Japan July wholesale prices +2.1 pct y/y, +0.6 pct m/m

Aug 10, 2007 - Japanese wholesale prices rose 2.1 percent in July from a year earlier, Bank of Japan data showed on Friday, matching economists' median forecast.

Compared with a month earlier, the corporate goods price index (CGPI), which tracks trends in wholesale prices of goods, rose 0.6 percent in July, compared with the market's consensus forecast of a 0.6 percent increase.

Colombia central govt deficit 2.2 pct GDP in Jan-April

Aug 10, 2007 - Colombia's central government deficit for January to April was $3.84 billion or 2.2 percent of the gross domestic product, the Finance Ministry said on Friday without providing any comparison to a year earlier.

The central government deficit accounts only for government ministries. This year's first quarter deficit was $2.97 billion, according to ministry figures.

U.S. ex-auto retail sales post slim growth in July

Aug 10, 2007 - U.S. retail sales excluding cars rose a modest 0.2 percent in July, as declining gasoline prices reined in overall sales growth, according to data from SpendingPulse released on Friday.

The seasonally adjusted gain equaled June's 0.2 percent increase, according to SpendingPulse, the retail data service of MasterCard Advisors, an arm of MasterCard Worldwide.

"We are still growing but it's pretty modest," said Michael McNamara, SpendingPulse's vice president of research and analysis.

The housing slump, exacerbated by a worsening subprime mortgage sector, also depressed sales on categories such as furniture and building materials last month.

While overall consumer spending has slowed sharply from their earlier robust level, there have been some retail segments like electronics and general merchandise, which posted solid growth in July, McNamara said.

Further erosion in retail sales would harm the economy with consumers generating more than two-thirds of overall economic activities, according to economists.

Sales growth without autos and gasoline climbed 0.5 percent in July, a tad below June's 0.6 percent.

Earlier this week, the government reported that U.S. retail gasoline price averaged $2.84 a gallon last week, the lowest level since early April.

"There are still areas of strength that are helping us to counter the housing issue," McNamara said.

SpendingPulse's July figure on "core" retail sales, which exclude cars, gasoline and building materials, showed a 0.7 percent increase versus a 0.8 percent jump in June.

Meanwhile, the U.S. Commerce Department will release its own July survey of retailers on Monday. The latest median forecast of the government's reading on overall retail sales was a 0.3 percent increase, and ex-auto sales a 0.4 percent rise, according to economists polled by Reuters.

The SpendingPulse data are derived from the aggregate sales in the MasterCard U.S. payment network, coupled with estimates on all other payment methods including cash and check.

China's wholesale inflation rate dips in July

Aug 10, 2007 - China's wholesale inflation rate unexpectedly slowed in July, showing cost pressures at the factory gate remain in check despite a food-related surge in consumer prices.

Annual producer price inflation slowed to 2.4 percent in July from 2.5 percent in June, the National Bureau of Statistics said on Friday. Economists had expected a rate of 2.6 percent.

Whereas food accounts for about a third of the consumer price basket, it makes up only about 10 percent of the producer price index, economists said.

"It has a higher weighting towards industrial goods. So it better underscores the fact that inflation pressures are mainly related to food rather than industrial goods," said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong.

The benign report lends support to the argument that, although the Chinese economy has been growing at a double-digit pace for five years, competitive pressures and productivity gains are keeping a lid on broad inflationary pressures.

"It's a figure that should give investors less reason to panic when we get a high-side CPI on Monday," he added.

Economists polled by Reuters expect consumer price inflation to accelerate to 4.9 percent in July from 4.4 percent in June.

Simpfendorfer expects a rise of more than 5 percent and there are rumours in financial markets that it could be as high as 5.6 percent, the highest in a decade.

"I don't know if that would provoke a monetary policy response but I do think the PBOC will worry about inflationary expectations and the potential impact on wage costs," he said.

A state think-tank said on Friday that even a rise in the consumer price index of 5 percent was unlikely to spell serious inflationary trouble for the economy.

"China's current economic growth can withstand CPI growth between 3 and 5 percent," the State Information Centre said.

