Sep 13, 2006. /Lesprom Network/. Although the evidence on the slowdown in the US economy is still mixed, most of the news coming in supports the view that the US economy will continue to slow down. The decline is mainly due to the bursting of the housing bubble. Higher interest rates and the delayed impact from the high energy prices play a role, too. The good news is that the service sector is doing better than expected and that the oil prices have started to head south. In Europe, reactions to stimulating measures are slow. During the first half of 2006, GDP-growth in the Euro area appears to have been as much as 3.4% with the full year’s consensus view now at 2.5%. Unfortunately, it is unlikely that the rapid expansion will carry very deep into 2007. In Japan, expansion continues at a moderated rate. Growth in exports and livelier corporate activity are the main drivers. Improved profits help capital expenditures. Industrial production came down in July, however. Consumer spending is rising, but only modestly. China scored again a new record in trade surplus in August. During the first 8 months, Chinese trade surplus grew by almost 60% from last year. Further interest rate hikes, or an appreciation of yuan are needed in China to stop the western world from over-reacting to Chinese export success. The paper industry order books are rising again after the slower summer months. European order in-flow more or less follows the typical seasonal patterns. In the US, the going appears to be getting a bit tougher even if some grades, such as uncoated free sheet are still doing well. Newsprint demand continues to fall in the US. Closures of capacity appear to be insufficient and the first downtime announcements at the existing mills have been published. In the containerboard market, high operating rates have increased the inventory levels, additional volumes are more easily available and prices in some of the US liner export markets are reported to be softening. In Europe, delivery volumes to the regional market remain good. Supply cuts in the coated paper sector have helped the operating rates but the pressure from Asian paper continues and keeps both the LWC and CWF markets quite competitive. Supply and demand remain in a tight balance in the pulp market. The start-up of the first of the two new Chilean mills is not showing, at least not for the time being, in the availability of spot volumes or in the pricing behaviour. Europulp reported a small decline in the stock levels in August. The PIX NBSKP benchmark moved up by $0.97/tonne, or 0.14%, to $710.66/tonne. The USD strengthened last week by 0.8% against Euro which helped our NBSKP index value higher in Euro to 559.00 Euro/tonne, up by 5.3 Euro/tonne, or by nearly 1%. BHKP market demand remains strong but supply continues to increase from the mills which started up last year/early this year. Euro weakened by 0.8% against the USD over last week. The strengthened USD pushed our BHKP benchmark up in Euro-terms. The index closed at 518.70 Euro/tonne, up by 4.6 Euro/tonne, or 0.9%. Converting the index-value into USD brought it to $659.42/tonne, up by $0.55/tonne, or by 0.08%. Newsprint market is weak in the US but continues to be ok in Europe. Last week, Euro strengthened nearly 1% against the weighted basket of the non-EMU currencies. Impacted mainly by the currency movements, the PIX Newsprint index moved down by 0.94, or by 0.18%, to 518.91 Euro/tonne. In coated mechanical reels, the market remains competitive on both sides of the Atlantic, in spite of the supply reductions. The nearly 1% strengthening of the Euro against the non-EMU basket pulled the index lower. The PIX LWC benchmark lost 4.1 Euro/tonne, or 0.6%, and closed at 700.88 Euro/tonne. In coated woodfrees, the downward pull from the strengthened Euro was the main reason for the fall in the index value. The PIX Ctd WF index shifted downwards and closed at 718.00, down by 2.3 Euro/tonne, or 0.3% from the previous week. In uncoated woodfrees, US market remains strong. Strengthening of the Euro pulled the benchmark down. Our PIX A4 B-copy index lost 2.3 Euro/tonne, or 0.3%, and closed at 804.63 Euro/tonne. In packaging sector, the tightness in the North American market is gradually dissipating. Operating rates are high and inventories have climbed up moderately. In Europe, linerboard and box demand is clearly up from last year. The price increases announced continue to go gradually through. The PIX Kraftliner index gained 5.2 Euro/tonne, or 1.1%, and closed at 495.17 Euro/tonne. The PIX White-top Kraftliner benchmark gained 3.2 Euro/tonne, or 0.5%, and landed at 673.30 Euro/tonne. The PIX Testliner 2 index rose by 4.2 Euro, or 1.1%, to 393.13 Euro/tonne. The PIX Testliner 3 index gained slightly less and moved up by 2.6 Euro/tonne, or 0.7%, to 362.06 Euro/tonne. The PIX RB Fluting benchmark went up by 3.2 Euro, or 0.94%, to 347.89 Euro/tonne.