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British Prime Minister Theresa May is bracing for defeat and China’s slowing economy is throwing up a roadblock for global automakers.
Good morning. Jeff Sparshott here to take you through key economic developments. We’ll also look at President Trump’s optimism on trade talks, Germany’s near-recession, Ivanka Trump’s new job, the Los Angeles teachers’ strike and more fallout from the government shutdown. Let us know what you think by replying to this email.
IT’S SO HARD TO SAY GOODBYE TO YESTERDAY
British Prime Minister Theresa May is likely to lose a vote Tuesday on her plan to leave the European Union, setting the stage for further political turmoil and a test of the U.K.’s political institutions. The House of Commons vote is expected to leave the status of Brexit in doubt just over 10 weeks before Britain’s scheduled departure, Jason Douglas and Laurence Norman report.
Possible outcomes: A surprise win for Mrs. May. Britain crashes out of the EU without a deal on March 29. The U.K. and EU delay the scheduled departure date. Fresh U.K.-EU negotiations. A second referendum. Markets had been pinning hopes on a delay.
WHAT TO WATCH TODAY
The New York Fed’s Empire State manufacturing survey for January is expected to fall to 9 from 10.9 a month earlier (8:30 a.m. ET)
The U.S. producer-price index for December is expected to slip 0.1% from a month earlier. Excluding food and energy, the index is expected to rise 0.2%. (8:30 a.m. ET)
European Central Bank President Mario Draghi presents the ECB’s annual report at 10 a.m. ET.
The Minneapolis Fed’s Neel Kashkari speaks on the regional economy in Rochester, Minn., at 11:30 a.m. ET, the Kansas City Fed’s Esther George speaks on the economy and monetary policy at 1 p.m. ET, and the Dallas Fed’s Robert Kaplan speaks in Plano, Texas at 1 p.m. ET.
President Trump has lunch with members of Congress as the partial shutdown drags on.
U.K. lawmakers are scheduled to vote on Prime Minister Theresa May’s Brexit deal.
TOP STORIES
CAR WRECK
Chinese vehicle sales fell last year for the first time since 1990 as economic uncertainty weighed on consumers. With the outlook still shaky, “there’s no evidence right now to suggest demand is coming back,” said Benjamin Lo, head of China autos research at Nomura Securities.
Facing saturation elsewhere, global auto makers have banked on China, the world’s largest car market. General Motors and Volkswagen sell more vehicles in China than anywhere else. Ford had a particularly disastrous year, with sales falling 37% to 752,243—the lowest since 2012, Trefor Moss reports.
HELP IS ON THE WAY
Chinese officials said they would step up efforts to spur economic growth, as signs continue to show the slowdown has deepened. Beijing intends to improve credit availability for smaller companies, accelerate infrastructure investment and cut taxes, Liyan Qi reports.
TRADE TALKS
President Trump said China is feeling the pain from U.S. tariffs, boding well for a trade deal: “We’re doing very well with China. They’re having a hard time with their economy because of the tariffs.” In midlevel talks last week, negotiators clarified their respective positions but remained far from a deal, Bob Davis and Alex Leary report.
Next step: Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin meet in Washington, D.C., on Jan. 30.
NOT JUST CHINA
Germany’s economy slowed sharply last year, shaken by softening consumer spending at home and weakness in several key export markets. In 2018 as a whole, Germany’s gross domestic product increased 1.5% from a year earlier, its slowest annual growth rate since 2013, Tom Fairless and Paul Hannon report. Germany’s slowdown is an ominous sign for the health of the world economy.
I SAY POTATO, YOU SAY KARTOFFEL
The U.S. and European Union are staking out sharply different goals for coming trade negotiations, raising the prospect for renewed trans-Atlantic tensions. The EU’s executive body is crafting a narrow mandate that would bar negotiations to reduce protections for Europe’s farmers. By contrast, the Trump administration’s negotiating objectives include “comprehensive market access for U.S. agricultural goods in the EU by reducing or eliminating tariffs,” Jacob M. Schlesinger and Emre Peker report.
The stakes are high for the negotiations, in part because the administration has threatened Europe with auto tariffs, saying its car exports may pose a national security risk.
PACKED AGENDA
Trade deals with the EU and China are just two items on a crowded U.S. trade agenda. The Trump administration is also seeking to launch free-trade talks with Japan and asking Congress to ratify a revised North American Free Trade Agreement. America’s big stick: The White House is expected to make public the global automotive tariff options it is considering by next month.
IVANKA AND THE WORLD BANK
Ivanka Trump, President Trump’s daughter and senior White House adviser, will help lead the process of selecting the next World Bank president. Ms. Trump isn’t a candidate for the position but will help manage the U.S. nomination process, Josh Zumbrun and Alex Leary report.
WALK OUT
Tens of thousands of teachers went on strike in the nation’s second-largest school district, the biggest face-off yet in a continuing wave of educator activism. The Los Angeles teachers’ union declared a final impasse Friday and rallied its 33,000 members to begin striking Monday, Nour Malas and Ian Lovett report.
There were more educator strikes in 2018 than any time in the past 25 years, in states including West Virginia and North Carolina. At issue: tight budgets, small raises and poor conditions.
SICK OUT
The partial government shutdown is rippling through the U.S. transportation system: Houston’s largest airport closed a security checkpoint and the world’s biggest hub in Atlanta suffered unusually long lines. The issues at several airports stem largely from a shortage of Transportation Security Administration staff. Many TSA employees are among the 420,000 essential government employees still working but not receiving pay, Alison Sider reports.
The TSA’s unplanned absence rate on Monday was 7.6%, up from 3.2% on the same day a year ago.
QUOTE OF THE DAY
I still love my country, I support the Communist Party of China, but I will never do anything to harm any other nation. —Huawei founder Ren Zhengfei, denying claims his company is used by the Chinese government for spying
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
President Trump’s unpopularity abroad may have cost U.S. companies about $3 billion in exports. “Holding other things constant, a country’s exports are higher if its leadership is approved by the importer; ‘soft power’ promotes exports. The soft power effect is statistically and economically significant; a one percent increase in leadership approval raises exports by around two-thirds of a percent,” Andrew Rose writes in a National Bureau of Economic Research working paper.
Paging Mr. Phillips. “A careful look at the wage Phillips curve across states yields little evidence supporting the contention that wage growth sharply rises as the labor market reaches especially tight conditions,” Sylvain Leduc, Chitra Marti and Daniel Wilson write in a San Francisco Fed Economic Letter. In other words, don’t expect wages to take off if the unemployment rate falls further.
UP NEXT: WEDNESDAY
Bank of England Governor Mark Carney testifies on financial stability at 4:15 a.m. ET.
U.K. consumer prices for December are out at 4:30 a.m. ET.
U.S. retail sales for December are delayed because of the government shutdown.
U.S. import prices for December are expected to fall 1.5% from the prior month. (8:30 a.m. ET)
The National Association of Home Builders index for January is expected to hold steady at 56. (10 a.m. ET)
The Fed’s beige book is due out at 2 p.m. ET.
The Minneapolis Fed’s Neel Kashkari speaks on the global financial system at 6:30 p.m. ET.
Bank of Japan Governor Haruhiko Kuroda speaks at a G20 symposium at 7 p.m. ET.
from Real Time Economics https://on.wsj.com/2AKkdTS
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