The U.S. monthly trade deficit grew more than expected in July, deteriorating 5.7% to $62.2 billion to mark the deepest monthly deficit since March 2007. The consensus was expecting the deficit to come in at $58.0 billion, following an upwardly revised $58.8 billion in June, the U.S. Census Bureau reported Thursday. June's reading was previously reported at $56.8 billion.

"This report does suggest that the sector may have some difficulty in repeating the strong Q2 performance," said Millan Mulraine, economics strategist from TD Securities. "However, with crude oil prices easing substantially since July, there is the distinct possibility that we will likely see some improvement in the trade balance in the coming months, though this will be partially offset by the strengthening U.S. dollar."

Initial claims for unemployment benefits in the United States came in just slightly above expectations, but still fell 6k to 445k in the week ending Sept. 6 from the previous week's upwardly revised figure, the Department of Labor reported on Thursday. Continuing claims rose to 3.525 million for the week ending Aug. 30 from the previous week's downwardly revised figure of 3.403 million. Initial jobless claims were expected to fall to 440k following last week's upwardly revised reading of 451k. Continuing claims were expected to come in at 3.460 million.

"While we have been arguing for quite some time that the true trend in the series has remained masked by the regulatory-driven change over the past month, it has become quite apparent that this has turned into a real economic story," said Ian Pollick, economics strategist from TD Securities. "The U.S. labor market continues to struggle and we expect the numbers to get worse, before they get better."

Speaking in Washington, D.C., Federal Reserve Vice-Chairman Donald Kohn (voter) said it's not yet clear if house prices in the U.S. are close to finding a bottom. Kohn did say it's encouraging that the pace of declines is starting to abate in some markets and that mortgage conditions are still tightening and will likely persist. He also said a transition to a safer, more resilient financial system is likely to take "a while."

According to the U.S. Treasury, monthly receipts totalled $157.016 billion and spending came in at $268.930 billion, resulting in a deficit of $111.914 billion for August. Economists were expecting the monthly deficit to come in at $107.3 billion, following the previous month's $102.8 billion budget deficit. The August 2007 deficit was $117.0 billion.

U.S. import prices declined 3.7% month-over-month in August, but posted a 16.0% annual gain, according to data released from the U.S. Bureau of Labor Statistics (BLS) on Thursday. The report also showed a 0.3% month-over-month drop in import prices excluding petroleum products. The decrease in the import prices was led by a 12.8% drop in petroleum prices, the largest decline since an 18.8% decline in April 2003, the report stated.

A quarterly look at the services sector in the U.S. revealed gains in each of the areas surveyed, according to the U.S. Census Bureau, which also mostly revised up Q1 data. Figures are not adjusted for seasonal variation or price changes. Information sector revenue moved up 2.5% in the quarter to $284.9 billion, while professional, scientific and technical services revenue saw an advance of 4.2% in the quarter to $319.3 billion.

Underground natural gas storage in the United States increased 58 billion cubic feet in the week ending Sept. 5, the Energy Information Administration (EIA) said Thursday. The weekly increase was above the +55 Bcf Bloomberg estimate. In the previous week, the EIA reported a supply increase of 90 Bcf. Natural gas supplies decreased because of the impact of Hurricane Gustav. After the report, natural gas was up $0.003 at $7.440 mmbtu.

A monthly U.S. consumer confidence survey from RBC shows confidence may be turning around as oil prices drop, and with a presidential election less than two months away. The consumer attitudes and spending by household (CASH) index from RBC showed that consumer confidence climbed 35 points to stand at 69.2 in September, compared to 33.8 in August. Gains were made in every facet of consumer sentiment, including assessments of current conditions, investing and job security.

In Canada, the rate of increase of new home prices continued to slow in July, with the average price up just 0.1%, Statistics Canada reported. On an annual basis, the cost of a new home was 2.7% higher in July than it was in the same month of 2007, down from +3.5% in June. The pace of price increases has been slowing for the past six months, StatsCan reported.

Canadian imports and exports both hit record levels in July, but with imports growing faster than exports the country's international merchandise surplus slipped to $4.85 billion, Statistics Canada reported Thursday. The surplus was well below the $5.6 billion consensus estimate of analysts and down from the previous month's revised surplus of $5.6 billion (previously reported as $5.8 billion).

BMO deputy chief economist Doug Porter said the August drop in commodity prices will see the merchandise trade surplus narrow more sharply in the months ahead, "probably to below the $3 billion mark in short order."

In overnight news, European Central Bank Governing Council member Yves Mersch said CPI growth was at a "worrying level" and would only begin to fall gradually by 2009. Mersch also said the current refinancing rate level would contribute to the ECB's price stability goal and warned that slowing growth may not necessarily diminish inflation pressures.

In its monthly bulletin released Thursday, the European Central Bank said inflation will continue to remain above levels consistent with the ECB's goal of price stability for a protracted period of time, and inflation risks due to higher energy and food prices prevail.

German wholesale price growth slowed more than expected in August as it decelerated to 7.4% in yearly terms following July's 9.9% spike, according to data from the Federal Statistical Office (Destatis) published Thursday. Economists had been more modest in their predictions and had pencilled in a growth rate of 8.6%.

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 , Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it , Todd Wailoo, 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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