The European Central Bank (ECB) said current risks to global growth, such as an unexpected tightening of financial conditions, eased during the past year. This resulted from careful communication by the US Federal Reserve, though new threats have developed due to high policy uncertainty surrounding the fiscal and trade plans of the new US administration.

The ECB highlighted that the expected gradual recovery of the world economy is subject to a number of important assumptions about policy and it remains heavily dependent on ongoing monetary and fiscal policy support. The central bank said that some risks seem to have lessened but the balance of risks to the global outlook remains tilted to the downside.

In the meantime, the UK Office for National Statistics (ONS) showed that Britain’s budget deficit narrowed last month. The decline was mainly driven by a recovery in VAT receipts. The UK has been struggling to fix its public finances since borrowing surged by approximately 10 per cent of GDP after the global financial crisis. The budget deficit for May was £0.3 million lower and stood at £6.7 billion compared with the same month last year. The reading was the lowest for the month of May since 2007. The budget deficit for the financial year ending March 2017 amounted to £46.6 billion, revised from the initial estimate of £48.7 billion. The UK’s economy has slowed dramatically as negotiations to leave the European Union progress and the pound’s value fell sharply following last June’s Brexit vote.

Finally, the National Association of Homebuilders (NAHB) stated that homebuilder confidence in the US fell unexpectedly in June. The NAHB builder sentiment came in at 67 in June, showing a slight decline from 69 in May. The decline in the housing market index surprised economists who were anticipating the index to rise to 70. NAHB chairman Granger MacDonald said: “Builder confidence levels have remained consistently sound this year, reflecting the ongoing gradual recovery of the housing market”.

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