According to Eurostat preliminary estimates, euro zone inflation reached a record high of 4.1% as expected in July. The previous record of 4.0% had been set in June.

Furthermore, Eurostat reported that the unemployment rate in the euro zone remained stable at 7.3% in June, unchanged from May's revised reading. Economists had expected no change to May's pre-revised 7.2% rate.

Late Wednesday evening, the GfK Group released UK consumer sentiment in July and reported that its consumer confidence indicator fell to -39 for the month. Economists had expected a decline to only -37 after the indicator had slipped to -34 in June.

According to the Nationwide Building Society, house prices in the UK fell 1.7% month-over-month in seasonally adjusted terms in July, adding to the 0.8% decline seen in June. Economists had expected a less severe 1.2% drop while June's reading was revised up from an initial figure of -0.9%. On an annual basis, house prices fell 8.1% compared to the expected decline of 7.3% as well as June's 6.3% fall in prices.

As expected, the German unemployment rate remained unchanged at 7.8% in seasonally adjusted terms in July, according to the Federal Labour Agency. Also in line with projections, 20,000 individuals who consider Germany their primary place of residence left the ranks of the unemployed in the same month, bringing the total number of unemployed down to 3.25 million. June had seen the number of unemployed fall by 38,000.

Meanwhile, the Federal Statistical Office (Destatis) released the German unemployment rate for June, as measured by the International Labour Organization (ILO). Germany's unemployment rate fell to 7.3% in June from May's 7.4% reading. Economists had expected no change in the unemployment rate for the month.

In a joint interview with Belgium's Trends magazine, European Central Bank Governing Council members Nout Wellink and Guy Quaden stressed that inflation expectations needed to be kept anchored at the target rate to prevent a wage-price spiral. "We must make clear that we will not let expectations rise, because when that happens, it filters through to wages and prices," Wellink said. "It is a delicate moment for central bankers. Sometimes the circumstances are such that inflation acquires its own dynamic. And then one must act."

On Thursday, the Central Bank of Ireland released its quarterly economic bulletin and highlighted that growth risks to the euro zone were on the upside and speculated that euro zone inflation could remain at elevated levels going into 2009. However, the central bank added that the euro zone economy would still continue to expand in 2008, while suggesting that the headline inflation rate would gradually moderate over the course of this year.

The National Institute of Statistics (ISTAT) reported that the Italian inflation rate reached a record high 4.1% in July 2008 compared to the same month one year ago. Economists had expected a less pronounced acceleration in price growth to 3.9% after rising 3.8% in June. On a monthly basis, the Italian consumer price index rose 0.5% in July, up from the 0.4% gain expected and seen in the previous month.

In EU harmonized terms, inflation in Italy surprised to the downside and came in at 4.1% year-over-year, down from the 4.2% rate expected. June had seen the CPI rise 4.0% in annualized terms. Month-over-month, Italian HICP fell 0.5%, down from expectations of a 0.4% decline for July. June had seen a monthly price gain of 0.5%.

On Thursday, the National Statistics Institute (INE) reported that Spanish inflation reached a record high 5.3% in EU harmonized terms in July. Economists had expected a rise to 5.2% after the consumer price index grew to 5.1% in the previous month.

According to the Bank of Spain, the Spanish current account deficit grew to €9.4 billion in May from a deficit level of €8.7 billion seen in the previous month. The central bank also reported that the trade deficit rose to €7.2 billion from April's €7.1 billion level, while the services surplus grew to €2.3 billion in May from €1.4 billion. The capital account surplus in Spain also increased, rising to €964 million from €258 million in April.

According to Statistics Finland, industrial production fell 2.3% in June month-over-month, overshadowing the 0.7% gain seen in the previous month. May's figure was revised up from an initial reading of -0.3%. Year-over-year, Finnish industrial output slipped 3.3% in June after rising 5.8% in the previous month, revised up from +4.2%.

Against expectations of a 7.3% reading, inflation in Slovenia slowed to 6.9% in July, down from the 7.0% rate seen in June, according to the Statistical Office of the Republic of Slovenia.

According to the Swiss Federal Statistical Office, consumer prices in Switzerland fell 0.4% as expected on a monthly basis in July. June had seen the Swiss CPI grow 0.2% in monthly terms. Year-over-year, the Swiss CPI grew 3.1%, up from both the 3.0% increase expected and the 2.9% price gain seen in the previous month.

On Thursday, Statistics Norway reported that credit growth in the Scandinavian country declined more than expected in June to 13.3% year-over-year. Economists had expected a more modest slowdown to 13.8% after growing 14.0% in the previous month.

Sweden's National Institute of Economic Research (NIER) reported that Swedish household sentiment slipped further in July, as reflected in the consumer confidence indicator falling to a 13-year low of -18.2 for the month. Economists had expected a less pronounced decline to -12.0 from June's -10.2 level.

Meanwhile, the Central Bank of Ireland released its quarterly economic bulletin and highlighted that growth risks to the euro zone were on the upside and speculated that euro zone inflation could remain at elevated levels going into 2009. However, the central bank added that the euro zone economy would still continue to expand in 2008, while suggesting that the headline inflation rate would gradually moderate over the course of this year.

