Weekly Indicators - Sep 6

Sep 6th 2007
From The Economist print edition

More bad news came from America's housing market, amid fresh concerns about the availability of mortgage finance. The number of home sales agreed on but not yet completed fell by 12.2% in July, according to the National Association of Realtors.

GDP in America rose at an annualised rate of 4% in the second quarter, revised up from 3.4%. The Institute of Supply Management's index of manufacturing activity fell from 53.8 to 52.9 in August.

Consumer prices in the euro area rose by 1.8% in the year to August, according to a preliminary official estimate, the same rate as in July. The currency zone's unemployment rate was stable at 6.9% in July.

Japan's unemployment rate edged down from 3.7% to 3.6% in July, the lowest level since December 1997. Core consumer prices, which exclude volatile fresh-food prices, fell by 0.1% in the year to July.

Australia's GDP rose by 0.9% in the second quarter and by 4.3% compared with the same period a year earlier. Despite a strengthening economy, Australia's central bank left its benchmark interest rate at 6.5%.

The Bank of Canada left its key policy rate at 4.5%. In a statement, the bank said that the economy in the first half of the year had been stronger than it had expected, but that the recent tightening in credit conditions should restrain future growth. Canada's GDP rose by 0.8% in the second quarter and by 2.5% from a year earlier.

German July Industrial Production Edges Up, Exports Fall

Sep 7, 2007 - German industrial production grew less than expected in the month of July as there was a mild decline in exports, official data revealed Friday

A report from the Economy and Technology Ministry showed that the industrial output in the largest Euro zone economy grew 0.1% month-over-month in July, while economists were looking for a rise of 0.9%. In June, industrial output dropped 0.2%, revised from the 0.4% decline estimated earlier.

Compared to the same month last year, industrial production grew working day adjusted 4.6% in July, smaller than a revised 5.2% growth seen in the prior month. The June number was revised up from the 5.1% initially estimated. Markets had expected a slightly higher growth of 4.9% for July.

In July, manufacturing production moved up 0.2% and construction output revealed a marked increase of 1.3%. Meanwhile, energy output declined 0.3%.

During the two-month period from June to July, overall industrial output grew 0.9% from the previous two-month period.

Earlier in the day, a separate report from the statistical office indicated that the German trade surplus widened to 17.9 billion euros in July. The trade surplus increased from the 16.5 billion euros registered in June. A year ago, the trade surplus amounted to 13.0 billion euros. Economists expected an excess of 15.6 billion euros.

On a seasonally adjusted basis, the trade balance showed a surplus of 16.4 billion euros.

Exports grew 11.8% annually, while it dropped 0.1% from the prior month. Meanwhile, imports increased 6.3% on a yearly basis to 63.6 billion euros in July. Compared to the last month, imports were down 2.4%.

The current account surplus narrowed to 14.1 billion euros from a revised surplus of 16.4 billion euros recorded in June. The number was revised down from the 16.6 billion euros estimated earlier. The current account surplus amounted to 7.3 billion euros in the prior year. The current account surplus for July came in better than the expected number of 12.2 billion euros.

Data released by the Ministry a day earlier revealed a 7.1% decline in manufacturing new orders, in contrast to a revised growth of 5.1% registered in June.

Commenting on the industrial production numbers, Frédérique Cerisier of BNP Paribas said, “For the time being manufacturing activity is still supported by a high level of incoming new foreign orders of capital goods. Were global investment and demand for equipment to moderate more rapidly than previously expected in the coming quarters, the manufacturing outlook could deteriorate very quickly”.

Czech Q2 Economic Growth Slows Yet Beats Expectations

Sep 7, 2007 - The Czech economy posted an annual 6% growth in real terms in the second quarter, the statistics office said, Friday. This was slightly more than the 5.8% growth that economists were expecting and a little less than the 6.4% growth witnessed in the first quarter. The growth for the first quarter was revised up from 6.1% growth estimated initially.

The economy climbed a nominal 10% annually to CZK899.7 billion in the second quarter, while inflation was 4%.

Value added in manufacturing grew 10.5% annually in real terms in the second quarter, while the value added in the wholesale, retail and repair of motor vehicles sector jumped 14.2% and value addition in the real estate, renting and business activities sector climbed 11.3%.

Household final consumption expenditure at constant prices expanded 6.5% in the second quarter, pushed by higher expenditure outlays for motor vehicles, food, tobacco products, furniture and recreation. Gross fixed capital formation growth gained 4.2%, slowed down predominantly by investment in buildings and structures, which took up 41% of total fixed capital formation. Inventories witnessed increase in the second quarter, due to growth in inventories in manufacturing, power industry and construction sectors.

External trade in goods resulted in a nominal CZK 16.2 billion surplus. Export prices rose 1%, while import prices dropped 0.9%.

In sequential terms, the real GDP grew a seasonal and working day adjusted 1.4%, in the second quarter, compared to the growth of 1.5% in the previous quarter.

The EU27 and the euro area grew 2.8% and 2.5% in the second quarter, according to the Eurostat.

Ecuador posts July trade surplus of $171 mln

Sep 7, 2007 - Ecuador posted a trade surplus of $171 million in July compared with a surplus of $70.9 million in the same month last year, the central bank said on Friday.

Petroleum exports, the Andean country's leading source of revenue, rose to $874.7 million in July compared with $643.9 million a year earlier, the central bank said.

Overall exports in July totaled $1.2 billion, compared with $1.04 billion in July 2006. Imports in July rose to $1.12 billion from $970.9 million a year ago.

In the January-July period, petroleum exports fell to $4.16 billion compared with $4.49 billion in the same period a year earlier.

The petroleum exports were a key factor affecting the country's overall balance of trade, which in the January-July period was a surplus of $341.4 million compared with a surplus of $1.15 billion in the same period a year earlier.

Sweden's Riksbank Raises Repo Rates

Sep 7, 2007 - The Sweden's Central Bank, the Riksbank, decided to increase its repo rate by 25 percentage points to a rate of 3.75%, the Executive Board announced, Friday. The Bank also said that the rate would be hiked further to contain inflation to the target rate of 2% by next year, while helping the economy grow in a balanced manner. The Bank's decision was based on the June Monetary Policy Report.

The Swedish economy grew stronger than expected in the second quarter, the Riksbank said. The labor market had become tighter and lending had increased, while house prices had risen. Cost pressures had built up, as productivity growth was less than expected in the second quarter. Food prices had increased more than anticipated, while companies and households had revised their inflation expectations upwards for the coming year, the Bank observed.

The Bank also took note of the general increase in uncertainty and unwillingness to invest, due to the turmoil in the financial markets engendered by the problems in the US sub-prime market. The unrest in the financial markets was expected dampen economic growth.Thus by increasing the repo rate 0.25%, the Bank hoped to balance the need to rein in inflation, with the need to sustain production and employment growth.

Future changes in the interest rate would depend on the growth of the economy and inflationary pressures. “The future direction for monetary policy will depend on how new information on economic developments abroad and at home will affect the prospects for economic activity and inflation in Sweden,” the Executive Board said.

A separate report by the Handelsbanken Capital Markets said that Swedish interest rates would rise to 5.5% over two years. It predicted that the Swedish economy would grow 3.7% in 2007, followed by a 3.2% growth in 2008.

Swedish Central Govt. Surplus At SEK9.6 Bln In August

Sep 7, 2007 - The Swedish central government reported a surplus of SEK9.654 billion in August as a result of central government payments, indicating a negative borrowing requirement of SEK9.584 billion, the Swedish National Debt Office or SNDO said Friday. This compares to a SEK4.928 billion borrowing requirement reported in the previous year.

The SNDO expect a borrowing requirement of SEK 0.9 billion.

The SNDO report said, “The deviation is mainly explained by tax income being approximately SEK6 billion larger than expected. In addition, the Premium Pension Authority has made a deposit of SEK 4 billion in their account at the Debt Office.”

Interest payments on central government debt were SEK 7.1 billion in August, which is SEK 0.6 billion higher than expected. The borrowing requirement for the twelve-month period to the end of August was minus SEK105.5 billion.

The central government debt came in at SEK 1,173 billion at the end of August.

Mexico inflation eases in August, still above goal

Sep 7, 2007 - Mexican annual inflation slowed to 4.03 percent in August, but remained above the central bank's target range, and analysts expected to bank to maintain its bias toward higher interest rates.

The central bank said the consumer price index rose 0.41 percent in August, matching the median forecast in a Reuters poll.

Closely watched core inflation, which strips out some volatile food and energy prices, was 0.21 percent in August compared with 0.34 percent in July.

Prices for some foods and vegetables grew less quickly in August than in previous months, the bank said.

Some analysts say that if the U.S. Federal Reserve cuts its benchmark fed funds rate on Sept. 18 in response to a growing credit crunch in the United States, Mexico's central bank might feel less need to maintain a bias toward tighter monetary policy.

But others say possible rises in food and vegetable prices from recent hurricanes, as well as expected higher taxes from a planned fiscal reform, mean significant inflation risks remain.

"I think this means they keep the tightening bias," said Francisco Diez, director of emerging markets trading at RBC in Toronto, after the monthly inflation report came out.

Consumer prices rose 0.42 in July and annual inflation was 4.14 percent.

All economists consulted by Reuters expect the bank to keep its key interest rate steady at 7.25 percent at its monthly monetary policy review on Sept. 21.

Mexico's central bank has held the rate unchanged but maintained a tightening since a surprise 25 basis point hike last April.

The central bank's 12-month inflation target is 3 percent, but it considers inflation up to 4 percent acceptable.

