a2873dd348b6497a8d8f56a5911240c8067ac562fd69a3cb5cfcff1456c6e285;;[{"layout":"linklist","uid":2824,"publicationDate":"05 May 13:18","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186473.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZ4P7dpCunu1E=&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<p class=\"ucrIndent\"><\/p><\/p><p><ul class=\"ucrBullets\"><li>European growth bounced beautifully in the first quarter of the year and inflation remained well behaved through April. The June rate cut is now a done deal, in my assessment. In the second half of the year, the ECB is increasingly likely to be tested on the degree to which it\u2019s willing to de-link from the Fed.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>This past Wednesday marked the 20th anniversary of the EU\u2019s big-bang enlargement to include eight Central European countries as well as Cyprus and Malta. The economic success of transition and integration has been clear, but the outlook has become blurred in recent years.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>French President Macron delivered his Sorbonne-II speech with a catalogue of proposed policy reforms to give Europe a chance of sovereignty in the emerging geopolitical constellations. It\u2019ll be an uphill battle and not all of the proposals will fly but some of them will.<\/li><\/ul>","hash":"a2873dd348b6497a8d8f56a5911240c8067ac562fd69a3cb5cfcff1456c6e285","available":"0","settings":{"layout":"linklist","size":"default","showanalysts":"-1","showcompanies":"-1","showcountries":"-1","showcurrencies":"-1","nodate":"0","notitle":"0","noproduct":"0","noflags":"0","dateformat":"d M G:i","nolinktitle":"0","synopsislength":"-1","synopsisexpand":"0","shownav":"0","oldestedition":"","limit":"12"}},{"layout":"linklist","uid":2823,"publicationDate":"03 May 16:57","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186472.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZ7I_I5XvKmlw=&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US April jobs report shows softening","product":"Data Comment","synopsis":"<p class=\"ucrIndent\"><\/p><\/p><p><ul class=\"ucrBullets\"><li>The US employment report for April showed slower employment growth and lower pay growth, amid further signs that the labor market is coming into better balance. The economy added a less-than-expected 175k jobs in April and payrolls in the prior two months were revised down modestly (by a cumulative 22k). The rise in payrolls in April is the smallest since October 2023. More than half of the job gains in April came from the private education & health sector, which tends to be acyclical. There was a big slowdown in net hiring in the leisure and hospitality sector, government sector and construction sector compared to recent months. The 175k rise in payrolls in April is marginally below a recent estimate by Brookings for the sustainable level of job gains (i.e. that needed to absorb population growth and not apply upward pressure on the unemployment rate) of around 180k per month, given higher immigration.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The unemployment rate edged up to 3.9% from 3.8%, only 0.1pp below the FOMC median projection for the end of this year. This reflected a 63k rise in the number of unemployed, a 25k rise in the household measure of employment (an alternative measure of employment to the payroll measure), and an 87k rise in the labor force. The participation rate was unchanged, as a rise in the prime-age (aged 25-54) participation rate was offset by a fall in that of younger and older (aged 55+) workers (the latter is to be expected, overtime, given the effect of ageing). In another sign that labor demand is softening, average weekly hours worked fell back in line with its pre-pandemic level.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Average hourly earnings rose 0.2% mom in April, less than expected. It took the year-on-year rate down to 3.9% from 4.1% in March. This is above the 3.0-3.5% range that Fed officials deem to be broadly consistent with meeting the 2% inflation target over time, assuming trend labor productivity growth of 1.0-1.5%. But recent dynamics, as measured by the three-month annualized rate, point to further falls in the yoy rate ahead. In the past, volatility in average hours worked has created volatility in average hourly earnings (this is because some workers report their pay as a weekly or monthly amount, and the BLS computes their hourly pay by dividing by their weekly hours worked). But the fall in average hours worked would have tended to push up average hourly earnings, not down. Aggregate payroll income was flat in April.