“Eurozone Inflation…”

Eurozone inflation surged to a 10-year high in August.  Consumer inflation in the 19 countries sharing the EUR accelerated to 3% in August from 2.2% in July moving well above the ECB’s 2% target rate.  According to Eurostat, the EU’s statistics agency, the increase was fuelled by energy costs, and food prices while there were unusually large increases in the prices of industrial goods too.

Eurozone Unemployment

Eurozone unemployment dropped as expected in July as 350,000 people found jobs compared to the previous month, said the European Union’s statistics office Eurostat on Wednesday. According to Eurostat the unemployment rate in the 19 countries sharing the euro dropped to 7.6% of the workforce from 7.8% in June.  This shows that in July there were 12,334 million people registered as unemployed in the eurozone down from 12.684 million in June.  Spain and Greece remained the EU countries with the highest unemployment rate at 14.3% and 14.6% respectively.  However, the number of jobless dropped sharply.  The Netherlands had the lowest unemployment rate in the eurozone at 3.1% followed by Malta at 3.3% and Germany 3.6%. 

French Inflation

French inflation accelerated more than expected in August at the fastest rate in nearly three years, a preliminary estimate from the INSEE official statistics agency showed on Tuesday.  INSEE said its index of EU harmonised consumer prices rose 0.7% from July, giving a 12 month inflation rate of 2.4% increasing from 1.5% in July to hit the highest since October 2018.  Inflation has increased worldwide as economies recover from the coronavirus crisis, straining supply chains and creating shortages that are driving prices higher.  The French central bank governor Francois Villeroy de Galhau said last week that although tight supply chains would push inflation higher in the short term, he continued to expect the increase to be temporary. 

German Inflation

German inflation outpaced wage growth in the second quarter amid increasing price pressures caused by an economic recovery and supply bottlenecks in manufacturing that reduced the spending power of consumers, showed data on Monday.  The Federal Statistics Office showed that agreed wages, including one-off payments rose by 1.9% on average from April to June compared to the second quarter in the previous year.  Excluding extra payments, wages increased by 1.4% on the year.  This was lower than the national consumer price inflation of 2.4% recorded over the same period. 

German Retail Sales

German retail sales dropped by far more than expected in July after two months of sharp increases, showed data on Wednesday.  This is the first indication that a consumer-driven recovery in Germany might be losing steam in the third quarter.  The Federal Statistics office said retail sales dropped 5.1% on the month in real terms after a revised jump of 4.5% in June and an increase of 4.6% in May.  The statistics office further said that the monthly comparison was distorted by the lifting of the COVID-19 restrictions on shopping in most parts of the country in June.  The German economy returned to growth in the second quarter however bounced back less strongly than other eurozone countries as supply chain bottlenecks slowed industrial output. 

Asia’s Factory Activity

Asia’s factory activity lost momentum in August amid a resurgence in the coronavirus cases that disrupted supply chains across the region.  Southeast Asia which is a low cost manufacturing hub for  many global companies was hit with factory activity shrinking in Vietnam, Indonesia and Malaysia because of the virus outbreak and suspensions in output, showed the surveys on Wednesday.  Furthermore, China’s factory activity also slipped into contraction in August for the first time in nearly 1 ½ years as the COVID-19 curbs, supply bottlenecks and high raw material prices weighed on output.  China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) dropped to 49.2 in August from 50.3 in July breaching the 50-mark that separates growth from contraction, according to a private sector survey on Wednesday.  The private survey followed the official PMI released on Tuesday, which showed the index falling in August however stayed above the 50 mark.  Japan’s PMI eased to 52.7 from 53 in July with new export orders posting their first contraction since January.  South Korea’s index dropped to 51.2 in August from 53 in July.  Factory activity in Vietnam dropped to 40.2 from 45.1 in July.  Malaysia’s PMI stood at 43.4 in August up from 40.1 in July however well below the 50-threshold.  

China’s Factory Activity

China’s factory activity slipped into contraction in August for the first time in nearly 1 ½ years as COVID-19 containment measures, supply bottlenecks and high raw material prices weighed on output.  Two separate official surveys released on Tuesday showed that China’s factory activity grew at a slower pace, while the services sector slumped into contraction.  The Caixan/Markit Manufacturing Purchasing Managers’ Index (PMI) dropped to 49.2 last month from 50.3 in July, breaching the 50-mark that separates growth from contraction. 

