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BOV Market Watch - Week ending 26th March 2021
26 Mar 2021

Eurozone private sector returns to growth. The flash reading of the IHS Markit composite purchasing managers’ index (PMI), seen as a good guide to economic health, bounced above the 50 mark separating growth from contraction, to 52.5 in March compared to February’s 48.8, its highest reading since late 2018. A rise above 50.0 indicates the first increase in business activity since last September, with the current expansion the biggest on record since last July and second-steepest in the past 28 months, said IHS. The flash eurozone manufacturing PMI output index jumped to 63 from 57.6 in February, as factories ramped up production. On the other hand, the services sector continued to be constrained by the Covid-19 pandemic, with the activity level inching up to 48 in March from 45.7.

UK inflation eases unexpectedly in February. The UK Consumer Prices Index (CPI) slipped in February compared to the previous month as rising petrol costs failed to offset discount clothing and footwear. UK CPI rose by 0.4 percent in the 12 months to February, down from a 0.7 percent rise in January. On a monthly basis, CPI rose by 0.1 percent in February 2021, compared with a 0.4 percent rise in February 2020, the Office for National Statistics said on Wednesday. Falling prices for clothing, second-hand cars, and games, toys and hobbies drove the inflation rate downwards. The drag on consumer price inflation in February from the Covid-19 lockdown will delay the rebound in inflation to two percent and perhaps prompt the markets to reconsider their view that interest rates will rise next year, Paul Dales, an economist at Capital Economics, said.

German consumer morale improves in March. German consumer sentiment improved for the second consecutive month in March, supported by an easing of lockdown measures at the beginning of the month, a survey showed on Thursday, although a recent decision to extend restrictions is clouding the outlook. The GfK research institute said its consumer sentiment index, which is based on a survey of around 2,000 Germans, rose to -6.2 points from a revised
-12.7 in March. That was the best result since November, when a partial lockdown to contain a second wave of infections began, and easily beat economists’ average forecasts of -11.9. The survey took place from March 3 to March 15, which was before Germany extended its lockdown until April 18 and a temporary suspension of the AstraZeneca vaccine following reports of possible serious side-effects.

US fourth quarter GDP revised up. The US economy grew at an annual rate of 4.3 percent in the final three months of 2020, slightly faster than previously estimated, as recovery expectations for 2021 rise along with vaccinations and the US unleashes nearly $2 trillion in government support. Gross domestic product (GDP) in the October-December quarter rose from an estimate last month of a 4.1 percent rate. The upward revision reflected stronger inventory restocking by businesses. For the whole year, GDP shrank by 3.5 percent, the largest annual decline since a plunge of 11.6 percent in 1946 when the US demobilised after World War II. The 3.5 percent drop was unchanged from the previous report.  Economists are expecting a huge rebound this year, helped by government support packages.

Australia manufacturing improves in March. The manufacturing sector in Australia continued to expand in March, the latest survey from Markit Economics showed on Wednesday with a manufacturing PMI score coming in at 57.0. That is up from 56.9 in February and it moves further above the boom-or-bust line of 50 that separates expansion from contraction. The uptick was supported by quicker increases in factory orders and employment, while production growth eased marginally from February. Goods producers registered the steepest increase in input costs in the survey history. The services PMI came in at 56.2, up sharply from 53.4 in February, while the composite index had a score of 56.2 - up from 53.7 in the previous month.

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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).