War, inflation hit eurozone recovery hopes; US job openings hit record high — Macro Snapshot

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RIYADH: France and Germany saw bigger than expected drops in consumer confidence this month as rising inflation and concern about the impact of Russia’s invasion of Ukraine took their toll, surveys showed on Tuesday.

The European Central Bank insists the eurozone can avoid recession, but the collapse in consumer morale in its two top economies is a setback. Italy, the third largest economy, is due to downgrade its growth targets, sources in Rome said.

In Germany, the GfK institute said its consumer sentiment index, based on a survey of around 2,000 people, dropped to -15.5 points heading into April from a revised -8.5 points a month earlier and the lowest since February 2021.

“In February, hopes were still high that consumer sentiment would recover with the easing of pandemic-related restrictions. However, the war in Ukraine caused these hopes to vanish into thin air,” GfK consumer expert Rolf Buerkl said in a statement.

In France, the INSEE official statistics agency said its consumer confidence index fell to 91 points from 97 in February, falling short of economists’ expectations in a Reuters poll for 94 and the worst headline figure since February 2021.

“A fall of that extent is rare,” BNP analysts commented in a note that observed that sharper monthly drops had only previously occurred around the 1993 recession and the 2020 lockdown.

US job openings 

US job openings slipped in February, but remained near record highs as companies continued to struggle to find scarce workers.

Job openings, a measure of labor demand, fell 17,000 to 11.266 million on the last day of February, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report on Tuesday.

Despite the second straight monthly decline, job openings were not too far from a record high of 11.448 million set in December. Economists polled by Reuters had forecast 11 million vacancies.

Ghana approves e-tax 

Ghana’s parliament approved a new 1.5 percent tax on electronic payments, known as the “e-levy,” on Tuesday after the opposition walked out in protest.

Finance Minister Ken Ofori-Atta proposed the e-levy in November to widen the tax net, but opposition was so fierce that it caused a brawl in parliament a month later.

Critics believe the e-levy will price lower income people and small business owners out of the digital economy.

Ruling MPs re-introduced the bill as a surprise on Tuesday, when many opposition MPs were not present, a move analysts have previously said would be one of the only ways for the tax to pass. 

Kenya’s benchmark lending rate 

Kenya’s central bank held its benchmark lending rate at 7 percent on Tuesday, its monetary policy committee said, in line with market expectations.

In a Reuters poll of eight analysts, five predicted a “hold” decision and three had forecast a hike of up to 50 basis points.

Tuesday’s decision was the 12th in a row to keep rates steady, extending a holding pattern which policymakers adopted shortly after the coronavirus crisis reached the East African nation.

Inflation expectations were well anchored within the government’s target range, policymakers said in a statement, adding that they stood ready to take further action if the situation changes rapidly.

Brazil’s job growth 

Brazil created a net 328,507 formal jobs in February, Labor Ministry figures showed on Tuesday, well above market expectations, amid positive data in all sectors and a substantial contribution from service activities.

Economists in a Reuters poll forecast 210,000 jobs would be created in Latin America’s largest economy last month.

The figure, however, came below the 397,463 jobs created in February 2021, according to adjusted figures.

Italy’s budget deficit 

Italy plans to confirm its 2022 budget deficit target at 5.6 percent of national output, two sources close to the matter told Reuters, despite coalition pressure to sharply hike borrowing as the growth outlook deteriorates.

Mario Draghi’s government is preparing to slash its growth forecast for this year to 2.8 percent from a previous 4.7 percent goal made in September, the sources said, amid surging energy costs and turmoil linked to Russia’s invasion of Ukraine.

In confirming the 5.6 percent deficit goal, Draghi is helped by the fact that on current trends the deficit is on track for 5.3 percent, according to the sources, allowing potential leeway of €4 billion to €5 billion ($4.4 billion to $5.5 billion) of additional spending without increasing the current target. Last year’s deficit came in at 7.2 percent.

Paying roubles for gas

The Kremlin on Tuesday said foreign companies need to understand that the “economic war” against Russia has changed the situation, meaning they need to buy roubles and pay for gas in the Russian currency, as Moscow seeks to shield itself from sanctions.

Kremlin spokesperson Dmitry Peskov reiterated that Russia would not export its gas for free and said Russia was drawing up ways to make gas payments simple, clear and practical, with all options due to be worked out by March 31.

“Companies should take into account the changing conditions and the absolute change in the situation that arose with the economic war against Russia,” Peskov told reporters.

With the election looming next month, the government has budgeted more than €25 billion ($27 billion) in measures to cap gas and power prices, make inflation offsetting handouts to low-income households and offer a rebate on fuel prices.

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