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Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.
SLOW RIDE
The Commerce Department today releases revised fourth-quarter gross domestic product figures. Economists polled by the WSJ are expecting a significant downgrade—a 2.2% pace of growth instead of the initially reported 2.6%. Yes, that’s all so 2018. But it points to a slowing trend that appears set to continue into the first quarter of 2019. The trend, however, has been looking better lately as more hard data comes in. The Atlanta Fed’s GDPNow model initially was tracking a scant 0.3% pace of growth for the first quarter. That’s now up to 1.5%. Some economists expect a rebound in the second quarter and ultimately a return to the 2% pace of growth that’s been typical of the nearly 10-year expansion.
WHAT TO WATCH TODAY
U.S. gross domestic product is expected to advance 2.2% in the fourth quarter, a downgrade from an earlier estimate of 2.6%. (8:30 a.m. ET)
U.S. jobless claims are expected to fall to 220,000 from 221,000 a week earlier. (8:30 a.m. ET)
Germany’s consumer-price index for March is out at 9 a.m. ET.
U.S. pending-home sales for February are expected to rise 0.7% from the prior month. (10 a.m. ET)
The Kansas City Fed manufacturing survey for March is expected to slip to 0 from 1 a month earlier. (11 a.m. ET)
It’s a Fed-tastic day: Vice Chairman Randal Quarles speaks on financial stability at 7:15 a.m. ET, Vice Chairman Richard Clarida speaks on global shocks and the U.S. economy at 9:30 a.m. ET, governor Michelle Bowman speaks on agriculture and community banking at 10:00 a.m. ET, Atlanta’s Raphael Bostic speaks on workforce development and income inequality at 11:30 a.m. ET, New York’s John Williams speaks in San Juan, Puerto Rico, at 1:15 p.m. ET and St. Louis’s James Bullard speaks on the economy and monetary policy at 5:20 p.m. ET.
TOP STORIES
TRADE DEFICIT NARROWS
The U.S. trade deficit narrowed sharply in January. The causes: a slowing domestic economy and volatile trade dynamics with China. Imports from China surged in December as companies raced to get products into the U.S. ahead of a threatened tariffs. They plummeted in January, though imports from other countries slipped as well, suggesting that slower growth at home may be playing a role as well, Paul Kiernan reports.
From an accounting perspective, Wednesday’s trade numbers bode well for U.S. economic growth in the first quarter, as trade deficits subtract from gross domestic product.
HOG WILD
China has recently resumed some purchases of U.S. pork after scaling back amid the broader trade fight between Washington and Beijing. The reason isn’t a big thaw in relations. Rather, it’s a deadly virus that has decimated Chinese hog herds. Chinese pig farmers have culled at least 10 million pigs to stop the spread of African swine fever, and hog production in China is running roughly 30% below last year’s levels. That leaves the world’s top consumer of pork relying more on imports, Kirk Maltais and Jacob Bunge report.
INVESTOR CAUTION
Government-bond yields from the U.S. to Germany are tumbling as central banks signal they are willing to hold interest rates lower for longer. The interest-rate moves have in large part been spurred by signs of slowing economic growth, particularly in the eurozone and China. The Federal Reserve’s argument for holding off on increases has been strengthened by low inflation, Akane Otani reports.
The Fed’s preferred inflation gauge, the personal consumption expenditure price index, is due out Friday. Economists expect core inflation in January rose 1.9% from a year earlier, a reading that would allow officials to continue their “wait-and-see” strategy.
NEITHER HERE NOR THERE
The U.K. doesn’t seem to know how it wants to Brexit. Lawmakers have twice rejected Prime Minister Theresa May’s plan. In a series of votes Wednesday, they failed to find a majority for any alternative. The votes showed the difficulty of breaking the Brexit deadlock in Parliament, but appeared to indicate a preference for maintaining closer ties to the bloc than Mrs. May has envisioned, Max Colchester and Jason Douglas report. (Oh, and somewhere in there Mrs. May said she’d resign if her deal is finally ratified by lawmakers.)
MAMA I’M COMING HOME
Good news: U.S. companies more than quadrupled the amount of foreign earnings they sent home in 2018 following enactment of a tax-law overhaul. Less good news: The repatriations surged in the first quarter and then faded through the rest of the year. The proportion of foreign earnings that are sent back to the U.S. is still elevated, though the pullback suggests repatriations are cooling, Sarah Chaney and Theo Francis report.
Policy makers supporting the 2017 tax legislation held out the prospect of large transfers of stockpiled profits to the U.S. from overseas, and the potential economic benefits as companies invested those funds. But the impact of the money coming back is unclear.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Debunking millennial myths: the kids don’t drive. “We find little difference in preferences for vehicle ownership between Millennials and prior generations once we control for confounding variables. In contrast to the anecdotes, we find higher usage in terms of vehicle miles traveled (VMT) compared to Baby Boomers,” Christopher Knittel and Elizabeth Murphy write in a National Bureau of Economic research working paper.
If first-quarter GDP looks a bit anemic, there may be a boring technical reason not to sweat it: residual seasonality. The San Francisco Fed in a blog post notes that the process of collecting and collating GDP data frequently distorts official numbers—depressing the first quarter and flattering the other three. Bureau of Economic Analysis efforts to fix the measurement problem may not yet have gotten the job done. The upshot: “actual first-quarter growth is somewhat stronger than what the professional forecasters are predicting and what the BEA is expected to report.”
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