UK inflation edged up to its highest level since March 2012, increasing the likelihood of a UK interest rate hike. Bank of England governor Mark Carney said it is more likely than not that he will write a letter to Chancellor Philip Hammond, explaining why inflation exceeded the two per cent target by one per cent.
Inflation rose to three per cent in September from 2.9 per cent in August, driven by higher transport and food costs, leading to a widespread increase in prices. Carney forecasts that inflation will peak around the October/November period, while dismissing the idea of a rate hike as a safety measure.
In Germany, strong data for industrial production and orders, and further improvement in the outlook for exports signalled that Europe’s largest economy is on track for a solid expansion in the second half of the year. The ZEW Indicator of Economic Sentiment for Germany rose to 17.6 in October from 17 in September. The latest reading was the highest since June, when it was 18, though it remained below the long-term average of 23.8 points.
ZEW president Achim Wambach said that October’s improvement was “decisively influenced by good growth figures in recent months”.
Finally, in the US, homebuilding plummeted to a one-year low in September as hurricanes Harvey and Irma disrupted new residential construction in the south. This suggests that housing will possibly remain a hindrance on economic growth during the third quarter.
Housing starts fell by 4.7 per cent to a seasonally adjusted 1.127 million in September, the lowest since September 2016.
The sharp decline revealed significant falls in both single-family and multi-family starts, which fell by 4.6 per cent and 5.1 per cent respectively. Building permits, an indicator of future housing demand, fell by 4.5 per cent to an annual rate of 1.215 million in September.
This report was compiled by Bank of Valletta for general information purposes only.