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The Fed will clearly welcome the April jobs report. It shows the labor market is moving into better balance, while employment growth is not falling off a cliff but moderating gradually. However, leading indicators of the labor market, such as the NFIB survey of small business\u2019 hiring intentions, point to further slowing in the coming months. The Fed will surely need to see more than one month of good data (including on inflation) before it will feel confident enough (that inflation is moving sustainably down towards 2%) to be able to cut rates. In a separate report today, the ISM services index fell by more than expected, to 49.4 in April from 51.4 in March, with the employment index down to 45.9 from 48.5. It adds to recent evidence that aggregate demand is slowing. We still expect the first rate cut in September and a total of 75bp of cuts for this year, one more cut than financial markets currently expect.<\/p><\/li><\/ul><p class=\"ucrIndent\"><p>Chart 1 shows that payrolls rose 175k in April, after a rise of 315k in March and 236k in February. The three-month average change eased to 242k in April from 269k in the prior month.<\/p><\/p><p class=\"ucrIndent\"><p><\/p>"},{"layout":"linklist","uid":2822,"publicationDate":"03 May 14:46","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186471.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZ3SDQjEHa2gA=&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - There is more than tourism behind Spain\u2019s strong GDP growth","product":"Chart of the Week","synopsis":"<p class=\"ucrIndent\"><\/p><\/p><p><ul class=\"ucrBullets\"><li>Spain\u2019s economic growth outperformed once again that of the eurozone, according to data released earlier this week. Spanish GDP increased 0.7% qoq in 1Q24, the same pace as 4Q23, compared to a 0.3% qoq pace of expansion for the eurozone as a whole. The 1Q24 GDP outcome lifted Spanish GDP 3.7% above its pre-pandemic level compared to 3.4% for the eurozone. <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>While there is a common perception that Spain\u2019s outperformance is largely driven by the recovery in tourism, our Chart of the Week shows that this is only part of the story. In fact, while Spanish services exports (among which foreign tourism is classified) have increased by more than 20% from the outbreak of the pandemic until end-2023, far outpacing its peers, the share of GDP accounted for by non-travel services exports rose much more than that of travel services exports. Incidentally, the increase of services exports would be even stronger if the 1Q24 data (not yet available for all countries) were taken into account, as Spanish services exports increased by a massive 11% qoq in the first quarter.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Spanish tourism performed better than that of the other countries: in Spain, the share of travel services exports in GDP (grey dots) increased above its pre-pandemic level (+0.6pp), whereas in the other countries it remained slightly below (Germany and France) or is broadly unchanged (Italy). However, it was Spanish non-travel services exports, especially business services, that increased the most, as reflected in the 1pp increase in the non-travel-services-exports-to-GDP ratio (black triangles). Among the other countries, only France recorded a similarly strong increase. <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Spain\u2019s increased ability to seize the demand for higher-value-added services suggests that growth in its services exports is likely to remain healthy given that global demand for these activities is increasing at a robust pace while the starting point for Spain (in terms of non-travel services exports as a share of GDP) is lower than that of the other large eurozone countries.<\/p><\/li><\/ul><p class=\"ucrIndent\"><p>Tullia BuccoEconomist+39 02 8862-0532tullia.bucco@unicredit.euUniCredit Bank GmbHUniCredit ResearchPiazza Gae Aulenti, 4 - Tower CI-20154 Milan[#PersonalizedTracker #]<\/p>"},{"layout":"linklist","uid":2821,"publicationDate":"03 May 13:28","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2024_186469.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRosmomqOU8viV_xr6TBIeC-A==&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"CEE Data Watch","product":"EEMEA Macro Note","synopsis":"<p class=\"ucrIndent\">The highlights next week are April CPI data for Hungary, and the central bank meetings in Poland and Serbia. S&P and Fitch will review Poland\u2019s sovereign rating, while Moody\u2019s will review Croatia\u2019s sovereign rating: we expect no changes.<\/p>"},{"layout":"linklist","uid":2812,"publicationDate":"30 Apr 13:05","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186458.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZ-Tzeja2eQQk=&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Italy: GDP growth accelerated in 1Q24, while inflation eased in April","product":"Data Comment","synopsis":"<p class=\"ucrIndent\"><\/p><\/p><p><ul class=\"ucrBullets\"><li>Italy\u2019s real GDP was up by 0.3% qoq in the first quarter, accelerating compared to the 0.1% qoq reading in 4Q23. This outcome is better than expected and shows a picture of moderate growth at the beginning of the year. The annual GDP growth rate for 1Q24 was 0.6%, broadly in line with the previous three quarters.