US consumer spending up 0.6%; incomes rise 0.3%

Sep 28, 2007 - US consumer spending rose 0.6 per cent in August as Americans shrugged off credit and housing market turmoil, government data showed on Friday.

The Commerce Department report was better than the 0.4 per cent rise expected by Wall Street analysts and showed that a key driver of US economic activity remained strong.

Personal income however rose a more modest 0.3 per cent, slightly below expectations of a 0.4 per cent gain.

A key inflation gauge in the report known as the personal consumption expenditures price index fell 0.1 per cent in August, and shows a 1.8 per cent rise over the past 12 months.

Core inflation, which excludes volatile food and energy costs, rose 0.1 per cent in August and 1.8 per cent in the past year.

Real disposable incomes, which are inflation-adjusted and measure income after taxes, rose 0.4 per cent in August after rising 0.5 per cent in July.

The report suggested that consumer spending, which represents two-thirds of US economic activity, held up in August even as credit conditions tightened in the face of concerns about a wave of failures of sub-prime mortgages.

French Economic Growth Slows In Q2

Sep 28, 2007 - The French economic growth slowed to 0.3% sequentially in the second quarter, a revised report from the statistical office INSEE showed Friday. The report confirmed the preliminary estimate. The economy expanded 0.6% in the first quarter.

Household expenditure improved 0.6%, slightly larger than the 0.5% growth seen in the first quarter. Household expenditure contributed 0.3 point to GDP growth. Total gross fixed capital formation growth eased to 0.4%, contributing 0.1 point to GDP growth.

Exports climbed at a slower pace of 0.9% compared to 1.4% in the prior quarter. Meanwhile, imports were up 1.9%, following a 0.6% rise in the first quarter. The net foreign trade contributed minus 0.3 point to GDP growth. Inventory changes contributed 0.1 point to GDP growth, after showing minus 0.2 in the previous quarter.

Croatian Economic Growth Slowed to 6.6% on Spending

Sep 28, 2007 - Croatian economic growth slowed in the second quarter as consumers and the government curbed spending.

Gross domestic product rose an annual 6.6 percent in the quarter, the state statistical office said on its Web site today, exceeding a median estimate of 6 percent by four economists in a Bloomberg survey. The economy grew 7 percent in the first quarter, the fastest growth in more than four years.

"We expect a certain slowdown of economic activity's growth in the second half of the year," Zdeslav Santic, economist at Raiffeisenbank Austria d.d. Zagreb said in an e- mailed report. "However, the GDP growth for the whole of 2007 should be visibly higher than in the year before and we don't expect it to be lower than 5.5 percent."

Lower economic expansion, combined with rising inflation pressures and slower wage growth, may dampen chances for boosting living standards in the country with purchasing power of 55 percent of the European Union average.

The former Yugoslav republic, which was devastated by the Balkan civil wars of the 1990s, is ahead of Ukraine, Serbia and Turkey in negotiations to join the EU and the Adriatic Sea state aims to become a member in this decade.

Construction, Investment

Capital investments dropped to 5.8 percent in the second quarter of the year from 11.2 percent in the first, the office said. Construction grew 2.5 percent in the second three months of the year annually, compared with 7.6 percent in the first.

"Construction works are a significant part of capital investments, so their slowing contributed to a drop in investment, which had the slowest growth rate in two years," Santic said.

Personal spending growth slowed to 6.5 percent from 7.1 percent in the previous quarter and government spending to 2.7 percent from 2.8 percent in the period, it said.

Industrial output grew 7.1 percent on average in the second quarter, according to Bloomberg calculations, from 8 percent in the first three months, and slid to a 14-month-low of 2.8 percent in August.

Manufacturing Imports

Electrical equipment makers Ericsson Nikola Tesla and Koncar Elektroindustrija d.d., which had a 43 percent net income growth in the first half of the year, needed to import manufacturing goods for production, increasing the trade deficit to 36 billion kuna in the first six months of the year, up 10.4 percent from the same period in 2006.

The trade gap is the main contributor to the increase in the current-account deficit, which amounted to 2.04 billion euros in the first three months of 2007. The central bank will report the second quarter balance of payment details later today.

Retail sales growth slowed to 5.8 percent annually in the second three-month period from 7.7 percent in the first three months of the year. Average net wages were 2.8 percent higher in the period from 3.6 percent in the first quarter and gross wages grew 3.6 percent in the second quarter compared with 4.5 percent in the previous three months.

``We expect growth to slow in 2008 given a post election more neutral fiscal stance, fading of recent unsupportable retail dynamics and high import dependency of the economy,'' Hypo Group Alpe Adria bank said in a market report. It forecasts growth of 5.9 percent for 2007 and 5.2 percent in 2008.

Croatia, which is having parliamentary elections in November, had external debt of 30.4 billion euros in August, carried mainly by companies and corporate banks taking loans abroad to meet demand. The government in 2004 started borrowing money domestically and reduced its contribution in the foreign debt.

The economy grew 1.2 percent from the previous quarter, the office said. Growth was 4.8 percent in all of 2006.

Malaysian M3 Broad Money Increases In August

Sep 28, 2007 - Malaysia's broad money, or M3, grew at an annualized rate of 11.8% percent in August, Bank Negara Malaysia said Friday. In July, M3 increased by 13.4%.

The central bank data showed that the M3 expanded mainly on account of higher claims on the private sector, supported by higher loans extended, as well as the holdings of private debt securities by the banks.

At the same time, narrow money, or M1, increased 17.8% due to higher currency in circulation and placements of demand deposits.

The central bank said in a statement that the gross financing to the private sector remained strong amid robust growth in the banking system loan disbursements in August.

Also, major loan indicators for the business and household sectors continued positive growth through August.

Meanwhile, the net NPL ratio of banking institutions improved further to 3.6% in the month of August.

Mexico posts 300 mln peso fiscal deficit in August

Sep 28, 2007 - Mexico posted a fiscal deficit of 300 million pesos ($27.4 million) in August compared with a surplus the month before, the government said on Friday.

Budgeted income rose 9 percent over the year-ago period, mostly because of a 9.5 percent rise in tax income unrelated to oil sales, the government said.

Spending in August jumped 29.3 percent in real terms, with more money handed out for pensions, as well as investment in state-oil firm Pemex and agriculture.

In July, the government posted a fiscal surplus of 15.7 billion pesos.

Thai August exports rise 18.4% on year

Sep 28, 2007 - Thailand's exports rebounded strongly in August, rising 18.4 per cent from a year earlier as shipments to Asian and European markets surged, central bank data showed on Friday.

Economists polled by Reuters this week had forecast a 17.6 per cent increase in exports compared with a rise of 6.2 per cent in July.

August imports rose 12.1 per cent from a year earlier, the data showed, below expectations of a 13.9 per cent increase and compared with a 3.7 per cent rise in July.

Record exports of US$13.82 billion and record imports of US$12.85 billion produced an August trade surplus of US$973 million, above expectations of a US$700 million surplus.

August's current account surplus widened to US$735 million from US$367 million in July, but was below the US$900 million analysts had expected.

Industrial production in August rose higher-than-expected 10.2 per cent from a year earlier after a revised 7.5 per cent growth in July and 4.1 per cent in June.

Japan August nationwide core CPI falls 0.1%

Sep 28, 2007 - Japanese core consumer prices fell 0.1 per cent in August from a year earlier, marking the seventh straight month of annual declines and matching economists' consensus forecast, government data showed on Friday.

