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German industrial output declines in June

German industrial production declined in June by slightly more than expected, led by a sharp drop in construction output. Total industrial output (which comprises output in manufacturing, energy and construction) fell by 0.9 per cent from May, according to the German economics ministry. Economists had expected a 0.4 per cent decline. However, compared with the same month last year, total production rose by a calendar-adjusted 2.5 per cent.

Output of capital goods – a measure of investment in the country – declined by 0.6 per cent in June compared with May, while construction output fell by 3.2 per cent.

The soft German production figures follow a set of weak manufacturing orders indicating that mounting trade tension between the US and the EU is already weighing on corporate investments.

In the meantime, UK house prices picked up last month, rising at the fastest annual rate since November, according to Halifax. The lender said that prices in the three months to July rose by 3.3 per cent from a year earlier, with the average cost of a house hitting a record £230,280. Prices in July rose by a stronger-than-expected 1.4 per cent from June. Despite these rises, Halifax said housing activity remained “soft”.

Last week, the Bank of England raised its key interest rate to 0.75 per cent from 0.5 per cent, which is set to affect the 3.5 million people with variable mortgages. However, Halifax said it did not anticipate that the interest rate rise would have a “significant effect on either mortgage affordability or transaction volumes”.

Finally in the US, the employment sector cooled in July while the unemployment rate slipped back below four per cent and wage increases remained subdued. This scenario reinforces a picture of steady labour-market growth in line with the Federal Reserve’s outlook for gradual interest rate hikes.

In July, the US economy created 157,000 non-farm jobs, after an upwardly revised 248,000 increase in June, Labour Department figures showed. Analysts predicted a gain of 193,000 jobs.

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

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