Aug 16, 2006. /Lesprom Network/. The Fed paused in its over 2-year string of consecutive interest rate hikes. Opinions are divided over the question whether or not rate hikes will continue in the next Fed meeting. US productivity was up more than expected during second quarter. Retail sales were positive in July but the housing market continues weak and the latest terrorist scare will hurt industries linked to flying. Oil prices could slide with curbing of the airplane fuel demand and rapid increase in the number of hybrid or biofuel cars. In Europe, especially the UK economy is expected to feel a negative impact from the plot to blow up airplanes. Prior to the incident, European economies were doing reasonably well. But the latest terrorist threat and the gradually reducing import pull from the US will bring lower growth rates also to Europe in third quarter and fourth quarter. In Japan, moderate expansion continues and the deflation is easing of into a minor 0.5-0.7% inflation. In second quarter exports to the US fell sharply and the pace of GDP-growth in second quarter was well below that of first quarter. The brisk domestic consumer spending and good corporate profit outlook provide a firm ground for renewed faster growth during 2nd half of the year. In China, People’s Bank of China said that China will adjust trade policies and make the Yuan more flexible to help curb the record trade surplus. Companies push their products to export markets and the risk of protectionist measures against Chinese imports is growing. Higher interest rates as well as an appreciation of yuan can be expected before the turn of the year. Paper industry order books are seasonally strong both in Europe as well as in the North American market. In Europe, the order books are not necessarily particularly long but new orders keep on coming in also in late July/early August, the time when things in some years get very slow. The increased cost pressure from higher raw material prices is somewhat eased in Europe by the stronger Euro against USD. Pulp market continues to be tight. Shipment rates appear to continue during the Northern summer months above the normal slow-season norm. Europulp reported a drop in the port stocks in July showing that the delivery numbers more likely reflect a steady consumption than speculative buying. The PIX NBSKP benchmark climbed up this time by $1.3/tonne, or 0.2%, to $706.95/tonne. The USD appreciated last week slightly by 0.1% against Euro which helped our NBSKP index value in Euro to increase to 553.39 Euro/tonne, up by 1.8 Euro/tonne, or 0.3%. BHKP market is described as firm, too. Euro weakened by 0.1% against the USD over last week. The stronger USD assisted our BHKP benchmark to increase in Euro-terms. The index closed at 515.44 Euro/tonne, up by 2.0 Euro/tonne, or 0.4%. Converting the index-value into USD brought it up to $658.47/tonne, up by $1.7/tonne, or by 0.3%. Newsprint market in Europe is proceeding well through the quiet summer period. The minor upward move of the index was predominantly currency driven, caused by the Euro weakening by about 0.3% against the weighted basket of the non-EMU currencies last week. The PIX Newsprint index moved up by Euro 0.25, or by 0.05%, to 520.23 Euro/tonne. In LWC, the persistent over-capacity of the recent years will be clearly reduced this summer by more than half a million tonnes with capacity closures by UPM in Finland and Stora Enso in France in June-August. Demand of coated mechanical reels was up by 3% during the first 6 months. Helped by the exchange rate movements, the PIX LWC benchmark gained Euro 0.53, or 0.08% closing at 706.38 Euro/tonne. In coated woodfrees, the production capacity is also reduced in Europe through summer time closures at mills. Helped by the weaker Euro the PIX Ctd WF benchmark went up by Euro 0.43, or 0.06%, ending at 721.37 Euro/tonne. In uncoated woodfrees, copier paper prices have shown a slight upward trend in recent weeks. The PIX A4 B-copy index moved up by Euro 0.71, or 0.1%, and closed at 807.76 Euro/tonne. In packaging, the US corrugated box shipments continued strong in June while inventories were down. On raw material side OCC prices are reported to have come down by $10/tonne. In Europe, containerboard price increases have been announced, typically 30-40 Euro/tonne from September for continental Europe and Euro 40/tonne, or equivalent, from August for the UK. The currency movements had a small positive effect on our indexes this time as the basket of non-EMU currencies strengthened by about 0.3% against the Euro. The PIX Kraftliner index inched up by Euro 0.08, or 0.02%, closing at 487.56 Euro/tonne. The PIX White-top Kraftliner benchmark gained Euro 0.69, or 0.1%, reaching 670.17 Euro/tonne. The PIX Testliner 2 index rose by Euro 0.66, or 0.17%, to 383.92 Euro/tonne. The PIX Testliner 3 index gained by Euro 0.95, or 0.27% to 356.36 Euro/tonne, and the PIX RB Fluting went up by Euro 0.71, or 0.21%, to 340.97 Euro/tonne.