Hurricane Henriette raged over farming states in northern Mexico this week, where a storm last year damaged tomato crops and pushed up prices.

For months, rising prices of fruits and vegetables, as well as high costs for dairy products around the world, have fueled inflation in Mexico.

The August annual rate was in line with the bank's forecast in July that annual overall inflation would be between 3.75 percent and 4.25 percent in the third quarter.

But 12-month inflation should come back down to between 3.25 percent and 3.75 percent in the fourth quarter and 3 percent by the end of 2008, according to the bank.

Hungarian Trade Deficit Narrows In July

Sep 7, 2007 - The Hungarian trade deficit narrowed to 165.0 million euros in July, the statistical office said Friday. A year ago, the trade deficit amounted to 369.7 million euros. Exports grew around 22% from the previous year and imports climbed nearly 17% in July.

During January to July, exports amounted to 38.44 billion euros and imports totaled 39.08 billion euros, resulting in a shortfall of 639.2 million euros.

The report noted that the share of EU member states in July was 80% in exports and 70% in imports.

Philippine August Intl. Reserves Hits All-Time High

Sep 7, 2007 - The Philippine central bank said Friday that the gross international reserves or GIR increased US$2.3 billion month-on-month to reach an all-time high of US$30.3 billion at the end of August. The increase in reserves was mainly due to sustained foreign exchange inflows, which also helped the Central Bank to service its debt and those of the National Government. Receipts of income from investments abroad also contributed to the increase in the GIR level.

The current GIR level can cover imports of goods and payments of services and income for 5.6 months in terms of adequacy of reserves, the central bank noted. Further, the central bank said this level was equivalent to 5.9 times of the country's short-term external debt based on original maturity and 3.2 times based on residual maturity.

The Bank added that Net international reserves-NIR, including revaluation of reserve assets and reserve-related liabilities, also stood at US$30.3 billion from the previous month in August. NIR is the difference between the BSP's GIR and total short-term liabilities.

German Trade Surplus Widens In July

Sep 7, 2007 - The German trade surplus widened to 17.9 billion euros in July, the Federal Statistical Office said Friday. The trade surplus increased from 16.5 billion euros registered in June. A year ago, the trade surplus amounted to 13.0 billion euros. Economists expected an excess of 15.6 billion euros. On a seasonally adjusted basis, the trade balance showed a surplus of 16.4 billion euros.

Exports grew 11.8% annually, while it dropped 0.1% from the prior month. Meanwhile, imports increased 6.3% on a yearly basis to 63.6 billion euros in July. Compared to the last month, imports were down 2.4%.

Meanwhile, the current account surplus narrowed to 14.1 billion euros from a revised surplus of 16.4 billion euros recorded in June. The number was revised down from 16.6 billion euros estimated earlier. The current account surplus amounted to 7.3 billion euros in the prior year. The current account surplus for July came in better than the expected number of 12.2 billion euros.

Finnish Q2 GDP Expands 4.4% On Year; Consensus 4.5%

Sep 7, 2007 - The Finnish gross domestic product expanded a seasonally adjusted 0.9% sequentially in the second quarter, the Statistics Finland said Friday. In the first quarter, the economy grew 0.8%.

Annually, the economy grew 4.4% in August compared to a 5.5% expansion seen in the first quarter. Economists expected that the economy would expand 4.5% annually in the second quarter.

Hungarian Annual Economic Growth Rev. Down To 1.2%

Sep 7, 2007 - The Hungarian annual economic growth was revised down to 1.2% in the second quarter, a report from the statistical office showed Friday. The growth number was revised down from the initial estimate of 1.4%. The economic growth slowed from the 2.7% recorded in the first quarter. The sequential growth eased to 0.1% from 0.3% registered in the prior quarter.

The GDP growth in the second quarter was led by industrial output growth. Meanwhile, the household final consumption dropped 3.4%. During the first half of the year, the economy expanded 1.9%.

Estonian CPI Growth Slows In August

Sep 7, 2007 - Consumer prices in Estonia increased 5.7% on an annual basis in August, the Statistics Estonia said, Friday. Consumer Price Index, CPI, rose faster 6.4% in the previous month. The CPI edged up 0.1% on a monthly basis in August, while the CPI gained 1.1% in the earlier month.

In August, prices of goods grew 2.9% annually, slowing from the 4.3% rise in the previous month. Food alcohol and tobacco prices expanded 5.7%, following the 6.7% climb in the earlier month. Manufactured goods prices gained 0.6%, while prices rose faster 2.2% in the last month. Services prices jumped 11.1% in August, hard on the heels of a 10.5% surge in July. The consumer price index in August was influenced chiefly by growing housing costs, rising food prices and falling motor fuel prices, the Statistics Estonia said.

Prices of food and non-alcoholic beverages expanded at an annual rate of 6.3% in August, decelerating from the 7.7% annual jump in the previous month. Clothing and footwear prices advanced 5.1% in August, a little higher than the advance of 4.4% in the last month. Housing prices soared 16.6%, matching the rise in housing prices of the previous month. Transport prices eased 1% annually in August, compared to the increase of 1.6% in the earlier month. Communications prices slipped 0.4%, following the 0.5% drop in prices in the last month.

On a monthly basis, prices of food and non-alcoholic beverages slipped 0.8% in August, versus the 1.3% advance in food and non-alcoholic beverages prices in the previous month. Clothing and footwear prices grew 1.2% recovering from a 0.8% fall in clothing and footwear prices in the last month. Housing prices gained 1.9% following the robust 4.5% expansion in housing prices in July. In August, vegetable prices sank on account of seasonal factors, while prices of motor fuel and heating energy and public transport eased, the Statistics Estonia observed.

Portugal final Q2 GDP up 0.5 pct vs Q1, up 1.6 pct yr-on-yr

Sep 7, 2007 - GDP rose 0.5 pct in the second quarter of this year from the first, and was up 1.6 pct from a year earlier, according to the final statistics from the INE statistics institute.

In a statement, INE said that year-on-year growth in the second quarter was slower than the 2.00 pct growth registered in the first.

The figures are practically in line with the preliminary calculations released mid-August, which estimated 1.6 pct year-on-year and 0.4 pct quarter- on-quarter growth for the second quarter.

Indonesia investments up 123%

Sep 7, 2007 - Actual domestic and foreign direct investments (FDI) in Indonesia during the first eight months of the year rose 123 per cent from a year earlier to US$11.70 billion, a government body said on Friday.

The National Investment Coordinating Board (BKPM) said in a statement that actual FDI in the January to August period rose 106.9 per cent from last year to US$8.13 billion, while domestic investment surged 171.9 per cent to US$3.57 billion.

Realised investment projects absorbed a workforce of 203,190 people, it said.

They said total investment proposals approved by the board in the first eight months rose 144.5 per cent to US$47.55 billion.

Approved FDI proposals rose 156.8 per cent to US$31.33 billion while approved domestic investment proposals grew 51 per cent to US$16.22 billion.

The paper and printing industries were the most popular sectors for FDIs, with approved proposals worth US$13.81 billion during the first eight months.

The chemical and pharmaceutical industry came in second with approved proposals worth US$6.9 billion.

Indonesia has been seeking to boost foreign investment as it tries to overcome a choked bureaucracy and rampant corruption.

Indian inflation falls to 16-month low

Sep 7, 2007 - India's annual inflation has fallen to a 16-month low helped by lower food prices, data on Friday showed, fuelling expectations that the central bank will loosen its monetary policy.

The wholesale price index, India's closest watched cost-of-living monitor, showed annual inflation slowed to a lower-than-expected 3.79 per cent for the week ended August 25, down from 3.94 per cent a week earlier.

'Some relaxation of the tight monetary stance' by the central bank 'makes some sense as inflation is hovering below 4 per cent', said economist Shashank Bhede at the National Council for Applied Economic Research, India's top economic research think-tank.

'It is only a question of timing now,' Mr Bhede said.

The latest official data showing inflation below 4 per cent for a second straight week came as welcome news to India's Congress-led government as inflation has emerged as a major political issue because of the burden it imposes on the nation's millions of poor households.

Annual inflation stood at 5.27 per cent during the corresponding week earlier a year ago.

The lower inflation was driven by cheaper food products and some manufactured goods, the data showed.

The latest weekly rate is considerably below the Reserve Bank of India's inflation forecast of close to 5 per cent for the financial year to March 2008.

The rate is also below its medium-term forecast of 5 per cent for the current fiscal and 4-4.5 per cent for the medium term.

Most analysts had expected that the rate would fall to about 3.9 per cent.

The central bank, which began tightening monetary policy in October 2004, has driven interest rates to five year highs in its bid to tame prices.

The monetary tightening has led to forecasts that economic growth will slow this year to around 8.5 per cent to 9.0 per cent from last year's blistering 9.4 per cent, which was the fastest expansion in nearly two decades.

S Korea holds rates steady citing turbulent markets

Sep 9, 2007 - South Korea's central bank held interest rates steady on Friday, as expected, saying inflation remained under control and it had to watch turbulent markets, convincing investors rates would stay on hold for some time.

The central bank left its overnight call rate target at a six-year high of 5.0 per cent after raising rates in July and August. The Bank of Korea joined several other major central banks that have kept borrowing costs steady in the face of global market turmoil.

Treasury bond futures prices jumped as much as 13 ticks after comments by Governor Lee Seong Tae bolstered market expectations that interest rates would not go up any time soon.

'The turbulence in international financial markets has not had any direct impact to the domestic economy,' Mr Lee told reporters. 'But there still is a good chance that international financial markets will become turbulent again.' All 11 economists recently surveyed by Reuters predicted rates would stay unchanged this week and a clear majority saw rates on hold until the end of the year.

