German economic confidence improved strongly in April to its highest level in nearly five years, as financial markets players turned optimistic.

After the record low in March, the much-followed economic sentiment index by ZEW that looks at future expectations posted an increase in April of 77.7 points, bringing the index to 28.2 points. However, its assessment of the current situation hit a near 11-year low amid the lockdown triggered by the COVID-19 pandemic.

On the other hand, the index for the current situation remains at very low levels at -91.5 points, 48.4 points lower than in March. This constellation of index readings being seen as regards expectations, and the assessment of the current situation, roughly corresponds to what was seen in April-May 2009 during the financial crisis, ZEW said.

After reporting a significant rise in existing home sales the previous month, the US National Association of Realtors (NAR) released a report showing that existing home sales pulled back sharply in March.

Sales of existing homes, the largest sector of the US housing market, fell more than expected in March, sliding by 8.5 per cent to 5.27 million annualised units, according to the NAR.

The decline was the largest in four years, even though the figures are based on contracts largely signed in January and February before the coronavirus pandemic hit the economy. Despite the steep monthly decline, existing home sales in March were up 0.8 per cent compared to the same month a year ago, reflecting the ninth consecutive monthly year-on-year growth.

The inflation rate in the UK fell to 1.5 per cent in March, largely driven by falls in the price of clothing and fuel before the COVID-19 lockdown. The consumer prices index declined from 1.7 per cent in February, according to the Office for National Statistics (ONS).

Clothing stores had offered more discounts as shoppers began staying at home, it said. Falling oil prices also resulted in cheaper petrol prices.

The ONS’s latest data was collected just before the lockdown started on March 23. But it shows that there were already signs people were spending less in shops and more on necessities such as food.

Economists warn that inflation could slide to 0.5 per cent in 2020 as the economy contracts.

This report was compiled by Bank of Valletta for general information purposes only.

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