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U.S.-China trade talks strike an optimistic note, manufacturing is in a recession, inflation is in hiding, a Brexit deal suddenly looks possible and oil prices are spiking. Here’s the latest economic news to take you into the weekend.
Early Harvest
U.S.-China trade talks kicked off amid expectations that Beijing’s emissaries are ready to offer compromises aimed at getting President Trump to hold off on tariff increases set to take effect next week and in December. Financial markets rose on prospects of any headway after five months of stalemate, and on the news Mr. Trump would meet on Friday with Chinese Vice Premier Liu He at the White House, William Mauldin, Chao Deng and Andrew Restuccia report.
- Business leaders and others following the talks are hoping for possible concessions—or “early harvests” toward a future comprehensive deal—that could include China offering more agriculture purchases, a joint pact to deter Beijing from devaluing its currency, and, on the U.S. side, suspending planned tariffs and relaxing export bans against blacklisted Chinese telecom giant Huawei Technologies.
WHAT TO WATCH TODAY
U.S. import prices for September are expected to be unchanged from a month earlier. (8:30 a.m. ET)
The University of Michigan’s preliminary consumer sentiment index for October is expected to fall to 92.0 from 93.2 at the end of August. (10 a.m. ET)
The Baker Hughes rig count is out at 1 p.m. ET.
President Trump meets with Chinese Vice Premier Liu He in the Oval Office at 2:45 p.m. ET.
The Minneapolis Fed’s Neel Kashkari speaks at the Council on Foreign Relations at 8 a.m. ET, the Boston Fed’s Eric Rosengren speaks in Madison, Wis., at 1:15 p.m. ET and the Dallas Fed’s Robert Kaplan speaks in San Francisco at 3 p.m. ET.
Correction: Thursday we said federal budget figures for FY2019 were due out yesterday at 2 p.m. ET. They probably won’t be out until next week. More details to come.
TOP STORIES
This Indecision’s Bugging Me
U.S. companies have filed more than 31,000 requests for exemptions from the $200 billion tranche of tariffs implemented last year on Chinese goods. Since the appeals process opened June 30, the U.S. Trade Representative’s office has ruled on 439. For those still waiting, uncertainty hangs over decisions on hiring, business planning and inventory, Anthony DeBarros and Josh Zumbrun report.
The Manufacturing Recession
U.S. manufacturing is in recession. Two-thirds of economic forecasters surveyed by the WSJ said the sector is in the midst of two or more consecutive quarters of contraction. The rest of the economy is holding up, though the outlook as darkened somewhat. Forecasters’ estimates for economic growth averaged a 1.82% pace in the third quarter and a 1.77% rate in the fourth quarter. Those figures are down from a September survey predicting 1.92% and 1.81%. Respondents largely cited the uncertain trade picture, weak global growth and U.S. political developments in their comments on the economic outlook, Harriet Torry reports.
Steady as She Goes
A key reading on U.S. inflation cooled slightly at the end of the summer. U.S. consumer prices were flat in September, as a decline in energy and used-vehicle prices held down broader inflationary pressures, Harriet Torry reports.
- Bad news: The latest inflation readings join other economic reports that point to signs that U.S. growth slowed in September.
- OK news: Some economists said the inflation data showed the U.S.-China trade war was so far having a limited impact on prices.
- Good news: The figures help keep the Federal Reserve on course for an expected rate cut at the end of the month.
So Is it Time to Cut?
The Federal Reserve makes its next decision on interest rates at the end of the month. A good time to cut for the third time this year?
Yes. “If the data continues to come in the way it has, I’m going to be supportive of another rate cut. How much more we need to go I don’t know.” —Minneapolis Fed President Neel Kashkari
Maybe. “I intend to avoid being rigid or predetermined from here, and plan to remain highly vigilant and keep an open mind as to whether further action on the federal-funds rate is appropriate.” —Dallas Fed President Robert Kaplan
This Is America
For roughly 24 hours, Humboldt County, Calif., was blacked out, part of the planned outages by PG&E Corp. that have left more than 700,000 California households and businesses without electricity in an effort to prevent active power lines from sparking wildfires. Humboldt was the only California county to lose power in its entirety, making it particularly difficult for residents to drive to other cities where they could charge phones, access light and heat, or shop. The result? Long lines for gas, shoving matches over batteries and looting at a liquor store, Ian Lovett reports.
Will the blackouts affect the economy? “The answer is yes, but it will be quite small and very hard to detect,” economists at Macroeconomic Advisers write. The only direct effect on GDP that won’t be made up within the quarter is the lost consumption of electric services. Macroadvisers figures that 1 million households without power for five days would add up to about $100 million on an annualized basis, a tiny drop in the national economic bucket.
Brexit, Stage Right
British Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar unexpectedly declared Thursday they saw a chance of a Brexit deal, stoking hopes that a last-ditch agreement to get the U.K. out of the European Union could still be in reach. The British pound posted its biggest one-day jump against the dollar in more than two years, Max Colchester and Avantika Chilkoti report.
Oh, Ship
The cost of moving oil around the world has hit an 11-year high. The cause: Producers are scrambling to find new supertankers after the U.S. blacklisted a major Chinese operator. Shipping executives say the U.S. action late last month over allegations that the vessels were tied to illicit shipments of Iranian crude has hit more than 40 tankers operated by a subsidiary of Cosco Shipping Energy Transportation, one of the world’s largest tanker owners and a major carrier for China’s oil needs, Costas Paris reports.
Breaking: Crude oil prices jumped Friday after reports of an explosion on an Iranian tanker near the Saudi Arabian port of Jeddah.
WHAT ELSE WE’RE READING
Hey, economists, step up your Twitter game. “Economists tweet less, mention fewer people and have fewer conversations with strangers than a comparable group of experts in the sciences, and use less accessible language with words that are more complex, with more abbreviations and with a more distant tone. Their tweets are less personal and less inclusive than those used by scientists,” the University of Reading’s Marina Della Giusta writes in the LSE Business Review.
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