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The Fed’s final meeting of the year highlights a busy week. Economists are looking for a “dovish hike” that reflects robust economic growth in 2018 but a less certain outlook for 2019.
Good morning. Jeff Sparshott here to take you through key developments in the global economy. We also have a looming government shutdown, rising homelessness, too much cheese, a timely boost for local infrastructure and another big tech investment. Let us know what you think by replying to this email.
A DOVISH HIKE
Federal Reserve officials conclude their final policy meeting of the year Wednesday. Economists expect them to raise rates for the fourth time in 2018—more interesting will be how they talk about the economy going forward.
The year wraps up with the unemployment rate at a 49-year low, tame inflation and annual (4Q to 4Q) growth possibly above 3% for the first time since 2005. But markets have been volatile, economies in Europe and China are slowing, and federal fiscal stimulus is fading. What’s a central banker to do? Possibly suggest a more gradual course of rate increases for 2019: two instead of three.
WHAT TO WATCH TODAY
The New York Fed’s Empire State manufacturing survey for December, out at 8:30 a.m., is expected to slip to 21.0 from 23.3 a month earlier.
It’s a busy week for housing data, starting with Monday’s National Association of Home Builders index. It fell to the lowest level in more than two years in November, partly a reflection of faltering demand amid higher mortgage rates and rising home prices. Economists expect it to tick up to 61 in December from 60 a month earlier.
TOP STORIES
TICK TOCK
The federal government could be headed toward a shutdown. Seven spending bills are set to expire at 12:01 a.m. Saturday. The major sticking point: funding for a border wall, Kristina Peterson reports.
On Sunday, both sides made clear they saw little room for compromise, though that dynamic could change as the deadline approaches. But if the government does shut down, its effects would likely be more limited than in previous episodes. Congress has already funded swaths of the government, including the Defense and Labor departments.
DESPITE OR BECAUSE OF A BOOMING ECONOMY?
Homelessness nudged higher in 2018 for the second consecutive year. Cities struggled to get people off the streets even as many ramped up building and poured millions of dollars into potential solutions.
The small rises over the past two years are a troubling reversal at a time when unemployment is at a 49-year-low and wages are rising. One cause: a lack of affordable housing. A limited supply of new dwellings is coming on the market, and what does tends to be very expensive. Nearly one-quarter of the nation’s homeless live in New York or Los Angeles. Rents in Los Angeles have increased 35% and New York 20% since 2012, Laura Kusisto and Nour Malas report.
SAY CHEESE
About 1.4 billion pounds of American, cheddar and other kinds of cheese is socked away at cold-storage warehouses across the country, the biggest stockpile since federal record-keeping began a century ago. Trade tensions and shifting tastes at home are behind the glut, Heather Haddon reports.
Cheese exports have suffered since Mexico and China, major dairy buyers, instituted retaliatory tariffs on U.S. cheese and whey. Cheese shipments to Mexico in September were down more than 10% annually and shipments to China were down 63% annually.
ROAD TO HAPPINESS
State and local government investment in roads, bridges, buildings and other infrastructure hasn’t returned to its previous peak, but it’s finally showing signs of a real recovery. Rising state and local tax collections are boosting capital projects and driving a municipal borrowing boom, Sarah Chaney and Heather Gillers report. Spending on transportation infrastructure in October was up 15% from a year earlier and spending on amusement and recreation facilities was up 31%.
At a time when other engines of U.S. economic growth show signs of slowing, public spending could help keep the expansion going.
A BIGGER APPLE
Add Google to the list of tech giants with ambitious expansion plans outside Silicon Valley. The company said it plans to invest $1 billion in capital improvements to a New York City campus and double its New York-based workforce to more than 14,000 employees over the next decade, Douglas MacMillan reports.
The expansion puts Google’s ambitions for the city on par with rival Amazon.com, which recently selected New York as one of two East Coast locations to employ 25,000 new workers each by 2028. Apple last week said it plans to invest $1 billion to build a second campus in Austin, Texas, for 5,000 employees.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Central bankers are worried about more than bad loans. “The Bank of England is planning to include the impact of climate change in its UK bank stress tests as early as next year, in what would be an unprecedented move for a central bank of a major financial center,” Caroline Binham and David Crow write in The Financial Times.
A government shutdown will have minimal impact on the overall economy. “But what the two-week 2013 shutdown showed is that some Americans really do suffer — specifically poor families, janitors, security guards, and other low-wage federal contractors,” Alexia Fernández Campbell writes at Vox.com.
UP NEXT: TUESDAY
U.S. housing starts for November, out at 8:30 a.m. ET, are expected to inch up to an annual pace of 1.23 million from 1.228 million a month earlier.
The Federal Reserve starts a two-day policy meeting.
from Real Time Economics https://ift.tt/2BobpCs
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