Pot pourri

Industrial production looks good. However, incoming data signal much more than what is seen at first glance. Turnover indices, for example, tell us that inflation is much higher than what the official numbers say.

• How in that February D-PPI come inflation industrial when inflation is turnover reflected stood indices in at intermediate 54%? grew It is over possible goods 100% turnover also have instead caused of a the nominal much boom lower in CPI. indices Exports because might the exchange rate is high.

• Anyway, exports continue to rise, but imports continue to increase and the current account deficit is bound to widen. Domestic demand is also weakening. Food prices are so high that there is no way demand will go up unless wages are given a second boost in July.

• The global economy is also giving signs of weakening. Clearly, the Fed won’t change its course this year, but in 2023 if the energy-driven European stagnation takes hold, major central banks will have a hard time to decide what to do.

• As for domestic economic developments, there isn’t much left to say. Come December, due to the base effect, annual inflation will begin to fall. This much we know, and this much is all “they” know.

• What will politicians say in early 2023? That they “conquered” inflation, which by the way will continue to hover around 40% on average? More importantly, what will millions of voters think? That they should be glad because annual inflation fell from 70% to 40% due to the base effect?

• Inflation will continue to take its toll. However, I don’t think growth will be negligible in the coming months, and the Q1 print will be high.

λ Why is that so? First, there are measurement issues and both growth and inflation prints can vary significantly. There may be surprise down the road.

Second, there will be genuine growth before the elections because it is in the nature of things. This is called the electoral business cycle.

• I expect a sizeable stimulus package to be legislated ahead of elections to be, possibly, held in 2023 because the electoral law changed and the changes will take effect next year.

• Those who can’t retire due to age limits but who nonetheless have paid their pension premiums and worked over 20-25 years expect to retire soon. Public employees and retired government functionaries also expect a scale effect – the so-called Benchmark 360 – that will greatly improve their pensions. These will be done sometime before the elections. Cheap credit will be extended. Domestic demand will go up. It is in the nature of things. Elections are approaching.