“The Group of Seven (G7)…”

This year’s summit was focused on the war in Ukraine and the global economic situation, particularly soaring food, and energy inflation.  The Group of Seven economic powers have agreed to explore imposing a ban on transporting Russian oil that has been sold beyond a certain price, they said on Tuesday.  An oil price cap could ratchet up existing Western pressure on Russia from sanctions, which German Chancellor Olaf Scholz insisted would stay until Putin accepted failure in Ukraine.  He stated, “There is only one way out: for Putin to accept that his plans in Ukraine will not succeed.”  The reason for the cap is to tie financial services, insurance, and the shipping of oil cargoes to a price ceiling.  If the need for these services is required by an importer or a shipper, they would have to commit to the Russian oil being sold for a set maximum price.  In their communication G7 leaders said, “We invite all like-minded countries to consider joining us in our actions.”  The reason for imposing such a cap is to prevent Moscow profiting from its invasion of Ukraine, which has sharply increased energy prices.  Meanwhile, in their June monthly report the International Energy Agency said that Russian oil export revenues climbed in May even as volumes dropped.  

US Economy

The US economy contracted slightly more than previously forecasted in the first quarter as the trade deficit widened and the increased number of COVID-19 cases impacted services. On Wednesday the Commerce Department’s estimate of gross domestic product also showed some softness in the economy, with consumer spending being revised lower and inventories were higher than reported last month.  Concurrently, Fed Chair Jerome Powell told the European Central Bank conference that “there is a risk” the US central bank could slow the economy more than needed to control inflation.  Gross domestic product dropped at a 1.6% annualised rate last quarter, revised down from the 1.5% pace of decline reported last month.  Consumer spending that accounts for more than two-thirds of the economy, grew at a 1.8% rate instead of the 3.1% pace reported last month.  Meanwhile, spending on recreation, financial services, and insurance as well as healthcare was lower.  Furthermore, the moderate pace of spending resulted in significantly higher inventories than estimated in May, with business inventories increasing at a $188.5 billion rate, rather than the $149.6 billion pace reported last month.  The increase occurred in the retail sector mainly in general merchandise stores. 

US Consumer Spending

In May, consumer spending climbed by less than expected amid a shortage of motor vehicles and a reduction in the purchases of other goods.  Through its report issued on Thursday, the Commerce Department suggested inflation has probably reached a peak and price pressures remained strong enough to keep the FED on its aggressive monetary policy tightening path.  Meanwhile, consumer spending that accounts for more than two-thirds of the US economic activity, gained 0.2% in May, the smallest increase in five months.  Data for April was revised downwards reflecting the increase in outlays of 0.6% instead of 0.9% as has been reported.  Concurrently, there were revisions to data going back to January showing a softer growth profile for spending this year. 

Russia defaulted on its International Bonds

Russia has defaulted on its international bonds for the first time in more than a century, said the White House and Moody’s credit agency.  This has arisen amid the sanctions that cut the country off from the global financial system.  The Kremlin that has the money to effect payments thanks to oil and gas revenues has rejected such claims and accused the West of causing an artificial default.  Concurrently, Moody’s credit agency on Monday stated that the missed coupon represented a default. The payments were of $100 million in interest on two bonds, one in US dollars and another in Euros that Russia was due to pay on 27 May.  The payments had a grace period of 30 days which expired on Sunday.   Russia has battled to maintain payments on $40 billion of outstanding bonds since its invasion of Ukraine on 24 February. 

Malta:  Unemployment Rate – May 2022

A press release dated 27 June 2022 shows that the seasonally adjusted monthly unemployment rate for May 2022 was 3.1% at par with the previous month and decreasing by 0.3% in comparison with May 2021 figures.  During May 2022, the number of unemployed persons was 8,780 with those in the age bracket 25 to 74 age group contributing the highest to overall unemployment.  The unemployment rate for those aged 15 to 24 years was 6.4%, while those aged between 25 and 74 years remained stable at 2.7%. 

Malta: Industrial Producer Price Indices – May 2022

The Industrial Producer Price Index (IPPI) monitors the changes in selling prices of all leading products taking a sample of around 80 large enterprises that account for over 80% of the total industrial turnover.  A Press release dated 27 June 2022 shows that during May 22, the industrial producer price index in comparison to May 2021 increased by 5.28%.  Higher prices were registered in all main industrial groupings except energy.  The highest increase was registered in intermediate goods (8.18%), consumer goods (4.63%) and capital goods (3.64%).  Industrial producer prices for the domestic market increased by 9.43%.  Prices were recorded in the intermediate goods (21.63%), capital goods (19.07%) and consumer goods (9.14%).  Meanwhile, during May 22, the industrial producer price index increased by 0.13% when compared to April 2022.  Intermediate goods and capital goods rose by 0.55% and 0.6% respectively while consumer goods declined by 0.38%.  No price changes were recorded in the energy sector.  Domestic market prices increased by 0.13% due to increases in intermediate goods (0.42%) and in consumer goods (0.07%).  

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