Release date 04 February 2022
January’s consumer price growth in the euro area above expectations
In December, Slovenia's exports of goods increased nominally by 28% year on year, which was double the rate we expected (+14%). We attribute this to the growth of trade in merchandise as well as an upbeat manufacturing production that fared better than the rest of CEE. Imports increased even more, being half as higher as in December last year. Throughout the year 2021, exports of goods increased by a fifth and imports by 30%. Trade deficit in goods stood at EUR 2.6 billion, which was mainly due to the growth in domestic consumption and investment which usually drive up the imports. An important factor were also higher prices of commodities.
The number of registered unemployed persons in Slovenia increased slightly in January (by 1,900 to 68 thousand) compared to December, which is a purely seasonal pattern (expiration of fixed-term contracts). This number thus needs to be looked in this context. In the previous 10 years, the average number of registered unemployed increased by 4,500 in January, which means that the increase was 50 % lower than usual and lowest since 2008 (+830). In January, 8,700 new unemployed persons registered with the Employment Service of Slovenia (ESS) (this includes the majority of those whose fixed-term contracts expired), which is 18% less than in January 2021. 6,800 persons exited the status, of which 4,600 due to employment, which was similar to the previous year. Among those who were employed, most were workers for simple jobs in manufacturing, secretaries, salesmen, cleaners, servers and domestic helpers, commercial sales agents, pre-school and assistant educators, storekeepers and purchasing and sales officers, simple civil engineering workers, kitchen assistants, waiters, business secretaries and car drivers, taxis and light delivery vehicles. Employers' demand for workers increased in January compared to January last year, as ESS employers reported 50% more vacancies, a total of 15,600. Employers do not have a legal obligation to report all vacancies..
More economic topics are below in the attachment.
One of the most important PMI indices in global manufacturing - JP Morgan Global Manufacturing PMI, fell slightly in early 2022 (to 53.2, 15-month low), due to lower growth in new orders, slower growth in international trade, delays in deliveries and the growing number of infections with Omicron, which had a negative impact on the world trade. With a value below 50 (deteriorating outlook in manufacturing), following countries have faced: Kazakhstan (some link also to recent political turmoil), Mexico, Brazil, Myanmar and China. On the other hand, the euro area and several important members remained upbeat about their prospects, despite rising energy and commodity prices. Austria, the Netherlands, Germany, Ireland, the Czech Republic, Italy and Greece were all on top of the optimistic countries list.
In January 2022, consumer price growth in the euro area (HICP methodology) increased more than expected (median change on Reuters: +4.4% compared to January 2021), that is by 5.1% (in December prices were up by 5% year on year). Our forecast was among the most accurate among the 41 institutions (5.2%), despite being the highest. The central assessment did not record such a large error for a long time (institutions submitted forecasts until 26 January 2022), which is due to significant differences in the models of transferring raw material and energy prices to final prices of goods and services. In January 2022, year-on-year price growth was highest in Lithuania (+12.2%), Estonia (+11.7%), Slovakia (+8.5%) and Belgium (+8.5%). Compared to the previous month (December 2021) HICP was up by 0.3%. Energy prices (mainly electricity, natural gas, but also oil) were 6% higher, while industrial product prices even fell surprisingly (by 2%). The reason for the fall in these prices is currently unclear (details are not available). Prices of services remained unchanged, while prices of food, alcohol and tobacco increased by 1.1% on average. Among the 18 euro area countries (data for Slovenia will be available with a delay, on 7 February), monthly price growth was highest in Slovakia (+3.6%), Lithuania (+1.8%), Belgium (+0.9%) and Germany (+0.9%). In Spain, Greece, Ireland and Malta, prices have even fallen. The average price growth in Slovakia is expected to be 4% in 2022, taking into account the average price of Brent oil in 2022 of USD 57 per barrel (Ministry of Finance public estimate). What exactly was behind the growth in January’s prices in Slovakia is not clear at the moment, but we estimate that this is a reflection of the growth of energy prices, which are partially regulated in this country.
Hidden Defaults; Horn at al.; ifw Kiel; Kiel Working Paper; 4 February 2022. Available at: https://www.ifw-kiel.de/publications/kiel-working-papers/hidden-defaults-16954/
Comment/Abstract: China’s lending boom to developing countries is morphing into defaults and debt distress. Given the secrecy surrounding China’s loans, also the associated defaults remain “hidden”, as missed payments and restructuring details are not disclosed. Authors construct an encompassing dataset of sovereign debt restructurings with Chinese lenders and find that these credit events are surprisingly frequent, exceeding the number of sovereign bond or Paris Club restructurings. Chinese lenders follow a resolution approach reminiscent of 1980s Western lenders; they seldom provide deep debt relief with face value reduction. If history is any guide, multi-year debt workouts with serial restructurings lie in store.
HICP, Slovenia, January 2022, (7 February), Statistical Office of RS; +6.2% (y-o-y)
Comment: we expect the CPI (+4.9% in Dec. 21) and HICP index (+5.1% in Dec. 21) to pick up in January due to lower base effect (January 2021 prices declined much compared to December 2020), higher energy prices (fuel, heating, electricity) as well as the secondary effect of higher commodity prices on several goods. In addition, 0.2 percentage points will be added solely by lack of one-time reduction in price of complementary health insurance.
“I have seen the future and it is very much like the present, only longer.”
(Kehlog Albran, The Profit)