Malta bucks the trend

Economic sentiment in both the EU27 and Eurozone continued to decline in July, as all sectors of the economy became less confident about the future, according to Eurostat.  Whilst lower confidence in the service sector was the main cause of the decrease in the EU27, the decline in the Euro area was driven by big declines in industry and consumer sentiment.

It is particularly worrying that the sharpest falls were registered in the two biggest economies, with the index worsening by 3.7 points in Germany and 2.3 points in France.  On the other hand, there was a continued recovery in economic sentiment in the UK (+1.7) and in Italy (+1.3).  Malta was one of nine member states where economic sentiment improved, in our case by 3.2 points.

Confidence in industry in the EU continued its downward trend since March, but whilst it was relatively moderate in the EU27 (-0.7), the July decrease in the Eurozone was sharp (-2.2).  Decreasing production expectations,  a more negative assessment of the current level of overall order books, as well as a deterioration in  the current level of export order books all contributed to the declines.

Even the German behemoth was beset by serious doubts about the future, as its industry sentiment shed 4.6 points, but uncertainty also affected Italy (-2).  In some countries, such as Slovakia, industry sentiment went to the dogs with a 9 point decrease.  In Malta, industry sentiment was comparatively stronger, with just a 0.9 point drop, making us one of only two member states with such a small drop.

Confidence in services fell back in both the EU and Eurozone for the fourth month in succession, being significant in the EU (-3.1) but modest in the EZ (-1.1).  Here, both Germany and France suffered, but the loss of confidence was widespread in the EU.  Again, Malta was an exception, with an insignificant drop of 0.2 points.

Confidence decreased slightly in the retail trade and in construction in both EU and EZ, after bigger drops in June.  Whilst the present situation was viewed positively, the negative assessment of the future caused a decline.  Eurostat  does not give a retail trade index for Malta, but the construction index shed 1.3 points.

Maltese industrial confidence was strengthened by better production expectations (+8.1 points), higher production trends in recent months (+4.7) and better export order books (+4.7).  But overall order books were pretty stable whilst stocks of finished products increased by 4.2 points.  A negative element was an expectation that selling prices would worsen (-9.0).  The positive elements contributed to improved employment expectations (+14.4 points).

It is also heartening that, whilst orders on hand assured an estimated production for between 3.1-3.9 months in the EU/EZ, those in Malta assured 6.8 months.  Again, whilst new orders in manufacturing industry were down in the other member states as a whole, in Malta they were still positive though not as much as in the previous month.

Finally, whilst consumer confidence eased slightly in the EU27 (-0.5) and EZ (-1.7), in Malta there was a slight improvement as households felt that their financial situation, savings and employment prospects would improve over the next 12 months.