Overnight News Recap: BOE Quarterly Inflation Report, EU Industrial Production

News Recap | Written by CEP News | Aug 13 08 11:46 GMT |
(CEP News)- European industrial production and the UK's inflation report dominated the news in Europe while Japanese GDP data pointed to a decline in the country's economy on Wednesday.

The Bank of England published its quarterly inflation report and said "it was more likely than not" that the inflation rate in the UK would reach and exceed 5% and that inflation uncertainties were "greater than usual".

In its report, the BOE noted the sharp price rises in June, primarily due to increases in food and petrol costs. The central bank forecast further increases in CPI well above the 2% target over the next few months, in part due to expectations of higher retail gas and electricity prices.

However, according to projections, inflation will fall sharply to slightly below target in the medium term, as upward pressures from energy, food and import prices begin to pull back. "The projection for inflation in the near term is markedly higher than in the May Report," the BOE noted.

The Office for National Statistics (ONS) reported that the number of individuals claiming unemployment benefits in the UK rose 20,100 in July to 864,700, thus pushing the claimant count rate to 2.7%, up from June's 2.6% level.

Economists had expected no change to the claimant count rate for the month and had forecast an increase of only 17,000 individuals claiming jobless benefits in July. June had seen the number of jobless claims rise 20,000, revised up from an initial figure of +15,500.

According to Eurostat, euro zone industrial production showed some unexpected weakness in June as it contracted 0.5% year-over-year. Economists had expected a rebound of 0.2% after the output level fell 0.4% in May.

Disaggregating the data, Eurostat noted that production in the capital goods sector had risen 1.4% in June compared to the same month one year ago, while non-durable goods production slipped 0.6% over the same period. Durable goods production dropped 5.3% in the year while output in the energy sector saw a 0.8% loss.

European equity markets are trading lower with the Eurostoxx losing 22.13 points on the day and the UK FTSE 100 down 38.50 points to 5496.

In Germany, the bund was down 1.0 tick to 113.79 with yields down 0.1 bps to 4.23%, while the 10-year gilt was down 17.0 ticks to 108.52 with yields up 2.2 bps to 4.66%.

The euro was up 0.01 cents to 1.4927 USD.

Downside surprises were seen in Norwegian retail sales for June, with Statistics Norway reporting that sales, excluding motor vehicles and petrol, only rose 0.1% year-over-year. Economists had expected a stronger gain of 1.0% after May's retail sales rose 6.1% annually.

In monthly terms, Norwegian sales levels fell 0.2% in June, down from both the 0.2% increase expected and the 1.2% jump seen in May.

The Spanish consumer price index continued to accelerate in July as it grew 5.3% in the month compared to the same month one year ago, up from both the expected 5.2% growth rate and the 5.0% increase seen in June, according to a report by the National Statistics Institute (INE) released Wednesday.

The most notable gains were seen in transportation costs, which jumped 10.6% in yearly terms, followed by housing and utility costs, which gained 8.4% over the same period.

Statistics Estonia released its GDP preliminary estimates on Wednesday and announced that the country's economy contracted 1.4% on an annualized basis in the second quarter of 2008. Economists had expected a less pronounced decline of 0.3% after the economy grew 0.1% in Q1.

"According to preliminary estimations, decrease in the GDP was most of all influenced by the decrease in the value added of manufacturing, wholesale and retail trade, transport and storage, energy and real estate activities," the statistics agency noted in a press release.

In Japan, preliminary Q2 GDP shows the economy contracted by 0.6%, a drop from the previous quarter's revised 0.8% positive performance. On annualized basis, the GDP dropped 2.4%, a significant drop from the previous 4.0% year-over-year result. The nominal GDP data shows a decline of 0.7%, a drop from the previous quarter's 0.2%.

Japan's current account grew to ¥493.9B, a sharp drop from the previous month's ¥2000.6B result. The adjusted current account came in at ¥493.9B, a steep decline from the previous month's ¥2032.7B figure.

JP Gross Domestic Product (Q/Q) Q2 Preliminary: -0.60% vs Revised: +0.8% vs Prior:+1.0%

JP GDP Annualized Q2 Preliminary: -2.4% vs Prior:+4.0% vs Prior: +3.2%

JP Nominal GDP (Q/Q) Q2 Preliminary: -0.7% vs Revised: +0.2% vs Prior: +0.5%

JP GDP Deflator (Y/Y) Q2 Preliminary: -1.6% vs Prior: -1.5%

JP Current Account Total June: +¥493.9B vs Prior: +¥2000.6B

JP Adjusted Current Account Total June: +¥1290.7B vs Prior: +¥2032.7B

JP Trade Balance - BOP Basis June: +¥252.1B vs Prior: +¥529.4B

AU Westpac Consumer Confidence August : +9.1% vs Prior: -6.7%

AU Wage Cost Index (Q/Q) Q2 : +1.2% vs Prior: +0.9%

AU Wage Cost Index (Y/Y) Q2: +4.2% vs Prior: +4.1%

GB Claimant Count Rate July: +2.7% vs Prior: +2.6%

GB Jobless Claims Change July: +20.1.K vs Revised: +20.0K vs Prior: 15.5K

GB Average Earnings including bonus 3M/(Y/Y) June: +3.4% vs Prior: +3.8%

GB Average Earnings ex-bonus 3M/(Y/Y) June: +3.7% vs Prior: +3.8%

GB ILO Unemployment Rate (3mths) June: 5.4% vs Prior: 5.2%

GB Manufacturing Unit Wage Cost (3Ms/(Y/Y)) June: +1.6% vs Revised:+1.9% vs Prior:+1.8%

GB Bank of England Quarterly Inflation Report

EU Euro-Zone Industrial Production (M/M) (SA) June: 0.0% vs Revised: -1.8% vs

Prior: -1.9%

EU Euro-Zone Industrial Production (Y/Y) June: -0.5% vs Revised: -0.4% vs Prior: -0.6%

By Steve Stecyk, sstecyk@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 , edited by Nancy Girgis, ngirgis@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

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