Macro Snapshot — Egypt’s unemployment rate dips to 7.2%; US economic outlook weakens

RIYADH: Egypt’s unemployment rate dropped to 7.2 percent in the first quarter, down from 7.4 percent in the previous quarter, the country’s state statistics agency CAPMAS said on Sunday.

US economic outlook 

The US economic outlook has weakened and inflation is set to remain higher than previously expected for a while yet, a Federal Reserve Bank of Philadelphia survey of professional economic forecasters showed on Friday.

Real gross domestic product is forecast to grow at a 2.3 percent annual rate this quarter, down 1.9 percentage points from the last survey three months ago, with the annual rate seen falling to 2.3 percent next year and 2 percent in 2024, both lower than the previous estimate.

The Philadelphia Fed’s latest snapshot of the views of 34 leading economic forecasters also revealed they project current-quarter headline Consumer Price Index inflation will average 7.1 percent at an annual rate, up from 3.8 percent at the time of the last survey. They also forecast headline Personal Consumption Expenditures inflation this current quarter to be 5.7 percent at an annual rate, up from 3.1 percent previously.

Forecasts for headline and core CPI and PCE inflation in 2022 and 2023 were also revised upward.

Despite the weakening outlook for economic growth as the Fed battles 40-year-high inflation, the forecasters expect only a small bump in unemployment.

They see the unemployment rate at 3.6 percent this quarter. That is the same level they expect in 2022 and 2023, with it only moving up to 3.8 percent over the following two years.

taly’s funding cost 

Market volatility may push Italy’s borrowing costs slightly higher this year, to their highest since 2019, the country’s head of debt said on Friday.

A looming rate hike by the European Central Bank as soon as July along with the end of its asset purchase program has inflated Italian government bond yields, pushing them to their highest since late 2018. 

“Our target for 2022 stands at 0.83 percent. It might be upwardly revised by a couple of basis points back to its 2019 levels,” Davide Iacovoni told Reuters in an interview.

Russian inflation jumps 

Consumer inflation in Russia accelerated in April to 17.83 percent in year-on-year terms, its highest level since January 2002, data showed on Friday, as it got a boost from the volatile rouble and unprecedented western sanctions that disrupted logistics chains.

But monthly inflation slowed to 1.56 percent in April from 7.61 percent in March when it staged the biggest month-on-month increase since January 1999, data from the federal statistics service, Rosstat, showed.

Inflation in Russia has accelerated sharply after Russia began what it calls “a special military operation” in Ukraine on Feb. 24.

The fall in the rouble to record lows in March boosted demand for a wide range of goods from food staples to cars on expectations that prices will rise even more. The rouble has recovered since and firmed to a near five-year high against the euro on Friday. Spain’s April final CPI 

Spain’s consumer prices rose 8.3 percent year-on-year in April, according to data from the National Statistics Institute on Friday, compared with9.8 percent in March and a Reuters poll forecast of 8.4 percent.

Core inflation, which strips out volatile food and energy prices, was at 4.4 percent year-on-year, up from a reading of 3.4 percent a month earlier and the highest rate since December 1995, data from the National Statistics Institute showed.

Spanish EU-harmonized prices rose 8.3 percent from a year earlier, down from 9.8 percent in March and in line with the Reuters forecast of 8.3 percent.

Russia’s invasion of Ukraine and the subsequent pressure on energy and food markets has stoked inflation, which was already accelerating as the global economy emerged from the coronavirus pandemic.

In Spain, INE said that the cost of both food and non-alcoholic drinks in April was higher than in the previous month and a year earlier. This was driven particularly by a surge in the price of oils and fats, along with prices in hotels, cafes and restaurants and, with the resumption of tourism, the cost of package holidays.

This was mitigated by electricity prices being lower than a year before. Gas and heating fuel are now costing more than they did last year, however, it said.

INE noted that prices for cars and air passenger transportation are rising, but petrol and lubricants were cheaper in April than in March.

Norway GDP points to recovery 

Norway’s economy contracted in the first quarter amid coronavirus lockdowns, but growth resumed toward the end of the period, Statistics Norway data showed on Friday.

Norway has scrapped its coronavirus curbs in recent months with most adults and many children now vaccinated. “In March, the activity in the mainland economy was approximately back to the same level as in November, the month before the (latest) lockdown was introduced,” SSB economist Paal Sletten said in a statement.

The January-March quarter saw a decline in mainland GDP of 0.6 percent compared with the October-December period, the statistics office said, more than the 0.5 percent drop predicted in a Reuters poll of analysts.

Mainland GDP, which excludes the often volatile impact of Norway’s oil and gas production, is the most commonly watched measure of how the Norwegian economy is performing.

In March, the final month of the quarter, mainland GDP grew 1.0 percent, beating an average prediction of 0.8 percent.

The crown currency weakened slightly to trade at 10.23 against the euro at 0622 GMT, down from 10.21 just before the data release.

The central bank, which has raised rates three times since last September, plans seven more hikes by the end of 2023.

ECB rate hike 

European Central Bank Governing Council member Mario Centeno said on Friday that the ECB should begin an interest rate hike cycle in early July, and he called for any withdrawal of stimulus to be done gradually.

He said the normalization of monetary policy was “necessary and desirable,” adding that any perception there had not been “a sufficiently vigorous response” might require further, more aggressive tightening to control inflation at a later date.

Normalization must be done gradually, he added, and policymakers should not “overreact” to inflation rising across Europe or risk penalizing economic growth.

He said the ECB is likely to end its bond-buying stimulus program early in the third quarter of this year and then start a cycle of interest rate hikes.

“It is anticipated that this could happen in the first weeks of the third quarter,” he said at a banking conference in Lisbon.

With inflation soaring to a record high of 7.5 percent in the euro zone last month, well above the ECB’s 2 percent target, policymakers are increasingly advocating a rapid unwinding of stimulus, and several have called for a rate hike in July. 

South Africa’s central bank 

South Africa’s Reserve Bank is set to make its first 50 basis point hike to its repo rate in more than six years next week, taking it to 4.75 percent, to prevent potential second-round effects from higher consumer prices, a Reuters poll forecast on Friday.

Despite a cost of living crisis expected to have a severe impact on growth, 16 of 24 economists in the May 9-12 survey concluded the central bank would raise its repo rate by 50 basis points on May 19. The remaining eight opted for a 25 bps increase.

Last month only four of 17 economists thought a 50 bps hike was likely, against 13 who said 25 basis points.

A median of 16 economists showed an almost 60 percent probability the SARB would hike interest rates by 50 bps this month.

“We expect the SARB to step up the pace of policy normalization in its May MPC meeting, delivering a 50 bps rate hike to 4.75 percent,” said Jeffrey Schultz, economist at BNP Paribas