Real indicators
The impact on recovery dell'Omicron, in Italy and abroad, was stronger than expected. Also because he added to other obstacles: further rises in the prices of raw materials, especially energy; value chains with lengthening bottlenecks; shortage of workers; transition to the electric car; real wages reduced by the increase in the cost of living. There would have been enough to knock down a hippopotamus (much more fearsome and resistant beast than the elephant).
instead, the economy held up and leading indices predict continued growth; albeit with less momentum, given that the pre-pandemic values have been reached if not exceeded almost everywhere.
With regard to Sars-CoV-19, its spread is clearly slowing down, in Italy, in Europe and especially in the United States. And everywhere it goes towards a clear easing of restrictions, with a consequent decrease in the absences of quarantined workers.
La Germany, the pivotal economy of the Old Continent, is suffering more than the others, because more than the others it suffers from the hitches of logistics (having opted to be a economy bazaar) and with a weight ofautomotive. Which is a large multiple of that in the others. By the way: to alleviate the fall in employment due to the death of internal combustion engines, Germany will internalize some production. Thus also taking the pigeon to reduce the dependence on logistics. To the wise connoisseur... However, the Zew and Ifo confidence indices recovered in January.
THEamerican economy shows no signs of tiredness. Accumulating and accumulating savings (at 7,9% of income is high compared to the historical average) means that personal spending may rise even as real disposable incomes fall (-2,3% from July to December). In the last two months, these expenses have indeed dropped (-1,2% cumulative real), but it is difficult to deduce a lower desire for consumption, as they are affected by the (self) anti-contagion restrictions and the lack of objects of desire (cars and electronics ), For shortage of microchips. A shortage that will last for a long time, because demand will continue to increase exponentially.
In China the impact of Omicron it was strong, but in a different sense. The unrealistic and resolute 'zero-Covid' policy is hampering production and consumption more than expected, and the PMI indices have dropped towards the 50 level, which means: things are neither better nor worse than before. Luckily, for China, the 'before' wasn't so bad…
Let's go back to Italy. The solution to the Quirinal crisis has given us back the team that, since a year ago, promised to put Italy back on the growth path it had abandoned for too long. The promise, despite everything, has so far been kept, and the return of the Dream Team reassures us about the future. A future, moreover, which is weighed down by a challenge (the implementation of the PNRR) and three unknowns, two economic and one geopolitical. The first is inflation – more on that later – and in particular energy prices. The second unknown lies in the increasingly widespread signs of a rate hike (again, more on that later).
The third and uncomfortable unknown is in fears and tremors related to Ukraine. Russia, under accusation from the West, is looking for shores in China, and is amassing troops on the borders. USA and Great Britain send weapons to Ukraine and threaten Putin with sanctions. Is there anything to worry about? The invasion does not suit anyone, and diplomacy has many cartridges in the diplomatic bag. The markets, who know how to measure the roosters in the henhouse, believe that the imperatives of Realpolitik they will mend the tears of geopolitics.
But there is another issue that must be looked straight in the eye, not to exorcise it but to resolve it: Italy is not a nation used to do well in the face of systemic challenges, where the private and the public are allies and join forces. Parochialisms, jealousies, personalisms, defense of small gardens mean that often the game is to prevent someone from excelling, rather than making sure that the nation wins. Demographic decline, energy transition, environmental protection, digitization, electric traction are, in fact, systemic challenges. For this it was essential that the Dream Team were confirmed: no one works miracles, but if someone could do them, they would be very similar to those who are at the helm of the country today.
Inflation
There is nothing of more definitive than provisional. The hands of the economy have perhaps paid little attention to this wise popular saying. And they were surprised by the persistence and intensity of the increase in consumer prices at least as much as central bankers, financial markets and forecasters. The latter, as one man, confirm that this inflation will be brought under control this year. Alone wishful-thinking for inability to admit a mistake?
Many times The hands they reiterated that inflation starts when all prices rise. All and especially one, that of work. And therefore it is necessary to look at the trend of that price to understand if it is true inflation. Well, on the basis of this parameter, some semblance of inflation begins to appear in the USA, not in the UK and the euro area.
However, a corollary of the saying quoted at the beginning is that the more something lasts over time, the more durable it becomes. In the sense that one of two things: either the temperature of prices drops or that of wages rises. And judging by the trend in commodity prices, it is more the latter than the former. In fact, the European contractual system causes wage dynamics to react with a delay to the upward thrusts that come from imported inflation, due to the rise in primary input prices.
Of course, it can always be the case that one accepts the inevitable consequence that the deterioration of the terms of trade it entails: the impoverishment of the whole system, because less is collected per unit of export than the amount paid for one unit of import. But this acceptance is more difficult when the workers cannot be found. AND businesses are full of orders and they cannot allow interruptions due to production strikes, unless they have to pay contractually fixed penalties.
Furthermore, the high cost of living extorts consumers and slows down both the recovery and the resilience that all policies have set themselves as a goal.