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Istat reports that GDP growth was the result of a recovery in activity in industry, services and agriculture, forestry and fishing. The positive surprise was most probably due to a good recovery in services value added, after it contracted by 0.1% qoq in 4Q23. The services PMI averaged 52.7 in 1Q24, well up on the fourth-quarter reading of 49. Tourism data for the first two months of the year also provided an encouraging message, adding to evidence of a possible improvement. Moreover, recent data on monthly production seems to suggest that there was an ongoing good expansion in construction activity following an increase of about 5% qoq in 4Q23. Activity in industry (excluding construction) is likely to have been somewhat weaker in 1Q24, probably dragged down by persisting weakness in output in energy-intensive sectors \u2013 which has stalled in recent months \u2013 while production in the other manufacturing sectors might have started to recover, as suggested by the manufacturing PMI indicator. <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Net exports provided support to GDP growth, although this was likely mostly due to a significant contraction in imports rather than a good increase in exports. Instead, domestic demand, including inventories, was a drag. When more details are released on 31 May, we expect to see a gradual improvement in private consumption, as nominal disposable income probably held up well and the disinflation process is proving to be even faster than initially thought, supporting household purchasing power. The consumer confidence indicator improved over the quarter (it was at 96.6 on average, compared to 93.3 in 4Q23), although some of this improvement was reversed in April. In contrast, monthly data on the production of capital goods seems to indicate a deceleration in machinery and equipment investment in 1Q24, amid still contained demand and high financing costs for firms, while construction investment likely increased further.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Confidence indicators available at beginning of 2Q24 support our expectation that GDP will increase at a modest pace in this quarter, mainly supported by private consumption and a recovery in exports, as the worst in terms of global trade is probably behind us. We think that GDP growth will be more sustained from 2H24, when we project the negative impulse coming from restrictive monetary policy to moderate. Moreover, at that time, the ongoing implementation of the National Recovery and Resilience Plan will become even more effective in supporting an acceleration in public investment, while the positive impact of building-renovation tax credits will probably fade. We currently expect GDP to expand by 0.6% in 2024, with some slight upside risks after today\u2019s outcome, and by 1.1% in 2025. The main downside risks remain related to geopolitical tensions in the Middle East, with Italy being particularly vulnerable to lower external trade via Red Sea routes.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Today, Istat also published Italy\u2019s inflation data for April, showing CPI inflation easing to 0.9% yoy from 1.2% in the previous month. This was mainly explained by a base effect, as the CPI was up by 0.2% mom, after stabilizing in March. The inflation report shows that energy prices continued to decline by more than 10% on an annual basis, also due to a significant reduction in electricity prices. This was only partly offset by an increase in fuel prices as oil prices rose due to geopolitical tensions. Core inflation was down from 2.3% to 2.2% yoy, supported by an easing in both core-goods and services inflation. We expect CPI inflation to remain around 1% yoy throughout the second quarter.<\/p><\/li><\/ul><p class=\"ucrIndent\"><p>Italy\u2019s real GDP was up by 0.3% qoq in 1Q24, accelerating from 0.1% qoq in 4Q23 (revised downward from 0.2%). GDP is currently 4.6% above its pre-pandemic level (4Q19), compared to 3.4% for the eurozone. In 4Q23, private consumption was particularly weak (down by 1.4% qoq), with GDP growth mainly driven by an acceleration in total fixed investment (up 2.4% qoq), particularly construction investment (up 3.8% qoq). We expect private consumption to have shown a gradual improvement in 1Q24.<\/p>"},{"layout":"linklist","uid":2811,"publicationDate":"30 Apr 11:08","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186456.