At its July policy meeting, the Reserve Bank of Australia's board decided to leave the cash rate unchanged at 7.25%. In a statement released by RBA Governor Glenn Stevens, the bank indicated that inflation in Australia has been "high over the past year in an environment of limited spare capacity and earlier strong growth in demand."

The statement noted that the inflation outlook remains "concerning" and that the board continues to forecast "moderate" demand growth this year. "Inflation is likely to remain relatively high in the short term, and the CPI will be further boosted in coming quarters by the recent rises in global oil prices," Stevens said in the release. "Looking further ahead, inflation in both CPI and underlying terms should decline over time, provided demand continues to evolve as expected." The board also noted that the current stance of monetary policy remains "appropriate".

Confidence amongst Japan's business leaders was slightly more optimistic than expected in the second quarter of 2008, according to the results of the Bank of Japan's closely-watched Tankan survey. The headline large manufacturers index fell to 5 in the second quarter from a previous reading of 11 and below the consensus forecast of 3.

The German unemployment rate for June fell to 7.8%, reflecting a 38,000-person drop in the number of unemployed in Germany, the federal labour agency reported. Economists had expected that the unemployment rate would stay at 7.9%, with only 14,000 individuals removing themselves from the list of unemployed.

According to the Federal Statistics Office (Destatis), the German unemployment rate, as measured by the International Labour Organization (ILO), remained unchanged at 7.4% in May, as expected. That translates into a seasonally-adjusted figure of 3.22 million unemployed in May, ILO noted. "Compared with the same month a year earlier, the number of unemployed was down by 440,000 persons or 12.2%."

Despite expectations of a slight rebound, German retail sales surprised to the upside in May with a gain of 1.3%, according to data released from the Federal Statistics Office (Destatis). Economists had only forecast a 0.8% increase following April's 0.6% decline, revised up from an initial reading of -1.7%. The annualized figures also showed some unexpected strength, rising 0.7% in May. The consensus forecast had called for a further 1.1% fall after slipping 0.2% in the previous month. April's figure was revised up from -1.0%.

Speaking to reporters in Berlin after meeting with German Economic Minister Michael Glos on Tuesday, U.S. Treasury Secretary Henry Paulson said Germany and the U.S. are "on the same page" regarding the current subprime mortgage crisis and ways in which to deal with its impacts. Paulson said banks in both countries are facing the same challenges of repricing the risks of financial products as well as the problems of too much leveraging.

Speaking to reporters in Frankfurt, German Finance Minister Peer Steinbrueck emphasized that inflation is a problem but that he hopes the European Central Bank is also taking into account the effects on growth when considering a possible rate increase. "Interest-rate policy dampens inflation but also has some other effects," Steinbrueck said. "However, there's no reason to make a drama out of that. Inflation is a problem and will occupy us more than the financial-market crisis."

Despite expectations for a decline, the euro zone unemployment rate held firm at 7.2% in May, Eurostat reported on Tuesday. Economists had forecast that the unemployment rate would to fall to 7.1%. Meanwhile, April's unemployment figure was revised up to 7.2% from 7.1%. According to Eurostat, the number of people unemployed in the euro zone increased by 42,000 in May.

According to data published by Markit Economics, the euro zone purchasing managers index for manufacturing fell further to 49.2 in June following May's slip to 50.6. June's reading is the lowest since May 2005. However, economists had expected a steeper fall to 49.1 for the month. The PMI figure was dragged down primarily by the deteriorating new orders component, which fell to its lowest level since June 2003.

Markit Economics also reported that the UK's manufacturing purchasing managers index fell to 45.8 in June - its lowest reading since December 2001. Economists had expected an improvement in June with the PMI figure rising to 49.8 after falling to 49.5 in the previous month. May's reading was revised down from an initial figure of 50.0. Declines were observed in most of the categories of the PMI. The most notable drops were seen in output, falling to 43.5 from 49.2 in June, and new orders, which slipped to 43.2 from 47.5.

