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BOV Market Watch - Week ending 3rd June 2022
03 Jun 2022
Fed Beige Book notes US economy slowing in some areas. The US economy is continuing to expand, though moderately, in most regions, according to regional surveys conducted by the Federal Reserve. Economic growth and price gains may be moderating in parts of the country as households and businesses navigate higher interest rates, the Russian invasion of Ukraine and ongoing disruptions from Covid-19 infections, the central bank said in its Beige Book report Wednesday. However, labour markets remained tight and "worker shortages continued to force many firms to operate below capacity." In response, firms continued to use automation, offer more job flexibility, and increase wages. In a few districts, though wage rate increases were leveling off or edging down. On the price front, about half of the districts said firms were maintaining pricing power and were able to pass costs on to clients and consumers.

Eurozone inflation hits record high. Eurozone inflation rose to a new record high of 8.1 percent in May from 7.4 percent in April, further aggravating the cost-of-living-crisis across the currency bloc, preliminary data by statistics agency Eurostat showed on Tuesday. Inflation increased across the board thanks to continued energy market volatility on the back of sanctions, soaring food prices and core inflation increasing due to businesses pricing through high producer prices. Food prices soared by 7.5 percent, while prices for other goods — such as clothing, appliances, cars, computers and books — were up by 4.2 percent. The cost for services rose by 3.5 percent. To tame price rises, the European Central Bank has already flagged up a 25 basis point increase in its minus 0.5 percent deposit rate in both July and September. 

UK house price growth slows May. UK house prices grew for a tenth consecutive month in May, according to Nationwide's House Price Index, but the rate of growth appeared to be decelerating as the ongoing cost of living crisis looked set to weigh on prices. House prices rose by 11.2 percent on the year in May, according to the mortgage lender, compared to an increase of 12.1 percent in April. On a monthly basis, prices went up by 0.9 percent, which is the tenth monthly rise in a row. The average house price in the UK now comes in at £269,914. "Household finances are likely to remain under pressure with inflation set to reach double digits in the coming quarters if global energy prices remain high," said Robert Gardner, Nationwide chief economist.

China’s manufacturing sector fell at slower pace in May as curbs eased. China's factory activity shrank less sharply in May as Covid-19 restrictions were eased and some production resumed. China's Caixin/Markit Purchasing Managers’ Index (PMI) for the manufacturing sector came in at 49.6 in May. That is up by 2.2 points compared with April. Analysts say the rebound in May shows the country's economic resilience and the steady recovery of supply and demand. The private survey, focusing more on small firms and coastal regions, was in line with Tuesday's official manufacturing PMI which rose to 49.6 from 47.4 in April.

India manufacturing expands in May despite headwinds. India's service sector grew at the fastest pace in more than 11 years in May, underpinned by a strong growth in demand following the reopening of the economy after the Covid-19 lockdowns, survey results from S&P Global showed on Friday. At 54.6 in May, little-changed from 54.7 in April and higher than analysts’ expectation of 54.2, the seasonally adjusted manufacturing PMI pointed to a sustained recovery across the sector. The findings of the survey come as India reported slow GDP growth of 4.1 percnet in the January to March quarter. Economists expect growth to slow down this fiscal year due to spillovers from the Russia Ukraine war which is expected to put pressure on the supply chain and contribute to rising prices.
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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).