US confidence rising while uncertainty in eurozone cuts growth
Retail sales in the US increased more than estimated in September, rising by 1.1 per cent as spending rose for every segment except department stores. This increase follows a revised 1.2 per cent gain in August.
A drop in joblessness and firming home prices are leading to an increase in confidence. In fact, the University of Michigan consumer sentiment gauge rose to 83.1 in a preliminary October reading, the highest level since September 2007, up from a final reading of 78.3 the previous month.
Meanwhile, US consumer prices rose by an annualised two per cent in September due to a surge in the cost of petrol. However, most economists do not see inflation as a threat to the economy.
The German Government has lowered its growth forecasts and now predicts that the German economy will grow by one per cent instead of 1.6 per cent it had forecast in April. For this year, however, the Government expects growth of 0.8 per cent, a slight rise from the 0.7 per cent predicted in April.
The Government cited the uncertainty about policymakers’ ability to curtail the eurozone debt crisis as the driving force behind this reduction in forecasts. This uncertainty has led to companies postponing investments while the turmoil in Germany’s main trading partners could weigh on the country’s exports.
In the meantime, UK consumer prices rose by the slowest pace in almost three years in September, with the inflation figure coming in at 2.2 per cent from a year earlier. This was a drop from 2.5 per cent in August and was mainly due to the fact that electricity and gas price increases a year earlier, dropped out of the index.
Bank of England officials will next month have to make a decision whether or not to expand the bank’s stimulus programme. In the meantime, the UK unemployment rate for the three months to August, as measured by the International Labour Organisation, fell to 7.9 per cent from 8.1 per cent. This was the lowest reading since the quarter through to June 2011.
This report was compiled by Bank of Valletta plc for general information purposes only.