The central bank cited its concerns that rapid credit and money supply growth would stoke inflation in the future as the main reason behind its rate increases in the past two months and earlier moves to tighten bank reserves.

But even as the central bank said it expected inflation to creep up in months ahead and the economy to maintain its growth momentum, its governor voiced confidence the bank had it under control.

Data published earlier this week showed that growth in Korea's broad money supply measure slowed in July while annual inflation in August came in at 2.0 per cent, below forecasts and the bottom of the central bank's 2.5-3.5 per cent target range.

Bank of Korea's decision came after several banks that only a month ago were widely expected to raise borrowing costs, decided to keep their rates on hold. The European Central Bank, the Bank of England and central banks in Australia and Canada all kept their benchmark rates steady this week.

Taiwan Aug exports up 10.5 pct yr-on-yr vs 8.2 pct rise in July

Sep 7, 2007 - Taiwan's exports in August rose 10.5 pct year-on-year to an all-time high of 21.40 bln usd, compared with an 8.2 pct rise to 21.18 bln usd posted in July, the Ministry of Finance (MoF) said.

Imports in August fell 0.3 pct year-on-year to 18.10 bln usd, compared with a 16.7 pct increase to a record high of 20.73 bln usd registered in the preceding month, it said.

Trade in August resulted in a surplus of 3.30 bln usd, widening sharply from a surplus of 450 mln in July, the MoF said.

Lee Li-shu, statistics director at the MoF, said the record-high exports in August was a result mainly of growth in exports to ASEAN countries and China; while exports to the US continued to drop.

"Exports to the US fell 11.5 pct to 2.65 bln usd....the year-on-year drop of 11.5 pct marked the largest fall we have ever experienced for exports to the US," Lee said.

The decline in imports was triggered principally by falls in the Middle East and ASEAN, she told reporters.

In particular, imports of crude oil amounted to 1.92 bln usd in August, down 25.1 pct from 2.57 bln a year earlier.

"Imports of crude oil fell 24.2 pct to 27.90 mln barrels in August, and the average price dropped to 68.92 usd per barrel from 69.48 usd a year earlier," Lee said.

The official also said growth in exports and the dip in imports led to the surge in Taiwan's trade surplus.

"The trade surplus of 3.30 bln in August stood as the second-largest in history, second only to the 3.62 bln surplus recorded in December 2005," she added.

For the first eight months of the year, the trade surplus stood at 14.29 bln usd, a rise of 32.6 pct from the same period a year earlier.

Exports in the January-August period rose 8.0 pct to 156.52 bln usd, while imports rose 6.0 pct to 142.23 bln usd.

In August, exports to Hong Kong and the mainland amounted to 8.89 bln usd, or 41.6 pct of Taiwan's total exports, while exports to the US reached 2.65 bln usd, or 12.4 pct, the MoF said.

Exports to Europe stood at 2.39 bln usd, representing 11.2 pct of the total; while shipments to ASEAN countries topped 3.30 bln usd, accounting for 15.4 pct, it said.

The finance ministry said August exports of heavy industrial and chemical products rose 12.6 pct year-on-year to 17.90 bln usd, comprising 83.6 pct of total exports.

Exports of chemical products were up 39.5 pct year-on-year; electrical engineering gained 38.8 pct; plastics were 14.4 pct higher; electronics products climbed 7.0 pct; machinery rose 5.3 pct; and base metals advanced 2.6 pct.

Exports of information technology and communications products were down 14.6 pct and textiles lost 5.9 pct .

Imports of agricultural and industrial materials in August fell 0.9 pct from a year earlier to 13.90 bln usd, or 76.8 pct of total imports, it said.

Imports of capital equipment grew 4.4 pct to 2.95 bln usd, the ministry added.

Hong Kong end-Aug forex reserves 138.3 bln usd vs 137.1 bln at end-July

Sep 7, 2007 - The Hong Kong Monetary Authority (HKMA) said the territory's official foreign currency reserve assets totaled 138.3 bln usd at the end of August, up from 137.1 bln usd at the end of July.

Including unsettled forward contracts, foreign currency reserve assets at the end of last month also stood at 138.3 bln usd compared with 137.1 bln in the preceding month.

Hong Kong is the world's ninth largest holder of foreign currency reserves based on the latest published figures, after mainland China, Japan, Russia, Taiwan, Korea, India, Brazil and Singapore.

The total foreign currency reserve assets of 138.3 bln usd represent about seven times the currency in circulation or 36 pct of Hong Kong dollar M3.

(1 usd = 7.8 hkd)

Japan forex reserves rise to record 932.16 billion dollars in August

Sep 7, 2007 - Japan's foreign exchange reserves surged to a new record of 932.157 billion US dollars at the end of August, up from the previous all-time high of 923.718 billion dollars in July, buoyed by rises in prices of US Treasuries, the Ministry of Finance said Friday.

The reserves at the end of August included $785.602 billion in securities and $125.265 billion in deposits. The rest includes IMF reserve positions, special drawing rights and gold.

Treasury prices were supported by strong interest from risk-averse investors fleeing the turbulence on global financial markets, stemming from the US subprime loan problem.

As a result, the yield on the 10-year note stood at 4.533 percent at the end of August, down from 4.743 percent at the end of July.

Bond prices move inversely to yields.

An official at the finance ministry said the increase in Japan's reserves was also because of higher coupon income from US bonds.

At the same time, the the weakening of the euro against the dollar deflated the dollar value of euro-denominated assets, negatively affecting the value of Japan's foreign exchange reserves, an official said.

The euro fell to 1.3630 dollars at the end of August from 1.3683 dollars in the previous month, according to data from the ministry.

Japan's forex reserves remain the second largest in the world, next to China, whose holdings reached 1.33 trillion dollars at the end of June, according to the latest available data from China's central bank.

Foreign exchange reserves consist of securities and deposits denominated in foreign currencies, plus International Monetary Fund reserves, IMF special drawing rights (SDRs) and gold.

At the end of August, Japan's foreign currency reserves totaled 910.867 billion dollars, IMF reserves stood at 1.490 billion dollars, SDRs at 2.917 billion dollars, gold at 16.533 billion dollars, and other foreign currency assets at 350 million dollars.

Japan's reserves are closely watched for evidence of how the country is managing its foreign currency holdings. Its actions are seen having a significant impact on currency exchange rates and global bond markets, particularly the US government bond market.

The biggest changes in Japan's forex reserves usually occur when authorities intervene in the currency market to prevent the yen from appreciating too much. Monetary authorities have not intervened since mid-March 2004.

The government does not disclose the currency breakdown of the external reserves. But historical data on Japan's currency intervention, which has mostly taken the form of dollar buying, suggests most of Tokyo's hefty reserves are in dollars.

Unlike some other countries which have been diversifying their forex reserves recently, Japan has been reluctant to significantly change the make-up of its reserves, fearing such action could disturb currency markets.

Top government spokesman Kaoru Yosano said on Friday that Japan needs to carefully manage its vast foreign reserves while paying heed to the stability of currency markets.

(1 US dollar = 115.37 yen)

Dutch's Inflation Rate Falls In August

Sep 6, 2007 - Dutch's consumer prices increased 1.1% year-over-year in August, which is 0.4% points lower than the 1.5% growth logged in July, the Central Bureau of Statistics reported Thursday. The CBS report stated that the rate dipped to this level for the first time in 2007.

In August, prices of fresh vegetables were down 3.8% compared to the same month a year ago, leading to a fall in the total consumer prices. In July, vegetables were highly expensive in comparison with July 2006.

The average price level of flowers and plants slid 1.2% year-over-year in August. The CBS report said, in July, prices of flowers and plants were one quarter higher than twelve months ago.

Prices of clothes increased 2.5% in August relative to the same month in 2006, but the price increase was more moderate than in July, which also had a downward effect on inflation.

The harmonized method consumer prices index or HICP also fell to 1.1% in August. In July, Dutch inflation according to the HICP was 1.4%.

ECB cuts 2007 euro zone growth forecast due to financial markets crisis

Sep 6, 2007 - The European Central Bank has cut its forecast for 2007 euro zone growth in the wake of the recent credit crunch in financial markets.

The ECB cut its forecast for 2007 GDP growth to 2.5 pct from 2.6 pct but held on to its projection for 2008 growth at 2.3 pct.

The ECB also kept its 2.0 pct inflation forecast for this year and next year.

The forecasts are the mid-point of ranges given by ECB president Jean-Claude Trichet at today's ECB news conference.

They are compiled by ECB staff and provide one input to the ECB governing council's assessment of price developments and risks to price stability, but they do not play a dominant role in the council's monetary policy decisions, the central bank says.

The ECB publishes its forecasts every three months. The previous forecasts were given on June 6.

The full ranges given by Trichet for the growth forecasts were 2.2-2.8 pct in 2007 and 1.8-2.8 pct in 2008. The ranges for the inflation forecasts were 1.9-2.1 pct in 2007 and 1.5-2.5 pct in 2008.

The forecasts are based on market expectations for interest rates and commodity prices.

The ECB said the forecasts therefore assume that three-month euribor interest rates will average 4.3 pct in 2007 and 4.5 pct in 2008, and that 10-year government bond yields will remain flat at their mid-August level of 4.5 pct.

Oil prices are assumed to average 68.1 usd per barrel on average this year and 71.9 usd in 2008.

The oil price assumptions reflect futures market prices and represent an upward revision from the ECB's June forecasts when it was assuming that oil prices would average 65.00 usd in 2007 and 69.90 usd in 2008.

Non-energy commodity prices are expected to increase 20.0 pct this year and 5.7 pct in 2008.