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZsovNJ9yn79o=&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - German GDP: The worst is finally behind us","product":"Data Comment","synopsis":"<p class=\"ucrIndent\"><\/p><\/p><p><ul class=\"ucrBullets\"><li>German real GDP rose 0.2% qoq in the first quarter of 2024 and therefore came in slightly stronger than expected (UniCredit and consensus: +0.1%). The figure in the previous quarter was revised down to -0.5% qoq from -0.3% (3Q23: +0.1%; 2Q23: -0.1%; see also chart 1 below). On a year-on-year basis, economic activity (adjusted for working days) still shrank 0.2% in 1Q24. As usual, the preliminary estimate released by the Federal Statistical Office today does not provide concise details on single GDP components, but the office did give a few hints this morning. As largely expected, growth impulses came from fixed investment in the construction sector and export activity, while consumer spending shrank, each on a qoq basis. <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li><strong>To give the most important message right in the beginning: <\/strong> Yes, it is true that special circumstances played an important role in lifting economy activity in 1Q24. But no, this is not a flash-in-the-pan, i.e. the German economy is unlikely to fall back into recessionary territory in the further course of 2024. In our view, the worst is finally behind us, as rising global trade but also lower inflation rates compared to last year will probably lead to further moderate growth in the next few quarters. Such a forecast is not just wishful thinking but, in the meantime, has been corroborated by such a forward-looking and reliable indicator as the Ifo business expectations component. The latter has managed a turnaround across sectors (see chart 2 below). <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The \u201cspecial-circumstances\u201d story for 1Q24 is about the construction sector. Unusually mild winter weather led to a temporary strong rise in construction activity. Based on so far publicly available data, construction activity surged about 4\u00bd% in January\/February compared to 4Q23. While a setback in March seems to be inevitable, the construction sector probably still posted its strongest growth in nearly three years. To be sure, forward-looking business expectations of companies in the housing sector and commercial real estate have also started rising, albeit from depressed levels. In other words, it is likely that the downward pressure in construction activity will probably ease in the second half of 2024. But to be crystal-clear, the 1Q24 construction data are statistical noise without any fundamental meaning. <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Despite the latest rise, the German economy has still been lagging other eurozone countries and the US, as shown in chart 3. Since 4Q19, and hence before the start of COVID-19, real German GDP increased a meager 0.3% on a cumulative basis compared to 8.7% in the US, 2.2% in France and 4.6% in Italy. Hence, what is still missing for a (somewhat) stronger and sustainable recovery' We think that the consumer has still been in \u201cwinter sleep\u201d in the first quarter, as flagged by depressed levels of consumer confidence. This morning\u2019s release of strongly rising retail sales in March (+1.8% mom) does not change the fundamental picture, as it was probably just a technical counter reaction to weak readings in the previous two months (February: -1.5% mom; January: -0.1%). However, we think that the combination of a robust labor market, comparatively strong wage hikes and lower inflation compared to last year will finally lead to a moderate recovery in consumer spending in the next few quarters. Chart 1 plots real GDP growth in quarterly terms, along with our forecasts through end-2025. We expect moderate GDP growth in the coming quarters.<\/p><\/li><\/ul><p class=\"ucrIndent\"><p><\/p>"},{"layout":"linklist","uid":2810,"publicationDate":"30 Apr 10:21","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186454.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZ6JhFUJgtsx0=&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - France: Slow recovery sets in","product":"Data Comment","synopsis":"<p class=\"ucrIndent\"><\/p><\/p><p><ul class=\"ucrBullets\"><li>French GDP expanded 0.2% qoq in 1Q24, after increasing 0.1% qoq at the end of last year. On an annual basis, growth accelerated to 1.1% from 0.8% previously. Looking at the GDP breakdown, final domestic demand re-accelerated, adding 0.4pp to GDP growth after no contribution in the previous quarter. This more than offset a negative contribution from inventories (-0.2pp). Net exports made no contribution to GDP growth as a further moderate increase in exports was offset by higher imports. <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>On the supply-side, business-oriented services were the main growth driver. Services growth was supported by a re-acceleration in information and communication, services to businesses and, to a lesser extent, retail trade, and transport services. The contribution from manufacturing activity and agriculture was zero.