In the Tokyo area, the core consumer price index (CPI), which excludes volatile fresh food prices, fell 0.1 per cent in September compared with a year earlier, against the consensus forecast of a flat reading.

The government announces Tokyo area figures a month before the nationwide figures.

August jobless rate rise to 3.8%
Japan's seasonally adjusted unemployment rate rose to 3.8 per cent in August against a market consensus forecast of 3.6 per cent, government data showed.

The jobs-to-applicants ratio for August was 1.06, meaning 106 jobs were available per 100 applicants, below the market consensus forecast of 1.07.

Industrial output up 3.4%
Japan's industrial production rose 3.4 per cent in August from a month earlier, compared with a median market forecast for a 3.2 per cent rise.

Manufacturers' output, the core component of production, is expected to fall 0.8 per cent in September but rise 4.1 per cent in October, data from the Ministry of Economy, Trade and Industry showed.

The ministry said industrial output is on a moderate rising trend, upgrading its assessment for the first time in four months.

August retail sales rise 0.5%
Japanese retail sales rose 0.5 per cent in August from a year earlier, compared with economists' median forecast for a 0.1 per cent increase.

It was the first time in three months that retail sales increased from the same month a year ago, signalling a moderate recovery in consumer spending.

Compared with July, retail sales were up 3.9 per cent on a seasonally adjusted basis, the Ministry of Economy, Trade and Industry said.

All households spending up 1.6%
Overall household spending in Japan rose 1.6 per cent in August from a year earlier in price-adjusted real terms, against a median market forecast of a 1.2 per cent rise.

Compared with July on a seasonally adjusted basis, spending rose 0.4 per cent.

The average household spent 296,035 yen (US$2,561) in August, according to the data released by the Ministry of Internal Affairs and Communications.

Spending by wage earners' households rose 3.6 per cent in August from the same month a year ago, the data showed.

Malaysian Q2 Current Account Surplus Widens

Sep 28, 2007 - Malaysia's June quarter current account surplus widened to 23.7 billion ringgit from 20.1 billion ringgit in the previous quarter, the department of Statistics said Friday.

The growth was mainly due to higher trade surplus on goods amounting to 29.1 billion ringgit, up from 27.6 billion ringgit in the earlier quarter. Services account was in surplus of 0.9 billion ringgit, compared to deficit of 0.5 billion ringgit in the previous quarter. Income account showed a deficit of 2.5 billion ringgit, improving from the earlier deficit of 3.1 billion ringgit. The net outflow on current transfers remained unchanged at 3.8 billion ringgit in the second quarter.

The department further said that exports expanded 4.6% to 138.6 billion ringgit in the second quarter, while imports climbed 4.4% to 115.9 billion ringgit.

For the first half year, the current account surplus reached 49.4 billion ringgit, sharply up from 24.0 billion ringgit last year. Trade surplus on goods fell 7.4% to 56.7 billion ringgit, from 61.2 billion ringgit over the same period. Services account showed a surplus of 0.3 billion ringgit in the first half year. This compared to a deficit of 5.4 billion ringgit posted last year. Meanwhile, the net outlay on government services improved to 0.1 billion ringgit from an outflow of 0.2 billion ringgit a year ago.

Japan's Industrial Production Rebounds In August

Sep 28, 2007 - Japan's August industrial output increased for the first time in two months, driven by higher production of transport equipment, electronic parts and devices and general machinery, the Ministry of Economy, Trade and Industry said Friday.

The ministry upgraded its assessment of industrial output saying, " Industrial Production is on a moderately upward trend." In July, the ministry said that Production appeared to be flat.

The industrial production index increased 3.4% in August from the previous month compared to a decline of 0.4% in July. This marked the highest growth in eight months.

On an annual basis, industrial output rose 4.3% in August, after climbing 3.2% in the previous month. Commodities that mainly contributed to the increase are large passenger cars, drive, transmission and control parts and small passenger cars.

Based on the survey, the Ministry forecasted that the production would decrease 0.8% in September and increase 4.1% in October. In the August survey, production was projected to fall 2.5% in September.

Transport equipment, information and communication electronics equipment, and general machinery industries are expected drag output in September. However, these industries are projected do better in October, the Ministry said.

The shipment index rose 4.3% from the previous month in August compared to a drop of 1.2% in the prior month. The monthly fall in July remained Unrevised. The shipping activity grew for the first time in two months. The index climbed 4.3% annually compared to the 3.1% growth in the prior month.

The industries that mainly contributed to the increase in shipping activity are Transport equipment, Electronic parts & devices, and Electrical machinery.

The inventory index increased 0.3% on a monthly basis in August compared to a fall of 0.1% in the previous month. The inventory index recorded an increase for the first time in four months. The index rose 2.2% in August compared to a increase of 2.4% in the previous month.

The inventory ratio declined 1.0% in August from the previous month, following a decline of 1.4% in the previous month. Annually, the ratio increased 0.9% in August, after a fall of 0.6% in July.

Japan August Consumer Price Index -0.2 YOY

Sep 28, 2007 - Japan's consumer price index for August 2007 was 100.6, a decline of 0.2 percent from the year before but a gain of 0.5 percent from the previous month.

The consumer price index for the Ku-are of Tokyo for September of 2007 was 100.4, a drop of 0.2 percent from the previous year but a gain of 0.1 percent from the previous month.

Among the top ten major national groups in the index, furniture and household utensils fell 1.8 percent for the year and 0.3 percent since July, Reading and recreation was down 1.2 percent for the year but up 1.6 percent from the month before.

Clothes and Footwear and Medical Care sectors posted the largest year-to-year gains, each at 0.8 percent for the year, although clothes and footwear was down 1.7 percent from July.

The food sector fell 0.4 percent for the year, but posted a 1.0 percent gain for July.

New Zealand Economic Growth Slows Less Than Expected

Sep 28, 2007 - New Zealand's economic growth slowed less than expected in the second quarter, signaling the central bank is unlikely to cut interest rates from a record.

Gross domestic product increased 0.7 percent in the three months ended June 30 from the first quarter when the economy expanded a revised 1.2 percent, Statistics New Zealand said in Wellington today. The median estimate of 11 economists surveyed by Bloomberg News was for 0.5 percent growth.

Reserve Bank of New Zealand Governor Alan Bollard raised the benchmark interest rate four times between March and July to a record 8.25 percent to slow domestic demand and inflation. Stronger-than-expected growth in the first half of the year suggests he has little scope to cut borrowing costs, buoying the New Zealand dollar.

"The strain on resources will bring no comfort to the Reserve Bank," Doug Steel, an economist at Westpac Banking Corp. in Wellington, said before the report was released. Rising growth 'ould certainly add to inflation worries and see a reduction in the probability of interest-rate cuts.'

New Zealand's dollar rose to 75.38 at 10:50 a.m. in Wellington from 75.09 cents immediately before the report.

Bollard will keep the official cash rate unchanged for the remainder of this year, according to all 13 economists in a second Bloomberg survey. Just four predict a cut before June 30.

Annual Growth

Steel says Bollard won't cut the rate cut until 2009, noting the Reserve Bank expects inflation will accelerate to 3 percent this year. Bollard is required to keep inflation between 1 percent and 3 percent. Consumer prices rose 2 percent in the year ended June 30.

From a year earlier, the economy expanded 3.2 percent. Annual- average growth was 2.2 percent from 1.7 percent in March. Economists forecast 2.1 percent.