The forecasts also see the euro remaining at 1.37 usd over the next two years and that its trade-weighted index will be 3.1 pct higher this year than the 2006 average and 0.5 pct higher in 2008 compared to this year's average.

Iceland Keeps Key Interest Rate at Record 13.3%

Sep 6, 2007 - Iceland's central bank kept its benchmark interest rate unchanged at a record high, citing a deterioration in the short-term inflation outlook as labor shortages push up wages.

Sedlabanki left the rate at 13.3 percent after 18 increases in three years, the Reykjavik-based bank said today on its Web site. All eight economists in a Bloomberg survey expected unchanged rates.

The bank reiterated a forecast that rates won't start to fall until the first half of next year after wages grew an annual 8.3 percent in July, helping to keep inflation above the 2.5 percent target. Robust domestic demand, house-price increases and "buoyant" lending growth also prevented a rate cut, the bank said.

"The inflation outlook has worsened since the bank's last monetary bulletin in July, mostly because of tension in the labor market," said Asdis Kristjansdottir, an economist at Kaupthing Bank hf in Reykjavik. "The krona is also a little weaker and the housing market is not cooling down as fast as we'd expected."

The krona lost 0.3 percent against the euro and was trading at 88.33 as of 11:22 a.m. in Reykjavik. The krona shed 3.6 percent against the European single currency last month.

Deterioration

"The short-term inflation outlook has deteriorated somewhat since the last interest rate decision," the bank said in comments published on its Web site after the rate decision. "Long-term prospects are unchanged, however."

House prices grew an annual 10.1 percent in August, accelerating for a third month and suggesting record borrowing costs have yet to feed through to the property market. Unemployment dropped to a seven-year low of 0.9 percent in July, the country's Labor Board said on Aug. 13.

The inflation rate fell to an annual 3.4 percent in August, Statistics Iceland said on Aug. 13. Consumer prices will probably rise an annual 4.2 percent this month, according to Kaupthing Bank hf.

"The economy is not cooling down fast enough for the central bank to reach its target," Ragnhildur Jonsdottir, an economist at Glitnir Bank hf in Reykjavik, said before the announcement. "Wages are going up, the labor market is quite tight and all these factors contribute to more inflation."

Rates Outlook

Policy makers probably won't start cutting the key rate until March next year "at the earliest," Jonsdottir said. The rate will drop to 9.25 percent at the end of 2008, Glitnir estimates. At Kaupthing Bank, economists don't expect the bank to start lowering the rate until May, bringing it to 11.5 percent by the fourth quarter of next year.

"Indicators suggest that domestic demand is still robust," the central bank said. "The labor market remains tight, turnover and housing demand are buoyant and the pace of lending growth has accelerated."

The economy will probably grow 0.2 percent this year, after expanding 2.6 percent in 2006 and 7.2 percent in 2005, the central bank estimates.

Gross domestic product contracted 0.1 percent in the first quarter led by a 28 percent slump in investments as the construction of aluminum smelters draws to a halt and the plants become operational.

August Greek Inflation Remains Stable

Sep 6, 2007 - The Greek Consumer Price Index, CPI, grew 2.5% on an annual basis in August, the statistical office said Thursday. In July also, the increase in the CPI was 2.5% annually. The CPI gained 3.5% in the same month of the last year.

On a monthly basis, the CPI slipped 0.7% in August, while the CPI eased 0.8% in the previous month. The CPI dipped 0.7% in the same year ago period also. In the twelve months to August, the CPI advanced 2.7%, a little less than the growth of 3.5% in the prior comparable period.

Prices of food and non-alcoholic beverages increased 3.3% annually in August, slightly higher than the 2.7% rise in prices of food and non-alcoholic beverages in July. Prices of alcoholic beverages and tobacco climbed 6.7% in August, the same as in the prior month. Clothing and footwear prices advanced an annul 4.1%, after gaining 3.5% in the last month.

In August, housing prices moved up 1.9% year-on-year, a tad less than the 2.1% expansion in housing prices in the earlier month. Transport prices slipped 1% in August, after sliding 0.2% in the previous month. Communication prices gained 1% in August, equal to the rise in communication prices in July.

On a monthly basis, clothing and footwear prices slumped 7.2% in August, while housing prices gained 0.5%. Transport prices sank 1.2% in August, while communication prices remained unchanged.

BoE holds rates at 5.75 pct, sees CPI at or below target in coming months

Sep 6, 2007 - The Bank of England's rate-setting Monetary Policy Committee has kept its official interest rate unchanged at 5.75 pct for the second month running and issued its first statement to an unchanged decision for more than eight years in order to address the turmoil in financial markets over the last few weeks.

The BoE said it is too early to tell how the turmoil in financial markets will affect the availability of credit to companies and households, adding that it will monitor closely developments in credit markets.

"It is too soon to tell how far the disruption in financial markets will impair the availability of credit to companies and households," it said.

"As stated in its August Inflation Report, the MPC is monitoring closely the evolution of both credit spreads and the quantities of credit extended, alongside all other data relevant to the outlook for inflation," it added.

On inflation, the BoE noted that the annual CPI rate fell back below its 2.0 pct target to 1.9 pct in July and may remain around, or a little below the 2 pct target for the next few months.

It said pay pressures remain muted and noted tentative signs of a slowdown in consumer spending.

However, the BoE said the recent solid pace of output growth has been sustained and that the margin of spare capacity appears limited. Indicators of pricing pressure also remain somewhat elevated, it added.

"Against that background, the committee judged that no change in Bank Rate was necessary at this meeting to keep inflation on track to meet the target in the medium term", it concluded.

This was the first time the BoE issued a statement on an unchanged rate decision since May 1999, and only the third time since it gained independence in 1997.

The decision was fully anticipated, with none of the 36 analysts polled by Thomson Financial News expecting the Bank to change borrowing costs until it can assess the impact of the turbulence in the financial markets.

Looking forward the future path of interest rates is now very unclear. The August Inflation Report indicated that one more interest rate rise would be needed in the coming months to bring the annual rate of CPI inflation back to the Bank's 2.0 pct target over the medium term.

However since then the turmoil in the credit markets has pushed market rates significantly above the base rate, and figures revealed the fall in annual CPI Inflation to below the BoE's target.

This has forced many analysts to change their forecasts. Now 11 out of 35 economists expect rates to hit 6.00 pct by the end of the year, compared to 24 out of 35 at the start of last month.

"More challenging financial market conditions present downside risks to the outlook, although recent data releases provide comfort that the UK economy entered this turbulent period on a relatively strong footing," said Andrew McLaughlin, chief economist at the Royal Bank of Scotland.

The markets will be looking for further guidance when the minutes to today's meeting are published on Wednesday, September 19.

China raises bank reserve requirements to slow credit growth

Sep 6, 2007 - China's central bank said it will raise the reserve requirement on bank deposits by 0.5 percentage points in a move to control rapidly expanding bank credit and money supply.

The People's Bank of China said in a brief statement on its website that the increase takes effect on September 25.

It is the seventh increase this year, bringing the reserve ratio to 12.5 pct for most banks.

China has been struggling to control a rapid expansion in bank lending, which it fears is fuelling investment and adding to inflationary pressure.

The central bank has already raised interest rates four times this year in an effort to check an expansion in bank credits. But outstanding loans were up 16.6 pct year-on-year as of the end of July, while the broad M2 money supply was up 18.5 pct.

In July, China's consumer price index rose 5.6 pct year-on-year, its highest monthly rate in over a decade, with senior government officials predicting August figures to be even higher.

The central bank has also been forced to soak up or sterilize funds entering the banking system as the nation builds up a growing trade surplus. China had a trade surplus of 136.82 bln usd in the first seven months of the year.

Analysts noted that the People's Bank of China needs to respond to maturing short term paper that it had previously issued to soak up liquidity in the banking system.

"The People's Bank of China is forced to hike reserve ratios because of 837 bln yuan in (central bank) paper maturing in the next two months," said Logan Wright, analyst at Stone & McCarthy Associates, a research firm affiliated with XFN-Asia.

Wright estimates the central bank's latest move will freeze 185 to 190 bln yuan within the banking system.

(1 usd = 7.6 yuan)

Bank of Canada leaves key overnight rate unchanged at 4.50 pct

Sep 5, 2007 - The Bank of Canada said it has left its key overnight interest rate unchanged at 4.50 pct.

The decision had been widely expected given the recent financial market turmoil, in contrast to forecasts a few weeks back that the central bank would raise rates by a quarter point.

In its accompanying statement, the BoC said the recent market uncertainty could now serve to dampen domestic demand, which it said had remained "robust", buoyed by "a continuing strong labour market and higher-than-expected increases in home sales and prices".

"Recent developments in financial markets have led to some tightening of credit conditions for Canadian borrowers, which should temper growth in domestic demand," it said.

The Bank said it will continue to closely monitor evolving economic and financial developments.

Canadian total and core annual inflation, at 2.2 and 2.3 pct respectively, has continued to be above the Bank's inflation target but generally in line with its forecasts. At the same time, the pace of economic growth in the first half of the year was above the Bank's expectations, it said.

"It now appears that the Canadian economy is operating further above its production potential than was estimated in July," the BoC said in an accompanying statement.

The BoC said there are "significant upside and downside risks" to the inflation outlook. On the upside, Canadian household demand could be stronger than anticipated, while on the downside the downturn in the US housing sector could become more severe and spill over into the broader US economy.

It now appears that the US housing market slowdown will be "more pronounced and protracted", exacerbated by the turmoil on financial markets.

On balance, this "implies weaker demand for Canadian exports" than had been assumed at the time of the July Monetary Policy Report, it said.

