The German economy suffered a surprise contraction in the second quarter, its first in more than a year. According to the Federal Statistics Office, German GDP declined 0.2 per cent in the second quarter. Foreign trade, which is a driver of German growth, and investment, particularly in the construction sector, were to blame for the decline.

Separately, German investor confidence resumed its drop in August, declining to the lowest level since 2012 as the tension in Ukraine and a weak euro-area recovery dampened the outlook for Europe’s largest economy.

The ZEW Centre for European Economic Research index of investor and analyst expectations, which aims to forecast economic developments six months in advance, dropped to 8.6 in August from 27.1 in July. This latest survey shows that German investors are becoming less and less optimistic about the economy as the situation in Ukraine is weighing on confidence. The gauge has slipped every month since reaching a seven-year high in December.

Unemployment in Britain edged closer to a six-year low in the three months to the end of June. Data published by the Office for National Statistics show that the unemployment rate fell to 6.4 per cent in the second quarter, the lowest since late 2008 and down from 6.5 per cent in May. However, average wages fell 0.2 per cent, the first fall since 2009.

British retail sales rose in July, driven by an upturn in furniture spending and other non-food purchases, according to figures released last week by the British Retail Consortium (BRC). Total retail spending was up 1.3 per cent in July compared with the same month last year.

However, food sales by value declined by the most in five-and-a-half years in the three months through July because of prices cuts by supermarkets, the BRC said, as food sales at shops open for at least 12 months slumped by 3.5 per cent from the year-ago period. This is the biggest drop since December 2008.

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