July 18 - 24, 2005






UK consumer price inflation (CPI) hit 2% in June, the first time it has touched that level since the new preferred measure was adopted in 2003.
The Office for National Statistics (ONS) data showed an increase from May's 1.9% number, and was the highest CPI figure since 2.1% in May 1998.
The increase may dampen expectations that the Bank of England could cut interest rates from the current 4.75%.
Annual retail price inflation, which includes housing costs, stayed at 2.9%.
The largest upward effect on CPI came from food, mainly fruit and meat.

Rising clothes and shoe prices, as well as more expensive soft drinks, also pushed the CPI figure up.



However the figure remains in line with the with the target of 2% set for the Bank of England's monetary policy committee (MPC) by chancellor Gordon Brown.

"In line with expectations, up 2.0%. Bang in line now with the MPC's target," said Adam Chester, chief economist at HBOS group.

"It's quite interesting that the main upward effect came from seasonal food prices - that was largely expected.

"What's also potentially interesting is that oil prices, petrol prices, don't appear to have impacted significantly on the June CPI."

He said the main impact from those increases would be seen in the July and August figures.

The largest downward effect on inflation came from recreation and culture, particularly audio-visual goods as prices for a range of products, including computers and DVDs, fell this year but rose a year ago.


The Organisation for Economic Cooperation and Development (OECD) has told eurozone policymakers reform is need to prevent weak growth until 2020.

An OECD report warns a growth limit of 2% can be expected unless the challenge of competition if faced.

In 2005 growth would be 1.25%, slightly less than last year, before reaching the 2% mark in 2006, it said.

The OECD advised the European Central Bank (ECB) to hold its key interest rate at 2.0%, despite calls for a cut.

"It would seem reasonable for the ECB to hold its rate stable as long as the outlook for price developments remains in line with price stability over the medium term," the OECD said in its latest survey of the 12-nation eurozone economy.

The persistent budget deficits and the near-zero growth in several key European economies, not least Germany and Italy, has prompted calls for the ECB to cut interest rates which have been at 2% for more than two years.

But the OECD said that unless there were major competitive reforms, including making labour markets more flexible and integration of its services markets, then it faced a growing income gap with the US.

"Boosting the poor growth performance to date requires stepping up the pace of structural reforms and restoring sound public finances," the OECD wrote.

European Central Bank governing council member and governor of the Bank of Greece, Nicholas Garganas, also said there was a case for reform.


Japan's government has awarded a Japanese oil company test drilling rights in a potential flashpoint maritime area also claimed by China.

Teikoku Oil Co asked for the rights in April, after Tokyo signalled a change in policy to allow test drilling.

China and Japan have held talks about how to share out resources in the East China Sea, but have failed to agree.

China said the Japanese move would harm bilateral ties, already strained by rows over history and resources.

"If Japan persists in granting drilling rights to companies in disputed waters it will cause a serious infringement of China's sovereign right," Chinese foreign ministry spokesman Liu Jianchao told reporters in Beijing.

China has been drilling since 2003 within the area both sides agree are in Chinese waters, but Japan is concerned that it may be drawing gas from the area is considers to be its zone.

Japan has held off drilling while the two sides have been trying to resolve the issue through talks, but these have made no progress.

At the last round of talks on the issue, Beijing suggested Japan and China engage in joint exploration of the area, but Tokyo turned down that offer.

Teikoku will not be able to begin drilling immediately.

"There are many issues regarding the water area such as safety so we want to make a decision on when actual work will take place after consulting with the government agencies concerned," the company said in a statement. Relations between Japan and China have been deteriorating for months.


Ukraine's fast-growing economy is losing some of its zip as uncertainty about the investment environment and lower metal prices take their toll.

Growth in the first six months of this year was 4%, compared with almost 13% in the same period a year earlier.

The government has warned it may trim its 2005 growth forecast to 8%, down from the stellar 19.1% the year before.

Ukraine has gone through a difficult period since the ruling administration was overthrown last year.

After long-standing President Leonid Kuchma was toppled in the Orange Revolution, the new government pledged to cut corruption, revitalise the economy, improve living standards, and move Ukraine closer to its western neighbours.

Despite the good intentions, the administration has failed to push through legislation paving the way for membership of the World Trade Organization and recent debates have ended in parliamentary punch ups.

With the good will that followed the change in power fading, the state of the economy has come back into the focus.

Figures released earlier this week showed that Ukraine's foreign trade surplus during the first five months of this year tumbled to $794.6m from $2.1bn in the same period a year earlier.

