Deepening eurozone industrial strain
Industrial output in the eurozone unexpectedly contracted in January, with the sector likely to face intensified pressures as energy prices surge due to the conflict in Middle East. On March 13, Eurostat reported a 1.5% month-on-month drop, marking the second consecutive decline, worse than economistsâ expectations for a rise. The headline was heightened by 9.8% plunge in Irelandâs output, a typically volatile component, though weakness was broad-based.
Among the blocâs largest five economies, only France recorded growth. Energy production jumped, but both durable and â non-durable goods production and intermediate goods fell sharply. Germany, Europeâs industrial core, was among the hardest hit, with output now 9% below its 2021 level, with poor order figures â suggesting no near-term relief.
UK economy grows 0.2%
The latest figures show the UK economy grew by 0.2% in the three months leading up to January 2026, slightly below the expected 0.3% increase. The data suggests mild stabilisation after the 0.1% increase the previous quarter, though momentum faded as Januaryâs monthly GDP was flat.
The production sector was the main driver, rising by 1.3%, supported by a 1.5% increase in manufacturing. Services added a modest 0.2%, with wholesale and retail trade leading gains. Construction remained the clear weak spot, with output falling 2%, marking its third consecutive decline.
Despite the softer data, markets turned more hawkish, with rising inflation concerns and higher expectations of a rate hike by year end. The shift highlights investor concerns about the UKâs vulnerability to the economic fallout from the war in Iran.
US labour market remains stable
New claims for US unemployment benefits fell last week, indicating that labour market conditions remain stable even after the economy shed jobs in February. Initial jobless claims came in at 213,000 in the week to March 7, down slightly from 214,000 the previous week and below expectations of 215,000 new claims, the Labour Department said.
The government recently reported that non-farm payrolls fell by 92,000 jobs in February, marking the sixth decline since January 2025 and the second largest in that period. The decrease was attributed to severe winter weather, a healthcare workers strike, payback after an unusually strong January hiring, and business caution amid uncertainty over import tariffs and integration of artificial intelligence into some work roles.
For now, the low level of layoffs gives the US Federal Reserve room to keep interest rates steady, even as the US-Israeli war against Iran pushes oil prices higher and threatens to fan domestic inflation.
This article does not constitute legal and/or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta).
