- "Six months after the publication of our 2010 Outlook, we provide an assessment of the track record of our main macro calls. We did a good job on GDP and CPI, where our current projections are very similar to the ones outlined at end-2009. Sovereign debt woes and fiscal tightening did not materially change the picture for growth and inflation, mostly because the euro worked as an automatic stabilizer and depreciated sharply since the beginning of the year. The impact on monetary policy, however, was material, with the ECB forced to delay its exit strategy and the refi rate likely to remain on hold until 4Q 2011."
- "Signs of peaking in world growth are starting to emerge, and this will probably translate into a softer export dynamic in the next few quarters. Using a simple VAR (Vector Autoregression) framework, we show how a slower pace of export growth can dent the improving trend in both capex and the labor market."
- "With data for full-2009 now available, we provide an updated assessment of the financial position of the eurozone corporate and household sector. We show that the financing gap of non-financial corporations has narrowed significantly, but we highlight that a return to positive selffinancing requires a sustainable return to profitability, as most of the benefits from the cost side have been exploited. For what concerns households, the savings rate has probably peaked and consumption has embarked into a slow recovery, but weak income dynamics and renewed uncertainty on financial wealth remain an important source of concern."
- "We stress the consistency of our baseline scenario envisaging another year of easing in core inflation. Looking at a broad set of indicators that provide useful information on the turning points in core CPI cycles and “averaging” their messages, we find that our central scenario remains well on track. If anything, several indicators suggest that the trough in core inflation could occur later than we currently expect. At the time of writing, selling price expectations are the only variable that hints at some upside risks to our view."
- FI: "The recent increase in demand at ECB refinancing operations signals renewed tensions in the eurozone money market. The amount of liquidity bid at the 3M and 1W auctions following the expiry of the 12M LTRO in June will signal how many troubled banks are still present in the EMU. We expect the amount that will be rolled-over to be lower than the expiring EUR 442bn. We expect little impact on money market rates after the June expiry as banks will continue to bid all the liquidity they need."
- FX: Despite its recent recovery attempts, there is no indication of a trend reversal and EUR-USD should weaken to at least 1.18.
Unicredit Euro Compass 2010Q3
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