The BoC is tasked with keeping inflation at the midpoint of its 1-3 pct target.

Brazil cuts Selic rate to 11.25 pct as prices rise

Sep 5, 2007 - Brazil's central bank lowered its benchmark lending rate on Wednesday to 11.25 percent from 11.5 percent, the smallest cut since April as inflation accelerates and the economy gains steam.

The bank's monetary policy committee, known as Copom, voted unanimously to reduce the so-called Selic rate, trimming the size of rate cuts after two consecutive reductions of 50 basis points.

"The Copom examined the macroeconomic scenario and decided that at this moment, the risks for future inflation still warranted additional monetary stimulus," the bank said in a statement explaining its decision.

"The committee will closely monitor the development of the macroeconomic scenario until its next meeting to then define the next steps in its monetary policy strategy."

Policymakers next meet to decide on rates on Oct. 16-17.

The cut was expected by all 20 economists in a Reuters poll.

The bank has slashed the Selic by 8.5 percentage points since September 2005, cutting lending rates 18 consecutive times in Brazil's longest-ever monetary easing cycle.

Consumer prices have risen every month since April on an annual basis as prices for food items surge.

CAREFUL STEPS

The IPCA inflation index, which the central bank uses to set interest rates, rose 3.95 percent in the 12-month period through mid-August, the highest annual rate since a 3.97 percent gain in July 2006. The index rose 3 percent in April, then quickened to 3.18 percent in May, 3.69 percent in June and 3.74 percent in July.

Brazil's inflation is running below the central bank's target of 4.5 percent. Still, some economists have argued policy makers needed to trim the size of rate cuts as economic growth accelerates to keep inflation at bay.

"The Copom did what was expected given the faster economic activity, the increase in inflation and as the international scenario is now more uncertain," said Alexandre Mathias, chief economist at Unibanco Asset in Sao Paulo. "It will have to evaluate its next steps very carefully."

The interest rate decisions have shown a clear division among policy makers, with a 4-3 split vote in April, 5-2 in June and 4-3 in July. The unanimous vote on Wednesday signaled the bank may soon stop cutting rates altogether, said Octavio de Barros, director of economic research at Bradesco.

"After a long period of dissension, the unanimous vote confirms the central bank is united," Barros said. "This was most likely the last cut in the Selic this year... but I don't rule out one more cut."

The bank had already said in the minutes of its July meeting that faster growth would require it to be especially cautious about future cuts. Since the last meeting, indicators showed faster growth and a surge in consumer prices.

Of the 13 economists in the Reuters poll that gave forecasts for Brazil's interest rates for the rest of the year, nine expect the bank will trim the Selic by a quarter percentage point again in October, while four expect policy makers will keep rates unchanged.

Philippine August inflation slows; targets met

Sep 5, 2007 - Philippine consumer prices rose at a slower pace of 2.4 per cent in August from 2.6 per cent the previous month, with the government on track to meet its inflation targets, officials said Wednesday.

The lower inflation rate was due to the slower annual price hikes of all the commodity groups, except for clothing, the National Statistics Office said.

Central bank governor Amando Tetangco said with the benign figure in August, the Philippines was on track to meet its target of containing inflation to between 4 and 5 per cent for the whole year.

Government, however, would remain vigilant on 'risks to guide our conduct of monetary policy going forward'.

'Our neutral monetary policy is bolstered by moderating risks from liquidity growth and adverse weather conditions,' he said.

The NSO said Inflation for food alone slid to 2.5 per cent from 2.8 per cent in July. Inflation for fuel, light and water group slowed to 5.1 per cent from 5.3 per cent.

The low inflation figure was announced just days after government boasted the economy had expanded 7.5 per cent year-on-year in the second quarter, the fastest growth clip in two decades.

President Gloria Arroyo on Tuesday said sub-prime woes that has wreaked havoc in world markets would likely not affect Philippine growth.

Taiwan Aug CPI up 1.59 pct yr-on-yr vs 0.34 pct fall in July

Sep 5, 2007 - Taiwan's consumer price index in August was up 1.59 per cent year-on-year due to price hikes in farm and fishery products, the government said on Wednesday.

The CPI was also up a seasonally adjusted 0.31 per cent month-on-month at 106.40, the Directorate General of Budget, Accounting and Statistics (DGBAS) said.

The August CPI posted the largest year-on-year increase in six months, after a hike of 1.75 per cent in February, it said.

'Because of typhoons in August, vegetable and fruit prices rose by 30 per cent and 10 per cent year-on-year, respectively,' said Wu Chung-ming, a section chief with the DGBAS.

The August core price index, which excludes prices of fresh vegetables/fruits, fishery products and energy, was up 1.59 per cent from a year earlier and up 0.15 per cent from July.

The core price index in August also posted the biggest year-on-year jump in six months, after a 1.66 per cent increase in February, the DGBAS said.

The wholesale price index in August rose 3.57 per cent year-on-year and it was up a seasonally adjusted 0.01 per cent month-on-month.

RBA Leaves Key Interest Rate Unchanged At 6.5%

Sep 5, 2007 - In a widely anticipated move, the Reserve Bank of Australia announced on Wednesday that it is maintaining its benchmark interest rate at 6.50%. At its August meeting, the central bank had increased its key overnight cash rate target by 25 basis points to an eleven-year high of 6.50%.

Some analysts speculate another rate hike before the year- end amid expectations that strong economic growth will fuel inflationary pressure. Australia's economy expanded a faster-than-expected 0.9% in the second quarter on a sequential basis, and logged a solid 4.3% year-over-year growth.

The growth was driven by a surge in business investment, which climbed 4.5% and contributed 0.7 percentage points to GDP. The Australian Bureau of Statistics said on Tuesday, that private business investment was pushed mainly by a 5.9% increase in new machinery and equipment, while new engineering construction rose 6.6% from the previous quarter.

In its latest quarterly statement of monetary policy released last month, the central bank, said that businesses have been reporting their highest levels of capacity utilization since the late 1980s. Despite the three interest rates hikes last year, the demand for finance strengthened in the first half of 2007, particularly in the business sector, the bank observed.

As a result unemployment in recent months has reached a generational low, the report said. The bank noted that high levels of business investment could contribute to the growth of productive capacity over time. However, it also raised some concern that the higher-than-average pace may further add to capacity pressures in the near term.

Although, wages did not rise significantly in recent months, except in construction and mining, due to scarcity of labor in those sectors, the bank said that the recent prices data indicated a pick-up in inflation.

The quarterly core inflation measures rebounded strongly from their low readings of the earlier two quarters. The core inflation rate rose to 2.6% from 2.5% in the earlier quarter. The trimmed mean inflation was 2.6% up from 2.3%, while weighted median inflation rose to 2.8% from 2.5% over the same period.

Australia's annual inflation stood at 2.9% in August after touching 3.0% in the prior month, according to a survey published by TD Securities and the Melbourne Institute on Monday. On a monthly basis, inflation rose 0.5% in August following a 0.6% increase in July.

Last month, the central bank revised up its inflation outlook of 2007 to 3.0% from its earlier forecast of 2.5%. It expected the underlying inflation to stay near the top of the target range of 2.5 to 3.0% in 2008.

The RBA Governor Glenn Stevens, while giving the customary semi annual testimony before the House of Representatives Standing Committee said on August 17, that the June quarter CPI data showed some pick-up in inflation, which with a stronger growth outlook indicated a higher path for inflation for another one to two years.

"The judgment we reached was that the risk of unnecessarily damaging growth with a modest rise in interest rates was small, whereas the cost of not responding to a deterioration in the outlook for inflation could well, in the longer term, be substantial," the governor said.

Picking cue from his comments a section of market believes that a further rise in the interest rate before the year-end looked firm. Analysts believe that the central bank's future policy stance depends on the degree of impact the U.S. subprime crisis could have on the global financial markets and domestic growth. Additionally, it is believed that any monetary policy tightening could be opposed by the government ahead of the elections, which is scheduled to be held later this year.

Malaysia confident of 6% GDP growth target

Sep 4, 2007 - Malaysia is confident of reaching its economic growth target of 6 per cent for this year, Second Finance Minister Nor Mohamed Yakcop said on Tuesday.

'We have the flexibility, in the context of any slowdown in the international environment. We have the flexibility to keep the momentum of growth in the economy,' he said.

Some economists have raised doubts about the government's target, citing weaker export demand, but strong domestic demand helped the country post better-than-expected growth in gross domestic product for the second quarter.

Last week, Malaysia reported second-quarter growth of 5.7 per cent from a year earlier.

Exports fall

Malaysian exports fell 0.02 per cent in July from a year ago, their second straight annual drop, on weaker global demand for electronics, official data showed on Tuesday.

Imports, about three-quarters of which are used to make exports, rose 2.5 per cent in July from a year earlier.

The trade surplus narrowed to RM7.98 billion (US$2.28 billion) in July from 9.04 billion ringgit a year earlier.

Swiss Economic Growth Remains Strong In Q2

Sep 4, 2007 - The Swiss economy remained on track to achieve robust expansion in the second quarter, official data indicated Tuesday. Higher consumer spending, investment in software and equipment as well as a strong trade balance drove growth in the second quarter.

A report from the Berne-based State Secretariat for Economic Affairs or SECO showed that the Gross Domestic Product or GDP rose 0.7% sequentially in real terms in the second quarter, logging the same pace as in the previous quarter. The quarterly growth matched economists' expectations. Initially, the first-quarter sequential growth was estimated at 0.8%.

