New home sales in the United States unexpectedly saw a substantial decrease during July, according to a report published by the Commerce Department. The report said that new home sales plunged by 9.4 per cent to an annual rate of 571,000 in July from the revised June rate of 630,000.

The sharp drop surprised economists, who had expected new home sales to edge up to a rate of 612,000 from the 610,000 originally reported for the previous month. The slowdown at the start of the second half of the year may reflect a lack of affordability and low inventory, which have been constraints, especially for younger, first-time buyers who find it harder to get housing-related credit.

In the meantime, the eurozone private sector maintained its strong growth momentum in August, underpinned by a manufacturing sector that expanded at its fastest rate in over six years, as a result of a strong demand for exports. The Flash Eurozone Composite Purchasing Managers’ Index (PMI) inched up to 55.8 in August from 55.7, beating the estimate of 55.5. The momentum was boosted by strong manufacturing growth in both of the eurozone’s biggest economies, Germany and France. Combined with a mild pickup in price pressures, the data are likely to support expectations that the European Central Bank (ECB) will later this year proceed with plans to scale back its asset purchase programme.

Finally, in the UK, the economy expanded moderately and in line with estimates in the second quarter, as household spending rose at its weakest rate in almost three years, amid rising prices.

The latest data from the Office for National Statistics (ONS) showed that GDP increased by 0.3 per cent sequentially in the second quarter, unchanged from the preliminary estimate. The rate came in line with the estimate published on July 26 and was slightly faster than the 0.2 per cent expansion posted in the first quarter. The latest figures confirmed that the British economy maintained a fairly sluggish pace.

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

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