Economic expansion will probably accelerate this year. Bollard expects 2.9 percent annual average growth in the year ending March 31, according to his latest forecasts. He predicted 0.5 percent in the second quarter.

Economists aren't as optimistic. Growth will probably be 2.4 percent in the year ending March 31, 2008, before slowing to 2 percent a year later, according to the average estimate of 10 economists surveyed by the New Zealand Institute of Economic Research Inc.

Growth could be as little as 2 percent over the next year, ANZ National Bank Ltd. said yesterday, basing its forecast on its monthly measure of business confidence. More companies expect profits will fall and fewer plan to hire workers, according to the survey of 423 firms.

Consumer Spending

The expenditure-based measure of GDP rose 0.8 percent as a 1.5 percent increase in domestic demand was offset by net exports, which subtracted from growth, the statistics agency said today.

Buoying growth, investment in new housing surged 3.8 percent. Government spending also increased. Inventories rose, adding to growth.

Household spending, which makes up 60 percent of the economy, gained 0.6 percent from the first quarter when it rose 2.1 percent.

Hallenstein Glasson Ltd., the third-biggest publicly traded retailer, said on Sept. 14 that full-year profit fell. The performance in New Zealand ``was challenging, with rising interest costs finally beginning to dampen consumer spending,'' Chairman Warren Bell said in a statement.

Skills Shortage

Spending on alcohol, food and other so-called non-durable goods rose 1.4 percent in the quarter. Purchases of cars, appliances and durable items gained 0.4 percent.

On Sept. 13, Bollard said there were signs that higher borrowing costs are damping domestic spending. Still, rising wages, government spending and record payouts to dairy farmers will prevent spending stalling, analysts said.

New Zealand's jobless rate fell to a record 3.6 percent in the second quarter as companies added more than twice the number of workers forecast by economists.

A skills shortage sparked a record 3.2 percent wage increase for non government workers in the second quarter from a year earlier.

Fonterra Cooperative Group Ltd., the world's biggest dairy exporter, has raised its milk payment to 10,900 farmers by 43 percent, citing record prices. That will add NZ$2.6 billion ($1.9 billion) to farm incomes this year.

Crimping growth, imports rose and business investment fell 2.9 percent from the first quarter, the agency said. Purchases of plant and machinery declined. The purchase of a navy ship buoyed investment in transport equipment.

Service Industries

Imports rose 2.5 percent, buoyed by the navy ship and spending also increased on overseas travel, which is treated as an import of services. Consumption goods imports fell 3.4 percent.

Exports of goods and services increased 0.5 percent in the quarter, with meat and dairy volumes declining. Tourist spending helped exports of services increase.

Service industries including finance and business services, transport and communications contributed most of the growth in the quarter, the agency said. Production from those industries increased 0.9 percent. The output from farmers and other primary industries rose 0.2 percent, while production from manufacturers and other goods producers dropped 0.1 percent.

Real estate sales and lending by financial institutions contributed most to output from the services industries.

Production from primary industries rose, buoyed by output from the nation's oil and gas fields. Farm production fell. Among goods- producing industries, manufacturing increased while construction declined.

The implicit price deflator gained 3.1 percent for the year ended June 30, the agency said.

South African Producer Prices Grow At A Slower Pace In August

Sep 27, 2007 - South African producer prices index rose 9.4 percent year-over-year in August, the Statistics South Africa said Thursday. In July, the index climbed 10.3%.

The statistical office said that the lower PPI figure can be attributed to decreases in the annual rates of change in the production price indices for electrical machinery and apparatus, basic metals, metal products, products of petroleum and coal, furniture, paper products, electricity and communications equipment.

These decreases were partially counteracted by increases in the annual rates of change for agricultural products that increased to 25.1 percent in August of this year from 22.7 percent at July 2007.

On a monthly basis, the PPI for all commodities for consumption in South Africa increased by 0.7 percent in August.

Icelandic Producer Prices Rebound In August

Sep 27, 2007 - Iceland's producer prices index or, PPI rose 4.8% to 121.0 points in August, the Statistics Iceland said Thursday. In the previous month the index fell 2.3%. The official data showed that this is the biggest monthly increase in 2007.

In August, the PPI for fish products increased 5.7% compared to July, while producer prices for power intensive industry products were up 9.1%. The PPI rose 3.5% for other manufactured products. Meanwhile, the PPI for food products declined 0.1%.

In August, producer prices for domestically sold products climbed 0.7%. The index rose 7.3% for exported products.

Compared to the same month of last year, the PPI edged up 0.2% versus a decrease of 6.5% in the prior month.

Dutch Economic Growth Rises In Q2

Sep 27, 2007 - Dutch economic growth in the second quarter stood slightly above the estimate, the Central Bureau of Statistics or CBS said Thursday.

Figures from Statistics Netherlands showed that the economy grew 2.6% year-over-year in the second quarter. First estimation showed that the economy would grow 2.4% in the second quarter.

Production in the care sector and goods sector increased higher than previously estimated, leading to an upward adjustment of 0.2 of a percentage point. Consequently, net exports and government consumption also grew in the second quarter.

At the same time, growth of re-exports and fixed capital formation were lower than previously estimated. Lower consumption of natural gas led to smaller increase in the household consumption, compared to 2006.

Consumer spending on durable goods such as consumer electronics and cars, and on hotels and restaurants and transport and communication maintained higher growth rate. Higher spending on care spurred on government consumption.

Among all sectors of industry, the construction industry had the highest production growth rate at 5%. Growth rate climbed 4% for commercial services and care sector.

Economic growth dropped slightly in the second quarter than in the same period in 2006 mainly due to a fall in production of natural gas. Due to this, growth for consumption by households and exports of goods declined. Other factors also resulted in a substantially lower growth of fixed capital formation.

Compared with the preceding quarter, economy grew 0.3% in the second quarter, which is slightly above the consensus of 0.2%. The CBS data showed that this is the lowest quarter-on-quarter growth for two years.

Euro Zone M3 Continues To Expand In August

Sep 27, 2007 - The M3 broad money supply measure grew a seasonally adjusted 11.6% in annual terms in August, the European Central Bank, ECB, said Thursday. This was slightly lower than the 11.7% expansion forecast by economists. The M3 had grown at a slightly higher rate of 11.7% in the previous month. The three- month average rate of growth came in at 11.4%.

The M1 measure of money supply comprises currency like banknotes and coins and overnight deposits and is commonly referred to as narrow monetary aggregate. The M2 is an intermediate aggregate, and comprises deposits with an agreed maturity up to two years, along with the M1.

The M3 is the broad measure of money supply, which the ECB uses to determine inflationary pressures. M3 comprises of M1 and M2, and certain marketable instruments. The M3 is less affected by substitution between various liquid asset categories and is more stable than narrower definitions of money.

M1 grew a seasonally adjusted 6.8% on an annual basis, the same as in the last month. Short-term deposits, stripped of overnight deposits, climbed 15.3%, slightly more than the 15.0% growth in the previous month. On the other hand, the growth of marketable instruments slowed to an annual growth 17.8%, after expanding 19.5% in the prior month.

On the asset side of the consolidated balance sheet, total credit granted to euro area residents advanced at an annual rate of 8.8% in August, a tad more than the 8.7% growth in the previous month. Credit extended to general government eased 4.2%, on the heels of a 3.7% annual decline in the preceding month.

Credit extended to the private sector quickened to 11.8% annual growth in August, after gaining 11.6% in July. Loans to the private sector climbed 11.2% in August, following an 11% expansion in the previous month. Loans to non-financial corporations surged a seasonally unadjusted 14.2% in August, while loans to non-financial corporations climbed 13.6% annually in the preceding month.