Speaking earlier this week, President Viktor Yushchenko admitted that some decisions taken after the revolution may have hurt the economy.

More than six months on from the ouster of Mr Kuchma, foreign investment in Ukraine has only increased by 3%.


China's foreign exchange reserves, the second-largest in the world after Japanís, hit $711 billion at the end of June, up 51.1 per cent from a year ago, official data showed. This reflected an increase of $20 billion in June alone, $8 billion more than in the same month last year, the Peopleís Bank of China said in a statement on its website.

The country added a total of $101 billion in foreign exchange reserves during the first half of this year, the central bank said.

That compared with a $67.3 billion increase in foreign exchange reserves recorded in the same period of last year, the bank said.

An unnamed central bank official said the end-June total excludes $15 billion that was used for a capital injection into the Industrial and Commercial Bank of China.


Russian economic growth slowed in the first half of 2005 to 5.4 per cent according to preliminary data, casting further doubt on President Vladmir Putinís aim of doubling the size of the Russian economy by 2010, the Russian prime minister said. Mikhail Fradkov, the Russian premier, said the pace of economic growth in the first half of 2005 ìwill not enable us to completely achieve the objective of doubling GDPî by 2010, according to a report by Russian news agency Interfax.

At the end of June, Russia's economic development minister, German Gref, also had warned that Putin's goal of doubling GDP in the next five years was "not realistic". To meet the target the Russian economy would need to grow at an average annual rate above 7.0 per cent.

This was achieved in 2004, when the economy expanded by 7.1pc compared with 2003, but the latest government estimate for 2005 is for growth of only 5.8pc.


Singapore's economy has spurred itself back to rapid growth on the back of a recovery in both manufacturing and services, official figures show.

The city state expanded at an annual rate of 12.3% in the three months from April to June.

The growth follows a 5.5% contraction in the first quarter as drug firms lost sales to generic competitors, sparking fears of recession.

Forecasters are now predicting a much stronger performance for the full year.

The annual rate is the pace of expansion if the three-month performance were to last for a full year, rather than a measure of the actual expansion over the previous 12 months.

The government's full-year prediction for 2005 was reduced from 3-5% to 2.5-4.5% following the January-March figures.

The expectation is now that the final result will come close to the top of the new range.

Manufacturing drove part of the revival, amid hopes of a pickup in electronics sales worldwide.

But services - accounting for two-thirds of the country's economy - also put in a strong showing, at 4.2% on a year earlier.


The UK's trade gap narrowed in May as falling exports of chemicals and cars were offset by a rise in oil exports.

The difference between what the UK exported and imported was £4.9bn ($7.2bn), down from April's £5.1bn.

The figure was higher than analysts' forecasts of a £4.8bn deficit, said the Office for National Statistics (ONS).

Heightened supply worries helped push the price of Brent crude through the £57 a barrel mark for the first time as demand soared.

The UK's trade deficit with the enlarged EU was virtually the same as that in April at £2.5bn, while the deficit with non-EU countries narrowed to £2.4bn from £2.6bn.

There were higher exports of crude oil and precious stones, while exports of cars and chemicals both fell. Imports of capital goods and aircraft into the UK rose, the ONS said.


China's economic growth will slow to 8.6 per cent in the third quarter and to 8.2 per cent in the fourth amid government efforts to make growth more sustainable, the China Securities Journal quoted a think-tank as predicting.

That would take full-year growth to 8.8 per cent, significantly lower than 9.5 per cent seen last year and in 2003, the paper quoted a report by the National Development and Reform Commissionís Macroeconomic Institute as saying.

The slower pace of growth would be in accordance with government efforts to adjust macroeconomic controls and would not mean that

China would enter a cycle of low economic growth in the coming years, the paper quoted the think-tank as saying.


Saudi Arabia has told global oil majors and European and US refiners it will keep crude supplies steady in August from July, traders said. With European and US crude stocks at the top end of ranges for recent years, majors and European buyers were not looking for more crude, traders said. "I donít think people were asking for more," one trader said. "There is plenty of crude available in the market."

Saudi Arabia's Oil Minister Ali al-Naimi has said the kingdom was able to lift output but that there was no demand for extra crude from the world's oil market due to bottlenecks in the global refining system.

Opec in June decided to raise its oil production target by 500,000 barrels per day effective July 1, but the move had little effect on oil prices. Majors have been receiving about 80 per cent of full contract volumes since May, while European refiners have been receiving about 70-75 per cent of contracted volume for some time.