On an annual basis, the mountain economy grew 2.8% in the second quarter, slightly accelerating from a revised 2.7% witnessed in the first quarter. The first-quarter annual growth underwent strong upward revision from the 2.4% initially recorded. Economists had expected the growth rate to hold steady at 2.4% in the second quarter.

Household spending eased to 0.5% in the second quarter from the 0.7% seen in the first quarter. Significant rise in spending was witnessed in healthcare, furniture, communications and financial and insurance services.

The Swiss investment bank UBS said recently that its Consumption Indicator is showing that Swiss consumer spending is still very buoyant. UBS noted that outlook for consumer spending is upbeat amid the job market recovery. The bank expects real private consumption growth of 2.5% in 2007, following an increase of 1.9% in 2006.

Investment grew 2.6% quarter-on-quarter led by a 7.6% enhancement in outlay in equipment and software. Meanwhile, investment in the construction sector contracted 3.7%.

In the second quarter, export growth moderated to 0.5% from the 2.5% jump seen in the previous quarter. The slow down was blamed on a 0.5% decline in overall exports including valuables. Excluding valuables, overall exports rose 0.9%. Services exports registered a robust growth of 3.1%.

Imports climbed 0.9% in the second quarter, with both goods as well as services imports rising 0.9%.

Government data showed that Swiss trade surplus was 1.57 billion francs in July, slightly down from the 1.65 billion francs recorded in the prior month.

On the production side, the sector dominated by industry revealed a value addition of 1.2% during the quarter. Hospitality industry, transport and communications as well as the financial market services sector had a 1.2% rise in value addition during the second quarter.

Meanwhile, the value added in the construction sector dropped 1.5%. Declines were also seen in the public services and agricultural sectors.

The GDP Deflator, a measure of inflationary pressures, rose 1% year-over-year in the second quarter, matching the pace seen in the previous three months.

In 2006, the Swiss economy grew 3.2%, much stronger than the 2.4% growth recorded in 2005. In June, the SECO raised its GDP growth forecast for 2007 to 2.3% from 2%. The SECO also revised up the 2008 growth projection to 1.9% from 1.7%.

The Swiss bank Credit Suisse forecasts economic growth at 2.2% for 2007 and is expected to slow to 1.9% in 2008. The bank expects jobless rate to remain steady at 2.8% in both the years. The UBS sees growth of 2.6% in 2007 and 2.3% in 2008.

Elsewhere, the Swiss National Bank or SNB has voiced concerns over the impact of the recent turmoil in financial markets, following the U.S. subprime rout. The central bank sees uncertainty in the growth momentum in the Swiss economy during the second half of the year.

The central bank is set to decide on interest rates in September. Latest data showed that annual inflation slowed to 0.4% in August from the 0.7% seen in the previous month. Slowing inflation coupled with the market turbulence is likely to be reason enough for the central bank to stay pat on interest in September. In June, the SNB raised its key interest rate to 2.5% from 2.25%.

Czech July foreign trade deficit dwindles year on year

Sep 4, 2007 - The Czech foreign trade deficit for July was 0.7 bln crowns, due to the negative balance of trade with semi-manufactured goods and materials, data published by the Czech Statistical Office (CSU) showed today.

However it also showed that over the last twelve months, the foreign trade balance is in surplus.

It is the first monthly foreign trade deficit this year - though the July balance has regularly been in deficit since 1993, the CSU said.

Compared with July 2006 the deficit is 2.7 bln crowns smaller, thanks to a growing surplus in export of cars and machinery, which rose by 19.7 pct year-on-year, an increase of 2.1 bln crowns, the data showed.

The balance for the last twelve months reached a surplus of 67.1 bln crowns, up by 36.7 bln compared with the last twelve-month period, the data showed.

Overall exports grew 20.7 pct year-on-year and imports rose 18.7 pct. In a month-on-month comparison, exports grew 4.8 pct and imports rose 1.9 pct.

"The deficit is due to the growth in the price of oil as well as the seasonal deterioration that takes place during summer holidays," said David Navratil, an analyst at Ceska Sporitelna.

Slovakia's Q2 GDP grows 9.4 pct, revised up from 9.2 pct

Sep 4, 2007 - Slovakia recorded GDP growth of 9.4 pct for the second quarter of this year, the Statistics Office of the Slovak Republic said, revising upwards its earlier estimate of 9.2 pct.

In the same period last year, GDP growth reached 6.7 pct.

For the first half of 2007, growth stood at 9.2 pct, against 6.7 pct for the first six months of 2006, the Statistics Office added.

Real GDP growth is expected to come to 8.8 pct for the full year. This information comes from the latest prognosis of macroeconomic development. The Statistics Office has not changed its estimates of GDP formation in absolute terms either, which should reach 1,830.1 bln Slovak koruna by the end of this year.

The Statistics Office is positive about inflation developments, reducing its previous estimate on average inflation for the whole of 2007 by 0.2 percentage points to 2.5 pct.

On the other hand, unemployment should slightly worsen, it said.

The jobless rate should reach 10.8 pct, 0.2 percentage points above the office's previous estimate three months ago.

(SKK 1 = EUR 0.0296)

Euro zone Q2 GDP up 0.3 pct from Q1, unchanged vs provisional estimate

Sep 4, 2007 - Euro zone GDP grew 0.3 pct in the second quarter from the first, and was up 2.5 pct year-on-year, EU statistics office Eurostat said.

The figures are unchanged from Eurostat's provisional estimates, published on Aug 14.

Eurostat gave a breakdown of second quarter GDP for the first time.

It said household consumption rose 0.5 pct quarter-on-quarter, investment fell 0.5 pct and government spending rose 0.1 pct.

Household consumption made a positive contribution of 0.3 percentage points to the quarterly GDP figure, while investment made a contribution of 0.0 points.

Changes in inventories made a negative contribution of 0.1 points and government spending accounted for 0.0 percentage points of the GDP increase.

Meanwhile, the European Commission left its growth forecasts unchanged for growth in the third, fourth and first quarters.

The commission forecasts growth of 0.3-0.8 pct for the third quarter, 0.2-0.8 pct for the fourth quarter, and 0.2-0.9 pct for the first quarter of 2008.

Indonesia inflation rises ahead of Ramadan

Sep 4, 2007 - Indonesia's inflation accelerated in August as a weaker currency pushed up import costs and Muslims increased spending in preparation for the holy month of Ramadan.

Consumer prices rose 6.5 per cent from a year earlier, following a 6.1 per cent gain in July, the Central Statistics Bureau said in Jakarta yesterday. Economists were expecting a 6.3 per cent increase. Prices were up 0.8 per cent from a month ago.

Bank Indonesia's senior deputy governor Miranda Goeltom said last week that instability in global markets caused by concerns about US housing-loan defaults meant it was 'not a good time' to cut borrowing costs.

The central bank, which has reduced interest rates six times this year amid easing inflation, next meets in three days to discuss monetary policy.

'For now, they will likely be constrained by the recent pressure on the rupiah amid ongoing global financial turmoil,' said David Cohen, an economist at Action Economics in Singapore. The central bank may still reduce its benchmark rate by a quarter-point before the end of the year if inflation pressures ease, he added.

The rupiah has declined 4.2 per cent in the past two months, the worst performer among Asia's 10 most-traded currencies, amid waning demand for emerging-market assets. A weaker currency spurs inflation by making imports more expensive.

Bank Indonesia last month kept its reference rate for bill sales unchanged at 8.25 per cent, after 13 cuts since May 2006. The decision was expected by economists.

Inflation is also quickening as consumers in the world's most populous Islamic nation stocked up on food items before the holy month of Ramadan, when families also buy clothes and travel from cities back to their home villages. More than four-fifths of Indonesia's 235 million people are Muslims.

Ramadan starts on Sept 13 in Indonesia this year. Indonesia's government expects the cost of rice, vegetable oils and meat to rise as much as 10 per cent during Ramadan, Trade Minister Mari Pangestu said on Aug 22. Demand for some food staples may gain by up to 20 per cent, she said.

Core inflation, which excludes government-enforced price increases, was 5.7 per cent in August, compared with 5.8 per cent in July, according to yesterday's report. That was less than the 5.8 per cent expected by economists in the Bloomberg survey.

S. Korean Money Supply Growth Eases In July

Sep 4, 2007 - South Korea's L money supply grew at a slower pace of 12.1% annually in July, the Bank of Korea said Tuesday. The growth rate slowed from the 12.7% recorded in the prior month. The broad liquidity amounted to 1,951.4 trillion won at the end of July. On a monthly basis, money supply improved 0.1%.

Malaysian Trade Surplus Narrows On Higher Imports In July

Sep 4, 2007 - The Malaysian trade surplus narrowed on higher imports in July, official data indicated Tuesday.

The trade surplus narrowed to 7.98 billion ringgit in July from 8.78 billion ringgit recorded in June, the Department of Statistics said. The report noted that the trade balance showed surplus for the 117th straight month since November 1997.

Imports climbed 5.3% to 42.54 billion ringgit from June. On an annual basis, imports were up 2.5%. Imports of intermediate goods were valued at 30.47 billion ringgit and capital goods imports amounted to 6.01 billion ringgit.

Exports grew 2.7% from the prior month on account of significant growth in exports of palm oil, liquefied natural gas, crude petroleum and electrical and electronic products. Electrical and electronic products accounted for 43.3% of total exports were valued at 21.85 billion ringgit. Meanwhile, overseas shipments dropped 0.02% annually compared to a 0.1% fall registered in the prior month. Economists were looking for an annual growth of 0.6% in exports. ASEAN, the U.S., the European Union, Japan, the People's Republic of China were the major export markets in July. Exports to ASEAN climbed 2.9%, while exports to the U.S advanced 1.5% from June.

