“Boris Johnson Quits as UK prime Minister…”

A focus on this week’s news was the announcement of Boris Johnson quitting as the British Prime Minister after losing support of his ministers.  He will remain until his successor is chosen.  A new leader will now have to be appointed by the Conservatives, a process which could take weeks or months.  Despite Johnson saying he would stay on, opponents and many from his own party believed that he should leave and be replaced by Dominic Raab, his deputy.  This situation came at a time when the British are facing higher prices amid soaring inflation and with the economy forecast to be the weakest among major nations in 2023 besides Russia.

German Industrial orders

German industrial orders increased slightly in May, beating expectations which data showed on Wednesday. The orders for industrial goods increased by 0.1% on the month in seasonally adjusted terms after an upwardly revised decline of 1.8% in April, showed figures from the Federal Statistical Office.  Foreign manufacturing orders grew 1.3% in May compared to April, with new orders from the non-euro area higher by 3.7%.  Concurrently, there was a slump in domestic orders of 1.5% and a drop in new euro-area orders of 2.4%.  As declared by the ifo institute, 75.7 of retailers reported that they have not received all the goods they ordered in June, and many are expecting and planning for supply issues to persist until the middle of 2023. 

Eurozone Business Growth

Business growth in Europe further slowed in June according to the S&P Global’s final composite Purchasing Managers’ Index (PMI) dropping to a 16-month low of 52 in June from May’s 54.8.  The index is a guide to economic health with the gauge above 50 indicating growth. Currently, a PMI that cover’s the bloc’s dominant services industry dropped to 53 from 56.1.  Meanwhile, a factory PMI released last week showed manufacturing production dropping in June for the first time since the commencement of the pandemic.  The services output prices index remained near a record high at 63.2 down from May’s 64.6.  Official data on Friday showed that inflation in the EU is more than four times the ECB’s target of 2%. 

Turkey’s Annual Inflation

Inflation in Turkey has jumped to 78.62% in June, showed data on Monday amid the war in Ukraine as well as soaring commodity prices and a slide in the lira that started in December.  The latest figures for consumer prices show an increase of 4.95% in June. The contributing factors to such an increase were transportation prices which edged up by 123.37% whilst food and non-alcoholic drinks prices jumped by 93.93% showed data from the Turkish Statistical Institute.  It was the highest inflation reading since September 1998 at an annual inflation reading of 80.4%.  At the time Turkey was battling with chronic inflation which has been further emphasised by the war in Ukraine.  Meanwhile, President Tayyip Erdogan last week said that he expects inflation to come down to “appropriate” levels by February-March next year.  The Central bank has kept the benchmark interest rate steady at 14% despite the increase, stating that inflation shall drop to 42.8% by the end of this year. 

Swiss Inflation

Swiss consumer price inflation touched a 29 year high of 3.4% exceeding the 3% level since 2008.  Prices have increased by 0.5% in June in comparison to May as fuel, heating oil and vegetables have become more costly.

FED Minutes

According to the minutes released on Wednesday of the 14-15 June meeting, “Participants concurred…that the near-term inflation outlook had deteriorated since the time of the May meeting,” confirming last month’s increase of 75 basis points to restrict monetary policy.  As families face the brunt of rising food and gas prices together with no evidence that the actions of the FED are fruitful in combatting the fastest increase in inflation in 40 years, “many participants judged that a significant risk… was that elevated inflation could become entrenched if the public began to question the resolve of the (Federal Open Market) Committee to adjust the stance of policy as warranted”, stated the minutes.  The group noted the willingness to move interest rates as high as necessary to bring inflation to the 2% target.  The minutes also showed that, “Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognised the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist.”  However, the minutes did not specifically mention the risk of recession.  In fact, Fed officials said they thought data showed US gross domestic “was expanding in the current quarter,” with the job market still tight.  However, they accepted the fact that the risk could slide particularly if the FED policy could have a larger than anticipated impact. 

Oil

Oil prices increased on Monday amid supply concerns led by lower OPEC output, the unrest in Libya and the sanctions against Russia.  Brent crude increased by 2% to $113.89 a barrel after falling more than $1 in early trading while US West Texas Intermediate (WTI) crude increased by 2% to $110.63 on thin volume during US Independence Day holiday.  Meanwhile, a Reuters survey found that the Organisation of the Petroleum Exporting Countries (OPEC) missed the June’s target to increase output.  UK Prime Minister Boris Johnson on Monday called on the OPEC+ producer group to produce more oil to tackle a cost-of-living crisis.  This year Brent crude has come close to reaching the 2008 level of $147 after Russia’s invasion of Ukraine adding to supply concerns.  High energy prices amid the bans on Russian oil and the reduction in gas supply increased inflationary pressures in some countries and led to fears of a recession. Tuesday saw oil dropping about 9%, the largest decline since March on fears of a global recession and the lockdowns in China that could curb demand.  Brent crude settled at $102.77 a barrel or 9.5% while US West Texas Intermediate (WTI) crude ended 8.2% lower at $99.5 a barrel.  On Wednesday oil prices dropped about 2% to a 12-week low continuing with the prior session as investors’ concerns increased of a possible global recession.  On Thursday oil settled sharply higher with Brent crude rising by 3.9% at $104.65 a barrel while US WTI crude futures climbed by 4.3% to $102.73 a barrel. 

US Weekly Jobless Claims

The number of Americans that filed new claims for unemployment benefits unexpectedly increased last week and demand for labour is slowing, while layoffs surged to a 16-month high in June amid the tightening approach being taken by the Federal Reserve that is raising fears of a recession.  Initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 235,000 for the week ended 2 July according to the Labour Department on Thursday.  Job cuts increased 39% to 77,515 in the second quarter from the January-March period.  However, layoffs in the first half of the year were the lowest since 1993.  Job cuts increased in the automotive, consumer products, entertainment, financial and real estate industries. 

Malta:  Registered Unemployment – May 2022

A press release dated 6 July 2022 shows that data provided by Jobsplus for May indicate that the number of persons registering for work stood at 961 decreasing by 1040 in comparison to the corresponding month in 2021.  The largest share of males and females on the unemployment register were in clerical support workers with 22.1% and 42.3% respectively. 

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