Confidence boost over US economic growth

US labour market data last week came in stronger than expected, with the number of people claiming unemployment benefits falling sharply to 404,000 in the week ending January 15, from 441,000 in the previous week.

The number of existing home sales rose sharply to an annual rate of 5.28 million in December from 4.70 million the previous month. The number of new building permits rose to the highest level for over 12 months, registering a 16.7% increase in December, after a 1.4% fall in November.

Although the overall economic data boosted confidence in the growth of the US economy there was some negative data from the housing sector. The annualised housing starts came in weaker than expected with a 4.3% decline, whereas economists were expecting starts to fall by just 0.9%.

In the eurozone, the current account balance improved to register a deficit of €6.0 billion in November, from a deficit of €2.1bn the previous month. On a negative note, construction output fell 0.9% from October when output increased by 0.3% on a seasonally adjusted basis. This drop was mainly led by declines in Europe’s two largest economies – Germany and France – where output fell by 1.1 and 1.3% respectively.

Meanwhile, analysts remained optimistic over the future of the German economy, as the ZEW index of investor and analyst expectations, which aims to predict developments six month ahead, increased for the third consecutive time, at a slightly more than expected 15.4 in January, from 4.3 in December.

In the UK, the inflation rose to 3.7% from a year earlier in December, the highest level in the past eight months, from 3.3% in November. This was mainly driven by higher fuel and food prices. Moreover, further price pressures are expected given the recent tax increases.

In the labour market, the number of people claiming unemployment benefit dropped unexpectedly in December by 4,100 to 1.457 million, from the previous month. This is the lowest level in 21 months.

However, the unemployment rate, as measured by the International Labour Organisation standards, remained unchanged at 7.9% for the three months ending November.

Finally, sales in the retail sector fell by 0.8% in December from the previous month, when they rose 0.4%, mainly due to higher prices and bad weather.

This article has been prepared by Bank of Valletta plc for general information purposes only.