“Energy Crisis…”

Tens of thousands of businesses are at risk of going under without government support because of soaring energy bills, according to insolvency experts.

Russia Stopped Pumping Gas to Europe

On Monday European gas prices surged as Russia stopped pumping gas to Europe after Russia’s state-controlled Gazprom said it would halt pumping gas via the Nord Stream 1 pipeline due to a fault. Concurrently, EU governments are going through packages worth billions to prevent power companies from suffering liquidity crunch and to safeguard households from soaring bills.  Meanwhile, Europe has accused Russia of retaliating using energy supplies amid the Western sanctions imposed on Moscow over its invasion of Ukraine. From their end, Russians are saying that the West has launched an economic war and sanctions have hampered pipeline operations. A number of European power distributors have already collapsed while other major generators could be at risk hit by caps that limit price increases that can be passed through to consumers.  Finland’s aim is to offer USD 10 billion and Sweden USD 23 billion in liquidity guarantees to their power companies.  Nonetheless, Germany which is more reliant than other EU states on Russian gas, has offered a multi-billion-euro bailout to power utility Uniper.   The benchmark gas price TRNLTTFMc1 edged by 35% on Monday to EUR 284 per megawatt hour (MWh) after the news of the gas halt.  Furthermore, European financial markets have felt the brunt as European shares tumbled and the euro sank to a 20 year low at 99 US Cents.    Meanwhile, according to Gazprom’s Deputy Chief Executive, Russia’s pipeline will not resume pumping until Siemens Energy repairs the equipment.  Concurrently, Siemens said that it was not currently commissioned by Gazprom to do the maintenance work on the turbine with the engine oil leak, however was on standby.  It further said that the engine oil leak at the last remaining turbine in operation at the Portovaya compressor station should not be the reason for the closure of the pipeline. 

Europe’s cost of living crisis deepens

Surveys on Monday show a deepening cost of living crisis and not so cheerful outlook indicating that the eurozone is heading into a recession.  Although there was some easing of price pressures, they remained elevated, leaving the European central bank under pressure as inflation has reached a record of 9.1% last month, at more than four-fold its 2% inflation target. The S&P Global’s final composite Purchasing Managers’ Index (PMI) which is seen a indicator to the economic health, dropped to an 18-month low of 48.9 in August from 49.9 in July.  Anything below 50 indicates contraction. The prospect of a recession has drastically impacted investor sentiment within the EU slumping in September to its lowest since May, 2020 showed another survey.  In Germany, services activity has contracted for a second month running in August, as domestic demand suffered the brunt of increasing inflation and lower confidence.  Meanwhile, in France, the services sector lost more steam with purchasing managers seeing an unpromising outlook.  Italy’s services industry returned to modest growth however in Spain, the activity expanded at the slowest rate since January as the inflation situation could weigh companies’ bottom line and the demand from customers.  Nonetheless, the situation in Britain as indicated by its PMI showed an economy that ended August in a much weaker position as overall business activity contracted for the first time since February 2021, signalling a recession.   

Liz Truss to be next British Prime Minister

Liz Truss is the new British Prime Minister after winning the leadership race for the governing Conservative party on Monday.  She vowed to cuts taxes and to deal with the energy crisis. Truss who was the foreign minister, defeated former minister Rishi Sunak in a vote of Conservative Party members, winning by 81,326 votes to 60,399.  She succeeded Boris Johnson, who was forced to resign in July after months of scandal.  Truss became the Conservatives’ fourth prime minister since a 2015 election.  Through that period that country has gone from crisis to crisis and could be facing a long-term recession amid inflation that hit 10.1% in July.  Truss will be facing cost of living increases, industrial unrest as well as a recession and a war in Europe.  The UK has long backed Ukraine.  During her campaign Russ indicated that she would challenge convention by removing tax increases and cutting other levies.  Such moves are perceived to fuel inflation by economists.   However, first she will turn to the urgent matter of energy prices. 

Oil

Oil prices soared by more than 3% on Monday extending gains, as OPEC+ agreed to cut oil production by a small amount to bolster prices.  Brent crude futures for November delivery increased by 3.7% to $96.45 a barrel, while US West Texas Intermediate crude was up by 3.4% to $89.47.  Meanwhile, US Markets were closed for a public holiday on Monday.  OPEC+ have agreed to reduce output by 100,000 barrels per day, amounting to only 0.1% of global demand for October.  Furthermore, they agreed to meet up to address adjustments to production before the scheduled meeting on 5^th October. Tuesday saw oil prices dropping amid concerns of further increases in interest rates and COVID-19 lockdowns that could lower the demand for fuel.  Brent crude lost 3% to reach $92.83 while West Texas Intermediate fell from Monday’s trading to settle at $86.88 a barrel.    

Malta:  Registered Employment for March- April 2022

A press release dated 2^nd September 2022 shows that administrative data provided by Jobsplus indicate that over a period of one year till Aprill 2022, labour supply excluding part-timers reached 250,127 rising by 4.7%.  This resulted from a year-on-year increase in full-time employment of 12,403 and a decline in unemployment of 1,285.  When comparing April 2022 with April 2021, accommodation and food services activities and administrative and support services contributed mostly to the increase in employment. 

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