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Private consumption moderately accelerated compared to the previous quarter, reflecting a partial rebound in spending on food products and energy and a further increase in spending on services, especially transport services and hotel and restaurants. The positive news was an increase in gross fixed investment after two consecutive declines. The increase reflected a partial rebound in investment spending by non-financial corporates and a solid increase in spending by the public administration. Investment by households continued to contract, albeit at a slower pace compared to the previous quarter. <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Today\u2019s outcome indicates that economic activity in France is slowly recovering, although it remains subdued. The decline in consumer inflation is bringing some relief to households\u2019 real income, supporting private consumption growth. Gross fixed investment by non-financial corporations resumed expanding signaling that the peak effect of the transmission of monetary policy is probably behind us. We expect economic activity to continue to grow at a similar pace to that of 1Q also in 2Q, benefiting from a gradual recovery in private consumption, and moderately accelerate in the second half of this year as global demand improves. In greater detail: Today\u2019s outcome lifts French GDP 2.2% above its pre-pandemic level, although activity remains well below its pre-pandemic linear trend.<\/li><\/ul>"},{"layout":"linklist","uid":2802,"publicationDate":"26 Apr 14:36","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/emergingmarkets_docs_2024_186446.ashx?EXT=pdf&KEY=l6KjPzSYBBGzROuioxedUNdVqq1wFeRoL4EO2l3nHcINy4lcqCPDzQ==&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"CEE Data Watch","product":"EEMEA Macro Note","synopsis":"<p class=\"ucrIndent\">Next week\u2019s highlights will be the 1Q24 GDP flash estimates for Czechia, Hungary and Serbia, April PMI data for CEE, the monetary policy decision in Czechia, and April inflation data for Poland and Turkey. Additionally, S&P will review Turkey\u2019s sovereign rating and an upgrade could be on the cards, in our view.<\/p><\/p><p class=\"ucrIndent\"><p> <\/p>"},{"layout":"linklist","uid":2800,"publicationDate":"26 Apr 12:11","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186444.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZPFqU10d6VCE=&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Chart of the Week - The hidden Iran-China oil trade","product":"Chart of the Week","synopsis":"<p class=\"ucrIndent\"><\/p><\/p><p><ul class=\"ucrBullets\"><li>US President Joe Biden recently signed into law the package on Iran oil sanctions, also known as \u201cStop Harboring Iranian Petroleum Act\u201d. The legislative package is a response to the airborne attack against Israel that was recently launched by Teheran for the killing of Iranian military officials in Syria. The measures toughen existing sanctions on Iran\u2019s oil sector, targeting foreign ports, vessels and refineries that knowingly process or ship Iranian crude. In addition, the legislation expands secondary sanctions covering all transactions between Chinese financial institutions and sanctioned Iranian banks.<\/p><\/li><\/ul><p class=\"ucrIndent\"><p><\/p><\/p><p><ul class=\"ucrBullets\"><li>Our Chart of the Week shows that the enforcement of existing sanctions has been poor. Since 2018, when Washington departed from the nuclear deal with Teheran and adopted a strategy of \u201cmaximum pressure\u201d, China\u2019s official imports of Iranian crude have been insignificant. But imports from Malaysia have picked up massively since then. At the moment, they are close to 1.1mb\/d \u2013 that is more than 500kb\/d above the production capacity of the country. According to the Energy Information Agency, China rebrands Iranian oil as originating from Malaysia (but also from the UAE or Oman), moving oil from ship to ship to camouflage the origin of the commodity. In turn, as reported by Bloomberg, Beijing uses small financial institutions to facilitate this commerce and shelter large financial entities, while leveraging the yuan-based Cross-Border Interbank System to clear transactions instead of SWIFT. The economic gain for China is represented by sizable price discounts, especially for small, semi-independent refineries known as teapots, while the strategic one is represented by reinforcing diplomatic ties with Teheran. <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The lack of sanction enforcement goes beyond the China-Malaysia trade. Iranian oil production peaked in 2018 at around 3.8mb\/d and troughed at 1.9mb\/d in 2020. Since then, it has continued to increase, hitting 3.2mb\/d last March. As described in detail by the Middle East Institute, this additional output is shipped across the world through a variety of tactics to evade sanctions. So far, as noted by the Congressional