According to the Australian Bureau of Statistics (ABS) on Thursday, retail sales contracted by 0.1% month-over-month in June despite forecasts for a flat reading and May's 0.7% gain was revised up to a 0.9% rate of growth for the month. Meanwhile, real retail sales for the second quarter contracted by 0.6% on the quarter despite forecasts for a 0.1% contraction, and Q1's 0.1% fall was revised down to a 0.3% decline.

The ABS also reported that Australia's trade balance rebounded unexpectedly to +A$411million in June despite forecasts for an increase to -A$100 million. May's -A$965 million figure was revised to -A$253 million.

The Reserve Bank of Australia saw a 0.4% month-over-month increase in private sector credit for June, short of forecasts for a 0.6% rise, and the previous month's 0.6% expansion was revised down to a 0.5% rate of growth. On an annual basis, available credit to the private sector was up 11.7% in June compared to the consensus 12.1% rate, and May's annual 13.4% increase was revised down to a 13.3% growth rate.

In Japan, the Nomura/JMMA manufacturing PMI improved to a reading of 47.0 in July from 46.5 in June.

The Japanese Ministry of Health, Labour and Welfare also reported a 0.6% annual decline in labour cash earnings for June, against forecasts for a 0.6% increase. May's 0.2% improvement was also revised to a 0.8% increase.

The Ministry of Land, Infrastructure and Transport reported that annualized housing starts surpassed expectations in June, reaching 1.130 million compared to May's 1.072 million. The consensus had been looking for 1.11 million housing starts for June. The move was not encouraging compared to twelve months ago, with housing starts having fallen 16.7% in June compared to May's annual 6.5% contraction. Economists had been expecting a 17.8% contraction.

The ministry also reported an 11.7% decline in annual construction orders in June compared to May's 25.2% fall.

The foreign purchase of Japanese stocks fell ¥39.7 billion in the week ending July 25 after selling off ¥297.6 billion in the previous week. Buying of bonds fell ¥39.7 billion following the previous week's ¥333.5 billion buy-up. Meanwhile, the Japanese sold ¥3.5 billion in foreign stocks following the ¥71.1 billion purchased in the prior week. The Japanese also purchased ¥347.9 billion in foreign bonds following the previous week's ¥167.7 billion buy-up.

JP Normua/JMMA Manufacturing PMI July +47.0 Prior: +46.5

JP Foreign Buying Japan Bonds W/E July 25 -¥39.7B vs. Prior: +¥333.5B

JP Foreign Buying Japan Stocks W/E July 25 -¥72.8 vs. Revised: -¥297.6B Prior: -¥297.2B

JP Japan Buying Foreign Stocks W/E July 25 -¥3.5B vs. Prior: + ¥71.1B

JP Japan Buying Foreign Bonds W/E July 25 +¥347.9B vs. Revised: +¥167.7B Prior: +¥172.3B

AU Private Sector Credit (M/M) June +0.4% vs. Exp: +0.6% Revised: +0.5% Prior: +0.6%

AU Private Sector Credit (Y/Y) June +11.7% vs. Exp: +12.1% Revised: +13.3% Prior: +13.4%

AU Trade Balance June +A$411M vs. Exp: -A$100M Revised: -A$253M Prior: -A$965M

AU Retail Sales June -1.0% vs. Exp: +0.0% Revised: +0.8% Prior: +0.7%

AU Retail Sales Ex Inflation (Q/Q) Q2 -0.6% vs. Exp: -0.1% Revised: -0.3% Prior: -0.1%

JP Labor Cash Earnings Y/Y June -0.6% vs. Exp: +0.6% Revised: +0.8% Prior: +0.2%

JP Housing Starts (Y/Y) June -16.7% vs. Exp: -17.8% Prior: -6.5%

JP Annualized Housing Starts June 1.130M vs. Exp: 1.110M Prior: 1.072M

JP Construction Orders (Y/Y) June -11.7% vs. Prior: -25.2%

GE ILO Unemployment Rate June 7.3% vs. Exp: 7.4% Prior: 7.4%

GB Nationwide House prices (M/M) (SA) July -1.7% vs. Exp: -1.2% Revised: -0.8% Prior: -0.9%

GB Nationwide House prices (Y/Y) (NSA) July -8.1% vs. Exp: -7.3% Prior: -6.3%

GE Unemployment Change July -20K vs. Exp: -20K Revised: -36K Prior: -38K

GE Unemployment Rate (SA) July 2.8% vs. Exp: 7.8% Prior: 7.8%

IT Large Company Employment (Y/Y) May -0.1% vs. Prior: 0.0%

IT CPI (NIC including tobacco) (M/M) July Preliminary +0.5% vs. Exp: +0.4% Prior:+0.4%

IT CPI (NIC including tobacco) (Y/Y) July Preliminary +4.1% vs. Exp: +3.9% Prior: +3.8%

IT CPI - EU Harmonized (M/M) July Preliminary -0.5% vs. Exp: -0.4% Prior:+0.5%

IT CPI - EU Harmonized (Y/Y) July Preliminary +4.1% vs. Exp: +4.2% Prior: +4.0%

EU Euro-Zone CPI Estimate (Y/Y) July +4.1% vs. Exp: +4.1% Prior:+4.0%

EU Euro-Zone Unemployment Rate June 7.3% vs. Exp: 7.2% Revised: 7.3% Prior: 7.2%

By Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This 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.