SHAPING EXPECTATIONS

The think-tank said consumer prices were likely to rise 4.3 percent on average over the third quarter compared with increases of 4.4 percent in June and 3.2 percent in the first six months.

The People's Bank of China, the central bank, has raised interest rates three times and banks' required reserves six times so far this year to mop up excess liquidity and prevent the world's fastest-growing major economy from overheating.

The bank said on Wednesday in its latest monetary policy report that it would keep leaning to a tighter policy to rein in prices and curb inflationary expectations.

Xue Hua, an analyst at China Merchants Securities in Shenzhen, said the drop in wholesale inflation in July reflected a high base of comparison in 2006.

He calculated that, from month to month, producer price inflation is still quickening -- to 2.75 percent in July, at an annualised rate, from 2.6 percent in June.

"PPI is still on the rise," Xue said. "I think monthly PPI growth will continue to pick up in August before declining in September or October."

A breakdown of the figures shows foodstuffs in July cost 7.8 percent more at the wholesale level than a year earlier, compared with a 6.7 percent increase in the year to June.

Prices for steel products, ferrous metals and coal also rose more quickly, but there were outright falls in the cost of crude oil, gasoline and consumer durables, the statistics office said.

Japan revised June industrial output +1.3 pct m/m

Aug 10, 2007 - Japan's industrial production rose 1.3 percent in June from a month earlier on a seasonally adjusted basis, revised government data showed on Friday.

Preliminary data had shown a rise of 1.2 percent.

The capacity utilisation index rose 0.8 percent from a month earlier.

U.S. July import prices rise 1.5 percent

Aug 10, 2007 - U.S. import prices rose for the sixth straight month, climbing 1.5 percent in July on higher petroleum costs, a government report on Friday showed.

Excluding a 7 percent increase in the cost of petroleum imports, prices were up 0.2 percent after a 0.1 percent rise in June, the Labor Department said.

July's rise in import prices exceeded the 1 percent increase Wall Street economists were expecting. The Labor Department revised down the June price figure to 0.9 percent from a first-reported 1.0 percent increase.

The report also showed that export prices rose 0.2 percent in July after rising 0.3 percent in June. That was somewhat lower than the 0.3 percent rise economists had forecast.

Foods, feeds, and beverage prices jumped 1.6 percent in July after rising 0.2 percent in June. Over the past year, prices rose 9.8 percent, the largest yearly increase since a 10.2 percent gain in May 1995.

The rise in nonpetroleum import prices was driven by higher prices for finished goods, the department said.

Automotive prices rose 0.1 percent in July while consumer goods, excluding autos also rose 0.1 percent.

Singapore's Q2 GDP growth at 8.6% year-on-year, 14% quarter-on-quarter

Aug 10, 2007 - The economy has picked up pace in the second quarter, with GDP expanding by 8.6 per cent year-on-year following 6.4 per cent in the previous quarter, according to data released by the Ministry of Trade and Industry on Friday.

Growth on a seasonally-adjusted quarter-on-quarter annualised basis increased to 14 per cent from 8.8 per cent in the first quarter.

Overall, the Singapore economy grew by 7.6 per cent in the first half of 2007.

Riding on the momentum of the second quarter and supported by a favourable external environment and broad-based growth across the major sectors, the economy is expected to grow by 7.0-8.0 per cent in 2007.

The previous full-year growth target was 5.0-7.0 per cent.

The improved outlook for 2007 reflects higher growth in financial and business services, manufacturing, and construction.

The driving factors underpinning the higher growth forecast are broad-based: strong global demand in the biomedical, aerospace and marine industries, robust regional demand for financial services, and a buoyant domestic property market.

Data for the second quarter showed growth being more broad-based, with the financial services and construction sectors registering double-digit growth, and the manufacturing sector remaining healthy despite a slowdown in electronics.

Financial services expanded by 17 per cent in the second quarter, up from 14 per cent growth in the first quarter, while the construction sector grew by 18 per cent, the strongest growth in almost 10 years.

Growth in the manufacturing sector picked up pace to 8.3 per cent, with strong growth in biomedical manufacturing and transport engineering more than making up for the slack in electronics.