In August, loans to households grew 7% on an annual basis, while loans for house purchase expanded 8.1%. Consumer credit advanced 5.7% annually in August, a little less than the 5.8% growth in the previous month.

Loans to non-monetary financial intermediaries, except insurance corporations and pension funds soared 19.6% on an annual basis in August, slightly less than the 20.5% surge in the preceding month.

In the twelve months to August, the net external asset position of the euro area MFI sector rose 247 billion euros, less than the 280 billion euros rise in the twelve months to July. Longer-term financial liabilities climbed 9.4% in August, after gaining 9.3% annually in July. Among the central banks, the ECB had taken the lead in mitigating the global credit squeeze by pumping in some 95 billion euros into money markets in August. The ECB said Thursday that it had loaned 3.9 billion euros at a penal 5% rate to unspecified borrowers. This was the largest sum tapped from its ‘marginal lending facility' since October 2004, the Financial Times reported.

This showed that European banks continued to face credit difficulties as a fall-out of the U.S. sub-prime crisis, analysts opined. The ECB was acting to ease the tightening of credit in money markets that has sent short-term interest rates soaring. Yet, once the money markets settled down to normal functioning, the ECB would shift its focus back to fighting inflationary pressures, analysts said.

U.S. Q2 GDP Growth Revised Down to 3.8%

Sep 27, 2007 - The Department of Commerce released its final report on second quarter gross domestic product Thursday morning, showing that the annual rate of GDP growth in the quarter was downwardly revised a little more than economists had expected.

The report showed that GDP growth in the second quarter was revised down to 3.8 percent from the preliminary estimate of 4.0 percent growth. Economists had expected GDP growth for the quarter to be revised down to 3.9 percent.

The downward revision to the second quarter growth reflected an upward revision to imports and a downward revision to non-residential construction. An upward revision to spending on equipment and software helped to limit the size of the downward revision.

Despite the downward revision, the GDP growth in the second quarter still represents a significant acceleration from the 0.6 percent growth that was seen in the first quarter.

The acceleration came amid a downturn in imports as well as upturns in federal government spending and in private inventory investment. Faster export, non-residential construction, and equipment and software spending growth also contributed to the acceleration.

However, the acceleration compared to the first quarter was partly offset by a notable deceleration in the pace of consumer spending growth, which slowed to 1.4 percent in the second quarter from 3.7 percent in the first quarter.

While the report also showed a slowdown in the pace of core consumer price growth compared to the first quarter, the increase in core prices was revised up to 1.4 from the preliminary reading of 1.3 percent growth. Core consumer prices rose 2.4 percent in the first quarter.

Nonetheless, the data is likely to be seen as old news, with many traders and economists focusing on more recent data to get an indication of the broader economic impact of the recent problems in the credit market.

Last week, the Federal Reserve announced its decision to cut interest rates by 50 basis points in an effort to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in the financial markets.

The Federal Open Market Committee, the policy-setting arm of the Federal Reserve, is scheduled to make its next decision on interest rates after a two-day meeting in late October.

Spanish Retail Sales Growth Improves In August

Sep 27, 2007 - Spanish retail sales grew 4.3% year-on-year in constant prices in August, the statistical office INE said Thursday. Retail sales growth came in much higher than the 3.4% rise logged in July.

Sales of foodstuff rose 2.3%, while non-food product sales climbed 5.6%. Among non-food products, sales of personal goods increased 6.6% and sales of furniture and household equipment gained 1%. Other goods showed an improvement of 5.4% in retail sales.

The statistical office noted that August 2007 was not impacted by calendar effect as the month had the same number of working days as August 2006. Hence, the adjusted General Retail Trade Index at constant prices revealed a 4.3% increase.

In department stores, retail sales rose 2.4% on an annual basis in constant terms in August. Sales of foodstuff declined 1.1%, while sales of non-food products rose 4.6%.

The retail sector had 1.8% employment growth in August. Employment in department stores increased 2.1%.

Hong Kong's August Merchandize Exports Rise Slower Than Expected

Sep 27, 2007 - Hong Kong's exports in August rose 7.5 per cent year-on-year boosted by vibrant trade flows from mainland China and rapid economic expansion in emerging markets, the government said on Thursday.

Exports rose to HK$243.2 billion (US$31.2 billion) after rising 8.6 in July, with re-exports, or imported goods reprocessed and exported from Hong Kong, grew 9.5 per cent year-on-year to HK$233.5 billion.

Imports expanded 9.0 per cent to HK$256.8 billion, although domestic exports dropped 25.3 per cent to HK$9.7 billion.

A government spokesman said while the external trading environment remains largely supportive, it is being subjected to increasing uncertainty.

'The direction of the US economy, in the face of its housing market correction and sub-prime mortgage turbulence, will be the key source of uncertainty in the period ahead,' he said.

'Also relevant to Hong Kong's export performance would be the effects of the mainland's cut in export tax rebate and tightening measures on processing trade, as well as exchange rate movements,' he added.

During the month, exports rose 11 per cent year-on-year to mainland China, the biggest market, and by 5.9 per cent to the Netherlands.

However, exports to some of Hong Kong's major destinations fell, with those to the UK falling 8.8 per cent, Japan down 7 per cent and Taiwan dropping 4.9 per cent.

For the first eight months of the year, exports to mainland China rose 14 per cent, the Netherlands were up by 8.8 per cent, France gained 8 per cent and Germany climbed 6.3 per cent.

IMF sees Chile growth easing to 5.3 pct in 2008

Sep 26, 2007 - The International Monetary Fund (IMF) on Wednesday said it expected Chilean economic growth to slow to 5.3 percent next year from 5.8 percent in 2007, but said the economy was well placed to weather external shocks.

In a Chile country report, the IMF said it would revise its inflation forecasts for Chile upward, and now saw year-end inflation of around 5.5 percent in 2007, easing to around 3.0 percent in 2008.

The IMF said it expected the central bank to tighten monetary policy further in the coming months as excess capacity is absorbed and as the economy continues to rebound from a poor performance in 2006.

The Washington-based body said the impact of recent turbulence in financial markets had been "relatively mild" in Chile and that the country's financial system was strong.

However, it warned that the risks to the Chilean economy were greater now than in May, when IMF officials visited the country.

"The recovery from the unexpected slowdown in the third quarter of 2006 remains broad based, and we believe growth will reach close to 6 percent in 2007 and remain around the potential rate of 5 percent next year," it said.

"Nevertheless, the risks to the outlook are now more on the downside given uncertainties about the global financial system, the U.S. outlook and investors' risk appetite, including for emerging markets."

The IMF also gave a forecast for Chilean copper production, which accounts for more than half its export revenue and makes up a third of global supply.

It said it saw Chile's copper output growing at about 3 percent per year over the medium term, rebounding after supply concerns in recent years.

"Labor disputes and technical problems slowed production in 2006, but completion of several labor contracts and investment projects should propel output toward its projected medium-term growth rate of 3 percent per year," the IMF said.

Brazil Aug primary surplus down more than forecast

Sep 26, 2007 - Brazil's consolidated primary budget surplus fell more than expected in August from a year earlier as government spending grew and profits at state-owned companies declined, government data showed on Wednesday.

The primary surplus fell to 8.09 billion reais ($4.37 billion) in August from 13.18 billion reais in August a year ago, the central bank said.

