Thursday's News Recap: BOC's Carney Says Economy Recovering, Philly Fed Mfg Down

News Recap | Written by CEP News | Jul 17 08 21:14 GMT |

(CEP News) - The highlights of the day included the release of the Bank of Canada's summer Monetary Policy Report update, which was followed by comments from Governor Mark Carney, as well as lower-than-expected readings in the Philadelphia Fed manufacturing survey and weekly U.S. jobless claims. Speaking at a news conference following the release of the Bank of Canada's summer Monetary Policy Report update, Governor Mark Carney said GDP will grow in the current quarter and continue to improve through the next two years, reaching 3.3% by 2010. GDP had declined by 0.3% in the first quarter. Meanwhile, inflation is expected to spike to more than 4% by the beginning of next year, pushed up by high prices for natural gas and gasoline, he said. The sharp increase is expected to be temporary, Carney said, and headline and core inflation should converge at 2% by the end of 2009. He also said Canada's credit markets have returned to a "new normal," and Canadian financial institutions are well positioned to weather the stresses of the most recent financial turmoil in the U.S. In the bank's report, it said the road to recovery will not be entirely smooth, as consumers trim their spending and world oil prices remain stubbornly above the $140 per barrel mark through 2010. In the U.S., markets received the July Philadelphia Fed manufacturing survey, which came in at -16.3 in July to mark the eighth consecutive monthly decline. The index was up from June's -17.1, led by negative figures in new orders, employment and shipments, none of which showed significant movement from the previous month. Economists had expected a reading of -15.0. Ian Shepherdson, chief U.S. economist at HFE, called the survey "very weak" but noted it has been "substantially undershooting the ISM this year," the key national survey of manufacturing. He suggested the Philly region may have been "hit disproportionately hard by the plunge in auto production." Initial claims for unemployment benefits in the United States rose much less than expected to 366k in the week ending July 12, following a slightly revised 348k in the previous week. Continuing claims fell back 81k to 3.122 million for the week ending July 5, the Department of Labor reported Thursday. The 18k rise in initial claims follows a drop of 56k in the previous week's survey. Prior to last week's dip, claims had been above 380k for four consecutive weeks. A consistent weekly claims level above 400k is commonly considered to be recessionary. The consensus forecast was for initial claims to come in at 380k. Due to a change in the housing code of New York City, U.S. housing starts came in above expectations at 1066k in June, a month-over-month rise of 9.1%, according to data released from the U.S. Department of Commerce on Tuesday morning. The consensus was looking for a decline to a level of 960k. The previous month's 975k was revised to a level of 977k. "New York City enacted a new set of construction codes effective for permits authorized as of July 1, 2008," reported the Department of Commerce, resulting in a large increase in building permits issued for multi-family residential buildings in New York City. Excluding the Northeast multifamily data, there was a 0.7% increase in permit authorizations and a 4.0% decrease in housing starts in June 2008. Underground natural gas storage in the United States increased 104 billion cubic feet in the week ending July 11, the Energy Information Administration (EIA) said Thursday. The weekly increase was above the +88 Bcf Bloomberg estimate. In the previous week, the EIA reported a supply increase of 90 Bcf. For Canadian data, travel to the country by visitors from other countries edged up 0.4% in May over April as visits by Americans and other non-residents increased, Statistics Canada reported. American visits grew by a small 0.3% in the month while residents from countries other than the U.S. also increased their travel to Canada by 0.7%. The increase happened despite declines in visits from seven of Canada's top 12 overseas markets. A report released by the Conference Board of Canada suggests soaring prices for agricultural crops like wheat and rice are being driven by demand, not speculation. The report recommends that governments address the fundamental causes, which include the rising demand in developing countries for protein-based diets, stagnating agricultural productivity, demand from bio-fuels producers, and government controls that limit output and trading. The International Monetary Fund raised its global growth forecast for 2008 to 4.1% from 3.7% while growth forecast for 2009 is 3.9%. The IMF report forecasts growth for six of the Group of Seven industrial nations, with Canada's being downgraded. The U.S. growth forecast is for the American economy to grow 1.3% in 2008, while a more modest pace of 0.8% in 2009 is expected. The euro zone growth forecast for 2008 has been elevated to 1.7% from 1.4%, while 2009 is forecast to hit 1.2%. The outlook for Canada is that growth will slow to 1% in 2008, and pick up to 1.9% in 2009. In overnight news, Eurostat reported that euro zone construction output rebounded and increased 0.2% in May on a monthly basis after slipping 0.6% in the previous month. April's figure was revised up from an initial reading of -0.8%. Year-over-year, construction production fell by a further 1.1% following April's 1.7% decline, which was revised up from an initial reading of -2.4%. Speaking on France's cable news channel La Chaîne Info (LCI) on Thursday, French Finance Minister Christine Lagarde said inflation would remain at high levels before slowing in August. "We'll finish the year at a clearly lower rate," Lagarde said. On July 16, the National Institute for Statistics and Economic Studies (INSEE) reported that the French consumer price index rose 4.0% in EU harmonized terms in June, the highest gain on record. By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Sean McKibbon, smckibbon@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Erik Kevin Franco, efranco@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 , Geoff Matthews, gmatthews@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. 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