Research Service, the US has turned a blind eye to this illegal trade in order to limit oil-price spikes and inflationary pressures following the curtailing of Russian oil exports in the aftermath of the war in Ukraine. In addition, the Biden administration was willing to reduce somewhat the pressure on Teheran to resume talks on its nuclear program. There are also legal issues that constrain the Biden administration because the law of the sea limits the enforcement of sanctions on Iranian oil at sea such as confiscating a vessel. With the November presidential election approaching, it remains to be seen how willing President Biden will be to enforce this new package of sanctions, considering how inflation has weighed on his popularity, clouding a positive economic growth track-record.<\/li><\/ul>"},{"layout":"linklist","uid":2797,"publicationDate":"25 Apr 16:43","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186440.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZVR54RJg4Hwk=&T=1&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - US 1Q24: Solid GDP growth, higher than expected core inflation ","product":"Data Comment","synopsis":"<p class=\"ucrIndent\"><\/p><\/p><p><ul class=\"ucrBullets\"><li>The US economy expanded at a solid 1.6% qoq annualized rate (or 0.4% non-annualized) in 1Q24. This is a slowdown from the rapid growth of 3.4% in 4Q23 and 4.9% in 3Q23, but only slightly below trend growth of around 2%. The details were stronger than the headline, since GDP growth in 1Q24 was dragged down by the volatile components, with net exports and inventories subtracting a combined 1.2pp from GDP growth. Excluding these volatile components, GDP growth would have been a strong 2.8%.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The main upward contribution to GDP growth again came from personal consumption expenditure, which rose 2.5% annualized and contributed 1.7pp to GDP growth in 1Q24. The increase in real spending was entirely driven by services, which rose at its fastest pace in two and a half years. Real spending on goods fell slightly, driven by a fall in durable goods, particularly motor vehicles. Strong personal consumption in 1Q24 went hand-in-hand with a jump in imports, which meant net trade provided a large downward contribution of 0.9pp to GDP growth. Real disposable personal income growth slowed in 1Q24, to just 1.1% annualized, and so the increase in spending was largely financed by a fall in the personal savings rate to 3.6% from 4.0%. The personal savings rate is unlikely to keep falling from its historically-low level, particularly if the labor market slows as we expect. If so, personal consumption growth is likely to slow later this year.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>Investment spending rose at a solid 5.3% annualized rate in 1Q24, with both an increase in business investment and a jump in residential investment. Within business investment, the main upward contribution came from intellectual property spending (likely in part reflecting spending on AI), while investment in structures fell slightly, which is the first fall since 3Q22 after which there was a boom due to the financial incentives within the 2022 Inflation Reduction Act and Chips Act. It seems like the boost to activity from these incentives has now faded. The pickup in residential investment (14% annualized) largely reflects the easing of 30Y mortgage rates from 8% at the end of October 2023 to 7% at the turn of the year. Residential investment is likely to soften in 2Q24, reflecting that mortgage rates have since risen to 7.5%.<\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The major surprise in the 1Q24 GDP release today was that the core PCE price index (the Fed\u2019s preferred measure of inflation) rose at a 3.7% annualized rate, materially higher than expected. It comes after core PCE inflation hit 2.0% in 4Q23 and 3Q23. Assuming no revisions to past data, it would imply a 0.45% mom rise in the March core PCE deflator (due to be released tomorrow), much higher than our forecast for a 0.3% increase. However, it seems likely that past months (January and\/or February) will be revised up, such that the rise in March is more contained. <\/p><\/li><\/ul><p><ul class=\"ucrBullets\"><li>The Fed will likely see the 1Q24 GDP report as solid, while the upward surprise to core PCE inflation will support the central bank\u2019s case for waiting longer before cutting rates. At least, it won\u2019t provide the Fed with the \u201cgreater confidence\u201d that it needs (that inflation is sustainably moving down to 2%) to cut rates. Last week we pushed back our expectation for the timing of the first rate cut to September from June previously. We see a total of 75bp of cuts this year, which is dovish compared to market expectations, as we still expect GDP growth to slow and disinflation to resume.