Pressures in the US housing market continue to grow as the National Association of Home Builders (NAHB) said its sentiment index dropped for the eighth consecutive month while turning negative. This led the NAHB to state that the US is facing a “housing recession”.

The NAHB/Wells Fargo Housing Market Index, which quantifies the pulse of the single-family housing market, fell to 49 in July, marking the worst stretch in this sector since the 2008 financial crisis. Any reading below 50 shows contraction. The index previously dipped below the 50 boundary only during a very brief plunge at the start of the pandemic.

As buyers pulled back, the number of home sale cancellations also soared to a two-year high in July. “Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB chief economist Robert Dietz.

In the meantime, Britain’s annual inflation rate surged into double digits in July and is expected to continue rising by the end of the year, increasing the pressure on already stretched household budgets, thus threatening a lengthy recession.

Data published by the Office for National Statistics (ONS) show that the UK inflation rate rose to a 40-year high of 10.1 per cent, from 9.4 per cent in June, beating expectations of 9.8 per cent and the Bank of England’s forecast of 9.9 per cent. Core inflation rose to 6.2 per cent from 5.8 per cent, above economists’ average forecasts of 5.9 per cent.

“All the 11 food and non-alcoholic beverage classes made upward contributions to the change in the annual inflation rate, where prices overall rose this year but fell a year ago,” the ONS said.

Finally, China’s central bank cut its key interest rate last Monday to help the struggling economy that was hit hard by the government’s zero tolerance to the COVID-19 infection rate.

The People’s Bank of China lowered the one-year Medium Term Lending Facility (MLF) rate to 2.75 per cent from the 2.85 per cent. It also injected two billion yuan (USD295 million) into the market, via seven-day reverse repos at two per cent interest rate, down from 2.1 per cent.

“Given the lingering COVID restrictions and fragile economic recovery, we expect the government to continue increasing policy support for the rest of 2022,” Wang Tao, UBS’s chief China economist, said in a research note.

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