“Russia Attacks Ukraine…”

Western fears of a major war in Europe after which on Monday, Russian President Vladimir Putin recognised the separatist enclaves in the Donbass region of eastern Ukraine that adjoin Russia.  On Tuesday, new sanctions by western nations were imposed after Russia ordered troops into separatist regions of eastern Ukraine and threatened to go further if Moscow launched an all-out invasion of its neighbour.  Meanwhile, the US, EU and Britain announced plans to target banks and elites whilst Germany stopped a major gas pipeline project from Russia.  Biden on Tuesday said, “To put it simply Russia just announced that it is carving out a big chunk of Ukraine.” “This is the beginning of a Russian invasion”.  Meanwhile, on Wednesday, Putin said that whilst he was open to diplomatic solutions, “the interest of Russia and the security of our citizens are unconditional for us.”

EU foreign ministers chose not to sanction Putin directly, but instead blacklist all members of the lower house of the Russian parliament who voted in favour of the breakaway regions, freezing any assets they hold in the EU and banning them from travelling in the bloc.  Banks that are involved in financing separatist activities in eastern Ukraine would be targeted and the two regions could also be removed from a free-trade deal between the EU and Ukraine.  The prospect of a disruption of energy supplies and the fears of a war, flustered markets and raised the prices of oil to their highest prices since 2014.  On Thursday, Russian forces fired missiles at several cities in Ukraine and landed troops on its coast according to official media.  This came about after President Vladimir Putin authorised what he called a special military operation in the east.  Meanwhile in a statement, Biden said, “I will be meeting with the leaders of the G7, and the United Sates and our allies and partners will be imposing severe sanctions on Russia.” Russia has demanded an end to the NATO’s eastward expansion and Putin has reinforced his position that the Ukrainian membership of the US-led Atlantic military alliance was unacceptable.  He stated that he authorised military action after Russia had been left with no choice but to defend itself against what he said were threats from modern Ukraine, a democratic state of 44 million people.  Russia cannot feel safe, develop, and exist with a constant threat emanating from the territory of modern Ukraine,” Putin said. “All responsibility for bloodshed will be on the conscience of the ruling regime in Ukraine.”  After Putin’s address, global stocks and US bond yields dropped, whilst the dollar and gold edged higher.

Eurozone Recovery

The eurozone economic recovery regained momentum this month amid the easing of restrictions that boosted the services industry showed a survey despite record price increases.  IHS Markit’s Flash Composite Purchasing Managers’ Index which is seen as a guide to overall economic health, jumped to a five-month high of 55.8 in February from 52.3 in January.  A flash PMI for the service industry soared to 55.8 from 51.1, a five-month high with a reading above 50 indicating growth.   The increased demand for services has pushed business activity across Germany’s private sector to a six-month high, while in France growth was stronger than expected, helped by an improvement in the COVID-19 situation.  Factories had another solid month and the flash euro zone manufacturing PMI only dipped from January’s 58.7 to 58.4.  An index measuring output that feeds into the PMI climbed up to 55.6 from 55.4.  Whilst activity could have been higher, supply chain bottlenecks and improved demand meant factories were unable to keep up and the backlogs of work index increased to 57.7 from 56.9. 

Oil

Oil priced jumped with Brent breaching $100 a barrel for the first time since 2014, amid Russia’s attack on Ukraine, raising concerns that a war in Europe could disrupt global energy supplies.  Brent crude reached $102.48 a barrel, the highest since September, 2014 whilst US West Texas Intermediate (WTI) crude futures jumped $4.85 or 5.3% to $96.95 a barrel, after rising to as much as $97.40, the highest since August, 2014.  Oil prices have surged more than $20 a barrel since the beginning of 2022 amid fears that the US and Europe would impose sanctions on Russia’s energy sector, distorting global energy supplies.  Russia is the world’s second largest oil producer, mainly selling its crude to European refineries and provides about 35% of the supply required by Europe. Meanwhile, in the current circumstances, some members of OPEC said there is no need for the group and its allies to raise output as a potential deal between Iran and world powers will increase supply. Some members of OPEC are already struggling to meet current targets.  Japan and Australia on Thursday claimed that they were prepared to tap their oil reserves, together with other International Energy Agency (IEA) member countries, should the situation in Ukraine hit global supplies.   

Malta:  Harmonised Index of Consumer Prices (HICP) – January 2022

A press release dated 23 February, 2022 shows that in January 2022 the annual rate of inflation as measured by the HICP was 4.1% up from 2.6% in December, 2021.  The biggest contributor to annual inflation was measured in the Food and non-alcoholic beverages Index (+1.25%), while the downward impact was recorded in the Communication index (-0.05%).  The HICP measures the monthly price changes in the cost of purchasing a representative basket of consumer goods and services.  The HICP is calculated according to rules specified in a series of European Union regulations that were developed by Eurostat in conjunction with the EU Member States.  The HICP is used to compare inflation rates across the EU. 

Malta:  Short-term Industrial Indicators – Q4/2021

A press release dated 22^nd February 2022 during the fourth quarter of 2021, seasonally adjusted industrial turnover decreased by 3.5% over the previous quarter.  Decreases were registered in energy (8%), capital goods (7.3%) and consumer goods (1.4%).  Intermediate goods increased by 0.3%.  Seasonally adjusted industrial employment increased by 0.5%.  Meanwhile, when compared to the corresponding quarter of 2020, working day adjusted industrial turnover increased by 0.6%.  Increased were registered in intermediate goods (7.8%) and energy (4.5%).  Meanwhile, consumer goods and capital goods dropped by 5.5% and 3.5% respectively.  An increase of 0.9% was recorded in the year-on-year unadjusted industrial employment. 

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