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Good morning! Today we look at U.S. economic momentum, global market jitters, a small breakthrough for U.S.-China trade, the latest for the Turkish lira, and how the American steel industry is responding to Trump administration tariffs.
U.S. ECONOMY LOOKING SOLID…
Strong consumer spending and rising manufacturing output suggest economic momentum from the second quarter is carrying into the third. Retail sales in July were up 6.4% from a year earlier, more than double the pace of inflation. Robust hiring, low unemployment and tax cuts mean households have income to spend. With demand strong, U.S. factory production is also up. The robust economic outlook is likely to keep Federal Reserve policy makers on track to raise short-term interest rates when they meet next month, and move them higher again in December, to prevent the economy from overheating, Harriet Torry writes.
…BUT
Investors are worried about the global economy. A rout in commodities and emerging-market assets spilled over to U.S. stocks Wednesday. The Dow Jones Industrial Average and S&P 500 fell for the fifth time in the past six sessions, a sign that investors are skeptical U.S. stocks can continue outperforming nine years into their rally. While the sweeping nature of Wednesday’s declines rattled some analysts, many expect U.S. stocks to rebound because the economy and earnings look healthier than they have in years, Amrith Ramkumar writes.
Will global troubles undermine U.S. economic growth? 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
U.S. jobless claims, out at 8:30 a.m. ET, are expected to remain at historically low levels.
U.S. housing starts for July, out at 8:30 a.m. ET, are expected to rise to an annual rate of 1.27 million.
The Philadelphia Fed manufacturing survey for August, out at 8:30 a.m. ET, is expected to slip to 22.0 from 25.7 the prior month.
TOP STORIES
SOMETHING TO TALK ABOUT
China and the U.S. reached a modest breakthrough in their standoff over trade, saying they will hold lower-level talks later this month on the spiraling dispute. China’s Commerce Ministry said a vice minister will travel to the U.S. at an unspecified date, at the invitation of the Treasury Department, to discuss trade issues. The new round of discussions would be the first since May, Grace Zhu and Bob Davis report.
WHY NOW?
Some academics and ordinary Chinese are growing uneasy with President Xi Jinping’s leadership. China’s trade tensions with the U.S., a sluggish economy, and public-health and financial scandals are leading to online essays, social-media posts and rare public protests venting misgivings about Mr. Xi and the Communist Party-run bureaucracy. Some criticism has been directed at the president and his policies, others at perceived government failings, Chun Han Wong reports.
TURKISH LIRA REBOUNDS
The lira posted gains for its third straight day Thursday. Turkey’s crisis has rippled through global markets and emerging economies. Other hard-hit currencies didn’t fall as steeply as the lira, and haven’t rebounded as sharply.
NEXT CHALLENGE: OIL
One side-effect of Turkey’s currency crisis: Skyrocketing costs for imported oil and natural gas. While oil is roughly 7% more expensive year to date for international traders, its price tag has risen 73% for Turkish buyers because of the plunge in their currency against the dollar, Jon Sindreu and Sarah McFarlane write. Turkey imports the vast majority of its fuel needs.
MAN OF STEEL
President Trump said that his steel tariffs on China and other countries are rescuing an iconic U.S. industry. Competition will be “internal, like it used to be in the old days when we actually had steel, and U.S. Steel was our greatest company,” he said in an impromptu, 20-minute Oval Office interview. If that’s the case, it’s hard to see in the data—at least so far. The Federal Reserve’s industrial production report for July showed steel and iron output at about the same level it’s averaged since 2000.
Separate jobs data is similar: hiring rose a little in June but is below levels from earlier in the decade. Iron and steel mill jobs account for about 0.06% of employment across the U.S.
Meanwhile, investors haven’t been too keen on U.S. Steel. Of course, it’s very early days and the broader impact of tariffs might not be apparent for years.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
High-growth firms are rarely named after their founder. “We propose that a key decision in entrepreneurship comes early on: when an entrepreneur decides how closely to tie herself to her firm. This decision has attendant tradeoffs related to reputational-payoff amplification and the possibility of growth, which are influenced by the financing environment,” Sharon Belenzon, Aaron Chatterji and Brendan Daley write in a National Bureau of Economic Research working paper.
In case you were wondering what Google’s chief economist thinks about Europe’s $5 billion antitrust fine: “In fact, it is more of a millstone than a milestone. The colloquial definition of ‘millstone’ is a ‘heavy burden,’ and of course the case is a burden for Google. But it is also a burden for the entire Android ecosystem of equipment manufacturers, carriers, app developers, and end users,” Hal Varian writes at the Center for Economic Policy Research.
UP NEXT: FRIDAY
The eurozone consumer-price index for July is out at 5 a.m. ET.
Canada’s consumer-price index for July is out at 8:30 a.m. ET.
The University of Michigan consumer sentiment index for August, out at 10 a.m. ET, is expected to inch up to 98.0 from 97.9 at the end of July, reflecting a broadly upbeat assessment of the economy.
The Conference Board’s leading economic index for July, out at 10 a.m. ET, is expected to rise 0.5% from the prior month.
from Real Time Economics https://ift.tt/2KYlGZ0
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