In today’s issue, India becomes world’s fifth largest economy, Russia plays key role in OPEC decisions, and housing in one of America’s wealthiest towns deflates. Good morning, this is Greg Ip taking you through the day’s economic news.
MAYBE INDIA SHOULD JOIN THE G7
[wsj-responsive-sandbox id = "1" ]This year India will surpass France and Britain to become the world’s fifth-largest economy, according to the latest IMF numbers. Given the IMF’s growth projections, India’s gross domestic product, in U.S. dollars at market exchange rates, will likely remain fifth largest for at least five years. The economy is the central issue in the election now under way in India. Regardless of who wins, India seems destined to rival China in global economic influence thanks to its growth and population (soon to surpass China’s).
Even without Britain, the European Union still is about 12% bigger than China. Assuming Brexit, China is on course to surpass the EU in 2022, but if the IMF is too optimistic on China and pessimistic on the EU, it could take China longer, especially if Turkey or someone else joins the EU or Britain stays. China won’t surpass the U.S. in the IMF’s five-year forecast window. —Josh Zumbrun & Greg Ip
Comments or suggestions for Real Time Economics? Write to Greg Ip at realtimeeconomics@wsj.com, tweet to @WSJecon and visit wsj.com/economy for the latest.
WHAT TO WATCH TODAY
U.S. industrial production fell in January and February as a long-predicted pullback made its way through manufacturing, including machinery, electronics and apparel. Economists expect it rose 0.2% in March. The Federal Reserve releases the numbers at 9:15 a.m. Capacity utilization is seen rising to 79.2% from 78.2%.
The National Association of Home Builders’ index, out at 10 a.m., is seen rising to 63 in April from 62 in March.
Dallas Fed president Robert Kaplan speaks in Hobbs, N.M., at 2 p.m.
WHOSE GDP IS IT, ANYWAY?
Americans generated more than $20 trillion of gross domestic product last year, but that says nothing about who benefited most from it and who got the least. The Commerce Department’s Bureau of Economic Analysis, which compiles GDP, is now working to change that by developing distributional measures that describe how much of the income earned by generating GDP went to the poor, the middle class and the rich, David Harrison reports. They hope to publish prototypes next year. Between 2007 and 2012, aggregate GDP adjusted for inflation rose 3.7%. But BEA researchers found the income earned by the top 10% in producing that output rose 5.8% while it fell 0.4% for the remaining 90%, which might explain why so few Americans believed the economy was faring well in the years after the recession.
THE RETAIL APOCALYPSE INTENSIFIES
Despite healthy consumer spending last year, the wave of brick and mortar retail closures has since intensified. So far this year 5,994 U.S. stores have closed, compared with 5,864 all of last year, according to Coresight Research. Net closings, or closings minus openings this year, stands at 3,353, Esther Fung reports. Payless ShoeSource Inc., Gymboree Group Inc. and Charlotte Russe Holding Inc. are among the retailers to announce closure after restructuring failed. That spells trouble for shopping malls. The mortgage for Destiny USA, one of the largest malls in the country, was taken over recently by a special servicer, a company that deals with defaults or renegotiations of loan terms.
RUSSIA, OPEC’S NEW POWER BROKER
Russia isn’t even a member of the Organization of the Petroleum Exporting Countries, but increasingly holds sway over OPEC’s decisions. Last December, it was Russia that salvaged an OPEC effort to cut production and cushion prices by agreeing to cut its own output, provided Iran was allowed to keep pumping, Benoit Faucon, Summer Said and Timothy Puko report. Saudi energy minister Khalid al-Falih recently joked that he talks more with his Russian counterpart Alexander Novak than with some of his colleagues in the Saudi cabinet. At the next OPEC meeting, scheduled for May, Russia and Saudi officials will discuss whether to formalize what has been until now an temporary alliance. OPEC has become “basically all about what [Saudi Crown Prince Mohammed bin Salman] and his buddy [Vladimir] Putin want,” says a Qatari official.
AMERICA’S MOST EXPENSIVE HOUSING MARKET GOES BUST
Once a beacon for Wall Street’s top brass and still one of the richest towns in the U.S., Greenwich, Conn., is facing a slew of issues. Many wealthy New Yorkers are opting to live in the city. Some of the wealthiest have decamped to Florida in search of more favorable tax rates. Banking executives who propped up the market with their yearly bonuses have also experienced cuts in compensation. Owners who paid top dollar for their homes in the Fairfield County town in the mid- to late-2000s are routinely selling for less than they paid, Katherine Clarke reports.
WOMEN IN MANAGEMENT: GOOD NEWS AND BAD NEWS
Women get their first promotion faster than men, but hit a glass ceiling about halfway up the corporate hierarchy, according to a study released today by ADP Research Institute. Women wait an average of 6.6 years for their first promotion compared with 7.3 for men. But their representation rapidly drops at the fourth level of management, roughly the vice-president level, the report finds. Women earn about 79% of what men do and that does not vary much between the bottom and top of the hierarchy.
WOMEN IN ECONOMICS: BETTER NEWS
The spring meeting of the International Monetary Fund and World Bank was the first where the chief economists of the world’s top multilateral institutions were all women. From left to right: Organization for Economic Cooperation and Development chief economist Laurence Boone, IMF managing director Christine Lagarde, IMF chief economist Gita Gopinath, and World Bank chief economist Pinelopi “Penny” Koujianou Goldberg.
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If you get past arguing about whether climate change is real and ask, ‘Should we be significantly increasing funding for clean energy research?’ you probably will get 80% support in the Senate.
Sen. Lamar Alexander (R., Tenn.) on his New Manhattan Project for Clean Energy which would tackle climate change with ramped up government research into clean energy and deployment of nuclear power.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE ARE READING
Republicans cut taxes for two-thirds of Americans in 2017, saying it would pay for itself and the American public would thank them. Now, as Americans finish filing to the IRS for the first time under the new system, surveys show just one-fifth of taxpayers believe their taxes have gone down, Bloomberg reports. That’s made it hard for President Trump to leverage the tax cuts as an issue in 2020. The law appears to have met a similar political fate as President Obama’s stimulus package in 2009, in which most Americans received a one-year tax break but the incremental gains in paychecks were so small that most didn’t notice.
Information technology investment leads to more jobs, not less. Economists James Bessen & Cesare Righi found that after companies made large investments in custom software, productivity rose 5%, sales rose 11% and employment rose 7%. This suggests IT investment is not generally labor replacing but labor-supplementing. The impacts are strongest in technology companies and weakest in mature industries, whose sales get less of a boost from lower costs. Also, the effects declined over the 1990 to 2012 period they examined.
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from Real Time Economics https://on.wsj.com/2KI8GMg
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