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0077e67ba122c312d4c353a6ab71bd843e8fb501d123c400010bd5f4f4c1e66e;;[{"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":"0077e67ba122c312d4c353a6ab71bd843e8fb501d123c400010bd5f4f4c1e66e","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":27988,"publicationDate":"24 May 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_183381.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJHzbeXiHo2MFeKYSnTCNkdk=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Still no signs of a wage-price spiral in eurozone","titleDe":"","titleIt":"","product":"Chart of the Week","synopsis":"<ul class=\"ucrBullets\"><li> Today\u00b4s release of negotiated wages in the eurozone showed a rise to 2.8% yoy in the first quarter of 2022 (4Q21: +1.6%). It was the strongest increase since 2009 and seemingly confirms what some economists and central bankers feared for quite some time: wage inflation has started to accelerate markedly in the eurozone. Resolute action by the ECB would be needed now to avoid a wage-price spiral, the sooner the better and maybe even a hike by 50bp. <\/li><li> A second more careful look reveals a different and subtle picture. The latest pick-up in eurozone wages was largely caused by Germany where negotiated wages jumped to 4.3% yoy from 1.5%. And here is the catch: As the methodology in capturing negotiated wages is somewhat different across eurozone countries, the German figure includes special payments and is far more volatile than the eurozone data (see also the spike in 2019). In yesterday\u00b4s release of its monthly report, the Bundesbank already noted that the pay hike was 'mainly due to high special payments and corona bonuses. By contrast, basic compensation adjusted for such special payments increased by only 1.6%.' <\/li><li> In other words, there are still no signs of excessive and wide-spread wage increases in the eurozone. For the record, negotiated wages in Italy were still below 1% yoy in 1Q22 and about 2\u00bd% for Spain and the Netherlands, while the French figure is not available yet. Typically, the ECB sees eurozone wage growth of 3% as consistent with 2% inflation over the medium term. The latest figure might support calls for gradual policy normalization by the majority of the Governing Council of the ECB but does not justify a 50bp hike. <\/li><li> Yesterday, Bundesbank President Nagel stated for Germany that 'when wage negotiations start in the second half of the year, we will see higher numbers'. We agree but how much it will be and whether it really requires monetary tightening is impossible to say at this stage. After all, there is a lot of uncertainty about how the economy will perform, especially in the manufacturing sector which is facing substantial downside risks in the form of lower growth dynamics in China and persistent supply shortages. Going forward, there are two important collective bargaining rounds in the pipeline for Germany. In the metal industry with nearly 4mn employees, the labor union will publish its wage demand at the end of June with negotiations starting in mid-September at the latest. In the chemical sector (0.6mn employees), the negotiations about a regular pay hike will be continued in October after the agreement on a one-off payment in April. <\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Andreas","last":"Rees","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=55&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=dd5fc2c9c41d30698de779b8edbc637f"}],"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":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":27258,"publicationDate":"15 Feb 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_182468.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMndEEiLxONcRYbB2d4UJes=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - Surging insolvencies in the German construction sector","titleDe":"","titleIt":"","product":"Chart of the Week","synopsis":"","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Andreas","last":"Rees","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=55&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=dd5fc2c9c41d30698de779b8edbc637f"}],"countries":[{"name":"Germany","ticker":"DE","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=9&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=b98f1916ef68c367defade63b875243d"}]},{"layout":"detailed","uid":27125,"publicationDate":"31 Jan 22","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2022_182299.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJARrg0KZdE9OuXI39toGeXE=&T=1&T=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - German inflation: A long way back to 2%","titleDe":"","titleIt":"","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> German consumer prices (national definition) increased 4.9% yoy in January (UniCredit: +4.7%; consensus: +4.4%). It was the first deceleration after six consecutive rises in the yearly rate from 2.3% in June to 5.3% in December 2021. The key driver behind the less pronounced increase was largely a technical effect in the form of an unwinding of the VAT effect which had significantly been driving up inflation rates last year. Furthermore, some base effects for food prices and transportation costs took place which contributed to the decline. <\/li><li> However, the underlying 'fundamental' upward pressure remained strong as flagged by persistently high goods prices triggered by ongoing supply shortages. The passing on of markedly higher electricity and natural gas prices by energy companies to consumers, which usually takes place at the start of the year, also prevented a more marked decline in headline inflation. This has been flagged by today\u00b4s release of inflation subcomponents of various federal states which showed rises of about 4\u00bd-7\u00bd% yoy for housing which includes utilities but also rents. <\/li><li> Going forward, we expect this sluggish deceleration to continue in the next few months. In all probability, there will be a tug of war between two factors. On the one hand, base effects such as the VAT will continue to exert downward pressure on yearly rates. On the other hand, energy prices are likely to remain elevated, at least in the short-term, as geopolitical risks have intensified. Furthermore, the easing of supply shortages has only been gradual until recently. In the light of the latest developments, inflation rates may only decline back to 2% at the start of 2023. So far, we have expected this to happen in 4Q22. One pattern which could still contribute to a somewhat stronger deceleration this year is the abrogation of the so-called EEG levy for renewable energies which has contributed to higher electricity prices for consumers. Finance minister Christian Lindner has recently announced to push for an end of the EEG levy already this summer instead of the start of 2023. <\/li><li> For the medium to longer-term inflation outlook, the upcoming collective bargaining rounds in Germany are crucial and will certainly be closely watched by the ECB. In comparison to other eurozone countries, there has considerably less slack on the German labor market with an unemployment rate of slightly above 5%. In March 2022, the pay agreement in the chemical sector with about 0.6mn employees will end. The same is true for the metal and electrical industry in September with 3.8mn employees. So far, the upward pressure in tariff wages including one-off payments have remained contained, as they only rose 2\u00bc% yoy in October\/November 2021 (latest available data). The ECB may also pay attention to the upcoming hikes in the minimum wage. It is already planned that the minimum wage will rise to EUR 10.45 per hour from July 2022 onwards (+6\u00bd%). The traffic light coalition signaled to hike it further to EUR 12 per hour already this year which would equal another rise of about 15% for 8-10mn employees. <\/li><\/ul>","synopsisDe":"","synopsisIt":"","analysts":[{"first":"Andreas","last":"Rees","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=analyst&tx_research_piedition%5Banalyst%5D=55&tx_research_piedition%5Baction%5D=analyst&tx_research_piedition%5Bcontroller%5D=Edition&cHash=dd5fc2c9c41d30698de779b8edbc637f"}],"countries":[{"name":"Germany","ticker":"DE","link":"https:\/\/www.unicreditresearch.eu\/index.php?id=country&tx_research_piedition%5Bcountry%5D=9&tx_research_piedition%5Baction%5D=country&tx_research_piedition%5Bcontroller%5D=Edition&cHash=b98f1916ef68c367defade63b875243d"}]}]

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Dr. Andreas Rees
Chief German Economist
UniCredit Bank AG, Frankfurt
Taunustor 1-3 -
60311 Frankfurt
Germany
+49 69 2717-2074

Andreas Rees is UniCredit’s Chief German Economist. He focuses on business-cycle and economic-policy-related topics. Andreas has a master’s from the University of Trier and a doctorate in econo...

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