Hong Kong CPI Logs Biggest Decline In Five Years

Hong Kong consumer prices dropped for the second consecutive month in July and marked its biggest fall in five years, the Census and Statistics Department said on Thursday.

The consumer price index or CPI declined 1.5% year-on-year in July, worse than a 0.9% fall in the previous month. The decline was in line with economists’ expectations. This was the first decline in CPI since January 2005 and the biggest since early 2004. The CPI had grown 6.3% in the same month last year.

The CPI, excluding the effects of all government’s one-off relief measures or underlying CPI, dropped 0.3% in July, in contrast to the 0.4% growth in the previous month. This was mainly due to the decline in food prices and smaller increase in private housing rentals.

During the first seven months of the year, the CPI rose 0.5% from the same period of the previous year. For the three months ending July, the index dropped 0.8% year-on-year.

A Hong Kong government spokesman said, the consumer prices decline in July was a part of a global phenomenon. The government expects the underlying consumer price inflation to stay negative in the coming months, as local price pressures continue to subside and import prices remain soft.

Last week, the government forecast headline consumer price inflation for 2009 at 0.5%, revised down from 1% predicted in May. Underlying consumer price inflation is expected at 0.9%, same as in May.

Though the main economic indicators are yet to confirm an economic recovery, Hong Kong’s economy emerged from the worst recession in the second quarter, prompting the government to raise the outlook for this year.

The government expects the recovery process to be “rather bumpy”. It now expects the economy to contract by 3.5%-4.5% in real terms this year, up from 5.5%-6.5% decline forecast in May. Most private sector analysts are currently projecting the economy to contract by 3.5%-5.5%.

Philippines Ends Monetary Easing In August

Thursday, the Philippine central bank ended its monetary easing that started in December 2008 as the economy showed signs of recovery from the global recession.

The Bangko Sentral ng Pilipinas held its key interest rate unchanged at a record low of 4%, in line with expectations. The interest rate on overnight lending or repurchase facility was kept at 6%.

In July, the central bank cut its key policy interest rate by 25 basis points to the current level.

Since December 2008, the central bank made a cumulative reduction of 200 basis points in its benchmark interest rate. The central bank also initiated liquidity enhancing measures.

Asian central banks have stopped cutting interest rates after seeing signs of economic recovery and demand rebound. In the second quarter, the Japanese economy grew 3.7% and China expanded 7.9%. Economic growth was 20.7% in Singapore.

Weekly Jobless Claims Show Unexpected Increase

While recent data has shown some signs of stabilization in the labor market, the Labor Department released a report Thursday morning showing that first-time claims for unemployment benefits unexpectedly increased in the week ended August 15th.
The report showed that initial jobless claims rose to 576,000 from the previous week’s revised figure of 561,000. The increase came as a surprise to economists, who had expected jobless claims to edge down to 550,000 from the 558,000 originally reported for the previous week.
With the unexpected increase, jobless claims rose for the second consecutive week, although they remain well off the highs seen in March.
The Labor Department also said that the less volatile four-week moving average rose to 570,000 from the from the previous week’s revised average of 565,750.
Additionally, the report showed that continuing claims edged up to 6.241 million in the week ended August 8th from the preceding week’s revised level of 6.239 million.

UK July Retail Sales Register Biggest Rise Since 2008

UK retail sales in July registered its biggest annual increase since May 2008 reinforcing the perception that recession is slowly leaving the economy. At the same time, government borrowing was the largest on record for July.

Retail sales rose 3.3% in July from a year earlier, which was the biggest increase since May 2008, the Office for National Statistics reported Thursday. July’s increase was larger than the expected growth of 2.7%.

Predominantly food store sales rose 2% annually in July and non-food store sales grew 3.4%. Clothing and footwear sales increased 10.3%, while sales volume for household goods stores dropped 1.3% in July.

On a monthly basis, retail sales volume grew 0.4% in July, in line with expectations, but slower than June’s revised 1.3% increase.

Further, the ONS report showed that the seasonally adjusted value of retail sales increased 2.6% on a yearly basis in July. Meanwhile, the estimated total value of sales on an unadjusted basis was GBP 21.9 billion in July. The average weekly value of sales was GBP 5.5 billion.

