MGI Weekly round-up | July 7th 2017

Stories MGI has been tracking this week:

  • Egypt’s central bank shocks market with interest rate hike
  • European Parliament passes resolution calling on the Commission and member states to suspend accession talks with Turkey
  • FT takes close look at how Greeks cope with never ending crisis 

And as always, we feature content from the MGI data and analysis platform, a summary of the week’s key statistical releases, and a look to the week ahead in data. In this edition of the newsletter we use MGI’s World Bank database to assess claims of Greeks shying away from café culture in favour of internet entertainment at home in the wake of the debt crisis.

Egypt’s central bank shocks market with interest rate hike
On Thursday, Egypt’s central bank lifted interest rates by 200 basis points for the second time this year in a surprise move. The deposit rate now stands at 18.75%, the second highest rate on record. The lending rate was also raised by 200 basis points to 19.75%. Economists had been expecting the Monetary Policy Committee to hold rates steady following its June meeting.
 
The bank cited runaway inflation as justification for the move. The currency has weakened steadily following the November decision to float the Egyptian pound. The bank last hiked rates in May.

European Parliament passes resolution calling on Commission and member states to suspend accession talks with Turkey
This week, the European Parliament called for a suspension of Turkey's European Union accession talks if Ankara fully implements President Tayyip Erdogan's referendum platform. MGI has been tracking developments on this front for some time, and it was not unexpected.
 
The broad new powers granted to the president by the referendum have been a divisive issue between Turkey and its European partners, who view the powers as contrary to the democratic principles enshrined in EU entry requirements. Turkey dismissed the resolution as relying on false claims.

FT takes close look at how Greeks cope with never ending crisis
The Financial Times this week had a special report on how Greeks have adjusted in daily life to the seemingly never ending financial crisis (paywalled). The piece describes the unique lack of gentrification in the city centre, which has been populated not by hipsters, but rather migrants from troubled countries in the region. It describes the waning political protests, with most Greeks giving up on lobbying for a different path. Interviewees describe the perception of the times not as a moment of crisis, but rather the new normal that needs to be lived with. Most Greeks seemed to have accepted the message that there is no alternative to the package of reforms introduced by Syriza, the left ruling party.
 
Older Greeks who were interviewed view the crisis though the lens of conspiracy theories, attributing it to deliberate action by foreign groups to advance their business interests.
 
Younger interviewees blame the crisis on older Greeks and have given up on dreams of comfortable retirements. They are increasingly seeking comfort in the home entertainment provided by the internet at low cost, over the traditional venue of the coffee shop. Their standard of living has been maintained due to the strong southern European family bonds, which have stepped in to provide the safety net that the state has not. A growing number of Athenians live with their parents well into their forties.

Featured content from the MGI.online data and analysis portal
This week we try to support the claim of Greeks increasingly turning to the internet in lieu of café culture using MGI’s World Bank statistical database (https://www.mgi.online/wb-series/). Below we plot trends in internet users per 100 people since 1990 in Greece and three other European Mediterranean countries. We can see that there is no particularly noticeable change in the trend of internet users following the debt crisis, except perhaps a small jump in 2011.
 
Greece has achieved just over 70% internet penetration, behind France and Spain, having recently overtaken Italy. MGI forecasts internet users to grow to nearly 85% of the population by the end of the forecast period in 2020. To conclusively test the claim of internet use following the recession, we would need further data on intensity of use. It could be that an increasing desire to stay at home and watch Youtube would show up in such statistics.

The week in data
It was manufacturing and services PMI week (Monday and Wednesday, respectively). PMIs in MGI’s countries across the Eurozone, Middle East, and Northern Africa can be viewed here. Highlights from the week in data include: 

  • Israel's business tendencies survey held roughly constant in June at 19.5 versus 19.6 in May http://bit.ly/2twLS5X
  • Egypt’s purchasing managers' index came in at 47.2 in June, broadly unchanged from 47.3 in May (Emirates NBD via Markit) http://bit.ly/2tjqT8a
  • Early estimates for May retail sales in France beat forecasts, coming in at 0.8% month on month http://bit.ly/2sODTPv 
  • Labour market contracts in Italy in May, shedding 51K jobs versus April. The unemployment rate rose to 11.3% (Istat) http://bit.ly/2tEUdXF

Looking ahead
Look for Israel’s central bank interest rate decision on Monday and several key inflation releases later in the week on Thursday and Friday. MGI’s complete data release schedule is available at https://www.mgi.online/release-calendar/.
 
Monday July 10th, 2017:

  • Israel consumer confidence and tourist arrivals for June
  • Israel central bank interest rate decision 
  • Albania CPI for June
  • Croatia unemployment for 2017Q1
  • Egypt CPI for June
  • Slovenia IPI for May
  • Montenegro CPI for June
  • Greece CPI for June

Tuesday July 11th, 2017:

  • Turkey retail sales for May
  • Italy industrial production for May

Wednesday July 12th, 2017:

  • Egypt IPI for May
  • Tunisia IPI for May

Thursday July 13th, 2017:

  • France harmonised and domestic inflation for June
  • Spain harmonised and domestic inflation for June
  • Israel balance of trade for June

Friday July 14th, 2017:

  • Spain industrial orders for May
  • Italy harmonised and domestic inflation
  • Israel inflation for June