Japan’s Retail Sales

Japan’s retail sales increased for a fifth straight month in July, beating expectations as the consumer sector continued its recovery.  Meanwhile, the resurgence of Coronavirus cases has put doubts on the spending outlook.  Retail sales advanced 2.4% in July from the same month a year earlier, showed government data on Monday.  This followed an 0.1% increase in June.  A surge in Delta variant cases this year led the government to widen the state of emergency restrictions that could hurt consumer spending and delay an economic recovery.  The trade ministry declared strong demand for a variety of items such as cars, clothing, general merchandise and food while fuel was helped by the surge in petrol prices.    Small retail establishments like convenience stores and drug stores saw biggest sales growth from a year earlier.  Compared with the previous month, retail sales gained a seasonally adjusted 1.1% as consumption continued the surprising growth seen in the second quarter, helped by the Tokyo Olympics.  Japan’s economy grew at a better-than-expected rate in the April to June quarter, mainly due to private consumption, which makes up more than half of the country’s gross domestic product. 

Japan’s Factory Activity Growth

Japan’s factory activity expanded at a slower rate in August amid a resurgence of coronavirus cases in Asia that disrupted supply chains across the region, leading to contraction in overseas orders for the first time in seven months.  The final au Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) in August eased to 52.7 on a seasonally adjusted basis from 53 in the previous month.  The PMI survey showed that overall new orders expanded at their slowest pace since January, while new export orders posted their first contraction since that month.  Overall output saw a rise, however the pace eased from the prior month amid the health crisis and the lack of raw materials that weighed on production. 

Market Wrap

Asian shares climbed after the US FED’s Jerome Powell’s dovish tone at the central bank’s long awaited symposium.  Investors have however remained cautious about the prospects in China.  The MSCI broadest index of Asia Pacific shares outside Japan gained 0.65% reaching a two-week high, and Japan’s Nikkei rose 0.46%.  Hong Kong rose 0.32%, Australia 0.2%, Korea 0.25% but Chinese blue chips dropped 0.26%.  On Monday the UK was closed for a bank holiday.  Investors waited to see whether Powell could give a clear indication of his views on the timing of the central bank’s tapering of asset purchases or the hiking of interest rates.  However, in his remarks, Powell offered no indication on cutting asset purchases beyond saying it could be this “year”.  This led to risky assets remaining supported after US Federal Reserve Chairman Jerome Powell laid out a slower than expected path to rate hikes.   European stocks moved higher on Monday holding below record highs reached earlier this month, on hopes that continued central bank support would sustain an economic recovery offset by the difficulties brought about by the Delta variant of the coronavirus.  Eurozone bond yields held near one-month highs ahead of the release of German inflation data.  European stocks closed higher on Wednesday as new signs of weakness in Asian economies were offset by hopes for more stimulus and investors shock off concerns about rising inflation. Retail, travel and leisure stocks were the top sectoral gainers, rising by 1.8% each.  Meanwhile consumer exposed sectors benefited from released data that showed eurozone unemployment fell as expected in July. In the US the Dow Jones Industrial Average closed 0.14% lower at 35,312.53, the NASDAQ 100 closed 0.19% higher at 15,611.57 whilst the S&P reached 4,524.09 climbing by 0.03%.  

Currency Roundup

The dollar steadied near two-week lows on Monday, held back by the message from the US Federal Reserve chief that there is no rush to withdraw the massive stimulus. The dollar traded near its lowest point in nearly three weeks versus major peers on Wednesday, with investors focusing on key US jobs report due on Friday.  The US$ was about 0.1% stronger at $1.18015 per euro on the day after touching the weakest since 5th August at $1.1845 in the previous session.   The Dollar traded around multi-week lows on Thursday pressured by softer than expected US labour data as traders awaited a fuller jobs report which is expected to guide the timing of the Federal Reserve’s pullback in bond buying.  The Dollar was also affected by a rising euro which climbed to $1.1857 on Wednesday after a survey showed strong European manufacturing growth together with inflationary pressure from supply chain problems.