Russia recorded a record budget surplus of 726 billion rubles ($25.2 billion, 20.8 billion euros) in the first half of 2005, with government coffers boosted by record oil prices and tax settlements from Russian companies, preliminary figures from the ministry of finance showed.

The figure is greater than the surplus for the whole of 2004 of $24.5 billion.

Government receipts totalled 2,393.1 billion rubles, 46 per cent higher than expected.

Yukos, formerly Russia's largest oil company, contributed 151.5 billion rubles to the budget after settling a backdated tax claim from the Russian authorities.

Spending totalled 1,657.1 billion rubles which was in line with revised government forecasts.


Arnold Schwarzenegger is being paid at least $1m (£567,000) a year as a consultant for fitness magazines, their publisher has revealed.

American Media Operations said the former actor, who is governor of California, was receiving 1% of the company's advertising revenue. Critics say the deal could amount to a conflict of interest.


Annual house price inflation slowed in May, according to the Office of the Deputy Prime Minister (ODPM).

Prices rose by 6% in the year to May, the ODPM said, compared with annual growth of 6.9% in April.

Recent surveys from mortgage lenders Halifax and Nationwide have also shown annual growth rates slowing.

However, the ODPM said the average UK house price rose slightly in May, standing at £182,651, compared with £181,832 in April.


Raw material costs rose at their fastest pace in 20 years in June as soaring oil prices continued to put pressure on industry.

Producer input prices rose 2.1% between May and June, giving an annual increase of 12.7%, according to the Office for National Statistics (ONS). This was the largest annual rise since March 1985.




Trade negotiators are gathering in the Chinese city of Dalian in the hope of restarting flagging world trade talks.

The aim is to flesh out an outline deal announced in May, which could break a deadlock on agriculture tariffs.

Farming is the big sticking point for December's top-level World Trade Organization (WTO) summit in Hong Kong.

The Dalian talks involve the US, China and the European Union, as well as the G20 group of developing nations and big farming producers such as Australia.

Farming subsidies and tariffs have long been a key problem in trying to reach a new trade deal.


The Philippines face rising borrowing costs after a third leading ratings agency cut its sovereign debt outlook.

The downgrade by Moody's, which follows warnings by Standard & Poor's and Fitch, came amidst a political storm surrounding President Gloria Arroyo.

Ms Arroyo is embroiled in a row over accusations of electoral fraud.

She has apologised for calling an election commissioner while votes were being counted during May's elections, but denies fraud and refuses to quit.

Calls for Ms Arroyo's resignation have come from, amongst others, her former economic team. The team, which includes finance secretary Cesar Purisima, quit last Friday.


India's second-biggest software firm Infosys has reported a 37% rise in profits as foreign firms continue to outsource parts of their business.

Net profits for the three months to June were 5.32bn rupees ($122m; £69m), on sales of 20.7bn rupees.

But the rise in profits still fell short of analysts forecasts, which foresaw earnings of 5.41bn rupees.


Telekom Austria has bought Bulgaria's biggest mobile phone operator Mobiltel for up to 1.6bn euros ($1.9bn; £1.1bn).

Companies are betting that demand for phone services is set to increase as Bulgaria's economy improves and it prepares for European Union membership.

Mobiltel had 3.2 million subscribers at the end of June. Bulgaria has a population of more than seven million.


Japan's current account surplus fell by 19.5% in May, as the soaring price of oil boosted the value of imports, while Japanese exports remained stagnant.

The surplus totalled 1.38 trillion yen ($12.4bn; $7bn) before seasonal adjustments, the finance ministry said.

Current account data measures the flow of goods, services and other financial transfers.

Weaker demand from Asia - and in particularly China - hit exports, a key driver of the Japan's economy.

Japan's trade surplus slumped 57.4% to 474.3bn yen, while exports rose just 1.7% to 4.58 trillion yen, official figures showed.

"The current account surplus fell sharply as import growth far outpaced export growth due to a rise in oil prices," a finance ministry official said.


US mobile group Sprint is to buy its affiliate US Unwired for around $1.3bn (£793m) in a deal that will end a series of legal rows between the two.

Under the deal, Sprint will also assume US Unwired's debt - which stood at $233m at the end of March.

Meanwhile, Unwired will end its legal actions against Sprint, including a bid to end Sprint's tie-up with Nextel.

The Sprint-Nextel deal will create the third largest mobile phone operator in the US drawing in revenues of $40bn.


A sharp rise in microprocessor sales has boosted profits for US chip maker Advanced Micro Devices (AMD), lifting its shares 3%.