The Nationwide Building Society reported that house prices in the UK slipped 0.9% on a monthly basis in June. Economists had expected a slightly stronger decline of 1.0% after house prices had dropped 2.5% in the previous month. Without adjusting for calendar effects, UK house prices tumbled 6.3% following May's 4.4% decline. Economists had expected a drop of 6.4% in annualized terms.

Following the announcement that Spain's manufacturing purchasing managers index fell to 40.6 in June - its lowest level on record - Spanish Finance Minister Pedro Solbes said he expects the Spanish economy to grow below 2% by the end of this year while inflation would remain around 4% over the same period. Solbes also said Spain would accept the European Central Bank's decision regarding interest rates and acknowledged that economic growth is the "secondary objective" of the ECB.

According to data published by Statistics Denmark, the retail sales index fell 0.6% on a monthly basis in May following a 0.4% gain in the previous month. The Danish economic output decreased 0.6% quarter-over-quarter in the first quarter of 2008, deepening the 0.2% decline recorded in the previous quarter. Economists had expected the economy to have grown 0.2%. Meanwhile, Q4 2007's reading was revised down from an initial growth rate of 0.3%.

Swedbank reported that its purchasing managers index for Sweden fell to 50.6 in June. Economists had expected a slightly stronger figure of 50.4 following May's rise to 51.2. While the overall indicator saw a decline in June, some components recorded improvements. The most notable gains were seen in export orders, rising to 52.5 from 50.9, and production, which increased to 53.9 from 53.4.

According to data published by Statistics Estonia, retail trade in the Baltic country fell 3.0% in May after registering no change in the previous month. "Compared to May of the previous year, the retail sales decreased in most economic activities except mail order sale and retail sales of pharmaceutical goods and cosmetics," the statistics agency said in a press release

AU AiG Performance of Mfg Index June: 47.0 vs Prior: 51.2

AU HIA Home Sales (M/M) May:-5.0% vs Prior: 0.1%

JN Loans & Discounts Corp (Y/Y) May: 1.0% vs Prior: -0.3%

JN Tankan Large Manufacturers Index 2Q May: 5 vs Prior: 11

JN Tankan Large Mfg Outlook 2Q May: 4 vs Prior: 7

JN Tankan Non-Manufacturing 2Q May: 10 vs Prior: 12

JN Tankan Non-Mfg Outlook 2Q May: 8 vs Prior: 13

JN Tankan Large All Industries Capex 2Q : +2.4% vs Prior: -1.6%

JN Labor Cash Earnings (Y/Y) May : +0.2% vs Prior: +0.6% Revised: +0.8%

AU Reserve Bank of Australia Cash Target Rate Jul: 7.25% vs Prior: 7.25%

JN Vehicle Sales (Y/Y) June: -3.6% vs Prior: -6.1%

AU RBA Commodity Index SDR (Y/Y) June: +38.2% vs Prior: +28.6% Revised:26.4%

DE ILO Unemployment Rate May: 7.4% vs Prior: 7.4%

DE Retail Sales (M/M) June: 1.3% vs Prior: -1.7 vs Revised: -0.6%

DE Retail Sales (Y/Y) June: 0.7% vs Prior: -1.0% vs Revised:-0.2%

GB Nationwide House prices (M/M) (SA) June: -0.9% vs Prior: -2.5%

GB Nationwide House prices (Y/Y) (NSA) June: -6.3% vs Prior: -4.4%

IT PMI Manufacturing June: 46.9 vs Prior: 48.0

FR PMI Manufacturing June Final 49.2 Exp: 49.2

DE Unemployment Rate (SA) June: 7.8% vs Prior: 7.9%

DE Unemployment Change June: -38K vs Prior: 4K Revised: 2K

DE PMI Manufacturing June Final: 52.6 vs Prior: 52.3

EU PMI Manufacturing June Final Exp: 49.2 vs Prior: 49.1

GB PMI Manufacturing June: 45.8 vs Prior: 50

EU Euro-Zone Unemployment Rate May: 7.2% vs Prior: 7.1% Revised:7.2%

By Steve Stecyk, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it and Tim Stackpool, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it

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