The result was much lower than the 12.75 billion reais median estimate of 14 economists in a Reuters poll. The estimates ranged from 9.8 billion reais to 13.7 billion reais.

In July, the government had a primary surplus of 7.9 billion reais.

In the 12 months through August, the primary surplus was equal to 4.12 percent of gross domestic product compared with 4.35 percent of GDP in the 12 months through July.

The primary surplus, which excludes interest payments, is closely watched by investors as a gauge of a country's ability to service its debt.

The overall budget including interest payments resulted in a deficit of 2.85 billion reais in August, compared with a gap of 2.38 billion reais in August a year ago.

The overall deficit, referred to in Brazil as the nominal budget deficit, fell sharply from 6.18 billion reais in July.

Net public sector debt edged down to 43.1 percent of GDP in August from 44 percent in July.

U.S. Economy: Durables Orders Decline by Most in Seven Months

Sep 26, 2007 - Orders for American-made jetliners, automobiles and communications gear fell in August by the most in seven months, raising concern that businesses are losing confidence in the economy.

Demand for durable goods fell a greater-than-forecast 4.9 percent, the Commerce Department said today in Washington. Excluding transportation equipment such as airplanes, orders declined 1.8 percent after a 3.4 percent gain.

The report suggests business investment, which had been forecast to make up for a slowdown in consumer spending triggered by the housing recession, may instead weaken. Falling orders reinforce economists' predictions that economic growth will slow in the final quarter.

"The report makes us a little more worried about business investment in the second half," said Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina. "Businesses are probably making decisions a little more deliberately than they did before the credit crunch."

Economists noted that durable goods figures are volatile, and last month's decrease followed a 6.1 percent gain in July, the biggest jump in almost a year. Treasury securities were little changed immediately after the release and later dropped.

Companies may decide to rein in spending after the meltdown in subprime lending sent financial markets reeling in August, dimming growth prospects.

Mortgage Applications

Mortgage applications fell 2.8 percent last week, led by the biggest drop in purchases since January, a report from the Mortgage Bankers Association today also showed. The group's purchase index dropped 7.3 percent, while its refinancing gauge increased 3.3 percent.

Orders for durable goods, made to last several years, were forecast to fall 4 percent, according to the median of 74 estimates in a Bloomberg News survey, after a previously reported 6 percent rise in July. Estimates ranged from a 7.9 percent decline to 1 percent gain.

Excluding transportation equipment, orders were projected to fall 1 percent, according to the survey median, after the 3.8 percent increase the government reported earlier.

Economists prefer to track the durable goods figures excluding transportation because orders for aircraft and automobiles can vary widely from month to month, obscuring underlying trends in spending.

Orders for commercial aircraft plunged 41 percent in August after increasing 13 percent a month earlier.

Boeing Co., the world's second-largest maker of commercial jets, received 75 orders in August, about half the 149 the Chicago-based company had in July, according to figures issued earlier this month. It shipped 42 planes, compared with 33 a month earlier.

Auto Strike

Demand for autos dropped 6.2 percent after an 11 percent gain the prior month that was the biggest in four years.

Auto dealers in July may have been trying to boost stockpiles ahead of a threatened strike against General Motors Corp. Detroit-based GM today reached a tentative four-year contract agreement with the United Auto Workers, ending a two- day strike. Union leaders will seek ratification this weekend and workers could return to picket lines if they reject the contract.

Non-defense capital goods orders excluding aircraft, a proxy for future business investment, fell 0.7 percent, after rising 0.9 percent in July. Shipments of those items, used in calculating gross domestic product, increased 0.8 percent after little change the prior month.

One bright spot in the report was that unfilled orders for capital equipment rose 1.2 percent, suggesting manufacturers had enough of a backlog to keep production lines busy in coming months. Inventories of all durable goods dropped 0.1 percent, the first decline since February 2006.

Lower Forecasts

Economists at Morgan Stanley in New York lowered their forecast for third-quarter growth to an annual rate of 2.2. percent following the durable goods report, from a prior estimate of 2.4 percent.

The drop in inventories 'should set the stage for an eventual pick-up in production - especially with unfilled orders continuing to surge,' said David Greenlaw, chief U.S. fixed- income economist at Morgan Stanley, in a note to clients.

The economy will grow 2 percent this year, the least since 2002, based on the median estimate of 64 economists surveyed by Bloomberg News Aug. 30 to Sept. 7. Economists projected 2.5 percent growth at the beginning of the year.

Less Confidence

Confidence among chief executives fell this quarter to the lowest point in four years, according to a survey released Sept. 17 by the Business Roundtable in Washington. The Duke University/CFO Magazine Business Outlook index also showed a similar decline this month among chief financial officers.

Demand for U.S. exports and lean stockpiles outside of the auto industry suggest manufacturing is unlikely to collapse, economists said.

U.S. steel inventories fell in August to the lowest since 2005, the Metal Service Center Institute, a trade association for metals industries, said Sept. 20.

Fort Wayne, Indiana-based Steel Dynamics Inc., the fifth- largest U.S.-based steelmaker, said last week that it will invest $85 million in an iron-making venture in Minnesota with Kobe Steel Ltd. to boost output of raw materials used in steelmaking.

U.K. Current Account Deficit Narrows To GBP9.1 Bln In Q2

Sep 26, 2007 - The U.K. current accout deficit narrowed to 9.1 billion pounds in the second quarter, the Office of National Statistics, or ONS, indicated Wednesday. The deficit declined from 10.6 billion pounds registered in the previous quarter. The shortfall is smaller than the expected deficit of 11.5 billion pounds in the second quarter.

The ONS said, “The second quarter deficit is equivalent to -2.6% of GDP compared with -3.1% in the previous quarter.”

The surplus on trade in services rose 0.6 billion pounds to 8.9 billion pounds, while the deficit of trade in goods narrowed 0.3 billion pounds to 20.3 billion pounds.

U.K. Q2 Annual Economic Growth Rev. Up To 3.1%, Expands 0.8% Sequentially

Sep 26, 2007 - The U.K. economy expanded 3.1% annually in the second quarter, revised up from 3.0% estimated earlier, the latest report from the Office of National Statistics, or ONS, showed Wednesday. Compared to the first quarter, the economic growth stood at 0.8%. The sequential growth number was left unrevised from the initial estimate.

The total volume of output in the production industry climbed 0.7% in the second quarter, within which manufacturing output rose 0.8%. The report said within manufacturing, the largest growth were witnessed in transport equipment and paper, printing and publishing. Services output increased 0.9% in the second quarter, slightly smaller that the 1.0% growth seen in first quarter.

Gross domestic expenditure improved 0.6% in the second quarter. Meanwhile, gross fixed capital formation dropped 0.9%. The trade deficit narrowed to 10.3 billion pounds in the second quarter from 10.8 billion pounds in the previous quarter.

Russia August GDP up 6.4 pct yr-on-yr

Sep 26, 2007 - Russian Economic Development and Trade Ministry head of macroeconomic forecasting Andrei Klepach said the nation's gross domestic product (GDP) rose by 6.4 pct year-on-year in August, Interfax reported.

He added that the ministry estimates GDP grew by 7.7 pct in the January-August period.

Norway central bank raises key interest rate to 5 pct vs 4.75 pct

Sep 26, 2007 - Norway's central bank has raised its key interest rate 25 basis points to 5 pct in a bid to rein in the country's rapidly-growing economy. It also said it was worried about global growth slowing due to the US sub-prime market crisis.

The bank said in a statement that lately, growth in the Norwegian economy has been faster than expected.

