USA

Commentary: The U.S. economy remained resilient, with activity showing renewed strength despite lingering signs of moderation. The labour market rebounded, with nonfarm payrolls increasing by 162,000 in August, reversing July’s weakness, while the unemployment rate remained stable at 4.1%. Inflation pressures persisted, with headline CPI rising to 3.4% year-on-year in August, driven in part by higher energy prices and ongoing geopolitical tensions in the Middle East. In response, the Federal Reserve raised interest rates by 25 basis points in September, citing elevated inflation and a resilient economy while signalling the possibility of further tightening if price pressures remain entrenched. Oil price volatility and regional conflicts continued to cloud the outlook. U.S. equities remained close to record highs through much of the period, with the S&P 500 and NASDAQ up by 10.3% and 11.8% respectively YTD.

Europe & UK

Commentary:

The euro area economy continued to show resilience, with second-quarter GDP growth confirmed at 0.4% and forward indicators pointing to sustained momentum. Inflation accelerated to 3.3% in August from 2.9% in July, driven mainly by a sharp increase in energy inflation. Core inflation stood at 2.4% and services inflation moderated to 3.0%. The ECB raised its key interest rates by 25 basis points in September, taking the deposit rate to 2.50%, while maintaining a cautious, data-dependent stance as policymakers assessed the inflationary impact of the Middle East conflict and elevated energy prices. Markets weakened over the period as higher energy prices, rising bond yields and expectations of tighter monetary policy offset support from resilient economic data, with geopolitical uncertainty contributing to renewed volatility. The EURO STOXX 50 is now up by more than 8% YTD.

Malta

Commentary:

Malta continued to outperform most euro-area economies, with real GDP expanding by 4.5% year-on-year in Q2, supported by strong services activity, household consumption, government spending and investment. Tourism maintained exceptional momentum, with residential property activity remaining robust. The labour market remained tight, although the seasonally adjusted unemployment rate notched up to 3.5%. Inflation remained contained at an estimated 1.9% in August, supported by government measures limiting the pass-through from international energy prices. Local banks remained very profitable with MSE rising strongly during the period and now up by 15% YTD.