Malta’s business activity slowed in July but still remained moderately above its long-term average, according to the Central Bank’s latest Economic Update.

The Bank’s Business Conditions Index, which measures annual growth in activity, registered a decline compared with previous months, signalling a softening in momentum.

At the same time, the Bank’s Economic Policy Uncertainty Index rose sharply, suggesting growing unease about the economic outlook. The indicator, which analyses local media coverage, stood well above its historical average in July.

Across Europe, confidence also appeared fragile. Both the European Commission’s Economic Sentiment Indicator and the Employment Expectations Indicator fell in July compared with June and are now below their long-term averages.

On the ground, Malta’s economy showed mixed signals. Industrial production and retail trade rose in June on an annual basis, while services output contracted for the fourth consecutive month. Labour market data remained a bright spot: the unemployment rate reached a new historical low of 2.5% in June.

Construction activity also picked up, with residential building permits rising in June compared with a year earlier, alongside increases in property promise-of-sale agreements and final deeds of sale in July.

Inflation remained steady. In July, the Harmonised Index of Consumer Prices stood at 2.5%, unchanged from June and still above the euro area average. Excluding food and energy, inflation measured 2.4%. The national Retail Price Index also held at 2.4%.

On the fiscal side, government finances deteriorated. In June, the Consolidated Fund deficit widened compared with the same month last year, reflecting lower revenue and significantly higher expenditure.

Meanwhile, financial indicators were stable. Growth in residents’ deposits remained unchanged in June, while credit growth edged up slightly.

The Central Bank said that while activity remains above trend, heightened uncertainty and weaker sentiment indicators point to a more cautious outlook for the months ahead.