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3493e6abb17b2484f7bdd3db4bb4501720ff1f7d250821ec5777108678842e35;;[{"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":"3493e6abb17b2484f7bdd3db4bb4501720ff1f7d250821ec5777108678842e35","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":28171,"publicationDate":"23 Jun 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183604.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJPRjevfYGAe45Uv3TjrnECM=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Eurozone PMIs sound an alarm bell","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The eurozone PMIs for June sound an alarm bell. The composite PMI declined more than expected, from 54.8 to 51.9 (UniCredit: 54.3; consensus: 54.0), the lowest level since February 2021. The deterioration was broad-based across sectors, suggesting that growth momentum might be weakening sooner and more quickly than expected. <\/li><li> Manufacturing seems to be already in a downturn, with the output index falling below 50 for the first time in two years and new orders contracting at a faster pace. This has led to the largest buildup of inventories of unsold goods since June 2020. Services held up better, but the trend is one of a clear slowdown as firms report that the reopening boost is already fading, with high prices accelerating the exhaustion of pent-up demand. Tighter financial conditions appear to have contributed to the slowdown in demand. <\/li><li> Output prices confirm recent signs of easing from peaks, validating the view of a turning point in underlying price pressures from extremely high levels. Perhaps unsurprisingly, this trend is more pronounced in the manufacturing sector, whereas it is more contained in services, where input prices hold around record-high levels. In the manufacturing sector, there is evidence that a gradual improvement in supply-chain bottlenecks keeps unfolding, although the situation remains far from pre-pandemic conditions. According to the survey, weaker demand for inputs amid rising inventories has played a role here. <\/li><li> Employment growth eased both in the manufacturing and the services sectors but remains at healthy levels for now.In greater detail: In manufacturing, the output index declined from 51.3 to 49.3, whereas the new orders index fell from 48.7 to 44.7, signaling the sharpest pace of contraction since May 2020.<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Tullia","last":"Bucco","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=41&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=4f70091ea90c58d6e88dbb4690d183e2"}],"countries":[{"name":"Euroland","ticker":"","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=25&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=fd74dfc966e72d45ff2580813616e07a"},{"name":"Europe","ticker":"","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=26&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=253d12e5521ae4b9a73e892ee04713f2"}]},{"layout":"detailed","uid":27986,"publicationDate":"24 May 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183379.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHzbeXiHo2MFtRi4U-8Jzo4=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Eurozone PMIs: services support economic expansion","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> In May, the eurozone composite PMI declined from 55.8 to 54.9, broadly in line with expectations (UniCredit: 55.0; consensus: 55.1). Both the manufacturing and the services indices declined moderately, although the headline index for manufacturing probably overstates the resilience of the sector whereas services activity continues to benefit from the reopening of the economy. At face value, the PMIs point to ongoing expansion and a low risk of recession.<\/li><li> In manufacturing, the slowdown was associated with persistent headwinds from geopolitical uncertainty, supply chain disruptions, soaring inflation, and expenditure-switching away from goods. The production index managed to hold in expansion territory, while the new orders index declined below 50 for the first time since the first pandemic wave, with export orders slipping further into contraction territory. This has led the inventories index to rise to the highest level in two years. Conversely, in services, weaker activity seems to have mainly reflected some easing from the previous high reached in the aftermath of the reopening of the economy. There have reportedly been some divergences between services sectors based on their degree of direct exposure to consumers: demand remained strong in consumer-facing sectors while it slowed in financial and industrial services, the latter being affected by the recent slowdown in manufacturing.<\/li><li> Pipeline pressures showed the first, tentative signs of peaking, especially in the manufacturing sector. However, both input and output price increases remain very close to record-high levels. In the manufacturing sector, there was also some tentative evidence of an improvement in supply-chain bottlenecks, as the suppliers\u00b4 delivery times index rose moderately, while remaining far from pre-pandemic levels. <\/li><li> The bright spot of the report was employment, which accelerated further across sectors. In services, new hiring even accelerated to the fastest pace since 2007. Despite uncertain growth prospects, firms are reported to seek to boost operating capacity. In greater details.In manufacturing, new orders fell below 50 for the first time since the first pandemic wave.<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Tullia","last":"Bucco","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=41&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=4f70091ea90c58d6e88dbb4690d183e2"}]},{"layout":"detailed","uid":27805,"publicationDate":"29 Apr 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183154.