The euro was trading at $1.18 steady on Monday close to a three-week high which also touched in Asian trade at $1.1810. The euro moved towards the previous session’s one month high on Wednesday as a higher than expected inflation reading pushed up bond yields, forcing investors to cover their bearish bets on the single currency. The euro reached its highest in a month at Yen 130.44 on Wednesday and reached a six-week peak of 86.02 pence.  It has also been helped by hawkish comments from the European Central Bank policymakers about their tapering plans. 

The pound climbed half a percent to the dollar to more than a week’s high on Friday and was set for a 1% weekly gain as the dollar dropped after the US FED Chair Jerome Powell stopped short of indicating the timing for a policy shift.  In a speech to the Jackson Hole economic conference, Powell indicated that the US Central bank will remain patient as it tries to support the economy back to full employment, repeating that he wants to avoid chasing “transitory” inflation. The pound was little changed on Tuesday hitting two-week highs due to the US dollar weakness.   The pound steadied on Wednesday close to two week highs versus the dollar, taking signals from other currencies as the week is light on data.  The pound traded at $1.3756 unchanged on the day and below two week highs reached on Tuesday of $1.3807.  Against the euro the pound was little changed trading at 85.855 pence.  Thursday saw sterling edging higher on softer dollar but found its resistance around $1.38.

The Japanese yen rose to its strongest since the previous Wednesday at Yen 109.70 per dollar.  Wednesday saw the dollar rising 0.23% to Yen 110.235, however remained near the middle of the trading range that has prevailed since early July. 


Oil prices reversed gains on Monday pulling back from more than three weeks highs reached earlier in the session as a powerful hurricane slammed into the US Gulf coast forcing shutdowns and evacuations of hundreds of offshore oil platforms.  Brent was down 0.2% at $72.54 a barrel.  It rose more than 11% last week in anticipation of disruptions to oil production from Hurricane Ida.  OPEC and its allies on Wednesday agreed to stick to their existing policy of gradual oil output increases despite revising its 2022 demand outlook upwards and the ongoing US pressure to raise production more quickly.  OPEC and allies led by Russia agreed in July to phase out record output cuts by adding 400,000 barrels per day of oil a month. As a result, oil prices dropped on Thursday with Brent crude trading down by 0.2% at $71.44 a barrel after dropping 4 cents on Wednesday.  Meanwhile, US oil fell 0.3% to $68.39 a barrel, after rising 9 cents in the previous session. 


Gold prices dropped on Monday after touching a near four-week high as a result of the increase in the dollar and as investors were cautious in the run-up to the release of key US jobs report later in the week.  Spot gold dropped 0.4% to $1,808.67 per ounce after touching its highest level since 4 August.  The price of gold initially increased on Monday amid the US FED Chair Jerome Powell’s speech to the annual Jackson Hole economic conference.  Gold prices held steady on Thursday as investors awaited the US non-farm payrolls that are crucial for the tapering timeline by the Federal Reserve.  Spot gold was little changed at $1,814.58 per ounce while US Gold futures traded flat at $1,816.50. 

Malta:  Unemployment Rate July 2021

The seasonally adjusted monthly unemployment rate for July 2021 stood at 3.3% showed a press release by the National Statistics office on 31 August 2021.  The unemployment rate for males was 3.8% while that of females stood at 2.5%.  The unemployment rate for July for persons aged 15 to 24 years was 10.6% while the rate for those aged between 25 and 74 years stood at 2.6%. 

Malta:  Industrial Producer Price Indices – July 2021

When compared to July 2020, the industrial producer price index increased by 1.15% showed a press release by the National Statistics Office on 30August.   Consumer goods, capital goods, and intermediate goods rose by 2.87%, 0.58% and 0.55% respectively.  No changes were registered in the energy sector.  The industrial producer prices for the domestic market increased by 1.49%.  Price rises were recorded in intermediate goods (5.73%) and consumer goods (0.64%) while capital goods dropped by 0.06%.  Meanwhile during July 2021, the industrial producer price index decreased by 0.10% when compared to June 2021.  Intermediate goods dropped by 0.32% while capital goods and consumer goods increased by 0.10% and 0.07% respectively.  There were no changes in the energy sector.

Antonella Mercieca

Client Relationship Manager


Reuters, https://nso.gov.mt/


September 3rd, 2021

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