This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.
Good morning! Today we look at Trump administration deliberations on tariffs, how the U.S. economy is growing while others are slowing, signs of stronger wages and rising inflation, and what to expect when the Federal Reserve’s policy meeting concludes today.
LET’S TALK
Some White House advisers are pushing President Donald Trump to apply tariffs as high as 25% on $200 billion of Chinese goods, up from an original proposal for 10%. The hope is that the harsher measures would bring Chinese negotiators to the table. The White House won’t make a final decision until at least late August, Bob Davis and Lingling Wei report. Meanwhile, the administration is split internally on the best way forward.
Hawks and doves: U.S. Trade Representative Robert Lighthizer pushing for more tariffs. Treasury Secretary Steven Mnuchin pushing for more talks.
WHY NOW?
1.) The debate over tariff levels comes as Washington has yet to make meaningful progress in settling its market-rattling trade dispute with Beijing. Treasury Secretary Mnuchin and Chinese envoy Liu He have continued to discuss U.S.-China relations, but some of those conversations have gone poorly. 2.) Advisers are justifying the steeper tariffs, in part, to make up for the rapid depreciation of the yuan. Since May 30, the yuan has fallen 6% against the dollar.
Backdrop: The U.S. has imposed 25% tariffs on $34 billion worth of Chinese imports and is on schedule to levy similar tariffs on an additional $16 billion of goods. The $200 billion would be the next installment. Mr. Trump has threatened to eventually impose tariffs on all $505 billion in goods China ships to the U.S. should negotiations fail.
What’s the best way to get China to the negotiating table: higher tariffs, more talks or something else? Write to Jeffrey Sparshott at realtimeeconomics@wsj.com, tweet to @WSJecon and visit wsj.com/economy for the latest news. (Please include your full name and hometown, or a title and company. Responses may be quoted in this newsletter.)
WHAT TO WATCH TODAY
The ADP jobs report for July, out at 8:15 a.m. ET, is expected to show private payrolls rising by 185,000 from the prior month.
Markit’s manufacturing purchasing managers index for July, out at 9:45 a.m. ET, is expected to hold steady at 55.5.
The Institute for Supply Management’s manufacturing PMI for July, out at 10 a.m. ET, is expected to inch down to 59.5 from 60.2. Anything above 50 signals expansion for the sector.
U.S. construction spending for June, out at 10 a.m. ET, is expected to rise 0.3% from the prior month.
U.S. auto sales for July are expected to register at an annual pace of 17.1 million, down slightly from the prior month.
The Federal Reserve releases a policy statement at 2 p.m. ET. The Fed is widely expected to leave its benchmark rate unchanged.
TOP STORIES
UPPER HAND
China, Europe and Mexico’s economies showed fresh signs of stumbling this week. The U.S., by contrast, is powering ahead, boosting Washington’s hand as it jockeys with other nations over trade. Mexico’s economy contracted in the second quarter; the eurozone economy notched 1.4% growth, its slowest rate in three years; and a measure of manufacturing in China fell to a five-month low, Josh Zumbrun reports. In the U.S., overall economic output expanded at a 4.1% annual rate, its best three-month increase since 2014, wage gains are accelerating and consumer spending has been solid. The Trump administration has heralded economic strength as a source of leverage in trade talks.
U.S. WAGE GAINS
U.S. workers received their biggest pay increases in nearly a decade over the 12 months through June. That’s the latest sign a strong labor market is boosting wages as employers compete for scarcer workers, Harriet Torry reports. The Labor Department’s employment-cost index for the second quarter rose 2.8% from a year earlier. Big caveats: 1.) Wages are still growing modestly, and certainly not as rapidly as before the recession. 2.) Inflation also is rising at a faster pace, eroding worker wage gains.
Next up: The Labor Department’s jobs report for July is out Friday at 8:30 a.m. ET. Look to see if average hourly earnings pick up further.
WHAT TO WATCH: FEDERAL RESERVE
Federal Reserve officials are likely to keep interest rates steady at their two-day policy meeting that concludes Wednesday, Nick Timiraos writes. Their debate could center on where to set rates once they’ve lifted them to a more neutral setting that neither spurs nor slows economic growth. Don’t expect the Fed to comment on President Trump, though officials have indicated they won’t be swayed by his recent criticism of central-bank rate rises.
DIAPER INFLATION
One key issue for the Fed: inflation. It’s been rising slowly, in part because companies haven’t been able to pass on rising costs to consumers. That may be changing. Procter & Gamble said it was raising prices on some of its biggest brands after more than a year of trying to combat weak demand with lower prices, Sharon Terlep reports. P&G, maker of Tide detergent, Pampers diapers and other staples, is just the latest big U.S. company raising prices amid a strong U.S. economy and healthy consumer spending.
The price index for personal-consumption expenditures, the Fed’s preferred inflation gauge, was up 2.2% in June from a year earlier. Excluding volatile food and energy costs, prices rose 1.9% on the year. The Fed targets 2% annual inflation.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Medicare for All comes with some sticker shock. Charles Blahous, from George Mason University’s Mercatus Center, finds that the national single-payer healthcare system backed by Vermont Sen. Bernie Sanders would increase federal budget commitments by about $32.6 trillion—trillion!—during the first decade of full implementation. The tradeoff? More people would be insured, payments to providers would fall and the cost would be more than offset by a drop in spending by employers and consumers. For what it’s worth, Mercatus gets funding from the conservative Koch brothers.
There’s a downside to mobility, at least for the regions people are leaving. Northern England, for example, is less educated and less productive than the south of the country. It’s not for lack of innate talent. “Talented northerners, however, are now mainly located in the south, where they are an economic elite,” UC Davis’s Gregory Clark and the London School of Economics’s Neil Cummins write at VoxEU. In other words, the north’s best and brightest move to London.
UP NEXT: THURSDAY
The Bank of England releases a policy statement, minutes and inflation report at 7:00 a.m. ET.
U.S. jobless claims, out at 8:30 a.m. ET, are expected to remain at historically low levels.
U.S. factory orders for June, out at 10 a.m. ET, are expected to rise 0.7% from the prior month.
from Real Time Economics https://ift.tt/2ArbisF
No comments:
Post a Comment