"There is strong growth in the Norwegian economy. There is strong growth....in the money market and house prices," said Norges Bank Governor Svein Gjedrem told a press conference in Oslo.

The bank said in a statement accompanying its rate decision that it was worried by an apparent pick-up on the inflation front.

"Cost inflation is on the rise and there are prospects of a further pick-up in price inflation," the bank said. "These conditions suggest that the interest rate should be increased."

But Norges Bank said a major factor in weighing up the decision had been the turbulence in the world financial markets, and the global economic outlook was uncertain.

"Global growth prospects have weakened as a result of the turmoil in financial markets," the bank said. "The US labour market has weakened. There are prospects of lower growth in the US and Europe."

The bank said the deteriorating situation abroad, and a possible negative on the Norwegian economy, had given it pause for thought in making its decision.

"The Executive Board considered the alternative of leaving the key policy rate unchanged at today's meeting," the bank said.

Norwegian inflation rose more than economists had forecast in August, with the core consumer price index up 1.8 pct year-on-year, increasing the chances of a rate rise.

But before the decision, analysts were evenly balanced on whether Norges Bank would raise its rate -- its 11th rate increase in a row to curb a flourishing and oil industry-dominated economy -- or keep rates on hold in order to calm domestic financial markets concerned about the global liquidity shortage.

"Consensus is split," one senior economist had said. "The latest survey is half and half -- with half the economists thinking the central bank will raise rates 25 basis points, and the other half going for no rate hike."

Earlier in September, Norway's statistics authority increased its forecast for mainland GDP growth in 2007 to 5.1 pct from the previous figure of 4.1 pct. Norway's oil-driven economy has enjoyed four years of growth, helped by relatively low inflation and low-but-rising interest rates.

Singapore Manufacturing Posts Robust Growth In August

Sep 26, 2007 - Singapore's manufacturing output grew 13.8% on an annual basis in August, the Economic Development Board, EDB, said Wednesday. Economists were looking for a growth of 15%. Factory output growth in August was slower than the 22.1% jump in manufacturing output in the previous month. Manufacturing growth in July was initially estimated at 21.6%.

Manufacturing output slumped a seasonally adjusted 13.7% month-on-month in August, after soaring 25.5% in the preceding month. Manufacturing output climbed 9.3% annually in the first eight months of the year. The three-month moving average index for manufacturing output expanded 8.7%.

The bio-medical cluster output soared 49.4% in annual terms in August. Production in the pharmaceutical segment surged 52.6%, buoyed by production of higher value added pharmaceutical ingredients. Medical technology output climbed 28.6% led by export demand. Pharmaceutical exports jumped an astonishing 105.8% in August.

The transport engineering cluster production gained 19.5% on an annual basis in August. Output of local shipyards shot up 36.6%, pushed by completion of prior contracts for shipbuilding, ship repairing and production of oilrigs. The land transport segment expanded 25.7%. In contrast, the aerospace segment declined 5.2%, due to base year effects, the EDB said.

The chemicals cluster production advanced 6.4% year-on-year in August, buoyed by the 27.7% annual surge in production of petrochemicals, mainly due to base year effects, the EDB noted. Production of petroleum products gained 1.5%.

The electronics cluster grew 5.6% annually in August. Production of semiconductors increased 8.6%, while the data storage segment advanced 5% reversing the prior month's decline in output. The infocomms and consumer electronics segment expanded 7.6% propelled by higher production of mobile products and PCs.

The precision engineering cluster eased an annual 4% in August, pulled down by the 7.4% decline in precision modules and components. This was partially offset by the 1.3% growth in machinery and systems sector.

Output of the general manufacturing industries expanded at an annual rate of 7.8% in August. Production of food, beverages and tobacco products jumped 9%, while output of printed products rose 4.8%.

New Zealand Trade Deficit Tops Expectations

Sep 26, 2007 - New Zealand's trade balance was a deficit of NZ$945 million in August, marking the highest level since it touched NZ$825 million in January this year. In July, trade deficit widened to NZ$791 million.

In August, the trade balance topped expectations of analysts. They were expecting a deficit of NZ$990.0 million.

Merchandise exports slid 2.7% year-over-year to NZ$ 2.7 billion in August, while imports dropped 2.2% to NZ$3.6 billion.

During the three months ended August, exports of merchandise goods fell 7.9% or NZ$687 million to NZ$8.0 billion, compared to the same period of the previous year. In 2005, exports grew 18.9% in the same period.

In the same period, imports of merchandise goods totaled at $10.3 billion, which is down NZ$247 million or 2.3% year-over-year.

Japan Aug trade surplus 743.2 bln yen, +287.6 pct y/y

Sep 26, 2007 - Japan's trade surplus rose 287.6 percent in August from a year earlier to 743.2 billion yen ($6.47 billion), government data showed on Wednesday.

The figure compared with analysts' median forecast for a 26.6 percent rise in the surplus to 242.8 billion yen.

Exports rose 14.5 percent from a year earlier to 7.0301 trillion yen, compared with economists' median forecast for a 10.7 percent rise, data from the Ministry of Finance showed.

Imports rose 5.7 percent to 6.2869 trillion yen, against the market consensus for a 10.0 percent increase.

Exports to the United States increased 4.6 percent from a year earlier to 1.3897 trillion yen, while those to China increased 23.8 percent to 1.1256 trillion yen.

On a seasonally adjusted basis, the overall customs-cleared trade surplus increased 30.4 percent from the previous month to 1.1449 trillion yen, the data showed.

Italy govt sees 2008 GDP growth of 1.3-1.6 pct, 2007 GDP below 2.0 pct

Sep 25, 2007 - Italy's economy minister Tommaso Padoa-Schioppa said that economic growth this year and next will be slower than previously expected because of the slowdown of the world economy.

Speaking in a parliamentary hearing on the 2008 budget, Padoa-Schioppa said that Italy's gross domestic product (GDP) will grow slightly less than the previously forecast 2.0 pct in 2007 and will grow somewhere between 1.3 and 1.6 pct in 2008 compared with the earlier estimate of 1.9 pct.

Both forecasts are within the forecast range of a consensus of economists that pinned GDP growth at 1.7-1.9 pct this year and at 1.3-1.6 pct in 2008.

"Our estimate (for 2008) will probably be in the middle of the range," Padoa-Schioppa said.

The economy ministry confirmed the government's forecasts for Italy's public deficit to be 2.5 pct of GDP in 2007 and 2.2 pct in 2008.

Italy's public debt is seen falling to 105.1 pct of GDP in 2007 from 106.8 pct in 2006, and to 103.5 pct in 2008, the ministry said.

Earlier government forecasts had seen 2007 debt at 104.7 pct of GDP and 2008 debt at 102.7 pct.

The ministry sees Italy's primary surplus being at 2.4 pct of GDP in 2007 and at 2.6 pct in 2008.

The minister said that he has received spending requests of 20 bln eur from Italian ministries and proposals for spending cuts of 5 bln.

Spanish Industrial Prices Hold Steady In August

Sep 25, 2007 - The Spanish General Industrial Price Index grew 2.3% on an annual basis in August, the statistics office said, Tuesday. Industrial prices advanced 2.3% in the previous month after expanding 2.6% in June. On a monthly basis, industrial prices gained 0.2% in August after rising 0.3% in the preceding month.

