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BOV Market Watch - Week ending 20th August 2021
20 Aug 2021
Fed minutes indicate tapering of asset purchases likely this year. Minutes of the Federal Reserve’s (Fed) July monetary policy meeting made public on Wednesday indicated that policymakers are on track to begin reversing their easy-money policies later this year, despite lingering differences over when exactly to pull back support for an economy growing faster than they envisaged earlier in the year. The minutes revealed an emerging consensus among Fed members to begin scaling back the bank’s $120 billion in monthly purchases of Treasury and mortgage-backed securities at any of the committee’s three remaining policy meetings this year. With the Fed pledging to provide advance notice before making changes to its asset purchase programme, the statement following the next monetary policy meeting in September is likely to be closely watched.

US retail sales tumble 1.1% in July amid continued weakness in auto sales.
Spending at US retailers fell sharply in July, as Americans bought fewer goods amid a rise in Covid-19 cases tied to the Delta variant. Retail sales—a measure of purchases at stores, restaurants and online—fell by 1.1 percent last month compared with June, the Commerce Department reported on Tuesday. The closely watched core retail sales, which exclude automobiles, gasoline, building materials and food services, slumped by one percent in July after surging by 1.4 percent in June. Tuesday’s report suggested Americans continued to shift their spending toward services in July. Sales dropped across several categories, primarily autos—which was down 3.9 percent—but also clothing, sporting goods and furniture. The retail sales figures capture spending mostly on goods, and don’t include services such as travel, entertainment and recreation.

Eurozone exits technical recession in Q2.
The eurozone economy recovered from a technical recession in the second quarter with the reopening of member-country economies after the coronavirus lockdowns, an initial estimate from Eurostat showed on Tuesday. Gross domestic product (GDP) grew by two percent sequentially, compared to a 0.3 percent decline in the first quarter. On a yearly basis, GDP rebounded by 13.6 percent after contracting by 1.3 percent in the first quarter.  The strong growth in the eurozone GDP in the second quarter is likely to be repeated in the third quarter despite the spread of the Delta variant, and should bring the economy back towards its pre-virus size in the coming months, Jessica Hinds, an economist at Capital Economics, said.

UK inflation slows to two percent.
Inflation in the UK fell to the Bank of England's (BoE) two percent target last month in an unexpectedly sharp slowdown that economists said was most likely a blip as the reopening of the economy after lockdown drove prices higher. Economists had expected inflation to come in at 2.3 percent in July following a 2.5 percent rise in June. July's slowdown in inflation reflected a jump in prices in the same month last year when Britain's economy was emerging from its first coronavirus lockdown. Prices of clothing and footwear and computers, games and toys also dragged on the rate of price growth last month, the Office for National Statistics said. "The fall in year-on-year inflation last month masks the strength of inflationary pressures currently within the UK economy," Yael  Selfin, chief economist at KPMG UK, said.

Malta’s inflation rises In July.
Malta's harmonized annual inflation increased in July, data from the National Statistics Office showed on Wednesday. The harmonized index of consumer prices, or HICP, rose 0.3 percent year-on-year in July, following a 0.2 percent rise in June. Education cost increased 19.7 percent in July and health cost increased by 1.1 percent. Prices for recreation and culture gained 2.0 percent and those of food and non-alcoholic beverages rose 2.9 percent. Compared to the previous month, the HICP rose 0.2 percent in July.
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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).