Aug 30, 2006. /Lesprom Network/. In the US, the sales of existing homes fell by 11% in July. For new homes, the drop was even more dramatic, 22%. Just how much influence the collapse of the housing market will have on the total economy is difficult to tell but some impact will certainly be felt. The alternatives are a slow-down and the first recession since 2001. In Europe, good news over the recent economic performance continues to pour in but full confidence over the future is lacking. Euro-zone in totality shows in second quarter the fastest expansion in 6 years and the EU area is even creating new jobs faster than the US. But, the IFO index retreated slightly and ZEW, the key investor confidence index in Germany, plummeted to its lowest level in 5 years, demonstrating the high probability of a significant slowdown in the near-term future also in the European economy. In Japan, very low inflation numbers in July and downward revision of the June data cast doubts over the earlier predicted interest rate hikes in late 2006. Although the low numbers were more due to the changes in the calculation basis than to a slower economic expansion rate, this news also weakened yen and brought it to its lowest level ever against Euro. In China, rapid growth is also raising tax revenues. Over the first six months, enterprise revenue taxes are up by 30%. But some things are slowing down, too. Although exports grew by almost 25% during January-July, that was 7% less than a year ago. And Chinese foreign investments actually fell from the first seven months last year. Textile exports to the US market were also lower than in 2005. The European paper data comparisons over the month of July, and partially for the year-to-date numbers, too, are distorted by the impact of the strike/lock-out of the Finnish paper industry in 2005. There was a distinct difference between the US and European paper markets in July. In the US, consumption of the newspaper dailies was down by 9%, coated woodfrees by 5.3% and uncoated free sheet by 1.7%. In Europe, newsprint demand was reported up by over 4% by CEPIPRINT. In SC the regional demand was also up a lot. Other uncoated mechanicals did very well, too. In coated mechanicals, regional demand gains were very small. In the CEPIFINE statistics over woodfrees, total deliveries were up a lot in the coated grades but the regional consumption showed a minor decline. In uncoated grades, all July numbers were positive. Solid performance of the European paper sector in July helped market pulp, too. UTIPULP reported market pulp demand down from July 2005 but the inventories of market pulp at consumers came still down by 17 000 tonnes from June 2006 and were over 80 000 tonnes below the July 2005 level. Market pulp shipments showed an 8.6% increase over July 2005. In spite of good shipment numbers, producer stocks went up more than the seasonal norm, or by 3 days’ worth of deliveries. Further price increase announcements have been made, the latest also by $20/tonne but from October rather than September. Last week the PIX NBSKP benchmark retreated by marginal $0.34/tonne, or 0.05%, to $708.37/tonne. The USD appreciated last week slightly, or by 0.3%, against Euro which helped our NBSKP index value to rise in Euro to 555.06 Euro/tonne, up by 1.5 Euro/tonne, or by 0.27%. BHKP market is supported by the increasing production and delivery volumes of woodfree and tissue papers, both in the European as well as Asian markets. Euro weakened by 0.3% against the USD over last week which helped our BHKP benchmark up in Euro-terms. The index closed at 515.76 Euro/tonne, up by 1.4 Euro/tonne, or 0.27%. Converting the index-value into USD brought it down to $658.21/tonne, down by $0.27/tonne, or by 0.04%. Newsprint shipments to the European market were strong. CEPIPRINT reported the European demand estimate up by 4.1% for the month of July and 4.3% up year-to-date. Euro weakened by about 0.4% against the weighted basket of the non-EMU currencies last week. The PIX Newsprint index inched up by a mere Euro 0.03, or by 0.01%, to 519.48 Euro/tonne. In coated mechanical reels, the shipment numbers in July were good over the labour strife impacted July 2005. Total shipments were up by 8.3%, according to CEPIPRINT. Regional demand was estimated up by just 0.3% but more, 2.7%, year-to-date. Helped by the 0.4% weakening of the Euro against the non-EMU basket, the PIX LWC benchmark gained Euro 0.36, or 0.05% closing at 705.13 Euro/tonne. In coated woodfrees, the July data from CEPIFINE showed shipments to Europe were marginally down and the estimated Western European demand was down by 0.4% for July but still up 3.3%, year-to-date. Helped by the weaker Euro, the PIX Ctd WF benchmark went up by Euro 0.97, or 0.13%, ending at 720.27 Euro/tonne. In uncoated woodfrees, CEPIFINE numbers were very positive. Total deliveries were up almost 10% in July, exports up nearly 30% and the estimated Western European demand by just over 6%. Weakening of the Euro by 0.4% against the weighted basket of non-EMU currencies was not enough to hold the benchmark up. Our PIX A4 B-copy index retreated by 1.7 Euro/tonne, or 0.21%, and closed at 805.42 Euro/tonne. In packaging sector, the US containerboard market remained firm in July. The operating rates reached 98% and the corrugated box shipments continued to rise. Inventories climbed at box plants but remained well below long-term average levels. In Europe, the activity has also remained better than seasonally expected in August. 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 0.4% against the Euro. Also the USD strengthened. For Kraftliner, changes in quotes received were mainly slightly up this time. The PIX Kraftliner index gained just over 2 Euro, or 0.4%, and closed at 489.71 Euro/tonne. For White-top Kraftliner, quotes received were mainly unchanged. With some help from the weaker Euro, the PIX White-top Kraftliner benchmark gained 1.24 Euro/tonne, or 0.19%, and reached 670.05 Euro/tonne. For the recycled based packaging grades the quotes were largely unchanged but with some upward changes as well. The PIX Testliner 2 index rose by 1.9 Euro, or 0.5%, to 385.53 Euro/tonne. The PIX Testliner 3 index gained also but only Euro 0.12, or 0.03% to 356.77 Euro/tonne, and the PIX RB Fluting went up by 1.44 Euro, or 0.42%, to 342.39 Euro/tonne.