The Ministry of Trade and Industry also raised the full-year GDP growth forecast for 2007 from 5.0-7.0 per cent to 7.0-8.0 per cent, due to a healthy external environment, and continued growth in the composite leading index and strong business expectations. Both manufacturing and services firms expect better business conditions in the coming half of the year.

China's July trade surplus close to record high

Aug 10, 2007 - China on Friday reported its second-biggest monthly trade surplus on record, handing more ammunition to critics who say Beijing gains an unfair trade advantage by keeping the yuan undervalued.

The surplus in July was $24.36 billion, down from June's record high of $26.91 billion, but above forecasts of $22.5 billion and dwarfing the July 2006 figure of $14.6 billion.

Economists had expected export growth to taper off after factories rushed to ship goods in June before rebates of value added tax were cut or scrapped on July 1 on 2,800 export lines.

But annual export growth in fact accelerated to 34.2 percent from 27.1 percent in June despite a string of recalls of Chinese products around the world, notably the United States, due to safety concerns involving everything from toys to toothpaste.

"It shows Chinese exporters are still scrambling to export despite government tightening," said Li Yushi, vice-director of a Ministry of Commerce think tank.

"Many exporters are privately run, and they have no intention to slow down their businesses," Li said.

Legislation is wending its way through the U.S. Congress that would impose duties on goods imported from countries like China deemed to have fundamentally misaligned exchange rates.

But Li said he doubted that trying to raise barriers to Chinese goods would make much of a difference.

"Demand for China-made products in overseas markets is still strong despite headline-grabbing anti-dumping cases and the like. I don't think there will be any massive boycott of Chinese products," he said.

INFLATION WORRIES

Li Huiyong, chief economist at Shenyin & Wanguo Securities in Shanghai, noted that exports usually gain momentum in the second half as factories gear up to meet Christmas demand.

The trade surplus in the first seven months rose 81 percent from the same period of 2006 to $136.8 billion, and Li said it could well reach $300 billion for the whole year.

The surplus in 2006 was $177.5 billion, easily a record.

"The surplus is still high and doesn't seem to have been affected much by the yuan's appreciation and cuts in export tax rebates," Li said.

The yuan has risen 7 percent since it was revalued by 2.1 percent against the dollar in July 2005 and untethered from a dollar peg to float within managed bands.

Annual import growth also outstripped expectations, accelerating to 26.9 percent in July from 14.2 percent in June.

Crude oil imports rose 39 percent, but Li with the Commerce Ministry said strength in imports also reflected robust domestic investment.

That would be a worry to policy makers, who are striving to prevent a resurgence of capital spending out of fear that the economy is already at risk of overheating.

Companies have strong incentives to invest. Global and domestic demand is strong, profits are rising fast and banks are awash in cheap money generated by the trade surplus.

Annual growth in the broad M2 measure of money supply spurted in July to 18.5 percent from 17.1 percent in June, the People's Bank of China said on Friday. The central bank is trying to cap M2 growth this year at 16 percent.

With the economy firing on all cylinders and money growth accelerating, the central bank is likely to tighten monetary policy further in coming months to nip inflation in the bud.

"Pressure on the central bank to tighten increases significantly with such a high growth rate in M2," said Li Mingliang, an economist with Haitong Securities in Shanghai.

INFLATION COMFORT

Li predicted another one or two interest rate increases by the end of 2007. The central bank has already jacked up borrowing costs three times this year.

Economists expect data on Monday to show that consumer price inflation rose to 4.9 percent in July from 4.4 percent in June.

There are rumours in markets that the figure could be as high as 5.6 percent, driven by a surge in pork and egg prices.

Analysts who contend that price pressures are confined to food took comfort on Friday from a dip in wholesale inflation in July to 2.4 percent, a 14-month low, from 2.5 percent in June.

They said the benign report lends support to the argument that, although the economy has been growing at a double-digit pace for five years, competitive pressures and productivity gains are keeping a lid on broad inflationary pressures.

"It's a figure that should give investors less reason to panic when we get a high-side CPI on Monday," said Ben Simpfendorfer with Royal Bank of Scotland in Hong Kong.

Peru posts wider June trade surplus of $879 mln

Aug 9, 2007 - Peru's trade surplus widened 12 percent to $879 million in June from $784 million in the same month a year earlier, the central bank said on Thursday.