Net profit of $11.3m (£6.41m) for the March to June quarter was better than investors had expected, albeit down from $32m a year ago.

Sales of high-margin microprocessors rose 38% during the quarter when compared with a year earlier. This offset weak memory chip sales, leaving revenues flat at $1.26bn.


Apple Computer has reaped fresh rewards from the popularity of its Pod music players, as sales and earnings rocketed in the past quarter.

For the three months to 25 June, its profit rose to $320m (£262.6m), up from $61m in the same quarter a year ago.

Sales surged 75% to $3.52bn, fuelled by a six-fold increase in sales of 'Pods since the third quarter of 2004. The company also shipped 1.2 million Macintosh computers during the last quarter.


US President George W Bush has said that the nation's large budget deficit will be $94bn (£53bn) less in 2005 than originally projected.

The White House now sees a deficit of $333bn for the fiscal year to October, after the Office of Management and Budget's (OMB) "mid-session" update.

Mr Bush also said the government was still on track to cut the deficit in half by 2009.

The news came on the back of increased tax revenues in recent months.

In February, the administration had estimated a projected budget deficit of $427bn for 2005.

"There's some good news today, OMB is going to announce that the 2005 deficit is $94bn less than previously expected," Mr Bush said after holding a cabinet meeting.

"I told the Congress and told the country we'd cut the deficit in half by 2009. We're ahead of projections now," he continued.

Earlier this year, Federal Reserve chairman Alan Greenspan warned that unless the huge budget deficit was addressed it could have "severe" consequences.




Venezuela has ordered oil giant Shell to pay $131m (£74m) in what it says is unpaid tax, as part of a clampdown on alleged tax avoidance by foreign firms.

In a separate move, the country's tax authority seized documents belonging to US oil firm Chevron which it said had not been produced upon request.

Venezuelan authorities have said that foreign firms may owe up to $3bn (£1.7bn) in unpaid taxes.

Neither Shell nor Chevron were available for comment.

President Chavez has sought to maximise income from foreign-held contracts.

His government is reviewing all foreign investment in the mining industry to see if it provides maximum benefits to the country.


Samsung Electronics, South Korea's largest firm by value, saw a 46% fall in second-quarter profits on lower memory-chip prices.

It made 1.69 trillion won (£0.89bn; $1.63bn) in the quarter to June 30, down from 3.13 trillion a year ago.

But analysts had expected the firm to announce lower profits of 1.63 trillion won on Friday last.

Lower memory chip prices were partly offset by strong flat-screen sales and revenue fell 9% to 13.59 trillion won.


Oil prices have bounced back from the early heavy falls triggered by the series of bomb attacks in London.

US light sweet crude recovered from a low of $57.20 a barrel, rising to $60.73, down 55 cents on the day.

In London, Brent crude fell to a session low of $55.55, before recovering to $59.28, down 57 cents.

Dealers said the initial sell-off was sparked by fears of a September 11- style economic slowdown in the wake of the London bomb blasts.

The rebound in crude prices was aided by a hurricane heading towards the Gulf of Mexico where much production and refining capacity could be at risk.


The Russian government has approved a space programme for the next ten years.

The programme provides money for the development of a reusable spacecraft to replace the ageing Soyuz manned launch vehicle.

Russia also wants to start experiments to test whether it is possible for humans to make the flight to Mars.

Under the plans, six volunteers will spend 500 days in a mock space module in Moscow. Over 20 volunteers have already applied to take part.

Russia has been struggling to finance the International Space Station (ISS) in the absence of the US space shuttle fleet.

The Soyuz craft took over all trips to and from the space station following the Columbia shuttle disaster in 2003.

But the new 10-year budget, reported to be about 300 billion roubles ($10.50 billion), is less than the US spends on space in a year.


Businessman David James' consortium is the third party in talks with the administrators for carmaker MG Rover, the Financial Times reported.

He said he would withdraw his proposal for turning Rover into a sportscar-making company, branded MG.

But PriceWaterhouseCoopers, the administrators, said on Thursday it was in talks with three groups: one from the UK. This is thought to be Mr James.

The others are Nanjing and Shanghai Automotive Industry Corp/Magma.


Thailand has announced it will offer anti-retroviral drugs for the treatment of HIV/Aids to all infected Thais, at virtually no cost to the patient.

The drugs will be available on the government's 30 baht healthcare scheme, with treatments costing just under $1.

There are estimated to be approximately 500,000 HIV-positive people in Thailand.

The Thai government has pioneered the production of cheap generic drugs to combat HIV/Aids.