Economic update August 2016

Abstract

Overall economic sentiment improved marginally in July, driven by a more favourable assessment by firms in industry. Nonetheless, industrial production fell again in annual terms in June. In contrast, activity in the tourism sector remained buoyant during the month. Retail sales increased moderately again. The labour market continued to perform solidly, with the annual growth rate of the gainfully occupied population at 4.0% in March. Meanwhile, both Jobsplus and Eurostat data show further declines in unemployment. This suggests that private consumption likely remained a key driver of economic activity in the second quarter. Industrial producer price data point to falling costs in annual terms. Consumer prices increased moderately, with the annual rate of inflation based on the Harmonised Index of Consumer Prices (HICP) and the Retail Price Index (RPI) standing at 0.9% and 0.7%, respectively, in July. Maltese residents’ deposits continued to expand at a rapid, though moderating annual rate in June, while the annual rate of growth of credit to residents eased slightly to 5.4%. As regards fiscal developments, the deficit on the cash-based Consolidated Fund narrowed in the first half of the year, due to an increase in tax revenue and lower capital expenditure.