Exports in the latest month totaled $2.4 billion while imports were $1.5 billion, the bank said.

The trade surplus for the six months of the year was $3.6 billion, up from $3.4 billion in the first half of last year.

Peru's trade surplus hit a record $8.9 billion last year as the economy expanded by more than 8 percent, led mainly by high prices for mineral exports.

Mexico inflation accelerates to 0.42 pct in July

Aug 9, 2007 - Mexican consumer prices jumped 0.42 percent in July, accelerating from June and pushing 12-month inflation above the 4-percent limit the central bank says is acceptable.

Closely watched core inflation, which strips out some volatile food and energy prices, was 0.34 percent during the month, the bank said on Thursday.

Prices rose 4.14 percent in the 12 months through July.

Analysts polled by Reuters on Wednesday had expected the consumer price index to rise 0.37 percent in July and had forecast a 0.34 percent increase in the core inflation index for the month.

The central bank said last week that annual inflation, as gauged over a 12-month period, could accelerate to above 4 percent during the third quarter before falling below 3.75 percent by year end.

In June the consumer price index rose 0.12 percent, while the core CPI index rose 0.30 percent.

Most analysts expect the bank will leave interest rates unchanged at its next policy announcement on Aug. 24.

But they say recent inflation data could put pressure on the bank to hike interest rates, especially if economists' price forecasts deteriorate.

"There is a risk of expectations being contaminated," said Omar Borla, an economist at Dresdner Kleinwort in New York.

Higher inflation expectations, which have risen in recent months, can act as a self-fulfilling prophecy by prompting companies to raise prices and workers to demand higher wages.

South Korea raises rates by 0.25%

Aug 9, 2007 - South Korea's central bank surprised markets Thursday by raising interest rates a quarter of a point to a six-year high of 5% to halt an acceleration in money supply growth that is fueling inflation.

The Monetary Policy Committee of the Bank of Korea decided today to raise the call rate target (uncollateralized overnight rate) by 25 basis points, from 4.75% to 5.00%.

The domestic economy seems likely to maintain its upward trend. While exports continue to post robust growth, investment and private consumption are increasing steadily.

Consumer price inflation remains stable despite the rise in international oil prices. The upward trend of real estate prices seems to have been contained.

In the financial markets, there is ample liquidity and financial institutions' lending continues to show a steady increase.

The Committee believes that, after this action, the degree of financial accommodativeness will be markedly reduced.

In a related action, the Committee also raised the interest rates on both the Bank of Korea's Liquidity Adjustment Loans and Aggregate Credit Ceiling Loans by 25 basis points to 4.75% and 3.25%, respectively.

Its first back-to-back monthly increase in rates sent stock and bond prices tumbling, although the markets recovered some ground after the Bank of Korea's governor suggested rates could now be put on hold for a while.

All 12 economists in a Reuters poll had expected the Bank of Korea to hold rates steady after a quarter-point rise in July, although most had forecast another increase later in the year.

"It is a big surprise. The Bank of Korea seems to be much more concerned over high liquidity than expected," said Park Sang-hyun, chief economist at CJ Investment & Securities.

"Liquidity is the key to monetary policy in the coming months. If the liquidity issue does not show signs of slowing down, the central bank will raise interest rates again, probably in October or November."

Central bank figures on Monday showed the broadest L money supply measure grew 12.7 percent in June from a year earlier, the fastest since a 12.9 percent gain in February 2003.

However, Governor Lee Seong-tae told reporters the central bank felt the cycle of seven rate rises from late 2005 had done much of its job in slowing money supply growth. He indicated the central bank would hold fire for a while to assess future money trends.

"We have raised the call rate target twice this year, three times last year and twice the year before, and I expect these to have an effect gradually over time," Lee told reporters.

"Even if liquidity growth does not change markedly in September, it will change gradually."

Treasury bond futures, which tumbled more than 50 ticks right after the decision was announced, recovered some of the losses to trade down about 30 ticks at 0527 GMT after Lee's remark on the effect of past rate increases.

