Aug 02, 2006. /Lesprom Network/. Global and US inflation continues to rise. Liquidity of money supply remains high and, coupled with still low real interest rates, continues to feed inflation. Further rate hikes will be seen and they slow down economic growth. US GDP growth in second quarter was just 2.5%. Home sales continued to weaken but consumer confidence readings are still positive and durable goods orders were up in June. In Europe, economic growth has continued stronger than earlier anticipated. But, inflation is also running above targeted levels and another interest rate hike later this week is a quasi-certainty. For 2007, consensus forecast of GDP-growth at slightly above 2% sounds optimistic. Higher interest rates, stronger Euro, increase in the German VAT and a weaker export market growth are likely to lead to a bigger change in the economic performance of the Union. Industrial production growth continued strong in Japan in June, suggesting a nearly 5% annual expansion rate. The higher-than-projected activity boosted the tax revenues over the last fiscal year by almost 8%. Higher interest rates are unlikely to impact private consumption negatively as savings rate is high and income gains from interest rate hikes are bigger than the cost increases. In China, the growth boom has spread also into the retail sales sector. The sales are expected to increase 13-14% from 2005. High rates are foreseen to continue in 2007 but by that time somewhat slower growth is expected in some other sectors, especially in industrial investments following the tightening of the credit availability. Growth in GDP is projected to decline from 10.5% this year to 8.5-9.0% in 2007. The paper industry volumes have responded to the still mainly positive news data on the world economic activity. In Europe the numbers released by CEPIPRINT and CEPIFINE over the June demand showed for most grades higher growth for the month than for the first half totals - comparisons again impacted by the labour strife in Finland in 2005. Newsprint demand in June was up by almost 4% SC and other uncoated mechanicals together over 10% and LWC over 6%. On the woodfree side, uncoated grades were up just over 2% and coated woodfree just over 3% compared to June 2005. Also in North America, the June statistics showed lively activity, especially in packaging and uncoated woodfree sectors. Box demand was up by nearly 5% and inventories came down, even if only slightly. Asian activity is also lively but the overcapacity in China has increased exports to the neighbouring countries and made the price increases more difficult to push through than in North America. In Europe prices have edged up further in packaging grades and in uncoated woodfree with still little real change in the coated grades. The tightness persists on the pulp market. The June data by PPPC on international market pulp shipments and inventories showed a 4.3% gain in the deliveries over June 2005 and an almost 6% increase year-to-date. High shipments were reflected in the producers' stocks which dropped to 28 days for all grades and just 24 days for BSKP. Further price increases have been announced in the Asian market, typically by $20/tonne for the August shipment. In Europe, the earlier announced increases continued to go through according to the price data received over the long-fibre market pulp business conducted during the last week of July. The PIX NBSKP benchmark climbed up this time by $3.51/tonne, or 0.5%, to $702.46/tonne. The USD strengthened last week but only very marginally, or by 0.1% against Euro. NBSKP index value in Euro increased to 554.69 Euro/tonne, up by 3.47 Euro/tonne, or 0.6%. In BHKP, the gain in shipping activity was as much as 12% over June 2005 but with also higher production numbers the producer inventories remained flat from May at 33 days but down from June 2005, though. Euro weakened marginally, or by 0.1% against the USD over last week. Our BHKP index closed at 516.52 Euro/tonne, up by 2.7 Euro/tonne, or 0.5%. Converting the index-value into USD brought it to $654.12/tonne, up by $2.6/tonne, or by 0.4%. Newsprint demand in Europe has continued strong. June numbers released by CEPIPRINT showed 3.9 increase in the estimated June demand over last year but, with reduced imports to the region, European shipments were up more, almost 5% for the total and 8.5% within Europe. The small upward adjustment of the index was mainly currency driven, as the EURO weakened by about 0.1% against the non-EMU currencies last week. The PIX Newsprint index moved up by Euro 0.13, or by 0.03%, to 519.20 Euro/tonne. In coated mechanical reels, the June numbers from CEPIPRINT gave an 8% increase in the total European shipments over the labour conflict affected numbers of June 2005. Estimated demand was up over 6% which brought the year-to-date gain to just over 3%. With the help of the exchange rate movements the PIX LWC benchmark gained 1.25 Euro, or 0.2% and closed at 704.65 Euro/tonne. In coated woodfrees, delivery numbers in July were quite positive with total deliveries by European mills up nearly 8% and WE estimated demand up 3%. The oversupply problems have still prevented the prices from moving up. In spite of the mini-boost from the 0.1% weakening of the Euro against the basket of non-EMU currencies, the PIX Ctd WF benchmark inched marginally downward. The index retreated by 0.13, or 0.02%, and ended at 718.95 Euro/tonne. The estimated demand for uncoated woodfrees in Europe was up 2.3% in June but total deliveries increased by 4.6%, supported by a big gain in exports. In spite of the minor assistance given by the currency movements, the PIX A4 B-copy index slid this time back by 1.35 Euro, or 0.17%, and closed at 803.02 Euro/tonne. The US corrugated box shipments continued strong in June, up by 4.9% on year-over-year basis, while inventories fell. Producers are reported to be trying to push containerboard price increases into box prices. In Europe, main producers have announced containerboard price increases, typically 30 Euro/tonne from September for the Continent and Euro 40/tonne from August for the UK. Our packaging indexes continued their way up. The currency movements had a small positive effect on our indexes this time as the basket of non-EMU currencies strengthened by 0.1% against the Euro. For Kraftliner, some higher quotes were received and the PIX Kraftliner index gained 1.28 Euro or 0.26%, ending at 485.77 Euro/tonne. For White-top Kraftliner, quotes received were mainly unchanged and the change was mainly currency driven. The PIX White-top Kraftliner benchmark rose by Euro 0.32, or 0.05%, reaching 668.32 Euro/tonne. Higher quotes were reported for the recycled based packaging grades, and the PIX Testliner 2 index went up by 1.14 Euro, or 0.30%, to 382.98 Euro/tonne, the PIX Testliner 3 by Euro 0.59, or 0.17% to 355.16 Euro/tonne, and the PIX RB Fluting by Euro 0.13, or 0.04%, to 339.89 Euro/tonne.