According to the Japanese Department Store Association, department store sales declined 7.6% nationwide in June 2008 compared to the same month one year ago. May had seen a 2.7% slip in sales figures. The strongest declines were seen in clothing sales, which fell 14.0%, and accessories, which contracted 9.3%.

According to the Federal Statistics Office (Destatis), German producer price inflation accelerated to 6.7% year-over-year in June, up from both the 6.5% growth rate expected and the 6.0% rate recorded in May.

June's annualized increase is the largest recorded since March 1982.

In monthly terms, the producer price index rose 0.9%. Economists had expected a more severe slowdown to 0.7% after prices increased 1.0% in the previous month.

On Friday, Statistik Austria reported that the Austrian producer price index grew 2.7% year-over-year in May, up from April's 2.5% growth rate. On a monthly basis, producer price inflation in the country accelerated to 0.4% following April's 0.2% rise.

Also on Friday, the National Institute of Statistics (ISTAT) reported that industrial orders in Italy fell 3.1% in seasonally adjusted terms in May month-over-month. Economists had only expected a 1.5% slip in orders levels after the latter rebounded slightly and grew 0.5% in the previous month. April's reading was revised down from an initial figure of 1.2%.

Year-over-year, Italian industrial orders tumbled 5.3% in May after jumping 12.8% in April. Economists had not foreseen a decline in the orders levels and had instead projected a slight increase of 0.1%.

The UK public sector net cash requirement surprised to the upside in June, coming in at £15.5 billion in June, up from both the £12.6 billion expected and the £11.0 billion recorded in May, according to a press release issued by the Office for National Statistics (ONS).

At £9.2 billion, net borrowing in the public sector also came in higher than expected. Economists had expected a borrowing level of £7.4 billion, down from the previous month's £12.5 billion level. May's reading was revised up from £11.0 billion.

According to preliminary estimates from the Bank of England, M4 money supply in the UK rose 2.0% month-over-month in June, up from both the 0.4% growth rate expected and the 0.3% rate observed in the previous month. May's reading was revised down from an initial figure of 0.4%.

On an annual basis, the money supply grew 11.5%. Economists had expected a deceleration in the growth rate to 9.7% after it rose 10.0% in May.

On Friday, Eurostat reported that the euro zone trade balance fell to a deficit of €4.6 billion in May. Economists had expected a smaller deficit reading of €1.0 billion following the previous month's €2.5 billion surplus. April's figure was revised up from a surplus of €2.3 billion.

Adjusting for calendar effects, the trade deficit was only €1.5 billion, down from a surplus of €1.4 billion recorded in April. Economists had expected a surplus reading of €800 million. Meanwhile, April's figure was revised down from a surplus level of €2.2 billion.

In a speech given in Tokyo late Thursday evening, Bank of Japan Governor Masaaki Shirakawa said that the central bank would have to balance the risks of a slowing economy with the threat of rising inflation.

"We don't have any pre-set direction for policy and must carefully examine both upside and downside risks," Shirakawa said. "If asked about a numerical-weight allocation, I would say that it is fifty-fifty growth to inflation."

On Thursday evening, the Bank of Japan released the minutes of its June 12 and 13 monetary policy meeting, where it was unanimously agreed that the current money market operation guidelines would be maintained and that the uncollateralized overnight call rate would remain unchanged at 0.50%.

In a joint interview with the Irish Times, France's Le Figaro, Germany's Frankfurter Allgemeine Zeitung and Portugal's Jornal de Negocios published on Friday, European Central Bank President Jean-Claude Trichet reiterated that the mandate of the ECB was to ensure price stability in the medium term and suggested that would be achieved "in line with our definition" over 18 months.

"We are not pursuing two goals; we are pursuing one goal, which is price stability in the medium term," Trichet said.

However, Trichet stressed that there was no contradiction between the central bank's price stability goal and economic growth, saying that "price stability is a pre-condition to sustainable growth and employment creation."

Trichet also highlighted the importance of avoiding second-round inflation effects and noted that signs had already been seen "that we have to take seriously".

Speaking to the Irish Times, European Central Bank President Jean-Claude Trichet said that policy-makers would not modify monetary policy to help individual euro zone states that are seeing notable economic slowdowns, such as Ireland, Spain or Portugal, and emphasized that the interest of the entire monetary zone was the focus of the ECB.

"Our monetary policy must be optimal at the level of the whole euro area," Trichet said.

Speaking at the London Stock Exchange on Friday, Bank of England Deputy Governor John Gieve expects inflation to rise to "well over" 4% in 2008 while economic growth should slow "fast".

"We are expecting inflation to be well over 4 percent for much of the rest of the year," Gieve said in a prepared statement, adding that "timely sources of data suggest the economy is already slowing fast."

Speaking with Finnish business newspaper Kauppalehti, European Commissioner for Economic and Monetary Affairs Joaquin Almunia said that there is a combined threat of slowing economic growth and rising inflation in Europe.

"We are in a difficult situation, because uncertainty in the markets and inflation are affecting economic growth," Almunia said.

By 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

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