<\/p><\/li><\/ul><p class=\"ucrIndent\"><p>Chart 1 plots GDP growth in quarterly annualized terms and year-on-year terms, along with our forecasts through end-2025. We expect GDP growth to slow in the coming quarters.<\/p><\/p><p class=\"ucrIndent\"><p><\/p>"},{"layout":"linklist","uid":2784,"publicationDate":"23 Apr 12:53","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186426.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZ_uZH6HdGAWQ=&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Data Comment - Eurozone PMIs: Services drive a slow recovery","product":"Data Comment","synopsis":"<ul class=\"ucrBullets\"><li> The eurozone composite PMI for April rose to 51.4 from 50.3, exceeding expectations of a mild increase (UniCredit: 50.8, consensus: 50.7). This is the second consecutive reading above 50 and the highest level since May last year. The improvement reflects a further acceleration in services activity while the pace of contraction in manufacturing intensified. Taken at face value, the outcome signals a moderate acceleration in economic activity at the beginning of the second quarter. This seems consistent with our forecast for a 0.2% qoq increase in 2Q GDP, after a likely 0.1% qoq increase in 1Q (1Q GDP data will be published next week). At country level, the composite PMI edged up above 50 in Germany while it remained only marginally below it in France. The note accompanying the data release for the eurozone indicates that \u201cthe rest of the region\u201d recorded once again the best performance, although this was slightly weaker than in the previous month.<\/li><\/ul><ul class=\"ucrBullets\"><li> Manufacturing remains the weak spot. The main disappointing news was the renewed downward pressure on new orders, the index of which move back to the 43-44 area, while the pace of contraction in output was little changed compared to the previous month. Weak demand conditions eased pressures on supply chains for a third consecutive month. Services activity accelerated amid a further improvement in new and outstanding business. In particular, the new business index recorded the second consecutive increase above 50. <\/li><\/ul><ul class=\"ucrBullets\"><li> The composite PMI for employment improved in April, indicating that the labor market remains resilient. New hiring continued to be driven by the services sector, where firms increased their headcounts at a faster pace amid expectations of future higher levels of activity. In manufacturing, firms reduced their workforce at the slowest pace since September last year.<\/li><\/ul><ul class=\"ucrBullets\"><li> Persistent divergence across sectors is fully reflected in relative trends for prices, with price pressures remaining elevated in services, well-above pre-pandemic levels. Importantly, in services, output price inflation reaccelerated in April as the improvement in demand conditions probably made firms confident of being able to pass on higher input prices to final customers. In manufacturing, both input and output price indexes remained below the 50 threshold. While the input price index increased to the highest level since February last year, the output price index was broadly unchanged and still stuck in the 47-48 area. This indicates that goods inflation is likely to remain well-behaved. <\/li><\/ul><ul class=\"ucrBullets\"><li><strong> Implications for monetary policy: <\/strong> Today\u2019s PMIs leave the ECB on track for a June cut. However, the ongoing strength in the pricing power of services providers is likely to limit the speed at which the central bank will want to dial back monetary restriction. We continue to expect a cumulative 75bp of easing for this year, with one cut of 25bp every quarter. <\/li><\/ul><p class=\"ucrIndent\"><strong>In greater detail: <\/strong> <\/p><p class=\"ucrIndent\">The composite PMI rose to 51.4 from 50.3. The index for manufacturing declined to 45.6 from 46.1, while that for services increased to 51.9 from 51.5, its highest level since May last year.<\/p>"},{"layout":"linklist","uid":2774,"publicationDate":"21 Apr 15:01","emaObject":{"protectedFileLink":"https:\/\/www.research.unicredit.eu\/DocsKey\/economics_docs_2024_186416.ashx?EXT=pdf&KEY=C814QI31EjqIm_1zIJDBJMfHK85BPUzZbV9BSVBOBB8=&P=1","protectedFileLinkDe":"","protectedFileLinkIt":""},"title":"Sunday Wrap","product":"Sunday Wrap","synopsis":"<ul class=\"ucrBullets\"><li> Geopolitics is indeed bad. US-China relations are deteriorating rapidly as economic policies adjust to support the national security concerns.<\/li><\/ul><ul class=\"ucrBullets\"><li> The risk of a Trump victory in November and what it may mean for the US and the world. Spoiler: Not good!<\/li><\/ul><ul class=\"ucrBullets\"><li> The economic outlook is fundamentally more uncertain than at any time during the 40 years I have come to IMF annual and spring meetings. Discussions about economic policies often seemed disjointed. A few observations on particularly US fiscal and European monetary policies.<\/li><\/ul>"}]