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

RIYADH (Reuters) – Egypt’s unemployment rate fell to 7.2% in the first quarter, from 7.4% in the previous quarter, the national statistics agency CAPMAS said on Sunday.

U.S. Economic Outlook

The U.S. economic outlook has weakened and inflation is expected to remain higher than expected for some time to come, a Federal Reserve Bank of Philadelphia survey of professional economic forecasters showed on Friday.

Real gross domestic product is expected to grow at an annual rate of 2.3% this quarter, down 1.9 percentage points from the last survey three months ago, with the annual rate expected to fall to 2.3% next year and 2% in 2024, both lower than the previous estimate.

The Philadelphia Fed’s latest snapshot of the opinions of 34 leading economic forecasters also revealed that they expect headline consumer price index inflation for the current quarter to average 7.1%. at an annual rate, compared to 3.8% at the time of the last survey. They also expect headline personal consumption expenditure inflation this current quarter to be 5.7% at an annual rate, down from 3.1% previously.

Headline and core CPI and PCE inflation forecasts in 2022 and 2023 have also been revised upwards.

Despite the weakening outlook for economic growth as the Fed battles high inflation for 40 years, forecasters expect only a slight increase in unemployment.

They see the unemployment rate at 3.6% this quarter. That’s the same level they expect in 2022 and 2023, with just 3.8% upside in the following two years.

Italy financing cost

Market volatility could push Italy’s borrowing costs up slightly this year to their highest level since 2019, the country’s debt chief said on Friday.

An impending rate hike by the European Central Bank as early as July and the end of its asset purchase program inflated Italian government bond yields, pushing them to their highest level since late 2018.

“Our target for 2022 is 0.83%. It could be revised upwards by a few 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% year on year, its highest level since January 2002, data showed on Friday, as it was boosted by ruble volatility and unprecedented Western sanctions that have disrupted supply chains.

But monthly inflation slowed to 1.56% in April from 7.61% in March, when it recorded the biggest month-on-month increase since January 1999, data from the service showed. Federal Statistics Office, Rosstat.

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

The ruble’s fall to record lows in March boosted demand for a wide range of goods, from basic foodstuffs to cars, in expectation of an even sharper rise in prices. The ruble has since rallied and firmed to a nearly five-year high against the euro on Friday. Spain’s final CPI in April

Spanish consumer prices rose 8.3% year-on-year in April, National Statistics Institute data showed on Friday, up from 9.8% in March and a Reuters poll forecast of 8.4 %.

Core inflation, which excludes volatility in food and energy prices, was 4.4% year-on-year, down from 3.4% a month earlier and the highest rate since December 1995 , according to data from the National Institute of Statistics.

Spanish prices harmonized with the EU rose by 8.3% compared to the previous year, against 9.8% in March and in line with Reuters forecasts of 8.3%.

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

In Spain, the INE said the cost of food and non-alcoholic beverages in April was higher than the previous month and a year earlier. This development was fueled in particular by a surge in the prices of oils and fats, as well as the prices of hotels, cafes and restaurants and, with the recovery of tourism, the cost of package holidays.

This decline was mitigated by the fact that electricity prices were lower than in the previous year. However, gas and oil are now more expensive than last year, he said.

The INE noted that prices for cars and air passenger transport are up, but gasoline and lubricants were cheaper in April than in March.

Norway’s GDP points to recovery

Norway’s economy contracted in the first quarter due to coronavirus shutdowns, but growth resumed towards the end of the period, data from Statistics Norway showed on Friday.

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

The January-March quarter saw a decline in mainland GDP of 0.6% from the October-December period, the statistics office said, more than the 0.5% fall 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 observed measure of the performance of the Norwegian economy.

In March, the last month of the quarter, mainland GDP rose 1.0%, beating an average forecast of 0.8%.

The krone currency weakened slightly to trade at 10.23 against the euro at 06:22 GMT 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

Mario Centeno, a member of the European Central Bank’s Governing Council, said Friday that the ECB is expected to begin a cycle of interest rate hikes in early July, and he called for any withdrawal of stimulus to be phased.

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

Normalization must happen gradually, he added, and policymakers must not “overreact” to rising inflation in Europe or risk penalizing economic growth.

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

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

As inflation hit a record high of 7.5% in the eurozone last month, well above the ECB’s 2% target, policymakers are increasingly calling for a quick unwind of measures stimulus, and many called for a rate hike in July.

Central Bank of South Africa

The Reserve Bank of South Africa is expected to make its first 50 basis point hike in its repo rate in more than six years next week, to 4.75%, to avoid potential second round effects of rising consumer prices, according to a Reuters poll due Friday. .

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

Last month, only four out of 17 economists thought a 50 basis point hike was likely, compared with 13 who said 25 basis points.

A median of 16 economists showed a nearly 60% chance that the SARB would raise interest rates by 50 basis points this month.

“We expect the SARB to pick up the pace of policy normalization at its MPC meeting in May, with a rate hike of 50 basis points to 4.75%,” said economist Jeffrey Schultz. at BNP Paribas.

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