Real Time Economics: Inflation Eases Up | China’s Economy Stumbles | Budget Deficit Balloons

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning. Today we look at worker pay amid slowing inflation, the biggest risk to the economy, another sign of a Chinese slowdown, misleading jobless claims, the fast-growing U.S. budget deficit, and Ben Bernanke‘s reflection on the financial crisis. INFLATION TAKES A BREATHER Inflation has been eating away at worker paychecks, so August’s consumer-price index was a welcome reprieve. The CPI, which gauges what Americans pay for everything from rent to razorblades, was up 2.7% from a year earlier, a slowdown from the prior two months. Core inflation, which excludes food and energy, rose 2.2%, slightly slower than in July, Eric Morath reports. Worker pay gains, by contrast, are accelerating. Adjusted for inflation, hourly earnings rose 0.2% from a year earlier. While modest, that’s an improvement from Continue reading "Real Time Economics: Inflation Eases Up | China’s Economy Stumbles | Budget Deficit Balloons"

Apple’s China Distraction Before Wednesday’s Big Event

President Trump has cast a formidable shadow in the days leading to Apple's big iPhone event on Wednesday. Over the weekend, he suggested in a tweet that Apple move its manufacturing plants to the U.S. to avoid tariffs in the simmering trade war between the U.S. and China.

Real Time Economics: Chances for a U.S.-China Trade Deal Fade | U.S. Job Growth Expected to Accelerate

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning. Today we look at escalating U.S.-China trade tensions, signs the U.S. economy is picking up as Europe’s slows, and your newest coworkers: Generation Z. Bonus: Greg Ip offers a sneak peek of his story on the 10th anniversary of Lehman’s collapse.  TARIFFS TODAY? Prospect for a U.S.-China trade deal are fading. The White House is getting ready to ratchet up pressure on China further by hitting as much as $200 billion in Chinese goods with tariffs of 25%, on top of the $50 billion of Chinese exports already facing 25% levies, Bob Davis and Lingling Wei report. An announcement could come as soon as Friday, though some observers expect the U.S. Trade Representative’s office to take time to review industry comments Continue reading "Real Time Economics: Chances for a U.S.-China Trade Deal Fade | U.S. Job Growth Expected to Accelerate"

Real Time Economics: Record Bull Market | Auto Tariffs | Chinese Savers

Good Morning! In today’s issue, the bull market in stocks becomes the longest in history, the U.S. delays auto tariffs to give diplomacy a chance, and in China “reach for yield” takes on dangerous new dimensions. THE BULL MARKET BREAKS A RECORD Today the bull market becomes the longest in history. It’s 3,453 days since the S&P 500 hit its low of 666 on March 9, 2009. It has since quadrupled, and on Tuesday briefly set an intraday high before closing at 2862.96. The market owes its longevity to the depth of the crisis that preceded it and central banks’ response: an unprecedented stretch of near-zero interest rates. Can it continue? True, valuations look stretched: columnist Jason Zweig notes stocks are trading at about 32.8 times long-term average earnings, adjusted for inflation, nearly twice their typical level since 1881. But with real bond yields less than 1%, valuations don’t look unsustainable. There’s
Continue reading "Real Time Economics: Record Bull Market | Auto Tariffs | Chinese Savers"

Real Time Economics: Make or Break for China Trade / Fed bond holdings / Moving

Good morning! Today we look at key trade meetings this week between the U.S. and China, the future of the Fed’s balance sheet, the surprising resilience of personal saving, and Venezuela’s deepening abyss. THE U.S.-CHINA TRADE CONFLICT WILL GET WORSE … Will the U.S. and China plunge into full-blown trade war or step back from the brink? This week could decide. The two have already imposed tariffs on $34 billion of each other’s imports and are scheduled to impose an additional $16 billion on Thursday. Meanwhile, the U.S. is teeing up tariffs on another $200 billion. On Monday, the U.S. Trade Representative kicks off six days of hearings where companies can comment on what the $200 billion will cover. Expect them to be contentious: so many companies want to comment (mostly against the tariffs) USTR had to double the number of hearings. … BEFORE IT (MIGHT) GET BETTER For
Continue reading "Real Time Economics: Make or Break for China Trade / Fed bond holdings / Moving"

Real Time Economics: China’s Economy Slows, India’s Rupee Dives and Germany’s GDP Accelerates

