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Fewer tourists are visiting the U.S., China says it’s “in effective communication” with Washington, and for the first time since President Trump was elected, more voters say the national economy is getting worse rather than better. 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.
Greetings From…
Tiffany & Co. blamed a drop in spending by foreign visitors to the U.S. for falling second-quarter sales. The results demonstrated “a continued sharp decline in sales to both Chinese and all other tourists, which we believe lowered our reported sales by a couple percentage points,” Alessandro Bogliolo, Tiffany’s chief executive, said on an earnings call Wednesday.
- Are tourists really dropping the U.S. from their travel plans? It does seem there’s been a slowdown in travel- and tourism-related spending in the U.S. The National Travel and Tourism Office shows travel and tourism exports (purchases of goods and services by foreign travelers in the U.S.) down almost 3% from a year earlier in June.
- The number of overseas arrivals appears to have tapered off too, especially from China. That’s a small dose of bad news for the U.S. economy: Travel and tourism is one of the rare industries where the U.S. runs a trade surplus, and China is a big reason for the surplus. The Commerce Department, meanwhile, estimates the industry supports 7.8 million jobs in the U.S.
Of course, the figures don’t say why. It could be a range of factors: The global economy has slowed, China’s economy has slowed, political tensions have increased and the outlook is less certain.
WHAT TO WATCH
Germany’s consumer-price index for August is out at 8 a.m. ET.
U.S. gross domestic product growth for the second quarter is expected to be revised down to 2.0% from 2.1%. (8:30 a.m. ET)
U.S. advance trade in goods for July is out at 8:30 a.m. ET.
U.S. jobless claims are expected to rise to 215,000 from 209,000 a week earlier. (8:30 a.m. ET)
U.S. pending-home sales for July are expected to fall 0.5% from the prior month. (10 a.m. ET)
Japan’s jobless rate for July is out at 7:30 p.m. ET, and industrial production and retail sales are out at 7:50 p.m. ET.
TOP STORIES
Call Me Maybe
China’s Ministry of Commerce said Thursday that Beijing and Washington remain “in effective communication” over the ongoing trade dispute, and both sides are still discussing whether to proceed with talks previously scheduled for September. Spokesman Gao Feng called on Washington to create the necessary conditions for bilateral talks to continue. Tensions between the world’s two biggest economies intensified dramatically last Friday after Beijing and Washington raised tariffs on each other’s goods, Lin Zhu reports.
Tough Enough
There’s a consensus in the U.S.: We need to be tougher on China. The only question is how much tougher. But the WSJ’s Greg Ip asks if the China backlash has gone too far.
- There’s good reason for the hawkish turn: China’s mistreatment of foreign companies, its more bellicose behavior toward neighbors and President Xi Jinping’s tightening grip over domestic dissent.
- But the pendulum may be swinging too far toward confrontation. “We have a China attitude, not a China policy,” says Henry Paulson, President George W. Bush’s Treasury secretary.
- So what’s the right strategy if not integration with China, as previous administrations sought, or decoupling, as this administration has threatened? The U.S. needs to unify its allies behind a common approach, and its strategy must maximize the benefits if China cooperates, and minimize the harm if it doesn’t.
High on the Hog
Pork prices in China have surged to new highs, adding pressure on a government trying to contain food-price inflation during the trade war with the U.S. Prices of the mainstay—used in dishes such as lunchtime dumplings and spicy mapo tofu—have risen 18% in China since the week ended Aug. 9 and are up more than 50% in the past year. The cause: African swine fever has decimated pork supplies. China’s pig herd had fallen 32% on year in July. Analysts expect 2019 production could fall as much as 30% and drop further in 2020, Lucy Craymer reports.
Brexit Showdown
British Prime Minister Boris Johnson wants to reduce the time that U.K. lawmakers will have to block a no-deal Brexit, and investors are scared. But they should probably welcome signs of a final showdown, Jon Sindreu writes. By forcing a confrontation, Mr. Johnson is now more likely to deliver some form of Brexit, or have a clear culprit to blame if he doesn’t. Members of parliament, meanwhile, are under more pressure and have a powerful excuse to rally against the government in the eyes of voters. Investors could end up more grateful for Mr. Johnson’s games than they now realize.
If You’re Happy and You Know It…
American workers under 35 report being happier with their paychecks than people over 55 for the first time since at least 2011, according to a new report from the Conference Board. Overall, the share of workers satisfied with their paychecks rose to 46.4% in 2018, from 43% in 2017, an increase that mirrors federal data showing that wage growth accelerated in 2018. The biggest leap came from millennials and Generation Z, whose enthusiasm for their compensation shot from 36% in 2017 to nearly 46% a year later, Lauren Weber reports.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
For the first time since President Trump was elected, more voters say the national economy is getting worse rather than getting better. A Quinnipiac University poll showed 37% saying it is declining, 31% improving, and 30% staying the same. Also for the first time, more voters say Mr. Trump’s policies are hurting rather than helping the economy. “As trade tensions with China dominate the headlines, confidence in the economy is slipping,” said Quinnipiac analyst Mary Snow.
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