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BOV Market Watch - Week ending 16th September 2022
16 Sep 2022

Eurozone Industrial production falls more than expected. Data published by Eurostat revealed that July’s Eurozone industrial production dropped more than anticipated. The rate of slowdown was deeper than economists' expectations of -1.0 percent, as industrial output declined by an increased rate of 2.3 percent from June, when production was up 1.1 percent. The main contributors to this monthly decline were a 4.2 percent reduction in capital goods output and a 1.6 percent decline in durable consumer goods production. On an annual basis, industrial production unexpectedly declined by 2.4 percent in July, reversing a 2.2 percent increase in June. The EU27 industrial production declined by 1.6 percent on a monthly basis in July and by 0.8 percent on an annual basis. Overall, this shows that industrial production is slowing more than expected.

German ZEW Economic Sentiment Falls to lowest levels in 30 years. The prospects of energy shortages this winter and their subsequent negative impact on the economy have weakened German economic confidence in September to the lowest level in 30 years. The ZEW Indicator of Economic Sentiment survey fell sharply to -61.9 in September from -55.3 in August, to the lowest level since December 1992 and below economists' expectations of -60.0. ZEW President Achim Wambach, stated that “the adverse prospects of the expected gas shortages this winter has contributed to this negative sentiment” especially for the main German industries. He also remarked that due to lower Chinese economic growth momentum, the latest statistical data is already revealing a decline in incoming orders, production as well as the values of exports. This was followed by weaker European area economic sentiment..

US Consumer prices rose further in August. The U.S. Labour Department reported that its consumer price index rose marginally rose by 0.1 percent in August on a monthly basis. Expectations were for consumer prices to move lower by 0.1 percent. The modest increase in consumer prices came as higher prices for accommodation, food and medical care contributed for an increase, while lower fuel prices contributed to a lower inflation level. On an annual basis, consumer prices rose by 8.3 percent in August, reflecting a slowdown from the 8.5 percent higher level in July. Core consumer prices, which exclude volatile food and energy prices, climbed sharply by  0.6 percent in August following another increase of 0.3 percent in July. On an annual basis core consumer prices accelerated to 6.3 percent in August from 5.9 percent in July, above the expected the annual growth rate of 6.1 percent. Paul Ashworth, Chief U.S. Economist at Capital Economics, said that the faster than expected core price increase "confirms" that the Federal Reserve will raise interest rates by at least 75 basis points, from the current 2.25%-2.5% range, during the next meeting aiming to slow down inflation down towards the Fed’s 2% target.

UK consumer price inflation slows in August.  A fall in UK fuel prices lead to a marginal fall in UK’s headline inflation, from the then prevailing 40-year high level. In August, consumer price inflation unexpectedly declined to 9.9 percent, from 10.1 percent in July, below forecast of rise to 10.2 percent. This was its first drop since September 2021. As expected, core inflation rose to 6.3 percent in August, slightly up by 0.1 percent from 6.2 percent in the previous month. ING economist James Smith stated that, despite the economic slowdown, overall inflation is forecast to trend around 11 percent into early next year before falling back more dramatically.

Australia’s Westpac consumer confidence improves for first time in 10 months. Westpac Banking Corp’s index of Australian consumer sentiment, rose by 3.9% to 84.4, from 81.2 in August, being the first-time improvement in ten months, as four of the five sub-indexes recorded gains in September. The improvements among consumers and also persistent strength of business sentiment support the Australia’s Reserve Bank’s assessment that the prevailing very tight labour market and solid consumption will keep the economy steady. The Australian central bank last week delivered its fourth consecutive half percentage-point interest rate increase to take the cash rate to 2.35%, to cool consumer prices.  The RBA has tightened monetary policy by 2.25 percentage points since May, when the base rate stood at a record-low 0.1%. 

 

 

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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).