Conditions worsen significantly 

Eco week 22-24 // 13 June 2022  
The deterioration of the business climate surveys continued in May, particularly in the manufacturing sector, even though industrial production  
held up until April. Output rose 1.6% m/m, to its highest level since December 2007. However, the manufacturing PMI dropped 2.6 points to 51.9  
in May, its sixth consecutive monthly fall. The sharp fall in this indicator shows up clearly in our barometer. The ‘new orders’ component fell  
steeply (-5.2 points, to 47.4) but the ‘input prices’ component also dropped (-5.7 points, to 81.4), following a record level in April. This said, the  
pace of increases in production costs remains high.  
Private consumption, which had already contracted in Q1 (-0.6% q/q), is set to be fragile again in Q2. Retail sales declined for the second month  
running in April – and are down by a combined 1.2% during this period – while household confidence stays very low, having already plunged in  
the first quarter. The European Commission index recovered only slightly in May (from -23.9 in March to -22.0), pulled down by the “savings  
expectations” component for the next twelve months which has been at its lowest level since July 2017. This reflects consumers’ concerns about  
the effect of inflation on their purchasing power.  
Indeed, the harmonised index of consumer prices (HICP) rose 7.3% y/y in May, the highest figure since the current statistics began in 1990.  
Although energy price inflation is still elevated, the rise in prices is also accelerating for food and non-alcoholic beverages (7.5% y/y), hotels,  
bars and restaurants (6.0%), household equipment (4.5%) and, to a lesser extent, clothing (1.6%). However, second order effects, specifically a  
price-wage inflation spiral, seem unlikely in Italy for the time being. According to Istat, hourly wages rose 0.8% y/y in April, suggesting a fall in  
real terms of 5.5% in that month, a very significant drop that explains part of the fall in consumer confidence.  
Overall, the recovery in the labour market has continued during the first half of the year, but first signs of a slowdown are showing up: employment  
fell in April (-12,150). This said, the unemployment rate dipped to 8.4% in April, while the youth rate also dropped, to 23.8%. The latter remains  
high but is nevertheless the lowest since December 2008.  
Guillaume Derrien  
-month moving average (actual)  
Industrial production  
-- 3-month moving average (4 months ago)  
PMI employment  
Unemployment Rate  
PMI new export orders  
PMI services  
Business climate - Construction  
PMI manufacturing  
Business climate  
Consumer confidence  
Retail sales  
The indicators in the radar are all transformed into ‘z-scores’ (deviations from the long-term average, as standard deviations). These z-scores have mean zero and their values  
are between -3 and +4. In the radar chart, the blue area shows the actual conditions of economic activity. It is compared with the situation four months earlier (dotted-line). An  
expansion of the blue area compared to the dotted area signals an increase in the variable.  
The bank  
for a changing  
QUI SOMMES-NOUS ? Trois équipes d'économistes (économies OCDE, économies émergentes et risque pays, économie bancaire) forment la Direction des Etudes Economiques de BNP Paribas.
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