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BOV Market Watch - Week ending 19th August 2022
19 Aug 2022

US homebuilders’ sentiment turns negative. Pressures in the US housing market continue to grow as the National Association of Home Builders (NAHB) said its sentiment index dropped for the eighth consecutive month whilst turning negative. This led the NAHB to state that the US is facing a “housing recession.” The NAHB/Wells Fargo Housing Market Index, that quantifies the pulse of the single-family housing market, fell to 49 in July, marking the worst stretch in this sector since the 2008 financial crisis. Any reading below 50 shows contraction. The index previously dipped below the 50 boundary only during a very brief plunge at the start of the pandemic. As buyers pulled back, the number of home sale cancellations also soared to a two-year high in July. “Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB Chief Economist Robert Dietz.

UK inflation tops ten percent. Britain’s annual inflation rate surged into double digits in July and is expected to continue rising by the end of the year, increasing the pressure on already stretched household budgets, thus threatening a lengthy recession. Data published by the Office for National Statistics (ONS) show that the UK inflation rate rose to a 40-year high of 10.1 percent, from 9.4 percent in June, beating expectations of 9.8 percent and the Bank of England’s forecast of 9.9 percent. Core inflation rose to 6.2 percent from 5.8 percent, above economists average forecasts of 5.9 percent. "All the eleven food and non-alcoholic beverage classes made upward contributions to the change in the annual inflation rate, where prices overall rose this year but fell a year ago," the ONS said.

China cuts lending rate as economic data disappoint and Covid cases rise. China’s central bank cut its key interest rate on Monday to help the struggling economy that was hit hard by the government’s zero tolerance to the Covid-19 infection rate. The People's Bank of China lowered the one-year Medium Term Lending Facility (MLF) rate to 2.75 percent from the 2.85 percent. It also injected two billion yuan (295 million dollars) into the market, via seven-day reverse repos at two percent interest rate, down from 2.1 percent. “Given the lingering Covid restrictions and fragile economic recovery, we expect the government to continue increasing policy support for the rest of 2022,” Wang Tao, UBS’s chief China economist, said in a research note.

India’s retail inflation eases in July. India's consumer price inflation (CPI) eased more-than-expected in July, data from the National Statistical Office showed on Friday. The country’s retail inflation fell to 6.71 percent, the lowest level in five months, on the back of easing food and oil prices. Despite declining to its lowest level since February 2022, the CPI continues to remain above the Reserve Bank of India’s upper margin of six percent for the seventh month in a row.

Australia's job market unexpectedly contracts in July. Australian employment unexpectedly fell in July, giving some space to the Reserve Bank to be more flexible in its monetary policy tightening cycle. Data from the Australian Bureau of Statistics (ABS) showed that the number of employed people in the Australia fell by 40,900 in July. Expectations were for growth of 25,000 people. However, the unemployment rate fell from 3.5 percent to 3.4 percent in July, according to the ABS. This was the result of the proportion of people participating in the jobs market also dropped to 66.4 percent from 66.8 percent  in the prior month. 

 

 

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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).