Durable goods excluding transportation posted another strong result in July, rising 0.7% despite forecasts for a 0.7% decline, according to the Department of Commerce. June's figure was revised to a 2.4% gain compared to the preliminary 2.0% reported.

Total sales of durable goods increased 1.3% against expectations for a flat reading. This follows an upwardly revised 1.3% advance in June, which was previously reported as a 0.8% increase. Excluding defence, orders were up 2.8% following an increase of 0.6% in the previous month.

"The strength of US durable goods orders in July is probably more a reflection of the resilience of demand abroad than it is a sign that domestic business investment is doing well," said Paul Ashworth, senior U.S. economist from Capital Economics. "The national accounts figures show domestic business spending on equipment and software actually contracted in Q2. Nevertheless, at the very least it suggests exports will put in another strong performance in Q3."

Speaking at an economic outlook conference, Atlanta Fed President Dennis Lockhart said he welcomes the recent rise in the U.S. dollar and speculated that housing prices could fall another 15%. In his prepared comments, Lockhart said recent measures of inflation are uncomfortably high, but that higher prices are likely more transitory than persistent. Lockhart said he expects CPI inflation to peak at or near July's level of 5.6%.

Annual unemployment rates grew higher in July in 338 out of 369 metropolitan areas, while falling in 25 other areas, according to the U.S. Bureau of Labor Statistics. The unemployment rate in July was at least 10% in 11 of the areas, up from six in June, while nine areas registered rates below 3%. The national unemployment rate for the month was 6.0%, not seasonally adjusted, up from 4.9% a year ago.

U.S. crude oil stockpiles decreased by 177k barrels in the week ending Aug. 22, while gasoline supply fell 1179k, the Energy Information Administration reported. The crude oil build is the largest since March 2001, while the gasoline draw was the second largest in the past 10 years. The largest draw was the prior week. Gasoline inventories were expected to decline 2450k barrels, while crude oil inventories were expected to increase 1100k, according to Bloomberg.

Manufacturing in the U.S. Midwest bumped up 0.4% to a level of 106.3 in July, up from the revised 105.9 total in the previous month, according to the Chicago Fed Midwest Manufacturing Index released Wednesday. The modest increase was attributed to auto sector production, and follows a sharp increase in the previous month.

Weekly mortgage applications in the United States increased in the week ending Aug. 22, according to data released from the Mortgage Bankers Association (MBA) on Wednesday, which reported a 0.5% week-over-week rise in applications. In the previous week, applications also fell by 1.5%.

Canada's international travel deficit remained near record levels in the second quarter despite a modest improvement from Q1 results, Statistics Canada reported Wednesday. Foreign travel spending in Canada climbed to $4.0 billion in the second quarter of 2008, 1.7% higher than the previous quarter. Canada's travel deficit with the United States fell to $2.2 billion in the second quarter, down $64 million from the first quarter.

Statistics Canada reported that Canadians took more than 7.2 million trips abroad in the first three months of the year, a 17.7% increase from the previous year. They left behind more than $7.2 billion Canadian dollars, up 18.2% from the first quarter of 2007. The United States continued to be the main attraction, accounting for almost 4.5 million of the total trips abroad, an increase of 21.5% from the previous year. Spending in the U.S. rose 23.3% to almost $3.8 billion.

Weak economic conditions in the United States reduced Canadian rail freight shipments in June, Statistics Canada reported Wednesday. The Canadian railway industry loaded 22.4 million metric tonnes of freight in June, a 6.7% decline from June 2007 levels.

Speaking in Buenos Aires, European Central Bank Vice-President Lucas Papademos said inflation risks in the developed world have increased. Papademos said he expects the economy to improve in late 2008 and early 2009. He forecasts a small moderation in inflation for the next year and expressed concern that inflation could potentially spark a wage spiral. He warned that second-round effects must be avoided.

Overnight, markets have been receiving regional German CPI data suggesting some deceleration in CPI growth. CPI for the Saxony, North Rhine West and Hesse regions declined 0.4% on the month, while Bavaria and Brandenburg reported 0.3% declines in August.

According to the German Federal Statistical Office on Wednesday, import prices for the country advanced 0.6% month-over-month in July, slightly above forecasts for a 0.5% gain, but slower than June's 1.5% increase.

Speaking in an interview with Bloomberg, Bundesbank President Axel Weber said talks about rate cuts are premature and that there was no guarantee that slowing economic growth would lead to lower inflation rates. The central banker added that inflation in the euro zone might not breach 2.0% by 2010 and that "considerable" price pressures remain in the pipelines.

Speaking in an interview with Reuters, Central Bank of Malta President Michael Bonello said markets have rightfully understood the European Central Bank's message of no changes in interest rates in 2008 and that it was too early to say rates would come down in 2009. The central banker also explained his definition of the ECB's current "no bias" stance on monetary policy as a possibility of rates moving either higher or lower.

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it , Adam Button, This email address is being protected from spam bots, you need Javascript enabled to view it , Steve Stecyk, This email address is being protected from spam bots, you need Javascript enabled to view it and Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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