Philly Fed Index Turns Positive For First Time In Almost A Year

Manufacturing activity in the mid-Atlantic region is showing some signs of stabilizing, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, with the index of activity in the sector unexpectedly climbing into positive territory in August.

The Philly Fed said its index of current activity rose to 4.2 in August from a negative 7.5 in July, with a positive reading indicating growth in the sector. Economists had been expecting a more modest increase to a negative 2.0.

With the bigger than expected increase, the index rose above zero for the first time since September of 2008 and reached its highest level since November of 2007.

However, Peter Boockvar, equity strategist for Miller Tabak, noted, “The data measures the direction of improvement, not the degree. So, don’t extrapolate that we are at November ‘07 output levels.”

A turnaround in new orders contributed to the improvement in the sector, with the new orders index rising to 4.2 in August from a negative 2.2 in July. The shipments index also jumped to 0.6 from a negative 9.5 in the previous month.

The report also showed that the inventories index rose to 0.3 in August from a negative 15.4 in July. This marks the first positive reading for the inventories index since September of 2007.

Leading Economic Indicators Rose For Fourth Consecutive Month In July

Research group the Conference Board released its report on leading economic indicators in the month of July on Thursday, showing that its leading indicators index increased for the fourth consecutive month.

The report showed that the leading economic index rose 0.6 percent in July following an upwardly revised 0.8 percent increase in June. Economists had expected the index to increase by 0.7 percent, matching the increase originally reported for the previous month.

Positive contributions from six of the ten indicators that make up the leading index contributed to the continued growth.

The interest rate spread, weekly jobless claims, weekly manufacturing hours, supplier deliveries, stock prices and manufacturers’ new orders for non-defense capital goods contributed positively to the index.

Meanwhile, the negative contributors were the index of consumer expectations, real money supply, and building permits. Manufacturers’ new orders for consumer goods and materials held steady in July.

Eurozone Private Sector Activity Stabilizes In August

(RTTNews) - The Eurozone private sector economy showed signs of broad stabilization as the Purchasing Managers’ Index hit the threshold level for August. A return to growth in manufacturing output and slowing rate of contraction in the service sector led to the stabilization.

The Flash Eurozone Composite Output Index rose to 50 in August from 47 in July, a survey from the Markit Economics showed Friday. Economists had expected the index to edge up to 48 in August. The latest reading marked the end to a fourteen-month stretch below the no-change mark of 50.

A reading above 50 indicates an expansion in the private sector activity, while a level below 50 suggests contraction.

Since its record low witnessed in February, the headline reading improved for each of the last six months. The increase seen in August was the greatest in the series history.

The Flash Purchasing Managers’ Index for the manufacturing sector stood at its 14-month high of 47.9 in August, rising from 46.3 in July. The expected reading was 47.5.

Meanwhile, the services PMI came in at 49.5, up from 45.7 in July. The services activity index posted its highest reading in the current fifteen-month sequence of contraction and stood above the expected 46.5.

European Session: USD Drops vs. Yen as Initial Jobless Claims Unexpectedly Rises

The US Dollar continued its fall backed by rising equity markets as Chinese equities started its rebound after the 4% decline on Wednesday. AIG said that it plans to repay the money borrowed from the US government which also helped push the equity markets higher. Leading indicators posted a reading of a rise of 0.6% backed by improvements in job sector and positive equity markets while the Philadelphia Fed manufacturing activity showed a positive reading at 4.2 against an expectation of -2.0 and better than the previous reading of -7.5 as new orders received increased. This data shows that the manufacturing sector has gained the most majorly boosted by the auto sector where the cash-for-clunkers program has helped the most.

Risk of US Session

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US Session: Bear Market Rally On Positive US & European Economic Data

Positive economic data out of the Euro zone and United States managed to lift investors’ desire for riskier assets, pushing equity markets higher. The EurUsd rose 73pips, finding support at 1.432, while the UsdJpy fell 32pips to 94.50. The GbpUsd appreciated 50pips, bringing the cable to the upper-range of 1.65. Equity markets rose in the U.S. and Europe, with the Dow higher by 1.45% or 136pts and the FTSE up by 1.43% or 66pts. The yield curve experienced some flattening, with the 10 and 30 year bonds up 12 and 9bps respectively. Commodities were higher across the board with oil up by $.44bbl at $73.39bbl and gold up $13.4oz approaching the mid-range of $954oz.