On the Seoul stock market, the benchmark KOSPI index initially wiped out a 1.3 percent gain after the rate rise, then fluctuated, and was down 0.2 percent at 0520 GMT.

The won (KRW-) rose to 921.4 per dollar from Wednesday's close of 923.7 but slipped back to around 923 by 0525 GMT.

"I think the BOK advanced the timing of a rate hike that was already in mind and will stay on hold for the time being," said Ryu Seung-sun, an economist at Mirae Asset Securities.

"But it doesn't mean that the current cycle of tightening has concluded, because the expected effect from rate increases may not take place."

The Bank of Korea maintained its economic outlook, saying in a statement that Asia's fourth-largest economy was expanding thanks to brisk exports and a recovery in private consumption.

Government data released later underscored growing optimism among South Koreans about the economic outlook and their future living conditions, although yet another interest rate rise might take a toll in coming months.

The National Statistical Office's seasonally adjusted consumer expectation index, which measures how South Koreans feel about economic prospects and personal spending six months ahead, rose to a 19-month high of 103.8 in July from 101.2 in June.

The central bank affirmed its view that inflation would gather pace due to growing domestic demand and firmer raw material prices.

Annual inflation stood at 2.5 percent in July, which is at the bottom of the central bank's target for 2007-2009 of between 2.5 percent and 3.5 percent but above its forecast for this year of an average 2.4 percent.

Analysts have said the central bank's confidence that economic growth would accelerate over the rest of this year and next would guarantee a hawkish stance on inflation.

The Bank of Korea estimated last month that gross domestic product grew a seasonally adjusted 1.7 percent in the second quarter, the biggest gain since late 2005.

It has forecast that the economy, which derives more than half of annual output from the service sector, would grow 4.5 percent this year and then speed up in 2008, after expanding by 5 percent in 2006.

Latvia GDP provisional growth in Q2 reaches 11.3 pct

Aug 9, 2007 - Latvia's gross domestic product grew 11.3 pct in the second quarter of 2007 compared to the same period a year ago, Latvian central statistics provisional assessment data shows.

In the second quarter of 2006, Latvia's GDP grew by 11.1 pct from the same period of 2005, while the total economy expansion last year reached 11.9%.

In the first quarter of 2007 Latvia's GDP increased by 11.2%.

The office said that more detailed data on the GDP growth in the first half and second quarter of 2007 will be published in a press release on Sept 7.

Japan June core machinery orders -10.4 pct m/m

Aug 8, 2007 - Japan's core private-sector machinery orders, a key gauge of corporate capital spending, fell 10.4 percent in June from the previous month, government data
showed on Wednesday.

That compared with economists' consensus forecast for a 1.9 percent decline, following a 5.9 percent rise in May, the Cabinet Office said.

Compared with a year earlier, core orders, which exclude those for ships and machinery at electric power firms, fell 17.9 percent, against a median forecast of a 9.9 percent drop.

Manufacturers surveyed by the Cabinet Office forecast that core orders, a highly volatile series regarded as an indicator of capital spending in the coming six to nine months, will show a 3.7 percent rise in July-September from the previous quarter.

In April-June, the orders decreased 2.4 percent.

Japan July outstanding bank loans +0.3 pct yr/yr

Aug 8, 2007 - The balance of outstanding loans held by most Japanese banks rose 0.3 percent in July from a year earlier, Bank of Japan data showed on Wednesday.

Loans held by the country's four main categories of banks, including "shinkin" credit unions, stood at 448.3902 trillion yen ($3,774 billion). Excluding special factors such as loan write-offs, the loan balance rose 1.1 percent from the same month a year earlier.

Japan end-July foreign reserves $923.718 bln

Aug 8, 2007 - Japan's official foreign reserves amounted to $923.718 billion at the end of July, up from $913.572 billion at the end of June, the Ministry of Finance said on Wednesday.

Greece H1 GDP growth at 4.4 pct, 4.2 pct in Q2

Aug 8, 2007 - Greece's Finance Minster, George Alogoskoufis, said Greece's GDP grew by 4.4 pct in the first half of the year, compared to the first half of 2006.

He added that growth beat the 3.9 pct annual budget target, but that second quarter GDP growth slowed to 4.2 pct from 4.6 pct in the first quarter.