Prices of consumer goods gained 2.3% year-on-year in August, accelerating from the 1.9% growth in the previous month. Prices of capital goods increased 3.1% annually, the same as in the previous month. Prices of intermediate goods expanded 5.4%, slowing form the 5.6% climb in the earlier month. Energy prices slipped 2.8% in August, after sliding 2.5% in July.

Producer prices in the mining and quarrying sector climbed 5% on an annual basis in August, while producer prices in the manufacturing sector advanced 2.3% and producer prices in the electricity and gas sector grew 3%.

Industrial prices of manufactured food products and beverages gained 3.7% annually in August, while producer prices of tobacco products expanded 4.3%. Industrial prices of textiles grew 3.3%, while prices of pulp, paper and paper products jumped 6.2%.

In comparison, industrial prices of coke and refined petroleum products slumped 9.9% year-on-year in August, while producer prices in the office machinery and computers sector eased 2%.

Compared to July, producer prices of consumer goods grew 0.3% in August. Industrial prices of non-durable consumer goods gained 0.5%, while producer prices of durable consumer goods remained unchanged. Industrial prices of capital goods edged up 0.1%, while industrial prices of intermediate goods advanced 0.2% and industrial prices in the energy sector eased 0.4%.

Swedish PPI Slows In August

Sep 25, 2007 - The Swedish producer price index rose 4.2% year-on-year in August to 140.4, the Statistics Sweden said Tuesday. This compared to an increase of 5.5% seen in July. Economists expected an annual increase of 4.9% for the month of August.

On a monthly basis, the index declined 0.4% in August, after rising 0.4% in July. Economists expected a monthly rise of 0.2% for the month of August. The monthly decline was due to lower prices of iron, steel and ferro-alloys, mining and quarrying, chemicals and chemical products, motor vehicles and machinery, excluding computers.

Swedish import prices dropped 2.6% in August from the previous month, which was mainly due to lower prices of crude oil.. This compared to the growth of 1.4% in July. Annually, import prices slipped 0.1%, after an increase of 3.9% in July.

Swedish August Trade Surplus Shrinks

Sep 25, 2007 - Swedish exports rose 3.0% to SEK85.0 billion in August, from last year, while imports climbed 13% to SEK84.4 billion, the Statistics Sweden said Tuesday. The net trade surplus came in at SEK0.6 billion in August compared to the trade surplus of SEK8.1 billion a year ago.

On a seasonally adjusted basis, the net trade surplus amounted to SEK6.5 billion in August, down from SEK7.3 billion in July.

Trade with the Non-EU member states fetched a surplus of SEK6.5 billion, while the trade with the EU member states resulted in a deficit of SEK5.9 billion in August.

During eight months ended August, the value of exports rose 5.0% SEK738.3 billion from last year. Meanwhile, the value of imports gained 10.0% to SEK657.1 billion. This resulted in the net trade surplus of SEK81.2 billion for the period January-August. During the same period last year, the net trade surplus amounted to SEK104.4 billion.

Estonia Trade Deficit Narrows In July

Sep 25, 2007 - The Estonian trade deficit narrowed to 3.4 billion kroons in July from the deficit of 3.8 billion kroons in June, the Statistics Estonia said Tuesday. The trade deficit was at 4.7 billion kroons in the same period last year.

The Statistics office said that the Estonian foreign trade turnover climbed 4.0% to 23.4 billion kroons in July from the previous year. But, on a monthly basis, the foreign trade turnover dropped 8.0% in July. Exports of goods rose 12.3% to 9.988 billion kroons in July from last year. In contrast, imports of goods dipped fell 1.2% to 13.445 billion kroons. On a monthly basis, exports slipped 7.3% in July, while imports declined 7.9%.

Slovak Central Bank Retains Key Interest Rate At 4.25%

Sep 25, 2007 - The Slovak central bank retained two-week repo tender rate at 4.25% on Tuesday. The decision came in line with economists' expectations.

The National Bank of Slovakia also held overnight sterilisation rate at 2.25% and overnight refinancing rate at 5.75%.

Philippines Trade Deficit Widens In July As Imports Outpace Exports

Sep 25, 2007 - Philippines trade deficit widened to US$854.0 million in July from US$396.0 million a year ago, the National Statistics Office said Tuesday. In June, the trade deficit stood at US$589.0 million.

The report said that imports climbed 14.3% from the previous year to US$5.042 billion, a sharp jump compared to the 3.8% growth in the prior month. Meanwhile, exports rose 4.3% to US$4.188 billion in July, after climbing 1.5% in the prior month. This has taken the total merchandise trade to US$9.230 billion, marking an increase of 9.5% from the previous year; the highest growth recorded this year.

On a monthly basis, total imports rose at a slower pace of 7.2% in July, compared to the 9.5% growth in June.

Imports of electronic products, accounting for 42.7% of the aggregate import bill, advanced 12.8% on an annual basis to US$2.152 billion, compared to an increase of 8.5% in June. The annual increase was due to the robust inbound shipment of semiconductors. On a monthly basis, imports of electronic products dropped 1.7% in July, spiking 22.5% in June.

Commodity wise, cereals and cereal preparations led the list with 59.6% growth, followed by mineral fuels, lubricants and related materials climbing 44.3%. Imports of organic and inorganic chemicals, telecommunication equipment and electrical machinery, plastic and electronic products also registered double-digit growth in July.

The statistics office further said that the total external trade in goods for January to July reached US$59.080 billion, showing a 5.1% increase from last year. Total imports grew 4.1% to US$30.355 billion, while exports went up 6.3% to US$28.725 billion. This has resulted in a trade deficit of US$1.629 billion during the seven-month period.

The U.S remained the top source of imports, claiming12.5% of total import bill. This was despite the imports from US falling 9.9% annually. Meanwhile, exports to the U.S amounted to US$767.95 million. Imports from Japan declined 2.6% while imports from Saudi Arabia increased 319.6% from last year.

Argentina Aug primary surplus up 23 pct from yr ago

Sep 24, 2007 - Argentina's August primary budget surplus expanded 23 percent from a year ago due to greater social security inflows as well as robust revenue from sales and trade taxes, the government said on Monday.

The primary surplus rose to 2.72 billion pesos ($854 million) from 2.21 billion pesos a year earlier, Economy Minister Miguel Peirano told reporters.

The figure came in above the median forecast of 2.55 billion pesos given in last month's central bank survey.

The primary budget surplus represents excess government revenue over expenditures before interest payments and is seen as a gauge of a country's ability to service its debt.

Argentina targets a primary surplus this year of 2.96 percent of gross domestic product and a surplus of 3.15 percent of GDP next year, according to the government's 2008 budget bill.

President Nestor Kirchner said this month that his wife, a prominent senator and the front-runner in Argentina's presidential race, would aim for a primary surplus of at least 4 percent of GDP if she were to win the Oct. 28 election.

Government spending levels have shot higher during this election year, outpacing growth in revenue. ($1 = 3.185 Argentine pesos)

Hungary central bank cuts leading interest rate 0.25 pct point to 7.5 pct

Sep 24, 2007 - The Hungarian central bank today lowered its key interest rate by a quarter of a percentage point to 7.50 pct, the bank's rate-setting Monetary Council said in a statement.

The rate cut had been widely expected by analysts, who say inflation in Hungary is now on a downward path.

According to the latest consumer price data published by the central statistics bureau KSH earlier this month, the annual rate of inflation in Hungary stood at 8.3 pct in August, fractionally lower than the 8.4 pct recorded in July.

In the period from January to August, the 12-month rate of inflation averaged 8.5 pct.

