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BOV Market Watch - Week ending 22nd October 2021
22 Oct 2021

Eurozone inflation jumps to 13-year high. Eurozone inflation rose as initially estimated in September, final data from Eurostat revealed on Wednesday. Inflation advanced to 3.4 percent in September from three percent in the prior month. This was the highest rate since September 2008. Core inflation that excludes energy, food, alcohol and tobacco, increased to 1.9 percent, as initially estimated, from 1.6 percent in the previous month. On a monthly basis, the harmonized index of consumer prices gained 0.5 percent, in line with flash estimate. The annual inflation was largely driven by the sharp 17.6 percent increase in energy prices. Among other components, food, alcohol and tobacco prices were up by two percent and non-energy industrial goods prices grew 2.1 percent. Prices of services rose 1.7 percent.

US industrial output unexpectedly tumbles in September. Industrial production in the US unexpectedly showed a steep decline in the month of September, the Federal Reserve (Fed) revealed in a report released on Monday. The Fed said that industrial production fell a sharp 1.3 percent in September, below expectations of a 0.2 percent gain. Adding to the sense of gloom in the report, the prior month’s industrial output figure was revised to a fall of 0.1 percent compared to the prior estimate of a 0.4 percent gain. This was the biggest decline in industrial production since February, when winter storm Uri wreaked havoc in Texas. Manufacturing had been a bright spot in the US economy, even though the sector is struggling with supply bottlenecks.

UK inflation dip unlikely to deter BoE from rate hike. Inflation in the UK slowed unexpectedly in September, but the decline was probably only a temporary respite for consumers and is unlikely to deter the Bank of England (BoE) from raising interest rates, possibly as soon as next month. Consumer prices rose 3.1 percent in annual terms in September, pulling back from 3.2 percent in August, the Office for National Statistics said. Economists had forecast inflation to remain unchanged from the prior month. Core inflation that excludes energy, food, alcoholic beverages and tobacco, slowed to 2.9 percent from 3.1 percent in the previous month. As inflation is still above the three percent rate the Bank of England forecast back in August, it is unlikely to significantly reduce expectations that the BoE will raise interest rates before the end of the year, Paul Dales, an economist at Capital Economics, said.

China GDP disappoints, third-quarter growth slows to 4.9 percent. China’s third-quarter gross domestic product (GDP) grew by a disappointing 4.9 percent in September as industrial activity rose less than expected. The National Bureau of Statistics said on Monday that GDP grew by 4.9 percent in the third quarter from the same period last year. That missed expectations for a 5.2 percent expansion. Industrial production rose by 3.1 percent in September, below the 4.5 percent expected by economists.  “Since entering the third quarter, domestic and overseas risks and challenges have increased,” Fu Linghui, spokesperson for the National Bureau of Statistics, said.

Australia manufacturing PMI expands to 57.3 In October.  Australia manufacturing sector continued to expand in October, and at a faster pace, the latest survey from Markit Economics showed on Friday with a manufacturing purchasing index, or PMI, score of 57.3. That is up from 56.8 in September, and it moves further above the 50 mark that separates expansion from contraction. Output and new order growth accelerated in their second consecutive months of expansion amid reports of better economic conditions and confidence by survey respondents. As a result, employment levels and buying activity continued to expand. The survey also showed that the services PMI climbed to 52.0 in October from 45.5 in September, while the composite rose to 52.2 from 46.0 a month earlier.

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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).