The latest economic news from around the world contained both positive and negative surprises.
Reuters reports on US retail sales:
U.S. retail sales jumped 1.8 percent last month as buyer incentives led to the biggest gain in auto sales since just after the Sept. 11, 2001, attacks, a government report showed on Thursday... July's retail-sales jump followed a similarly healthy 1.7 percent rise in June, the Commerce Department said, but fell short of forecasts for a 2.2 percent rise. Excluding autos, sales rose a modest 0.3 percent, also below forecasts.
Auto sales shot up 6.7 percent last month... Gasoline station sales rose 2.4 percent, reflecting higher prices at the pump... Excluding both autos and gasoline, retail sales would have been unchanged in July. Sales at electronics, health and sporting goods stores moved higher. But the report showed a sharp 1.3 percent drop in furniture sales, after a 2.2 percent jump in June, and a 0.4 percent decline in building material sales.
... business inventories:
The [Commerce Department] said inventories at the nation's retailers, wholesalers and manufacturers held steady in June as sales rose 0.7 percent. At retailers, however, inventories dropped 0.4 percent as auto dealers cut their bloated stocks by 2.4 percent. The overall strong sales performance in June pushed the inventories-to-sales ratio -- a measure of the number of months it would take to deplete stocks at the current sales pace -- to a record low 1.29.
...and unemployment:
Separately, the Labor Department said the ranks of Americans filing initial claims for state unemployment benefits thinned by 6,000 last week to 308,000. The drop, which defied Wall Street expectations for a rise to 315,000, brought a four-week moving average of claims -- a closely watched barometer of the pace of layoffs -- down to 309,250, its lowest level since late February.
In Europe, GDP in the euro zone and EU25 both grew 0.3 percent in the second quarter from the previous quarter, according to Eurostat. In the first quarter, growth rates had been 0.5 percent in both zones. Among the major European economies, Germany's GDP was flat in the second quarter, compared to a 0.8-percent growth in the first quarter, while the UK economy grew 0.4 percent in the second quarter, the same as in the first quarter.
Meanwhile, in its update of economic forecasts for the euro zone, the European Commission forecasts a range 0.2 to 0.6 percent GDP growth for the third quarter, unchanged compared to the previous release, while its first forecast for growth in the fourth quarter is between 0.4 to 0.8 percent.
Today, Japan reported second quarter GDP.
Japan's economy grew for the third straight quarter in the three months to June as a rebound in exports added to brisk capital spending and consumption, though the growth rate was slightly below expectations...due mainly to a drawdown in inventories.
Gross domestic product (GDP) grew 0.3 percent in real, price adjusted terms in April-June from the previous quarter, Cabinet Office data showed on Friday, compared with economists' median forecast of a 0.5 percent rise. That translated into 1.1 percent annualised growth in the world's second-largest economy, below a consensus forecast of 2.0 percent growth...
Domestic demand...has replaced exports as the main engine of growth this year... A drawdown in inventories lopped 0.5 percentage point off GDP growth... Private-sector consumption...rose 0.7 percent... outperforming a consensus forecast for a 0.4 percent gain... Capital spending rose 2.2 percent, compared with forecasts for a 1.6 percent increase...
But reflecting stubborn deflation...the GDP deflator fell 0.8 percent from the same quarter a year earlier.
However, high oil prices continued to put pressure on Japan's current account surplus in June, according to figures released yesterday.
Japan's current account surplus fell by an unexpectedly wide margin in June as soaring oil prices boosted the costs of imports and demand dwindled abroad for Japanese electronics, official figures showed Thursday...
For June, the current account surplus dropped 15.3 percent from a year earlier to 1.09 trillion yen (US$9.8 billion), the [Finance Ministry] said... The trade surplus for June plunged 57.4 percent year-on-year to 474.3 billion yen, with exports rising 1.7 percent to 4.58 trillion yen and imports expanding 21.2 percent to 4.10 trillion yen in the month, the ministry said.
It's a rather different story in China, which posted its second biggest monthly trade surplus in July.
China chalked up its second-biggest trade surplus on record in July... The $10.4 billion surplus in July took the cumulative total for the first seven months to $50 billion, already dwarfing the surplus for all of 2004 of $32 billion... July exports were up 28.7 percent from a year earlier, while imports rose 12.7 percent.
If China's trade surplus arises from an undervalued currency -- as many claim -- the effect of the latter does not appear to be showing up in its consumer prices.
China's consumer price index (CPI), a measure of inflation, rebounded slightly in July, rising 1.8 percent compared with the same period in 2004, official data showed. The July figure compares with a 1.6 percent year-on-year growth rate in June and 5.3 percent for July last year.
Brad Setser analyses China's trade performance and concludes that "China's economy looks even more unbalanced than the US economy, with far too much savings (and too little consumption) and far too much reliance on exports".
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