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHlYjR85eD_wwwGf-at81cU=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - France: GDP stagnates as Omicron weighs on services activity","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> French GDP stagnated in 1Q22 (0.0% qoq after 0.8% qoq in 4Q21), coming in weaker than expected (UniCredit: 0.2%; consensus: 0.3%). The deceleration reflects a further slowdown in services activity, especially in-person services, due to government restrictions and voluntary distancing following the spread of the Omicron variant. The recovery in the hospitality sector marked a pause after three consecutive quarters of growth. Conversely, manufacturing activity accelerated significantly but its positive contribution to GDP growth was offset by a decline in energy production. <\/li><li> Domestic demand weighed on GDP growth (-0.6pp) due a significant contraction in private consumption whereas gross fixed investment remained resilient. Private consumption contracted for the first time in a year, probably reflecting the worsening of the health situation and the surge in inflation. Households cut their spending, not only on services but also on manufactured goods, notably clothing. Investment held up reasonably well, mainly driven by investment in information and communication services and equipment goods. Net exports added 0.1pp to GDP as growth in exports outpaced growth in imports. The INSEE reports that the healthy performance of exports is explained by the delivery of a cruise ship. Inventories added 0.4pp to GDP growth.<\/li><li> The effects of the Russia-Ukraine conflict on French economic activity will become clearer with 2Q22 GDP data. April PMI data have pointed to resilient activity two months since the start of the conflict, driven by the reopening of many sectors as pandemic restrictions were lifted. Manufacturing activity has also fared relatively well as companies reported an increase in orders, although some of these were placed in anticipation of higher prices. Overall, risks to the growth outlook remain skewed to the downside as the combination of rising prices and uncertainty is heavily weighing on consumer confidence and supply-side disruptions and pipeline price pressure appear far from abating in the manufacturing sector. GDP growth will likely be affected once the impulse from the reopening fades.The stagnation in 1Q22 GDP growth was largely driven by a contraction in private consumption (down by 1.3% qoq in 1Q22 after +0.6% in 4Q21).<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Tullia","last":"Bucco","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=41&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=4f70091ea90c58d6e88dbb4690d183e2"}],"countries":[{"name":"France","ticker":"FR","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=7&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=e6a2e89fd8e2fc9b0aecc636b7a1cd3c"}]},{"layout":"detailed","uid":27755,"publicationDate":"22 Apr 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183093.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJIXgDTO8o1UFsCtUsk_lGyM=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Eurozone PMIs: resilience, but largely due to reopening ","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> In April, the eurozone composite PMI rose from 54.9 to 55.8, beating expectations for a decline (consensus: 53.9; UniCredit: 54.0). The acceleration in economic activity reflects divergent trends at sectoral level. On the one hand, there is the services sector (up from 55.6 to 57.7) that benefits from pent-up demand in the wake of the reopening of the economy. On the other hand, the manufacturing sector (down to 55.3 from 56.5) is under pressure due to a combination of supply constraints, worsening price pressure and expenditure-switching towards services. <\/li><li> The divergence between the two sectors is particularly pronounced when looking at indicators of demand conditions. The index for new orders in the manufacturing sector declined to the lowest level since June 2020, whereas new business in the services sector rose to its highest level since late last summer, before a new pandemic wave spread.<\/li><li> Inflationary pressures remain strong. Prices charged for goods and services rose at an unprecedented rate in April as higher costs from raw materials, energy and wages were passed on to customers. The index for input prices further increased in the manufacturing sector while it slightly declined in the services sector after having hit an all-time high in March. <\/li><li> Overall, two months since the start of the conflict in Ukraine, the general picture is that of still-growing economic activity driven by the reopening of economies as pandemic restrictions are lifted. Manufacturing activity struggles, particularly in those countries, like Germany, which are more exposed to supply chains disruptions, which appear far from abating. Accordingly, growth prospects remain subject to downside risks as the fading of the reopening effect risks causing a significant slowdown in activity if the manufacturing sector remains under pressure.The manufacturing PMI declined from 56.5 to 55.3 whereas the services PMI rose from 55.6 to 57.7.CHART 1: BETTER THAN EXPECTED<\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Tullia","last":"Bucco","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=41&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=4f70091ea90c58d6e88dbb4690d183e2"}],"countries":[{"name":"Euroland","ticker":"","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=25&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=fd74dfc966e72d45ff2580813616e07a"}]}]

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Tullia Bucco
Economist
UniCredit Bank AG, Milan
Piazza Gae Aulenti, 4 - Tower C -
I-20154 Milan
Italy
+39 02 8862-0532

Tullia Bucco covers France and eurozone peripheral countries, namely Spain, Greece and Portugal. She has been working for UniCredit since 2002 and was based in Paris until March 2006. Tullia has a ...

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