Hungary's high inflation rate partially reflects big cuts in state subsidies for household energy, which were implemented to rein in the public deficit, which at 9.2 pct of gross domestic product is the highest in the European Union.

The Hungarian central bank forecasts the annual rate of inflation to average 7.6 pct in 2007. Inflation is then expected to slow sharply to 4.5 pct in 2008.

The central bank had already cut its key interest rates by a quarter-point to 7.75 pct in June. Prior to that, the interest rate had been held at 8.0 pct since October of 2006.

U.K. August Budget Deficit Swells on Spending Growth

Sep 24, 2007 - The U.K. had a larger budget deficit than economists forecast in August as spending jumped and revenue from profits fell, piling pressure on the government to save money as income from financial services dwindles.

The 9.1 billion-pound ($18.4 billion) shortfall was the highest for the month since records began in 1993, the Office for National Statistics said in London today. It exceeded the median 6.5 billion pounds forecast in a Bloomberg survey of 20 economists.

Spending grew twice as fast as revenue, making it harder for Chancellor of the Exchequer Alistair Darling to cut borrowing. At the same time, revenue may be eroded as the collapse of the U.S. subprime mortgage market hits the profits of banks and cools a decade-long housing boom.

"The financial services sector and corporations have been providing a lot of revenue, and if that slows the near-term outlook for public finances will look worse," said Nick Kounis, an economist at Fortis Bank in Amsterdam who formerly worked on budgetary affairs at the U.K. Treasury.

Government income rose 3.6 percent in August from a year earlier. Corporation tax payments almost halved due to rebates, while value-added tax, a levy on sales, fell by 1.6 percent.

Spending rose by 7.4 percent as departmental outlays increased 8.7 percent and higher borrowing costs pushed up interest payments.

Spending Limits

The increase suggests the Treasury is finding it hard to rein in departments after almost a decade of soaring investment in schools and hospitals drove up taxes and borrowing.

Darling has signaled he intends to stick to the tight budget limits set out by his predecessor Gordon Brown, now prime minister, when he fixes funding for each department for the three fiscal years through March 2011 next month.

The clampdown risks a confrontation with government workers angered at pay increases that are less than inflation, and with Brown refusing to rule out holding an election before the 2010 deadline, pressure for more spending is likely to grow.

"Attempts to cut spending quite substantially over the coming years will be tough to balance with political considerations," Kounis at Fortis Bank said.

Worsening Outlook

Unlike Brown, who enjoyed the strongest economic growth in more than a decade during his first years as chancellor, Darling faces a worsening outlook that may imperil plans to cut the deficit by a third by 2012.

At worst, subprime mortgage losses and the credit squeeze they triggered could shave as much as 1 percentage point from the pace of growth in 2008 and 2009, costing the Treasury billions of pounds in lost revenue, Ernst & Young said Sept. 14.

James Knightley, an economist at ING Financial Markets in London, this month cut his forecast for economic growth in 2008 to 1.7 percent from 1.8 percent. In March, the Treasury forecast growth of as much as 3 percent.

London bankers' bonuses may fall to 7.5 billion pounds this year from a record 8.8 billion pounds in 2006 as higher borrowing costs paralyze leveraged buyouts and mergers, the Centre for Economics and Business Research said Sept. 18.

"The Treasury will doubtless be concerned that the recent problems in banks and financial markets will reduce the tax payments it receives from the financial sector, an unusually important source of revenue for the U.K.," said Gemma Tetlow, a research economist at the Institute for Fiscal Studies in London.

Golden Rule

Tax receipts rose 5.1 percent in the first five months, less than the 6.8 percent the Treasury forecasts for the full fiscal year. Corporation tax receipts fell 3.1 percent. Spending, up 6.4 percent on the year since April, is running ahead of the 6 percent growth projected by the Treasury.

Darling says Britain will continue to meet a golden rule that the government raises enough tax revenue to cover day-to- day spending and borrows only for investment over the economic cycle.

Excluding investment, the budget deficit in the first five months was 11.7 billion pounds, 3.1 billion pounds more than the same period a year earlier, the statistics office said. In August, the deficit was 7 billion pounds, the highest for the month since records began in 1998.

A cash-based budget measure that indicates how much the government will need to borrow through bond sales was in deficit by 5 billion pounds in August, the most for the month since 1984, the statistics office said. It compares with the median 3.5 billion pounds in a Bloomberg survey of 23 forecasts.

The statistics office also announced that it would reclassify Metronet Rail and Tubelines to the public sector from the dates in 2002 and 2003 they signed their public-private partnership contracts with London Underground. The move would add to net debt by the equivalent of 0.1 percent of gross domestic product. Debt stood at 36.7 percent of GDP in August.

The government guarantee of deposits at Northern Rock Plc, which recently sought an emergency bailout from the Bank of England, are classified as a 'contingent liability' and therefore don't appear on the balance sheet, the office said.

Singapore Annual CPI Growth Accelerates In August

Sep 24, 2007 - Singapore's consumer prices rose in August at the fastest pace in more than 12 years, suggesting the central bank will maintain a policy of allowing its currency to appreciate to damp inflation.

The consumer price index increased 2.9 percent from a year earlier, after gaining 2.6 percent in July, the Department of Statistics said today. That was the quickest pace since December 1994 and exceeded the 2.8 percent expected by economists. Prices rose 0.3 percent from July.

The central bank last month raised its forecast for inflation this year after prices gained the most in more than a decade in July following an increase in the goods and services tax, or GST. The Monetary Authority of Singapore, which has sought a 'gradual and modest' strengthening in the currency since April 2004, will review its policy next month.

"Inflation pressures have increased with oil prices reaching record levels and the higher GST rate," said Vishnu Varathan, an economist at Forecast Singapore. "I don't see the MAS stepping away from its policy for an appreciation in the Singapore dollar anytime soon."

The currency has gained 1.9 percent this year. It rose 0.2 percent to S$1.5047 against the U.S. dollar as of 1:02 p.m. local time from S$1.5071 on Sept. 21.

The central bank expects inflation in 2007 to be between 1 percent and 2 percent, it said on Aug. 27, up from a previous range of 0.5 percent to 1.5 percent. Consumer prices may rise as much as 2 percent next year.

Sales Tax

The government raised the goods and services tax by 2 percentage points to 7 percent on July 1 to make up for a revenue shortfall after corporate tax rates were reduced. The tax increase will add between 0.4 percent and 0.6 percent to consumer prices this year and next, the central bank has said.

Food prices, which make up 23 percent of the index, rose 3.3 percent in August from a year ago, following July's 2.9 percent increase. From July, food prices gained 0.4 percent.

Transport and communication costs, the second-biggest component at 22 percent of the index, climbed 3.4 percent in August from a year earlier. From July, transport and communication prices rose 0.5 percent.

Transport costs are likely to gain further in coming months. Fares for bus journeys will be raised from October, while oil prices above $80 a barrel will increase fuel costs for automobile owners.

Housing, Power

Housing costs, the third-largest component of the consumer price index, climbed 1.1 percent from a year ago, after a 0.7 percent gain in July, today's report showed. From a month ago, housing prices rose 0.2 percent amid higher rental costs.

Singapore Power, the island's biggest power company, raised electricity tariffs for the July to September quarter by an average 8.8 percent, citing higher oil prices. It reviews rates every three months.

Recreation costs, which include holiday travel, gained 4.4 percent in August from a year ago and rose 0.3 percent from the previous month. Prices of clothing and footwear gained 0.8 percent from a year earlier and increased 1.5 percent from July.