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This week’s data highlights: U.S. retail sales this morning and consumer prices Tuesday. Both should provide some clarity on the economy’s trajectory as we get deeper into the first quarter. Good morning. Jeff Sparshott here to take you through the day’s top economic news. Send us your questions, comments and suggestions by replying to this email.
BACK IT UP
The world’s central banks are engaged in a major policy reversal to prevent the world economy from sinking into unexpected recession. Alarmed by an economic slowdown and stress in financial markets, they are calling off interest-rate increases sooner than expected and in some cases easing monetary policy.
In many cases, the central bankers are boxed in, with few policy tools available to cushion their economies. Collectively, though, economists say they have reduced market risks and helped ease financial conditions in a way that should keep expansions—nearly a decade long or older in the U.S. and China, while fragile and short-lived in Europe and Japan—going through 2019, Jon Hilsenrath and Nick Timiraos report.
THE GOOD PLACE
Federal Reserve Chairman Jerome Powell said the economy doesn’t require higher or lower interest rates now: “Our interest-rate policy is in a very good place.” Speaking on “60 Minutes,” Mr. Powell said the main risks to the U.S. economy are now from slower growth in China and Europe.
Fed officials raised their benchmark rate four times last year and as recently as December appeared poised for more in 2019. But they pivoted at the beginning of 2019, putting rates on hold while watching to see how recent financial-market developments might slow the economy, Nick Timiraos reports.
WHAT TO WATCH TODAY
U.S. retail sales in December fell at the fastest pace since 2009, raising questions about the overall strength of the economy. January’s reading is expected to be flat, though revisions and underlying trends may help show whether December was a blip or the start of a deeper consumer slowdown. (8:30 a.m. ET)
Fed Chairman Jerome Powell gives videotaped welcoming remarks at a National Community Reinvestment Coalition conference at 7 p.m. ET.
TOP STORIES
CHINA, ROCKET MAN AND TARIFF MAN
U.S.-China trade talks face a new hurdle. Chinese officials are balking at committing to a presidential summit until the two countries have a firm deal in hand. China wants a summit to be more of a signing ceremony than a final negotiating session, Lingling Wei, Jeremy Page and Bob Davis report.
The sides appeared to be closing in on a draft accord but Chinese leaders were taken aback by President Trump’s failed meeting with North Korean leader Kim Jong Un. Mr. Trump’s decision to break off those talks and walk away sparked concern that China’s President Xi Jinping could be pressured with take-it-or-leave-it demands at a potential summit later this month.
GO IT ALONE
President Trump is keeping European allies at arm’s length while confronting China on its trade and business practices. He’s declined to share details of a draft trade agreement with China—which he has called “my deal”—and told French President Emmanuel Macron he didn’t want the European Union reaping the benefits of a U.S.-China trade pact, Vivian Salama and William Mauldin report.
“I honestly believe that good people tried for 20 years a multilateral approach,” U.S. Trade Representative Robert Lighthizer told lawmakers recently. “You’ve tried something, it’s failed, failed, failed for 20 years. You’d have to be crazy in my judgment not to try something else.”
BAD ECONOMIC NEWS: CHINA
Auto sales in China declined for the eighth consecutive month in February. Vehicle sales in January and February—a period that includes China’s Lunar New Year holiday—totaled 3.85 million, down 15% from a year earlier. That extended a grim spell for auto makers in the world’s biggest car market, where sales in the second half of 2018 were off 11% from a year earlier, Trefor Moss reports.
BAD ECONOMIC NEWS: GERMANY
German industrial production dropped in January and exports were flat, a sign that Europe’s largest economy continues to flounder. Total industrial output—which comprises manufacturing, energy and construction output—declined 0.8% from the month before. “The start of the new year has hardly been any better for the German economy than the end of last year,” said Carsten Brzeski, an economist at ING. The economy avoided recession by the skin of its teeth in the final quarter of last year, undermined by a slowdown in global demand, trade tensions and a series of temporary factors, Nina Adam reports.