The figures were scheduled to be released on Friday by the Greek National Statistics Service, but the minister revealed them when speaking at a press conference organised to present a public fund designated to combat poverty in Greece.

In the beginning of May, the European Commission forecast that economic growth in Greece for 2007 will fall to 3.7 pct from 4.3 pct in 2006, but the local finance ministry had not accept these estimates.

U.S. Productivity slows, labor costs moderate

Aug 7, 2007 - Worker productivity grew at a slightly slower-than-expected 1.8 percent annualized pace in the second quarter, government data on Tuesday showed, while labor cost growth moderated in somewhat better news for inflation.

It was the largest rise in productivity since the first quarter of 2006, when it was up by 2.5 percent, the Labor Department said.

Economists polled by Reuters had expected the preliminary reading of U.S. non-farm productivity to rise by 2.0 percent as the economy picked up, compared with revised 0.7 percent increase in the previous three months. This was previously reported as a 1.0 percent gain.

"The report does show that productivity improved in the second quarter, but still is growing only modestly and as a result, labor costs are still growing - probably at the high end of the Fed's comfort zone," said Gary Thayer, chief U.S. economist at A.G. Edwards and Sons in St. Louis.

Unit labor costs, a gauge of inflation and profit pressures under close scrutiny by the Federal Reserve as it meets to decide interest rates, mounted by 2.1 percent in the second quarter. This compared with forecasts for a 1.8 percent gain, but was below the revised 3.0 percent increase in the first quarter, up from a 1.8 percent rise previously reported.

The Fed is expected to keep interest rates unchanged at 5.25 percent when it announces the outcome of its meeting shortly after 2:15 p.m. (1815 GMT).

In the report, manufacturing productivity increased at a 1.6 percent annualized pace in the second quarter, the weakest performance since the first quarter of 2004, when it fell by 1.4 percent.

Policymakers monitor productivity, a measure of how much any given worker can produce in an hour, for clues on whether cyclical swings in the business cycle are pressuring inflation, as well as for signals on longer term structural trends.

Weakening productivity amid tight labor markers can spell wage-driven inflation.

"The Fed will hold rates steady again today. They still are concerned about resource utilization and these labor cost numbers still show potential for rising costs of production," Thayer predicted.

In fact, hourly compensation grew by 3.9 percent in the second quarter from 3.7 percent in the first quarter, revised up from a previously reported 2.8 percent gain.

Underlying productivity performance over a period of years also shapes the economy's long-term growth potential, which policymakers estimate for a sense of how fast the economy can grow without sparking price pressures.

Argentina July inflation sparks analyst skepticism

Aug 6, 2007 - Argentina's July inflation came in at a lower-than-expected 0.5 percent, the government said on Monday, as official consumer price data again aroused analysts' suspicion of tampering.

A Reuters poll of 14 local and international analysts yielded a 0.7 percent median forecast for July inflation, with estimates ranging from 0.5 percent to 0.8 percent.

Analysts and economists in Argentina and abroad have repeatedly questioned recent inflation data reported by the INDEC statistics agency, saying the government is intentionally underreporting inflation in an election year.

"Nothing surprises us since the INDEC made methodological changes," said Fausto Spotorno, an economist at Orlando Ferreres y Asociados. "We were expecting inflation would be a little higher, at least 0.7 percent."

Inflation has proved to be the biggest economic challenge to President Nestor Kirchner, whose wife, Sen. Cristina Fernandez de Kirchner, is the front-runner in an October presidential election.

"You can see that the index is manipulated, it is not real," said Rodolfo Rossi, an economic analyst and former central bank president. "Surely it must have some basis, but this is not the index that people are suffering."

The consumer price index rose 0.4 percent in June and 0.6 percent in July 2006.

Prices for education rose 2.2 percent in July, INDEC said, followed by a 1.1 percent rise in transportation and communication costs, and an identical climb in prices for home furnishings and supplies.

In a report published ahead of the data's official release, Deutsche Bank said: "Despite the fact every indicator points to high inflation, the official CPI reading keeps surprising on the downside."

The CPI rose 4.4 percent in the first seven months of the year and 12-month inflation through July was 8.6 percent.