"Federico","link":"https:\/\/unicreditresearch.de\/index.php?id=analyst&L=N3tsp4rk3rRef&tx_research_piedition%5Banalyst%5D=14&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=f79e47dce659611d0660b0c3359f171b"}],"countries":[{"name":"Italy","ticker":"IT","link":"https:\/\/unicreditresearch.de\/index.php?id=country&L=N3tsp4rk3rRef&tx_research_piedition%5Bcountry%5D=5&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=39d7224c0452f3251d42f8f8656acb2b"}]},{"layout":"detailed","uid":28884,"publicationDate":"27 Jan 23","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","titleDe":"","titleIt":"","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>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Loredana","last":"Federico","link":"https:\/\/unicreditresearch.de\/index.php?id=analyst&L=N3tsp4rk3rRef&tx_research_piedition%5Banalyst%5D=14&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=f79e47dce659611d0660b0c3359f171b"}],"countries":[{"name":"Italy","ticker":"IT","link":"https:\/\/unicreditresearch.de\/index.php?id=country&L=N3tsp4rk3rRef&tx_research_piedition%5Bcountry%5D=5&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=39d7224c0452f3251d42f8f8656acb2b"}]}]


Dr. Loredana Federico
Chief Italian Economist
UniCredit Bank AG, Milan
Piazza Gae Aulenti, 4 - Tower C
I-20154 Milan
+39 02 8862-0534

Loredana Federico has worked as an economist in the Research department at UniCredit CIB since 2009. She is based in Milan, and her main area of coverage is Italy. Loredana joined UniCredit Group i...

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