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In today’s issue, an aging U.S. population may weigh on the economy, producer prices will give the latest read on inflation, U.S. businesses are supremely confident right now, trade policy keeps the EU and China outlook in check, and Lawrence Kudlow could be Gary Cohn‘s replacement at the White House.
AMERICA IS GETTING GRAYER
This really isn’t good news for the U.S. economy.
People over 65 years old are expected to outnumber children within the next two decades, a first in U.S. history, Paul Overberg and Janet Adamy report. The nation’s aging has accelerated as baby boomers move into their senior years, and economic and political forces weigh on the number of births and levels of immigration.
The shift deepens challenges for the overall economy. Economic growth is a function of an expanding labor force and rising productivity. Now, the prime-age workforce—ages 25 to 54—isn’t growing as fast as expected just three years ago. Productivity has been in a rut.
The growing elderly population will also put pressure on the budget and on lawmakers to shift funding toward programs such as Medicare and Social Security, particularly because elderly Americans vote at high rates.
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WHAT TO WATCH TODAY
The U.S. producer price index for February, out at 8:30 a.m. ET, is expected to rise 0.1% from the prior month, a moderate gain for the inflation measure. The forecast excluding food and energy is for a 0.2% increase; excluding food, energy and trade (the Labor Department’s favorite way to do it) it’s also +0.2%.
On Tuesday, the consumer price index showed inflation cooling with a monthly increase of 0.2% in February, well down from a 0.5% jump in January. Recent data now show the economy in a sweet spot with moderate inflation in February, together with bumper job creation, a 4.1% unemployment rate and strong consumer sentiment readings, Harriet Torry reports.
U.S. retail sales for February, out at 8:30 a.m. ET on Wednesday, are expected to rise by 0.3% from the prior month, a rebound from January’s disappointing 0.3% drop. Excluding autos, the forecast calls for a 0.4% increase. Some economists, however, say delays on tax refunds could temporarily depress the numbers. “We expect catch-up in March. Refunds started slowly in 2017 as well, and the control series rose 0.8% in March after a 0.5% decline in February,” said High Frequency Economics’s Jim O’Sullivan.
U.S. business inventories for January, out at 10 a.m. ET, are expected to climb 0.6% from the prior month.
TOP STORIES
MAIN STREET, WALL STREET AGREE ON ECONOMY
Main Street and Wall Street are feeling pretty good about the economy.
Chief executives of America’s largest companies raised their outlook for spending, hiring and sales to the highest level in 15 years in the first quarter after the passage of the U.S. tax overhaul, Sarah Chaney reports. Small-business owners, in a separate National Federation of Independent Business survey, reported their highest optimism in 35 years in February.
Lower taxes and a rollback on regulations are the main reasons. The big caveat: looming protectionism. Leaders from the Business Roundtable, the CEO group, warned that recent U.S. trade policy could imperil the gains.
ECB PATIENT AMID TRADE TENSIONS
U.S. businesses, of course, aren’t the only ones worried about President Donald Trump‘s trade rhetoric.
European Central Bank President Mario Draghi warned that the bank isn’t yet ready to end its giant bond-buying program, pointing to new threats from U.S. trade restrictions and a strengthening euro currency.
The comments indicate that, despite a small step last week toward ending its large monetary stimulus, the ECB is concerned that recent volatility in financial markets and aggressive trade rhetoric emanating from Washington, could upset its plans, Tom Fairless reports.
CHINA, TOO
China’s economy expanded faster than expected in the first two months of 2018, helped by strong overseas demand for Chinese goods. Trade tensions with the U.S. threaten to derail that momentum in the months ahead.
Industrial production, a rough proxy for economic growth, expanded by 7.2% in January and February from a year earlier, Grace Zhu and Liyan Qi report, well above the 6.2% pace in December.
Economists expect the benefit from overseas demand to fade as Mr. Trump ramps up trade penalties against Chinese intellectual property theft. “Even without a trade war with the U.S., it’s almost impossible for China to maintain over 20% export growth for the rest of the year,” said Standard Chartered’s Ding Shuang.
SEE WHAT HAPPENS
Mr. Trump’s tariffs haven’t taken effect yet but they’re already distorting markets. There’s a widening gap between the price buyers are willing to pay for aluminum on the London Metal Exchange and the Shanghai Futures Exchange.
Prices in Shanghai are at their lowest in roughly a year, Rhiannon Hoyle reports, and about $200 a ton less than what’s fetched abroad when China’s value-added tax is stripped out. That divergence can’t last long. China’s aluminum exports jumped 43% on-year in February, according to the country’s latest customs data.
That could leave global markets awash in Chinese aluminum and threatens to bring the industrial commodity’s two-year-long recovery to an end.
TRUMP LEANS TOWARD KUDLOW
Mr. Trump said he is “very strongly” considering naming CNBC commentator Lawrence Kudlow to replace Gary Cohn as director of the National Economic Council. A decision could be finalized within days, Nick Timiraos reports.
Mr. Kudlow’s candidacy for the post is notable because the former Wall Street economist has repeatedly and publicly chided Mr. Trump’s position on trade. He has also voiced alarm with rising budget deficits, Mr. Trump’s apparent preference for a weaker dollar, and the president’s desire to use trade deficits as a report card on economic vitality.
“We don’t agree on everything but in this case I think that’s good,” Mr. Trump told reporters. “I want to have a divergent opinion. We agree on most.”
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
So what does an aging population mean for the economy in hard numbers? One calculation, made before the latest Census population estimates, suggests annual U.S. GDP growth will slow by 1.2 percentage points this decade. “Two-thirds of the reduction is due to slower growth in the labor productivity of workers across the age distribution, while one-third arises from slower labor force growth,” Harvard Medical School’s Nicole Maestas, and RAND Corporation’s Kathleen Mullen and David Powell said in a 2016 working paper.
President Trump’s decision to pull the U.S. out of the Trans Pacific Partnership killed that 12-nation trade pact. The CPTPP, or Comprehensive and Progressive Agreement for Trans-Pacific Partnership, has emerged from its ashes. The Economist explains what’s in the new deal, and its significance for the region. “The establishment of the CPTPP means China will not be able to dominate Asia with its own trade agreement. And the door has been left open for America, under Mr Trump or his successor, to change its mind and join up.”
Even the Queen of England suffers from a gender pay gap. Well, not the real queen. Variety reports that Claire Foy, who played a young Queen Elizabeth in the Netflix series “The Crown,” was paid less than co-star Matt Smith, who played her spouse, a mere prince. The drama’s producers promise to change that. “Going forward, no one gets paid more than the Queen,” said the show’s creative director, Suzanne Mackie.
UP NEXT
The Swiss National Bank releases its policy statement at 4:30 am ET on Thursday. The SNB is widely expected to keep its deposit rate at -0.75%, though such a deep negative policy rate appears at odds with an economy that’s performing pretty well.
U.S. jobless claims, out at 8:30 a.m. ET on Thursday, are expected to remain historically low at 226,000.
U.S. import prices for February, out at 8:30 a.m. ET, are expected to rise 0.2% from the prior month.
The New York Fed’s Empire State manufacturing survey for March, out at 8:30 a.m. ET, is expected to register at 15.0, up from the prior month’s 13.1.
The Philadelphia Fed’s manufacturing survey for March, out at 8:30 a.m. ET, is expected to fall to 22.0 from 25.8 a month earlier.
from Real Time Economics http://ift.tt/2Hye5Po
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