FISCAL POLICY FUN TIME
President Trump plans to seek $8.6 billion for additional barriers along the southern U.S. border as part of his budget proposal to be released Monday, a potential prelude to another fight over funding the president’s long-promised border wall. Congress is unlikely to approve anything that closely resembles the White House budget, as Democrats control the House and spending bills in the GOP-led Senate need bipartisan support. Instead, the blueprint serves to lay out a presidential administration’s priorities, Kate Davidson reports.
SUPPLY AND DEMAND: OIL
The U.S. is on track to become a net petroleum exporter by 2021 and will soon after surpass Russia and rival Saudi Arabia, currently the world’s largest oil exporter, the International Energy Agency said Monday. U.S. crude production, driven by relentless growth in shale oil, is expected to account for 70% of the total increase in global production capacity over the next five years. Shale was largely behind the glut of American oil that flooded the market more than four years ago, leading oil prices to crash in late 2014, Christopher Alessi reports.
SUPPLY AND DEMAND: EXTENSION CORDS
Germany’s Siemens is joining with a Danish investment fund to build and operate a 349-mile-long electrical-transmission line that would carry wind and solar energy from Iowa into the Chicago area. The link would allow renewable energy from the Upper Midwest to travel all the way into the eastern U.S. by hooking up to the PJM Interconnection, the power grid that serves all or part of 13 states, including Illinois, Ohio and Pennsylvania. Called the SOO Green Renewable Rail, the project is a giant extension cord designed to carry electricity on buried direct-current lines, Russell Gold reports.
SUPPLY AND DEMAND: GEOPOLITICS
Germany needs natural gas. Russia has plenty. A plan to connect the two via the Nord Stream 2 pipeline is driving a wedge between the U.S. and its allies. The Trump administration contends the pipeline would prop up Moscow, still under Western sanctions for its 2014 Ukraine invasion. Berlin says the pipeline would improve the continent’s energy security, Bojan Pancevski reports.
SUPPLY AND DEMAND: SPAGHETTI MEAT
Chicken companies spent decades breeding birds to grow rapidly and develop large breast muscles. That efficiency drive helped U.S. meat giants such as Tyson Foods produce a record 42 billion pounds of chicken nuggets, tenders and other products in 2018. But it’s also adding an estimated $200 million or more in annual industry expenses to deal with the consequences ranging from squishy fillets known as “spaghetti meat,” because they pull apart easily, to leathery ones known as “woody breast,” Jacob Bunge reports.
QUOTE OF THE DAY
Well, the law is clear that I have a four-year term. And I fully intend to serve it. —Fed Chairman Jerome Powell, when asked if President Trump could fire him
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
The international tax system needs an overhaul. “The bottom line is that the current international corporate tax architecture is fundamentally out of date. By rethinking the existing system and addressing the root causes of its weakness, all countries should benefit, including low-income ones. At the same time, we can restore faith in the fairness of the international tax system,” International Monetary Fund Managing Director Christine Lagarde writes in the Financial Times.
Uber in 2009 ushered in a new era of online, on-demand businesses. How’s that worked out? “An unkind summary, then, of the past half decade of the consumer internet: Venture capitalists have subsidized the creation of platforms for low-paying work that deliver on-demand servant services to rich people, while subjecting all parties to increased surveillance. These platforms may unlock new potentials within our cities and lives. They’ve definitely generated huge fortunes for a very small number of people. But mostly, they’ve served to make our lives marginally more convenient than they were before,” Alexis Madrigal writes at The Atlantic.
UP NEXT: TUESDAY
The National Federation of Independent Business small-business survey is out at 6 a.m. ET.
U.S. consumer prices for February are expected to rise 0.2% from the prior month. The forecast excluding food and energy is the same. (8:30 a.m. ET)
U.K. lawmakers are scheduled to vote for a second time on a Brexit deal. Prime Minister Theresa May warned Friday that if British lawmakers fail to endorse the new deal, Britain may never leave the European Union.
from Real Time Economics https://ift.tt/2UtjJsU
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