So? The only way for governments is to calm the bills of the price increases for families. It is not a definitive solution and it works if and only if in the meantime the supply of commodities adjusts to demand, causing their prices to decrease. But we have learned over the years that there is no best possible world and, as Quinto Fabio Massimo taught us, it is also important in economic policy To gain some time to let the economy adjust itself to approach the non-existent ideal.
Rates and currencies
THEinflation, whether temporary or not, has reached levels that worry central banks. The level of 'concern' is directly related to the level of inflation: the first to worry was la Federal Reserve (inflation at 7,5% in January 2022) which announced, starting next month, a series of increases in the key rate; the second was there Bank of England (inflation at 5,4% in December), which has already taken action, and increased rates twice, at the end of December and at the end of January; the third was there ECB (inflation at 5,1% in January 2022): he changed his mind and it doesn't rule out rate hikes already this year (previously it ruled them out until next year).
The recent unanimous rise in interest rates (in which the BTp stood out – see graph) constitutes a salutary warning: interest rates are not low forever, and they can ascend, as before they descended. And they had gone down a lot: between a weak economy and deflation, the central banks, denying the reputation of people in suits not inclined to adventures, had, in fact, ventured into the terra incognita of zero rates.
And even when they had bumped into the famous 'zero lower bound', the border of zero rates, had in some cases happily decided to go below, crossing those 'pillars of Hercules'. For a long time the guide rate in some countries it went, albeit slightly, below zero (for example, even today for the ECB the rate on the 'deposit facility' is -0,50%).
I savers, of course, they weren't happy: until recently, anyone who wanted a super-safe investment, such as i Bund at 10 years, had to resign himself to seeing his capital eroded over time, since the German Treasury, instead of paying interest, reduced, thanks to the negative rate, the capital it would one day repay. Unlike savers, i fund takersInstead, they were happy: the case of a Danish commercial bank remains in the annals of banking, which came to offer borrowers a negative rate.
With such precedents, the super-low rates had become solidly grafted into the financial DNA of borrowers and lenders of funds. And it is understandable how today the transition, for the Bunds, from below zero to a rate – listen, listen!… – of +0,25-0,30% can be experienced as an epochal turning point. But what's happening is a 'normalization' (copyright Madame Lagarde): it means that we are returning to normal. A normality from which we had deviated too much.
Un central banker of twenty years ago, who was informed that, in the face of inflation rates of 5-7%, the central banks decide to raise the guide rates and bring them to 0,25-0,50%, he would rub his eyes and would not believe his ears. There is talk of hawks and doves. But this monetary policy response is a dovecote, even though many believe that monetary policy around the world has veered towards the falconry.
There are two rules for an economy in conditionsnormal': the first wants that in an economy that is, like the harpsichord, 'well-tempered', the interest rate is at least equal to the inflation rate; the second, wants the real interest rate is roughly equal to the growth rate of Real GDP. Well, both of these rules, in the current circumstances, are blatantly violated: the interest rate is well below the inflation rate, and the growth rate of the economy – largely positive – is well above the interest rate real – largely negative.
The blatant violation of the two rules is explained by the fact that the current inflation is (correctly) considered as temporary. And it's not just the central banks – the Fed as well as the ECB – who judge it as such. It is significant as in the Commentariat economic nobody has dared to say that today's inflation was caused by the huge money creation of the last two years.
All those who had criticized the superexpansive policy of central banks, stating that it would cause inflation, they are silent. And yet, this would be the time to say: you see, the facts have proved us right! If they don't, it's because they too see the surge in prices as temporary, one discrepancy between supply and demand due to the pandemic impacts on production and logistics.
In the currency markets, the dollar it stood out for its ups and downs, going from 1,116 at the end of January to over 1,14 against the euro and then losing something. It is difficult to say whether the strengthening – which has lasted since mid-2021 – has come to an end. Never – both those of the real economy and those of the fight against the virus and those of monetary policy – they still militate in favor of the greenback. The volatility of the dollar was also reflected against the yuan (the fork, between the end of January and today, ranges from 6,32 to 6,36), but the trend of the Chinese currency towards a slow appreciation remains intact.
Sui stock markets, the agonizing question is the same as always: the correction? Yes and no, but more no than yes. It depends on the indices. If we set the correction bar at -10% and compare the levels of the last few days with the highs of the last 52 weeks, China rises on the podium (so to speak): -22% for the CSI300, flanked by the Nasdaq (-15%) and from Nikkei (-10%). but theS & P500 left 8% on the field, the DAX of Frankfurt 5%, and, in our small way, theFTSE MIB fell just short of the DAX.
However, as mentioned several times, the Bags have broad shoulders, and, having digested the bitter pill of the rate hike, remain the privileged place for long-term investments. The proverbial 'Belgian dentist', who wonders where to put his savings, the result of countless and expensive (for the patients) root canal treatments, today has the choice: to buy a Belgian Treasury bond that yields him 10 for 0,73 years %, or put the same sum on the Stock Exchange, trusting that at the end of the 10 years the nest egg - including dividends - will have risen by more than 7,3%. We would have no doubts.
In any case, it must be repeated that what is happening is a normalization of monetary policy, not a change of sign, as he rightly said (for once) Madame Lagarde.
