Inflation rises in US, UK, but falls in EU-17

Headline consumer prices in the US rose 0.5% for July, which was significantly higher than expected. July’s increase led to a year-on-year reading of 3.6%, which was 0.3% higher than expected by economists.

US industrial output rose in July at its quickest pace in seven months, with strong car production boosting last month’s figures far above analysts’ expectations.

Output rose 0.9%, more than twice June’s revised 0.4% advance and much higher than the 0.5% gain expected by market participants.

Utilities also added to the boost in industrial production as extreme heat led many Americans to increase their use of air-conditioners.

In the UK, headline consumer inflation rose to 4.4% on an annual basis last month from 4.2%, while the core rate rose to 3.1% from 2.8% in June. Due to stubbornness of the UK’s inflation rate, Bank of England governor Mervyn King was forced to write a letter of explanation to the Chancellor of the Exchequer George Osborne.

Meanwhile, the latest UK employment data was weaker than expected as the unemployment rate rose to 7.9% for the three months ending in June. Economists were expecting a rate of 7.7%.

By contrast, inflation in the eurozone was confirmed at 2.5% in July, versus 2.7% the previous month, and there was a significantly weaker than expected reading for the core rate, which fell to 1.2% from a previous reading of 1.6%. July’s reading, coupled with weaker growth, is expected to maintain pressure on the European Central Bank to switch to an easing of monetary policy.

The ECB announced that it purchased €222 billion in peripheral bonds over the previous week and continued to discourage short-selling in the said bonds by its presence as either a buyer or potential buyer.

The first reading of GDP in the 17-nation region came in at a weaker-than-expected 0.2% in the second quarter of the year, lower than the 0.3% expected by analysts.

This article was compiled by Bank of Valletta plc for general information purposes only.