Total trade amounted to 93.06 billion ringgit in July, up 3.9% from the prior month.

During the first seven months of 2007, exports totaled 333.65 billion ringgit and imports amounted to 281.99 billion ringgit, resulting in a trade surplus of 51.66 billion ringgit.

Australia's Q2 GDP Expands More Than Expected

Sep 4, 2007 - Australia's second quarter gross domestic product rose 0.9% sequentially on the back of robust business investment, the Australian Bureau of Statistics said Tuesday. The growth topped the expected 0.6% growth despite trailing the 1.6% pace in the first quarter. Annually, the economy expanded 4.3% in the second quarter after climbing 3.8% in the previous quarter.

The bureau said that non-farm GDP increased 1.2% sequentially in the second quarter. In both trend and seasonally adjusted terms, non-farm GDP increased 5.2% from last year, which is the highest year-over-year trend growth since December quarter of 1994.

In seasonally adjusted terms, final consumption expenditure rose 0.5% from the first quarter and advanced 3.4% from last year. The main contributors to the increase in expenditure on GDP were private business investment which rose 4.5% in seasonally adjusted terms. The growth contributed 0.7 percentage points to GDP in the second quarter.

Growth in private business investment was mainly due to a 5.9% increase in new machinery and equipment. New engineering construction rose 6.6% and total intangible fixed assets rose 8.1% from the previous quarter. Dwelling investment fell 0.2% sequentially impacted by a 0.7% fall in new and used dwellings.

Household final consumption expenditure rose 1.0% sequentially contributing 0.3 percentage points to GDP. Among household consumption expenditures, the main contributors to growth were rent & other dwelling services and recreation and cultural expenditure.

However, private non-farm inventories and imports dragged GDP, with negative contributions of 0.5 percentage and 0.3 percentage points respectively in the June quarter.

The report said that total exports of goods and services increased 0.8% from the previous quarter. Exports of goods rose 0.9%, driven by a 21.0% rise in non-monetary gold exports. However, exports of rural goods declined.

Meanwhile, total imports of goods and services rose 1.1% sequentially in the second quarter. Imports of goods climbed 0.5%, mainly due to a 3.0% increase in imports of Capital goods.

In seasonally adjusted terms, net exports detracted 0.2 percentage point, down from the 0.4 percentage points detraction in the previous quarter.

Australia's terms of trade representing the relationship between the prices of exports and imports fell a seasonally adjusted 0.1% in the second quarter, marking the first fall since the December quarter of 2001. An increase in the terms of trade reflects an increase in export prices or a faster rate of export growth than the imports.

Business Services Up

Business services sector rose 2.5% sequentially, led by property and business services, which contributed 0.3 percentage points to growth, while finance and insurance provided 0.2 percentage points.

Agriculture, forestry and fishing fell 8.2% from the previous quarter, contributing a negative 0.2 percentage point to GDP growth.

Mining activity rose 0.3% sequentially in the second quarter, with stronger growth in services to mining offsetting a small fall in the output of mineral products.

Manufacturing recorded a 0.5% increase from the prior quarter, boosted by metal products and Petroleum, coal & chemicals. In contrast, other manufacturing industries textiles, clothing and footwear, food, beverages & tobacco and machinery & equipment slipped in the June quarter.

However, transport and storage increased 1.2%, driven by solid performances from road transport and air & Space, which rose 2.9% and 2.3%, respectively.

Govt. Welcomes Growth

Meanwhile, Treasurer Peter Costello said that growth in the June quarter was remarkable amid a severe downturn in Australia's agricultural production.

Costello said the farm sector of the Australian economy was still suffering "very badly" due to drought.

"So that makes the overall growth even more remarkable that our economy grew as it did, at 4.3%, notwithstanding a very severe drought and a very severe downturn in farm production," Costello said.

Costello also said that the factors such as sub-prime mortgage crisis in the United States and local risks such as the equine influenza outbreak, instability in equity markets and interest markets affected the economy and will continue to have an effect.

But the Treasurer said the surge in investment was adding to the capacity of the economy. The 4.3% growth recorded by Australia was faster than that of any of the G7 countries and demonstrated the effect of a surge in investment, Costello added.

RBA To Announce Policy Decision

The Reserve bank of Australia' board is scheduled to meet on Tuesday for its next policy decision meeting. The decision will be announced on Wednesday morning.

On August 8, the central bank raised its key overnight cash rate target by 25 basis points to a eleven-year high of 6.50%, as a strong economy tilted the risks to inflation to the upside putting pressure on the bank. This was the first hike of the year after a nine-month break.

However, majority of analysts, expect the central bank to leave the interest rates unchanged this time, although there was concern about rising price pressure in recent months.

Australia's annual inflation stood at 2.9% in August after touching 3.0% in the prior month, according to a survey published by TD Securities and the Melbourne Institute on Monday. On a monthly basis, inflation rose 0.5% in August following a 0.6% increase in July.

The market believe that an interest rate increase now will worsen the liquidity crunch in the financial market, which is struggling to come out of the impact of the US subprime crisis.

New Zealand 2008 Economic Growth Forecast Rev. Down To 1.3%, Sees Higher Inflation

Sep 4, 2007 - The New Zealand economic growth forecast was revised down to 1.3% in the year to March 2008, the latest report from the New Zealand Institute of Economic Research - NZIER indicated Tuesday. Annual average growth rate was initially estimated at 2.1% in the year to March 2008. The institute predicts 1.5% growth in the year to March 2009. The lower growth expectation was largely due to slowdown in private consumption growth.

The annual growth rate over the first five years ended March 2007 was 3.4%. The institute sees the second half of 2007 and the first half of 2008 to be the period of slowest growth since 2000-01. The growth would rise gradually to 3.6% by the March 2011.

The report added that on per head of population basis, growth would be below 1% in the next two years and 0.4% in the March 2008. Further, the growth would be 0.7% in the March 2009 year.

NZIER forecasts that consumer price inflation would rise sharply later this year from its current rate of 2.0%. Inflation would breach the central banks' medium term target range of 1%-3% in the December quarter and peak at 3.5% in March 2008. The inflation would not return to be within the band until the end of the 2008 calendar year.

The report added that the Reserve Bank raised the Official Cash Rate by 1.0% to 8.25%. The institute said, “The Reserve Bank is in a very difficult position with the inflation outlook not good, the economy already growing slowly and its main policy instrument, interest rates, already at a level that should be significantly contractionary.”

Brazil's trade surplus rises 5.6 pct in August

Sep 3, 2007 - Brazil's trade surplus rose 5.6 percent in August from July, government data showed on Monday, as imports grew at a slower pace after the country's currency tumbled during global market turmoil last month.

The trade surplus rose to $3.54 billion in August from $3.35 billion in July. The result was lower than the $4.55 billion surplus in August 2006 and higher than a $3.1 billion median estimate of 11 economists in a Reuters survey. The estimates ranged from $3.05 billion to $3.7 billion.

Exports rose 6.9 percent to $15.10 billion in August from July, slightly down from the 7.6 percent expansion in July from June. Imports grew 7.4 percent to $11.57 billion in August, half the growth rate for the month-on-month expansion in July, when imports rose 15.8 percent.

Brazil's currency, the real , slumped 4.3 percent in August, posting its biggest decline in 15 months because of the market volatility caused by concerns over a global credit crunch. The weaker currency made it more expensive to buy goods from abroad.

Brazil, Latin America's largest economy, posted a record trade surplus of $46.08 billion in 2006.

S. Korean Aug. Trade Surplus At US$1.5 Bln, Exports Up 14.4% Annually

Sep 3, 2007 - South Korean exports advanced 14.4% annually in August, a government report showed Monday. Economists were looking for an annual growth of 14.7%. Exports amounted to 31.2 billion dollars in August. Imports advanced 9.8% to 29.7 billion dollars, resulting in a trade surplus of 1.5 billion dollars.

S. Korean Aug. CPI Up 2.0% Annually, Rises 0.1% On Month

Sep 3, 2007 - South Korea's consumer prices climbed 2.0% year-over-year in August, the National Statistical Office said Monday. The number came in weaker than the expected rise of 2.3%. On a monthly basis, consumer prices were up 0.1%.

Thailand's Economic Growth Accelerates In Q2

Sep 3, 2007 - The Thai economic growth accelerated on exports in the second quarter, government data showed Monday.

The economy grew 4.4% year-over-year in the second quarter, larger than a revised 4.2% growth registered in the prior quarter, the Office of the National Economic and Social Development Board said. The growth number for the first quarter was revised down from the initial estimate of 4.3%. Economists were looking for an annual growth of 4.1% in the second quarter. On a sequential basis, the GDP growth stood at a seasonally adjusted 1.3%, slightly larger than the 1.2% in the first quarter.

During the first half of the year, economy expanded 4.3%.

The report said although the exports growth slowed to 22.6% from 32.9% in the first quarter, net exports was the main contributor to the annual GDP growth.

Government expenditure surged 7.4% in the second quarter, while household consumption improved only by 0.9%, continuing its downward trend since the second quarter of 2006. Total investment moved up 0.2%, reversing a 1.5% decline in the previous quarter as public investment increased. Private investment slid 0.8%, while public investment growth climbed at a faster pace of 3.1%.

Agriculture production growth increased to 9.7% from the 3.3% growth seen in the prior quarter. Meanwhile, non-agricultural sector growth came in at 4.0%, smaller than the 4.3% rise recorded in the first quarter reflecting slowdowns in most major sectors.

Manufacturing improved at a slower pace of 4.4% compared to 4.6% in the prior quarter. This resulted from the slowdown in light industries as well as capital goods and high technology industries growth.

