Falling fuel costs in eurozone lead to negative inflation

Declining fuel costs in the Eurozone had an effect on consumer prices, which fell into negative territory for the first time in June.

Meanwhile, eurozone industrial production expanded in May for the first time since last August, boosted largely by capital and non-durable consumer goods.

However, there was a weaker-than-expected German business confidence survey with the ZEW index falling to 39.5 in July from 44.8 the previous month, which was the first monthly decline since October.

In the UK, the ILO unemployment rate was significantly worse than expected. It increased to 7.6% from 7.2% the previous month. This represented the biggest quarterly increase in unemployment on record with the level rising to a 12-year high.

On a positive note, the consumer inflation rate in Britain fell to 1.8% in June from 2.2% previously, which was in line with market expectations.

On the other side of the Atlantic, there was positive news in the US job market, as initial jobless claims fell again to 522,000 last week from a revised 569,000 the previous week.

Retail sales rose 0.6% in June after increasing by a mere 0.5% the previous month. Consumer prices rose 0.7 per cent in June as gasoline increased sharply while core inflation (which excludes energy and food) increased 0.2% as expected. Nonetheless consumer prices still fell 1.4% over the year.

The other growth-orientated data was mixed, but offered some degree of support, with the New York Em-pire manufacturing index strengthening to -0.6 in July from -9.4 the previous month, which was the strongest reading since last October.

The decline in industrial output also slowed to 0.4% in June from a revised 1.2% decline.

This article was prepared by Bank of Valletta plc, which is licensed to conduct investment services business by the MFSA, for general information only. This information is not a solicitation or offer by the bank to acquire or sell securities. Nor does it constitute any form of advice by the bank. Appropriate advice should be obtained before making any such decision. Past performance is not necessarily a guide to future performance and the value of investments may fall or rise.