Newsletter: Housing Is Hot, Manufacturing Is Not

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This is our final issue of 2019. Real Time Economics is taking a break for the holidays. We’ll be back Monday, Jan. 6, with a look at what to expect in 2020. For news and analysis while we’re gone, please visit wsj.com/economy. Happy New Year!

Over the River and Through the Woods

The American love affair with driving is cooling. Over the past three years, the average number of miles driven per person has hovered around 9,800 miles a year, roughly 2% fewer than at the 2004 peak, David Harrison reports.

For decades, the country’s driving pattern moved in sync with the economy. People drove more when times were good. They cut back when recessions cost them their jobs. Now, however, we’re driving less even though the economy has been expanding for more than a decade.

Among the reasons for the national decline are migration to dense urban areas; young adults’ preference to live close to their jobs or to use alternate modes of transportation; more online working, shopping and streaming; and a growing population of retirees who don’t commute to jobs anymore. The result: City planners are now focusing much of their energy on people who don’t drive.

WHAT TO WATCH TODAY

The CPB World Trade Monitor is out at 9 a.m. ET.

The Richmond Fed’s manufacturing survey for December is out at 10 a.m. ET.

TOP STORIES

Drag Show

U.S. business investment remained sluggish late this year. Weak business spending was a drag on U.S. economic growth in the second and third quarters and is likely to offer little support in the fourth, which ends next week. The Federal Reserve Bank of Atlanta is tracking fourth-quarter economic growth at a 2.3% pace, with business investment nearly flat, Eric Morath reports.

The good news: There are prospects for an improvement in 2020. The latest data, for November, reflected orders placed before news on progress in U.S.-China trade talks, completion of a new trade deal with Canada and Mexico, and Federal Reserve policy makers saying they intend to maintain the current low level of interest rates.

The bad news: Boeing last week said it planned to halt 737 Max production in January, a blow to the factory sector and a move J.P. Morgan economists estimated would subtract 0.5 percentage point from first-quarter 2020 economic growth.

You know what else would help U.S. manufacturers? Stronger growth in the rest of the world. There, the outlook is mixed. “China, the factory of the world, is slowing down in response to external and internal challenges. The eurozone’s economic fortunes look tenuous. Unrest in several parts of the world could also break badly next year,” Northern Trust economist Carl Tannenbaum said. The drag from slower global growth is evident in trade data: Yes, the trade war with China hit exports to that country. But sales to the rest of the world are decelerating sharply.

The domestic side of the U.S. economy, meanwhile, seems to be holding up amid steady job creation, strong consumer demand and low interest rates from the Fed. The latest evidence: Sales of newly built, single-family homes rose in November and are up about 10% through 11 months in 2019 from 2018. “2019 will go down as the best year for new home sales since before the Great Recession,” said Zillow economist Matthew Speakman. Reasons for hope in 2020: Builder optimism is at a two-decade high, construction activity appears to be picking up, the Fed plans to keep rates low and demographics suggest there should be plenty of demand. The usual caveats: Housing inventory is tight, home prices are high and rising.

Gold Bug

The Dow Jones Industrial Average hit a new record Monday. But not everyone is convinced the outlook is 100% rosy. Gold prices climbed to their highest level in more than six weeks as investors remain cautious about the world economy and geopolitics. The haven metal is on track to rise 16% over the course of 2019, which would be its biggest one-year rally since 2010, Joe Wallace reports.

Coal Country

China’s efforts to wean itself off coal are losing steam, as the world’s biggest carbon emitter is putting economic growth and energy security above its ambitions to be a leader in combating climate change. Coal consumption is back near peak levels despite pledges to make steep cuts in the country’s most prevalent and polluting source of energy. China is building more coal-fired plant capacity than the rest of the world combined. Infrastructure stimulus measures to offset the impact of the trade war with the U.S. have boosted consumption. And Beijing has taken a softer stance on coal use after a missile attack in September on Saudi Arabia, China’s biggest source of oil imports, underscored the country’s reliance on foreign energy, Stephanie Yang reports.

WHAT ELSE WE’RE READING

Maybe central banks can solve declining birth rates too. “We estimate that each 1 percentage point drop in the policy rate increased birth rates by 2%. In aggregate, this pass-through of accommodative monetary policy to mortgage rates was sufficiently large to outweigh the headwinds of the Great Recession and prevent a ‘baby bust’ in the UK, in contrast to the US,” Fergus Cumming and Lisa Dettling write in a Bank of England working paper. (Why the difference between the countries? In the U.K., about half of homeowners had mortgages that were directly tied to the policy rate—so when the BOE cut, payments fell immediately.)

And here’s a great* topic for the holiday dinner table: What was the big story in economics over the last decade? Scholars from the Brookings Economic Studies program make their picks here. Louise Sheiner has what must surely be one of the most concerning: “After increasing steadily for decades, life expectancy began falling in 2014, fueled by increases in drug overdoses, alcoholism, and suicides among working-age Americans.”

*OK, probably not a ‘great’ topic.

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