The services sector in the United States rebounded into growth mode at 50.6 in August, according to the ISM Non-Manufacturing Index (NMI), against expectations that the index would see a second consecutive month of slowdown at 49.5. Leading the advance was a rebound in business activity, while both trade components were in contraction.

Paul Ashworth, U.S. economist at Capital Economics, called the advance in the headline "mildly encouraging," but said the drop in the employment component to a 45.4 reading would be consistent with a triple-digit decline in the BLS nonfarm payrolls report on Friday.

Initial claims for unemployment benefits in the United States came in well above expectations, rising to 444k in the week ending Aug. 30 against forecasts for a fall to 420k following last week's upwardly revised reading of 429k, the Department of Labor reported. Continuing claims rose to 3.435 million for the week ending Aug. 23 against expectations for a fall to 3.420 and following the previous week's upwardly revised figure of 3.429 million.

Meanwhile, private non-agricultural employment in the United States fell in line with consensus with a 33k loss of jobs in August, according to a report released from Automatic Data Processing. The figure was in line with expectations for a 30k loss. The previous month's data was revised down to a gain of 1k from an originally reported advance of 9k.

Economics strategist Millan Mulraine from TD Securities said the decline corresponds to a modest 14k drop in the nonfarm payrolls report to be released Friday by the Bureau of Labor Statistics, though economists expect a drop to 75k.

San Francisco Fed President Janet Yellen said she expects growth in the second half of 2008 to be "decidedly subpar" as consumer spending falters now that the boost from the stimulus package is wearing off, as exports slow and as problems persist in the housing, financial and labour markets. She said another interest rate cut by the Fed is unlikely, but that it couldn't' be ruled out. On inflation, Yellen said she expects both headline and core inflation to move down to a moderate rate of just over 2% in 2009.

Dallas Fed President Richard Fisher said it's unclear whether slow growth will moderate inflation into 2009 and that there are even odds that inflation will accelerate from its current level. Speaking in Texas, Fisher said although the jury is still out on whether inflation will moderate, the most recent measures "are not particularly encouraging."

U.S. second-quarter unit labour costs fell by an annual rate of 0.5%, while nonfarm productivity came in above forecasts by increasing 4.3%, according to final data released Thursday by the U.S. Bureau of Labor Statistics. Economists expected labour costs to come in flat in the quarter and nonfarm productivity to see a 3.5% gain.

U.S. crude oil stockpiles decreased by 1898k barrels in the week ending Aug. 29, while gasoline supply fell 1037k. Gasoline inventories were expected to decline 1300k barrels, while crude oil inventories were expected to increase 450k. The EIA said "crude oil inventories are in the middle of the average range for this time of year," while gasoline inventories are "near the lower boundary of the average range."

A monthly employment index measuring online job availability in the U.S. bumped up two points in August reflecting employers' increased hiring for the late summer and fall, Monster Worldwide Inc. reported Thursday. The index rose to 159, up slightly from the 157 level in July, but is still down 14% from a year ago.

U.S. chain store sales rose 1.7% year-over-year in August following a revised 2.5% increase in July, according to a report released by the International Council of Shopping Centers on Thursday. Total sales rose by an annual 6.3%, lower than the previous month's 7.4% gain.

In Canada, official international reserves shrank by US$65 million during August to US$42.6 billion, the Federal Department of Finance reported Thursday. The bulk of the reserve - just over $40 billion - was held in securities, with just over $91 million in gold.

Overseas, two major central bank announcements were delivered, with the Bank of England holding its key interest rate at 5.00%, while the European Central Bank held its rates at 4.25%.

At his monthly press conference following the rate announcement, ECB President Jean-Claude Trichet repeated that the current monetary stance adopted by the ECB, including the rate hike in July, will contribute to achieving the central bank's objective of price stability. The central banker reiterated that he had no bias regarding interest rates.

In other overnight news, housing prices in the UK declined 10.9% year-over-year in the three months to August, down from both the 10.7% fall expected and the 8.8% drop recorded in the three months to July, the Halifax Bank of Scotland (HBOS) said in a press release.

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it , Steve Stecyk, This email address is being protected from spam bots, you need Javascript enabled to view it and Geoff Matthews, 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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