Meanwhile, mining and quarrying sector improved 5.6%, larger than the 1.1% growth seen in the first quarter. Construction sector grew 3.7% on the back of public sector construction. Wholesale and retail trade advanced 2.4%, due to an increase in agricultural products in the market.

Merchandise exports decelerated to 7.9% in the second quarter from the 8.5% seen in the first quarter. On the other hand, services receipts climbed 1.8%, larger than the 0.5% rise in the previous quarter. Merchandise imports were up 3.0% and service payments jumped 7.2% in the second quarter. The trade balance at current market prices showed a surplus of 51.4 billion baht.

S. Korea Revises Up Q2 Economic Growth

Sep 3, 2007 - The South Korean second quarter economic growth underwent upward revision, the latest official data indicated Monday. The economy expanded at its fastest pace in three and a half years in the second quarter, driven by robust exports as well as manufacturing and service sector growth.

The Bank of Korea revised up the sequential economic growth for the second quarter to 1.8% from the 1.7% initially estimated. The GDP growth accelerated from the 0.9% seen in the first quarter.

The real GDP improved 5.0% annually, revised up from the 4.9% estimate released on July 25. The economy expanded 4.0% in the first quarter and the fourth quarter of 2006. The central bank retained its GDP growth forecast at 4.5% for the whole year of 2007.

The manufacturing sector advanced 3.6% sequentially, reversing a 0.9% fall recorded in the first quarter. The growth was driven by the strength in semiconductors, industrial machinery, ships and automobile manufacturing.

Meanwhile, service sector growth climbed at a rate of 1.3% on account of strong growth in financial intermediation. The construction sector dropped 1.8% as both building construction and engineering declined from the prior quarter. Agriculture, forestry and fishing sector growth eased to 0.7% from the 1.8% growth in the first quarter.

Private consumption growth slowed to 0.8% from the 1.5% increase logged in the prior quarter. The central bank noted that the decline in expenditure on durables was partially offset by a gradual growth in non-durable spending. Facilities investment grew 3.4% from the previous quarter.

Exports of goods moved up 5.2% on higher exports of semi-conductors, industrial machinery and shipbuilding. This compares to a growth rate of 2.7% in the first quarter. The contribution of net exports to GDP growth was 0.3 percentage point, in contrast to a negative contribution of 0.8 percentage point in the prior quarter. On the other hand, contribution of domestic demand to GDP growth dipped to 0.9 percentage points from the 1.3 percentage points recorded in the prior quarter.

The real Gross National Income - GNI increased 2.2%, as net factor income from the rest of the world turned to rise. Annual GNI growth came in at 4.7%.

Separately, a government report showed that exports grew weaker than expected in August. Exports advanced 14.4% annually in August, while imports climbed 9.8%. Economists were looking for an annual growth of 14.7% in exports. Exports amounted to 31.2 billion US dollars and imports totaled 29.7 billion US dollars, resulting in a trade surplus of 1.5 billion US dollars. Exports to China increased 12.9% and shipments to the U.S. rose 3.3%.

Elsewhere, the National Statistical Office announced that the CPI annual inflation eased to 2.0% in August from a 2.5% rise seen in the prior month. The number came in weaker than the expected rise of 2.3%. The core inflation, excluding volatile items, remained at 2.3% annually in August. On a monthly basis, consumer prices were up 0.1%.

Meanwhile, the central bank is expected to hold key interest rate at 5.0% on its policy board meeting on September 7. In August, the Monetary Policy Committee of the Bank of Korea decided to raise the call rate target by 25 basis points to a six-year high of 5.0%. 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.

Czech state budget posts a surplus by end-Aug, compared with deficit last year

Sep 3, 2007 - The Czech Republic posted a budget surplus for the eight months to end-August, due to faster-than-expected inflow of income, the finance ministry said.

The January-August balance was in surplus by 22.23 bln crowns, compared with a 6.44 bln deficit last year.

Income for the year so far is 656.7 bln crowns, and state spending 634.4 bln crowns.

Indonesia yearend inflation target achievable despite high Aug CPI

Sep 3, 2007 - The government's yearend inflation target is still achievable despite the higher-than-expected inflation in August, Finance Minister Sri Mulyani Indrawati said Monday.

"The outlook for overall inflation is not going to be far away from the projection," she told reporters in parliament.

The government had initially projected a yearend inflation rate of 6.5 percent before recently revising it to 6.0 percent.

Indrawati said apart from trying to facilitate better distribution of goods, the government is also paying attention to the increase in the prices of kerosene and cooking oil.

But she did not elaborate.

Central Bureau of Statistics head Rusman Heriawan agrees with the view that the yearend inflation target is achievable. But the government must try to ensure that food supply is sufficient to meet rising demand, Heriawan said.

Food consumption normally picks up during the month-long Muslim Ramadhan fasting period which starts this month, as well as at the Eid-al Fitr celebrations next month.

"Year to date CPI now is at 3.58 percent. (This) means that the government needs to keep CPI at an average 0.60 percent over the next four months (to achieve the yearend target)," Heriawan said.

Consumer prices in August rose 0.75 percent from July and were up 6.51 percent from the previous year, driven by higher costs for education, fresh food and housing.

Analysts were expecting August CPI to have risen 6.15 to 6.4 percent from a year earlier, and to have advanced 0.3 to 0.63 percent from July.

Heriawan also blamed the cut in kerosene supply by PT Pertamina for the higher-than-expected August inflation.

Pertamina reduced kerosene supply as it began to replace the use of kerosene with liquefied petroleum gas (LPG).

Indonesia's poor families are still using heavily-subsidized kerosene for cooking.

Unlike other subsidized fuel products, the distribution of kerosene is undertaken by a third party, not by Pertamina. Therefore the price is still determined by supply and demand.

Hong Kong July retail sales up 14.2 pct by value on growth, tourism

Sep 3, 2007 - Hong Kong retail sales rose faster than expected, growing 14.2 percent in July from the year earlier to 21.3 billion Hong Kong dollars.

The rise was supported by strong economic growth and an increase in tourists, drawn in by activities linked to the 10th anniversary of the handover of the former British territory to China.

The growth in sales beat June's 14.3 percent increase and the consensus estimate of a 9.9 percent gain from economists polled by Thomson IFR.

"The growth momentum in the volume of retail sales remained vigorous and broad-based," a government spokesman said in a statement Monday. "This reflected the upbeat consumer sentiment on the back of robust economic fundamentals."

Gains in the stock market, rising wages, a falling jobless rate and the arrival of more tourists also helped boost sales of cars and electronic goods, the spokesman said.

The Hong Kong economy expanded 6.3 percent in the first half of this year from same period in 2006 and the government last month raised its full-year growth forecast to 5-6 percent from 4.5-5.5 percent.

Retail sales contribute about a fourth of Hong Kong's gross domestic product, said Dave Cohen, director of Asian economic forecasting at Asian Economics in Singpaore.

Tourist arrivals rose 12.3 percent in July from a year ago, according to the government. Visitors from mainland China, which account for 57 percent of the total, rose 16.2 percent.

"The improving unemployment rate and GDP growth in the first half is convincing consumers to spend in the period," said Paul Tang, chief economist at Bank of East Asia, who forecast a retail sales growth of 10 percent for July.

Hong Kong's jobless rate fell to 4.1 percent in May-July, down from 4.2 percent in April-June, the government said last month.

By volume, retail sales rose 12.1 percent in July from a year ago, above the 7.2 percent forecast in the IFR Thomson survey.

Sales of motor vehicles and parts increased 56 percent, the highest growth among the items monitored by the government. Sales of electronic goods and cameras rose 37.4 percent, while sales of jewellery, watches and other valuable gifts increased 20 percent, the government said.

"Retail sales will continue to boom and the outlook is bright for the Hong Kong economy," Cohen said. "This is supported by the strong tourist traffic coming from China and the expected investment from Chinese citizens in the stock market."

China on August 20 allowed residents to buy Hong Kong shares, though until now the plan has not yet been implemented.

Cohen expects retail sales by value to grow 10 percent this year, faster than 2006's 7.2 percent.

Bank of East Asia's Tang, however, expressed some caution.

"Concerns over a possible slowdown in the US economy could hurt sentiment going forward and possibly appear in the data sometime late this year or early next year," Tang said. "Consumer spending patterns may change around yearend if the US economy turns for the worse."

(1 US dollar = 7.80 Hong Kong dollars)

Czech govt sets 2008 public deficit target at 2.95 pct of GDP

Sep 3, 2007 - The 2008 proposal of the Czech state budget sets the public budget deficit target below 3 pct, and proposes gradual cuts to the deficit to 2010, the finance ministry said today.

In 2008 the deficit should reach 2.95 pct of gross domestic product (GDP), while in 2009 it should fall to 2.6 pct and in 2010 it should be at 2.3 pct, the ministry said.

The income of the 2008 state budget should reach 1,036.5 bln crowns, which is a 9.2 pct rise compared with 2007.

The budget expenditures are proposed at 1,107.3 bln crowns in 2008, up by 6.4 pct year on year.

The state debt is expected to reach 990.1 bln crowns at the end of 2008 or 26.1 pct of GDP, compared with 905.3 bln crowns, or 25.7 pct of GDP, expected in 2007.

Russia to raise FY GDP growth forecast to 7.2-7.4 pct from 6.5 pct

Sep 3, 2007 - Russia expects to raise its full year GDP growth forecast by the end of this month to 7.2-7.4 pct from its current 6.5 pct projection, Economic Development and Trade Minister German Gref said today, Interfax reported.

"There are no serious or global risks to the Russian economy," he noted.