“German Business Activity…”

In August Germany saw a downturn in business activity as shown by the S&P Global’s flash composite Purchasing Managers’ Index (PMI) that tracks both the manufacturing and services sectors which both account for two-thirds of Germany’s economy. The Index dropped 47.6 in August from 48.1 in July.  This is the second time in a row that the index dropped below 50 which separates growth from contraction.  Meanwhile, the manufacturing index climbed to 49.8 in August from 49.3 in July, while the services index dropped to 48.2 from 49.7 in July.

Eurozone Business Activity

Business Activity in the eurozone contracted in August for a second straight month with consumers’ spending dropping while manufacturers were impacted by supply constraints.  The S&P Global’s flash Composite Purchasing Managers’ Index (PMI) which acts as a guide of the overall health of the economy dropped 49.2 in August from 49.9 in July.  A reading below 50 indicates a contraction.  Meanwhile, the new business index came in at 47.7, just ahead of the 47.6 in July.  A PMI that covers the bloc’s dominant services industry dropped to 50.2 from 51.2.  Despite, firms providing services increased their prices at a slower rate this month, the output prices index remained well above the long-term average with a reading of 59.9 lower than July’s 62.1.  Furthermore, manufacturing activity, dropped again this month with the factory PMI dropping to 49.7 from 49.8 the lowest since June 2020.

Oil    

Oil prices traded nearly flat on Monday after dropping earlier on in the session as markets took into consideration Saudi Arabia’s warning that OPEC+ production could cut output as the US, UK, France, and Germany discussed the possibility to revive the 2015 Iran nuclear deal, said the White House on Sunday.  This could allow sanctioned Iranian oil to return to the global markets.    Brent crude futures for October settled at $96.48 per barrel lower by 0.25%.  During the session it had dropped by 4.5% breaking three days of gains.  US West Texas Intermediate (WTI) crude for September delivery that expired on Monday, dropped 0.6% at $90.23.  Meanwhile, Tuesday saw oil prices surging by nearly 4% after the Saudi put forward the view that OPEC + output cuts to support prices should Iranian crude supply returns and US inventories drop.  Global benchmark Brent crude settled at $100.22 a barrel up by 3.9% while US West Texas Intermediate crude closed 3.7% higher at $93.74 a barrel.   Wednesday saw oil prices closing higher after a volatile trading session amid concerns that the US will not consider additional concessions to Iran in its response to a draft agreement that would restore Tehran nuclear deal.  Brent crude settled higher to $101.22, higher by $1, while the US crude settled to $94.89 a barrel by $1.15. 

Gold

Monday saw gold dropping by more than 1% to its lowest level in nearly four weeks, as the expectations of more interest rate hikes by the US FED strengthened the dollar. In this light, spot gold dropped by 1.1% to $1,728.67 its lowest since 27 July setting to drop for a sixth straight session, after having dropped by 3% last week.  US gold futures also dropped by 1.2% to $1,742. Nonetheless, gold traded near a one-month low on Tuesday as a stronger dollar lowered gold’s appeal and investors remained concerned about the possibility of more aggressive interest rate hikes by the US FED.  Gold is very sensitive to rising US interest rates as higher interest rates increase the opportunity cost of holding the non-interest yielding gold.  Meanwhile, the dollar hit a new five-week high, making gold more expensive for buyers holding other currencies. Gold prices dropped on Wednesday as the Dollar strengthened after hawkish comments from the FED official that kept investors cautious ahead of Jackson Hole symposium which was due later in the week.  Spot gold dropped by 0.1% at $1,746.18 per ounce and US gold futures eased by 0.1% to $1,769.20.  The annual global central banking conference held in Jackson Hole, Wyoming on Friday, FED Chair Jerome Powell speech will be keenly watched for more indications of interest rate hikes. 

US Private Sector Activity

US private sector business activity contracted in August to its weakest in 27 months, with more soft data in the services sector amid weaker demand on the back of inflation and tighter financial conditions.  The S&P Global flash composite purchasing managers index (PMI) for August dropped to 45 this month from a 47.7 reading in July.  Such drop happened more in the services sector with that sector’s PMI dropping to 44.1 from 47.3 last month more than in factory activity. Meanwhile, the survey’s manufacturing gauge still showed modest expansion at 51.3 versus July’s 52.2.  The survey’s new orders index shrunk to 48.8 the lowest since May 2020 from 50.8 in July.  The survey’s indexes of input and output prices both dropped to the lowest since February of 2021, an indication that inflationary pressures may be easing. 

US Economy

The economy in the US contracted by a more moderate pace in the second quarter than initially expected.  Details of a report from the Commerce Department on Thursday showed the economy growing steadily last quarter when the income side is measured.  The strength in the economy is even underling by the recent upbeat readings on the labour market, retail sales and industrial production.  The government showed that in its second estimate of GDP contracted at an 0.6% annualised rate last quarter, higher than the 0.9% previously estimated.  The economy contracted by a 1.6% in the first quarter. 

Malta:  Retail Price Index (RPI) – July 2022

A press release dated 23 August 2022 shows that the annual rate of inflation as measured by the RPI was 6.82% in July higher than the 6.21% in June 2022. The RPI measures the monthly price changes in the cost of purchasing a representative basket of consumer goods and services and is linked to the Cost-of-living Adjustment (increases and periodic rent payment adjustments). The largest upward impact on annual inflation was measured in the Food Index (+2.47%) while Clothing and Footwear Index dropped by (-0.02%). 

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