The first revision of the US GDP shows the economy rebounding more strongly than initially estimated in the second quarter of the year as more growth was driven by domestic demand and less by replenishment of inventories by businesses. According to the Commerce Department, GDP grew by an annual rate of 4.2 per cent instead of the previously estimated four per cent, after upward revisions to business spending and exports. It was the fastest rate of GDP growth since the third quarter of 2013.

It was the fastest rate of GDP growth since Q3 of 2013

In a speech at the annual gathering of central bankers in Jackson Hole, Wyoming, on August 22, European Central Bank (ECB) president Mario Draghi said the bank had taken note of the recent fall in inflation expectations in the euro area. The comment signalled that falling inflation expectations is creating alarm at the ECB and prompted speculation that the bank is considering to further loosen monetary policy and possibly introduce a quantitative easing (QE) programme of large-scale asset purchases to inject money into the economy.

The ECB loosened monetary policy significantly in June but has stopped short of launching QE. The steep fall in inflation expectations is undermining Draghi’s claim that inflation expectations are “firmly anchored” around the ECB’s target of an annual rate “below but close” to two per cent.

German unemployment rose slightly in August, as the conflicts in Ukraine and the Middle East weighed on the economic performance of Europe’s largest economy.

According to the Germany’s Labour Agency, the number of people unemployed grew by a seasonally-adjusted 2,000, as the economy was impacted by geopolitical issues. The August increase puts the number of people out of work at 2.902 million, but the unemployment rate remained unchanged at 6.7 per cent. The German economy shrank during the second quarter.

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

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