Tuesday, 14 August 2007

Expectations for rate hike by BoJ fall on weaker growth

Bloomberg reported on Friday that Japan's producer price inflation was high in July.

An index of prices companies pay for energy and raw materials climbed 2.1 percent from a year earlier after gaining 2.3 percent in June, the Bank of Japan said in Tokyo today...

From a month earlier, producer prices rose 0.6 percent in July after gaining 0.1 percent in June, the Bank of Japan said.

But yesterday saw news that Japanese economic growth slowed more than expected in the second quarter.

The world's second-largest economy expanded at a 0.5 percent annualized rate in the three months ended June 30 from a revised 3.2 percent in the first quarter, the Cabinet Office said in Tokyo today. The median estimate of 27 economists surveyed by Bloomberg News was for 0.9 percent growth...

Investors see a 32 percent chance of rate increase next week, down from as high as 75 percent on Aug. 9, according to Credit Suisse Group calculations based on interest payments.

In contrast, expectations for more tightening in China remains high after the latest economic data. Bloomberg reports:

China's retail sales grew at the fastest pace in more than three years as rising stock prices and wages left consumers in the world's most populous country with more money to spend.

Spending climbed 16.4 percent to 699.8 billion yuan ($92 billion) in July from a year earlier, the National Bureau of Statistics said today, after gaining 16 percent in June. That beat the 16.2 percent median estimate of 18 economists surveyed by Bloomberg News...

July's consumer prices rose 5.6 percent, the biggest increase in more than a decade, on higher food costs...

Compared to the Chinese, US retail sales growth of 0.3 percent in July certainly looks weak, although it does represent a rebound from June.

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