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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.
Our House
U.S. home sales are picking up in the second half of the year. Existing-home sales were up 2.7% in November from a year earlier, the fifth straight month of year-over-year gains, the National Association of Realtors said Thursday. The latest data included fresh signs that buyers are becoming more confident after a lethargic first half of the year, Will Parker and Amara Omeokwe report.
The drivers: Pent up demand, a strong job market and historically low mortgage rates. Millennials now account for nearly half of home-purchase mortgage originations.
The headwinds: There aren’t enough houses for sale, especially at the lower end of the market. Limited supply has contributed to higher prices. “If we were building more homes under $300,000, these [sales] numbers would be through the roof right now,” said Robert Frick, an economist at Navy Federal Credit Union.
WHAT TO WATCH TODAY
U.S. gross domestic product is expected to advance at a 2.1% pace in the third quarter, unrevised from an earlier reading. (8:30 a.m. ET)
U.S. consumer spending for November is expected to increase 0.4% from the prior month. (10 a.m. ET)
The personal-consumption-expenditure price index excluding food and energy for November is expected to rise 0.1% from a month earlier and 1.5% from a year earlier. (10 a.m. ET)
The University of Michigan’s consumer sentiment index for December is expected to hold steady at 99.2. (10 a.m. ET)
The European Commission’s flash consumer confidence survey for December is out at 10 a.m. ET.
The Kansas City Fed’s manufacturing survey for December is out at 11 a.m. ET.
The Baker Hughes rig count is out at 1 p.m. ET.
TOP STORIES
The Trash Trade
For decades, America and much of the developed world threw their used plastic bottles, soda cans and junk mail in one bin. The trash industry then shipped much of that thousands of miles to China, the world’s biggest consumer of scrap material. That changed last year when China banned imports of mixed paper and plastic and heavily restricted other scrap. Since then, India, Malaysia, Vietnam, Thailand and Indonesia—other popular markets for the West’s trash—have implemented their own restrictions. The moves have caused a seismic shift in how the world deals with its waste. Long used to shipping off trash to poorer countries to sort and process, nations are now faced with the question of what recycling is worth to them. They are undertaking new investments in domestic processing, ramping up alternative strategies such as incineration and rolling out education campaigns to teach homeowners to sort trash. Others are dropping programs altogether, Saabira Chaudhuri reports.
Golden Years
Congress passed the most significant changes to the nation’s retirement system in more than a decade, a move designed to help Americans save more. With the U.S. population aging and employers shifting responsibility for retirement saving to individuals, lawmakers have grown concerned that a significant portion of Americans are at risk of outliving their money. Americans between the ages of 35 and 64 face a retirement savings shortfall of $3.83 trillion, with 41% of households projected to run short of money in later life, Anne Tergesen reports.
You Can Go Home Again
U.S. companies brought back a seasonally adjusted $95.3 billion in foreign profits in the third quarter, pushing the total amount repatriated since the start of 2018 to more than $1 trillion. Repatriations spiked last year after the Tax Cuts and Jobs Act eliminated most taxes on them. While still elevated, companies are once again leaving some of their foreign profits overseas. (h/t to the WSJ’s Theo Francis for deciphering the U.S. current account tables.)
Hold on Loosely
Federal Reserve officials are fairly upbeat about the year ahead, and have set a pretty high bar to changing monetary policy. The WSJ’s Michael S. Derby chronicles the latest comments:
“I penciled in no rate increases for 2020.” —St. Louis Fed’s James Bullard
“When I look to the year ahead, I think monetary policy is in a good place.” —New York Fed’s John Williams
“I’ve got penciled in no change.” —Dallas Fed’s Robert Kaplan
“It is appropriate to take a patient approach to considering any policy changes.” —Boston Fed’s Eric Rosengren
Who else is on hold? Just about everyone. Economist Phil Suttle: “On a day of seven central bank meetings (at least in the sample that I follow), the general policy picture emerging is one of stability.” Sweden raised by a quarter percentage point and Mexico cut by the same amount. Japan, England, Norway, Indonesia and Taiwan all held steady on Thursday.
Breaking central bank news: The Bank of England’s next governor will be Andrew Bailey, the chief of the U.K.’s financial regulator, the government said. He will take over from Mark Carney in March.
Don’t Call it Nafta
The House of Representatives approved President Trump’s amended North American trade pact on Thursday. The U.S. Mexico Canada Agreement, or USMCA, passed by a 385 to 41 vote. The Senate is expected to approve the legislation early next year, after which the president would sign it into law. Mexico’s Senate has approved the deal, but it needs ratification in Canada to enter into force and replace the North American Free Trade Agreement, or Nafta.
The Competitive Enterprise Institute’s Ryan Young: “Its economic impact will be almost too small to measure.”
WHAT ELSE WE’RE READING
Cleveland Fed researchers built a new labor-market indicator based on advance layoff notices. “We find evidence that these notices, aggregated to the national level, lead other prominent labor market indicators, such as initial unemployment insurance claims, the change in the unemployment rate, and changes in private employment. … Most recently, WARN data suggest a slight increase in labor market slack,” Pawel Krolikowski, Kurt Lunsford and Meifeng Yang write in an economic commentary.
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