Intesa Sanpaolo: The labour market has officially become the compass guiding monetary policy.
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Weekly Economic Monitor – 20 January 2023
Intesa Sanpaolo – Research Department
By integrating “standard” data with other measures, less popular but more reliable in cycle turning points, the reduction of market imbalances seems well under way.
In the Eurozone, the recession expected between late 2022 and early 2023 is not expected, according to our central scenario, to generate a significant increase in the unemployment rate and dampen the recovery of wages. Labour cost growth is expected to remain below inflation but with upward risks.
The next two weeks’ market movers
Next week in the euro area, household and business sentiment surveys for January will be published in Germany, France, and Italy, as well as flash PMIs. We expect sentiment to benefit from the decline of energy prices and confirm lower downside risks to the scenario at the turn of the year. In Spain GDP was probably stagnant in Q4.
In the United States , the week’s data releases are not expected to change the picture of still positive but slowing growth at the end of 2022. The initial estimate of 4Q GDP should record a positive change, albeit more modest than in the summer. January PMIs are expected to stay in recessive territory, for both the manufacturing and services sectors, sending indications of an ongoing easing of pressures on prices. Among December data, new home sales should continue to drop, whereas durable goods orders are expected to rebound after declining in November. Personal spending is forecast lower in both nominal and real terms, and personal income should be up modestly. The core consumption deflator for December is expected to confirm a 0.3% m/m increase and the slowdown of the inflation trend.
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