The question of the persistence of high inflation matters because it will determine the extent of monetary tightening necessary to bring inflation under control. Key factors are growth of unit labour costs, the price elasticity of demand and its mirror image, the pricing power of companies. The latter two are conditioned, at least in part, by the cyclical environment: when growth is very strong, price elasticity of demand will be lower and pricing power higher than normal. A regression analysis between the PMI output prices index and the PMI input prices index (explanatory variable) shows that recently in the US and the euro area, pricing power has increased quite significantly
Health restrictions implemented in front of a new wave of the Covid 19 pandemic dominated by the Omicron variant seem to have had only a mild impact on growth in early 2022, and the gradual lifting of these restrictions bodes well for a rebound in growth. These disruptions occurred in the midst of a rather favourable environment.
Concerning the Italian economy, now that the presidential election is behind us, attention has focused again on the risks associated with surging inflation and the upcoming start of the normalisation process of ECB monetary policy. 10-year Italian government bond yields have risen by nearly 50 basis points since early February, and they could reach the 2% threshold very soon.
Sixteen million new Covid-19 cases were confirmed during the week of 9-15 February, a 20% decline from the previous week. All regions reported declines, with new cases down 44% in North America, 34% in Africa, 26% in South America, 14% in Europe, and nearly 12% in Asia.
