Second-quarter U.S. GDP rose above expectations in the preliminary report, rising to 3.3% from the previously reported 1.9%, the Bureau of Economic Analysis reported on Thursday. Economists were expecting a revision to 2.7%. First-quarter growth in 2008 was 0.9%. Exports advanced by 13.2% in the revision, up from the originally posted 9.2% gain, while imports fell by 7.6%, following the former 6.6% decline.

Personal consumption in the first quarter posted a 1.7% increase, higher than the previous estimate and above expectations. Core PCE, which excludes sales of volatile food and energy components, posted a 2.1% gain on a quarter-over-quarter basis, in line with the advance figure originally posted.

"Overall, this was a fairly strong report and suggests that the fiscal-stimulus driven consumption spending and weak dollar added significant momentum to U.S. economic activity in Q2," said Millan Mulraine, economic strategist from TD Securities. "However, with the dollar strengthening in the past few months and the tax-rebate cheques spent, economic activity is expected to moderate significantly in the coming quarters."

Initial claims for unemployment benefits in the United States came in line with expectations, dropping further to 425k in the week ending Aug. 23, the Department of Labor reported on Thursday. Continuing claims, meanwhile, came in above expectations at 3.423 million for the week ending Aug. 16. Economists had forecast a reading of 3.390 million.

The Department of Labor recently introduced new rules, which extended benefits and made filing claims easier. "While it is difficult to whittle the data down to a level that is granular enough to report a 'true' number, the trend is self evident insofar as to say that the U.S. labor market continues to face a tumultuous state of affairs," said Ian Pollick, economics strategist at TD Securities.

Underground natural gas storage in the United States increased 102 billion cubic feet in the week ending Aug. 22, the Energy Information Administration (EIA) said Thursday. The weekly increase was above the +84 Bcf Bloomberg and Reuters estimates.

Markets continue to keep a watchful eye on Tropical Storm Gustav, which is expected to grow into a hurricane before hitting U.S. soil early next week. Crude oil prices shot above $120 at one point today before settling back around $115 per barrel, while oil companies race to evacuate workers from oil and gas platforms in the Gulf of Mexico.

In Canada, the CD Howe Institute's shadow Monetary Policy Council said the Bank of Canada should leave its key lending rate unchanged when it meets next week. Seven of the 11 members attending the MPC meeting recommended keeping the target steady, while four recommended raising the rate to 3.25%.

Canada's current account surplus grew to $6.8 billion in the second quarter on the strength of higher prices for many exported commodities, particularly energy, but it still fell short of economists' expectations for an $8 billion surplus. The first quarter current account balance was revised down to $4.5 billion from the previously reported $5.6 billion.

Canadian exports to the U.S. rebounded in June after posting the first decline of the year in May, according to the U.S. Bureau of Transportation Statistics. Goods shipped to the U.S. via surface methods increased 2.3% in June after contracting 3.3% in May. Increases in goods shipped by truck and pipeline offset a decline in rail exports. Total Canada-U.S. surface trade was reported at US$48.899 billion, down 0.1% in June, but up 8.7% year-over-year.

A report from the Conference Board of Canada says Canadian manufacturers are facing huge hiring challenges as growth in some manufacturing sectors is stagnating or even shrinking. The report also identifies increased competition from emerging markets, rapid technological change and the appreciation of the loonie as pressures on the industry.

Speaking at a round table discussion in Cortina, Italy, European Central Bank Executive Board member Lorenzo Bini Smaghi said the central bank must put the focus on limiting inflation, which is at 4%. Bini Smaghi said current interest rates are not "so restrictive," adding that inflation is hurting economic growth.

In overnight news, the German Labour Office reported the number of persons unemployed in Germany declined by 40,000 despite a deepening economic crisis in the region. The consensus had been for a decline of 10,000 jobs in August after July's 20,000 contraction. The unemployment rate also dropped to 7.6% despite expectations of no change to July's 7.8% rate.

According to a report from the German Federal Statistical Office on Thursday, the number of unemployed persons in July was 3.16 million compared to 3.18 million in June, translating into a 7.3% unemployment rate. The result was consistent with the consensus forecast.

The Nationwide Building Society reported that house prices in the UK continued their steady downward trend in August, falling 10.5% compared to 12 months ago. The consensus forecast had been for a 9.6% annual decline in August after house prices in July declined 8.1% versus one year ago.

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Steve Stecyk, This email address is being protected from spam bots, you need Javascript enabled to view it , Sean McKibbon, 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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