Thursday, 9 September 2010

BoC raises interest rate

The Bank of Canada raised its interest rate on Wednesday. Bloomberg reports:

The Bank of Canada raised its benchmark interest rate today for a third time this year, and said it expects households and businesses to spend even as the outlook for the U.S. economy weakens.

The bank raised its target rate for overnight loans between commercial banks to 1 percent from 0.75 percent, matching estimates from 14 of 20 economists surveyed by Bloomberg. While the country’s recovery will be “slightly” slower than it had projected because of a weaker outlook for the U.S. economy, inflation is in line with expectations, it said.

This came as the Ivey purchasing managers index showed a large jump in August. Again from Bloomberg:

Canadian business spending increased more than expected in August, reaching its highest level in more than two years, the Ivey purchasing managers’ index showed.

The index rose to 65.9 in August from 54 the month before, according to the survey of 175 purchasing managers by the Richard Ivey School of Business in London, Ontario. Figures higher than 50 indicate purchasing increased. Economists expected a reading of 55.5, based on the median of 10 estimates compiled by Bloomberg.

Japan also released some positive data on Wednesday. Bloomberg reports:

Japan’s machinery orders and current account surplus exceeded forecasts in July even as the yen appreciated, supporting the central bank’s decision to hold off from further monetary easing yesterday.

Orders rose 8.8 percent from June, the biggest gain this year, the Cabinet Office said in Tokyo today. July’s current- account surplus widened 26 percent from a year earlier to 1.676 trillion yen ($20 billion), a separate report showed.

Surprisingly, some of the weaker data on Wednesday came from Germany. From Bloomberg:

German exports fell and industrial production rose less than economists forecast in July, suggesting the recovery in Europe’s largest economy is losing momentum.

Sales abroad dropped 1.5 percent from the previous month, while production increased 0.1 percent, reports from the Federal Statistics Office in Wiesbaden and the Economy Ministry in Berlin showed today. Separate reports showed that industrial production declined in the Netherlands in July, while annual production output in Spain rose the least in five months.

In the UK, the economy may also be slowing although growth in manufacturing held up in July. Reuters reports:

British factory output maintained a healthy pace of growth in July, official data showed on Wednesday, but a slowdown in both manufacturing and the broader economy looks inevitable to economists.

Factory output rose 0.3 percent on the month, the same pace as June and May, continuing its recovery from last year's deep recession. That lifted the annual growth rate to 4.9 percent, the highest since December 1994...

The broader measure of industrial output also rose 0.3 percent on the month, recovering from a 0.5 percent drop in June caused by an early start to oil rig maintenance. The statistics office said there was scope for further gains as more oil rigs came back on stream in August...

Forecasters at the National Institute of Economic and Social Research think-tank calculated that British GDP growth slowed sharply to 0.7 percent in the three months to August from 1.3 percent in the three months to July.

And the Federal Reserve reported on Wednesday that US economic growth is also slowing. From Bloomberg:

The Federal Reserve said the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks.

Five regional banks reported “economic growth at a moderate pace” and two pointed to “positive developments or net improvements.” The remaining five banks said conditions were mixed or decelerating.

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