Friday's News Recap: Canadian Wholesale Trade Up, Consumer Spending Still Strong

News Recap | Written by CEP News | Jul 18 08 20:39 GMT |
(CEP News) - It was a quiet day for releases in North America, with wholesale trade and leading indicators released in Canada. In the U.S, markets received state and regional employment data and heard some comments about inflation from Minneapolis Fed president Gary Stern.

Canada's wholesale sales posted a larger-than-expected 1.6% rise in May, driven predominantly by rising fertilizer sales, Statistics Canada reported Friday. Wholesale sales hit $44.2 billion in the month, up from $43.5 billion in April. This marks the fourth gain in the last five months. Analysts had expected to see a 0.5% increase in the monthly figure. Fertilizer exports soared 57.7% compared with the same month last year.

"Since the volume of wholesale trade was only robust in May (in real terms) this report will likely have a sizable impact on May GDP," noted Charmaine Buskas, senior economics strategist from TD Securities. "The next piece of the puzzle is the retail sales numbers which come out next week, but there is already good momentum for May GDP."

Canada's composite leading index was unchanged in June as consumer spending remained strong but housing and manufacturing showed signs of weakness, Statistics Canada reported Friday. The flat reading in the index followed gains of 0.2% in May and 0.1% in April. Analysts had expected to see the composite index rise by another 0.1% in June. New orders from manufacturers plunged 3.5% to $25.4 billion in June from $26.3 billion the month prior.

In the U.S., regional and state unemployment rates were generally little changed in June, as 24 states recorded month-to-month unemployment rate increases, 16 states and the District of Columbia registered decreases and 10 states had no change, according to data released by the Bureau of Labor Statistics.

On a year-to-year basis, the unemployment rate was up in 45 states (and D.C.), down in four states and unchanged in one state. The national unemployment rate was unchanged in June at 5.5%, but was up from 4.6% a year earlier.

Speaking in an interview with Bloomberg on Friday, Minneapolis Federal Reserve President Gary Stern (voter) said that the Federal Reserve can't wait for the end of the crisis to raise rates. "I worry about the prospects for inflation. The headline inflation rate is clearly too high," said Stern. He also noted that the Fed is well-positioned for a downside risk to growth. He commented that the current credit crisis was reminiscent of the early 1990s.

In overnight news, Germany's Federal Statistics Office (Destatis), reported that German producer price inflation accelerated to 6.7% year-over-year in June, up from both the 6.5% growth rate expected and the 6.0% rate recorded in May. June's annualized increase is the largest recorded since March 1982. In monthly terms, the producer price index rose 0.9%. Economists had expected a more severe slowdown to 0.7% after prices increased 1.0% in the previous month.

Eurostat reported that the euro zone trade balance fell to a deficit of €4.6 billion in May. Economists had expected a smaller deficit reading of €1.0 billion following the previous month's €2.5 billion surplus. April's figure was revised up from a surplus of €2.3 billion. Adjusting for calendar effects, the trade deficit was only €1.5 billion, down from a surplus of €1.4 billion recorded in April. Economists had expected a surplus reading of €800 million. Meanwhile, April's figure was revised down from a surplus level of €2.2 billion.

The Bank of Japan released the minutes of its June 12 and 13 monetary policy meeting, where it was unanimously agreed that the current money market operation guidelines would be maintained and that the uncollateralized overnight call rate would remain unchanged at 0.50%.

In a joint interview with the Irish Times, France's Le Figaro, Germany's Frankfurter Allgemeine Zeitung and Portugal's Jornal de Negocios published on Friday, European Central Bank President Jean-Claude Trichet reiterated that the mandate of the ECB was to ensure price stability in the medium term and suggested that would be achieved "in line with our definition" over 18 months.

"We are not pursuing two goals; we are pursuing one goal, which is price stability in the medium term," Trichet said.

Speaking to the Irish Times, Trichet said that policy-makers would not modify monetary policy to help individual euro zone states that are seeing notable economic slowdowns, such as Ireland, Spain or Portugal, and emphasized that the interest of the entire monetary zone was the focus of the ECB. "Our monetary policy must be optimal at the level of the whole euro area," Trichet said.

Speaking at the London Stock Exchange on Friday, Bank of England Deputy Governor John Gieve said he expects inflation to rise to "well over" 4% in 2008 while economic growth should slow sharply. "We are expecting inflation to be well over 4 percent for much of the rest of the year," Gieve said in a prepared statement, adding that "timely sources of data suggest the economy is already slowing fast."

By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.