CBM’s Economic Update: Annual growth in business activity slightly below its long-term average

The Bank’s Business Conditions Index indicates that in July, annual growth in business activity declined, and remained slightly below its long-term average.

Both the European Commission’s economic sentiment indicator and the employment expectations indicator for Malta fell in July and remained below their long-term average.

Price expectations decreased in industry and in the retail sector, but increased in the remaining sectors. The largest increase was recorded in the construction sector.

Developments in activity indicators were mixed. In June, industrial production rose at a faster pace on a year earlier while the volume of retail trade contracted in annual terms. In May, services production accelerated on a year-on-year basis. Unemployment remained low from a historical perspective. It fell marginally when compared with the preceding month and stood slightly higher than a year earlier.

In June, residential permits were below their year-ago level. In July, the number of residential promise-of-sale agreements and the number of final deeds of sale were below those of a year earlier.

During the 12 months to June, Maltese residents’ deposits, forming part of the broad monetary aggregate M3, increased due to higher balances belonging to households and non-financial corporations. Annual growth in credit to Maltese residents, though remaining strong, moderated when compared to the preceding month, reflecting slower increases in lending to general government and other residents.

In July, the annual inflation rate based on the Harmonised Index of Consumer Prices (HICP) rose marginally to 2.3%, in part reflecting a small uptick in HICP excluding energy and food, which stood at 2.1%. Both measures remained below the corresponding euro area average. According to the Retail Price Index (RPI), inflation in July rose slightly to 1.4% from 1.3% in June.

In June, the Consolidated Fund recorded a smaller deficit when compared with a year earlier, as an increase in government revenue was complemented by a decline in government expenditure.

The full Economic Update is available here.