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning! Today we look at slower growth in China, more fallout from Turkey’s economic crisis, Germany pulling away from the rest of Europe, and which U.S. manufacturers are driving the sector’s resurgence. SIGNS OF SLOWER GROWTH IN CHINA China’s economy is cooling. Spending on factory machinery, public-works projects and other fixed-asset investments in China’s nonrural areas grew at the slowest pace in nearly two decades. Retail sales also slowed and unemployment ticked up, Liyan Qi, Grace Zhu and Dominique Fong report. The economy is still expanding. But the data suggest further escalation in trade tensions with the U.S. come at a particularly bad time for China. The slowdown in fixed-asset investment reflects Beijing’s campaign to curb risky borrowing by local governments and companies. A government spokesperson said infrastructure investment Continue reading "Real Time Economics: China’s Economy Slows, India’s Rupee Dives and Germany’s GDP Accelerates"

Tariffs Could Slow Exports, Not Just Imports, New York Fed Research Warns

Higher tariffs on imported goods aren’t likely to narrow the U.S. trade deficit because domestic producers are likely to face higher costs for exports, according to a new analysis from the New York Federal Reserve Bank. “The end result is likely to be lower imports and lower exports, with little or no improvement in the trade deficit,” wrote co-author Mary Amiti, an economist at the New York Fed, in a blog post published Monday. The Trump administration has finalized plans to impose tariffs on $16 billion in Chinese imports, following duties imposed earlier this year on $34 billion in products. Washington also is considering imposing 25% tariffs on a longer list of $200 billion in Chinese imports, and Beijing has unveiled its own list of $60 billion in U.S. products it would tax if the Trump administration continues down its current path. The New York Fed research Continue reading "Tariffs Could Slow Exports, Not Just Imports, New York Fed Research Warns"

Real Time Economics: Trump Advisers Push for Higher Tariffs on China

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning! Today we look at Trump administration deliberations on tariffs, how the U.S. economy is growing while others are slowing, signs of stronger wages and rising inflation, and what to expect when the Federal Reserve’s policy meeting concludes today. LET’S TALK Some White House advisers are pushing President Donald Trump to apply tariffs as high as 25% on $200 billion of Chinese goods, up from an original proposal for 10%. The hope is that the harsher measures would bring Chinese negotiators to the table. The White House won’t make a final decision until at least late August, Bob Davis and Lingling Wei report. Meanwhile, the administration is split internally on the best way forward. Hawks and doves: U.S. Trade Representative Robert Lighthizer pushing for more tariffs. Treasury Secretary Steven Mnuchin Continue reading "Real Time Economics: Trump Advisers Push for Higher Tariffs on China"

Real Time Economics: China Signals Slower Growth, Europe’s Economy Sputters

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here. Good morning! Today we look at signs of weaker growth in Asia and Europe, the best-case scenario for the Fed, a massive deficit for U.S. pensions, and the so-so startup scene in the U.S. TARIFFS SQUEEZE CHINA’S ECONOMY China’s business activity faltered in July. Official surveys of factories and service providers highlighted sluggish domestic demand, and slower production and investment, Liyan Qi and Grace Zhu report. The manufacturing purchasing managers’ index fell to a five-month low, while the import subindex of slipped to a 23-month low. Exports held steady thanks to a weaker yuan. The first official data reflecting the impact of U.S. tariffs adds to signs that trade tensions have started to pinch China’s economic growth. EUROPE DECELERATES The eurozone’s economy slowed in the three months Continue reading "Real Time Economics: China Signals Slower Growth, Europe’s Economy Sputters"

Two Views of U.S.-China Trade Relations That Shape American Diplomacy

WASHINGTON—U.S.-China trade relations have largely been shaped by two veteran trade lawyers with very different views of how to influence Beijing. Charlene Barshefsky, President Bill Clinton’s trade representative, now 67 years old, negotiated China’s accession to the World Trade Organization. She is a multilateralist who sees herself as part of a tradition dating back to the Roosevelt administration of officials who nurtured international organizations, like the United Nations and the WTO, to build a peaceful and prosperous world. Adding China to the WTO in 2001 was the latest expansion of that U.S.-dominated system, she told a Senate panel in 2000.  “WTO accession represents a potentially profound and historic shift, building upon but going much further than China’s domestic reforms to date,” she said. In a July interview, she counted the gains. China has opened its economy in many sectors and become the world’s second-largest importer, giving Continue reading "Two Views of U.S.-China Trade Relations That Shape American Diplomacy"

Why Treasury Hasn’t Labeled China, EU as Currency Manipulators

President Donald Trump said Friday that “China, the European Union and others have been manipulating their currencies and interest rates lower,” returning the spotlight to the issue. Mr. Trump was alleging that these economies take policy measures to lower the value of their currencies relative to others to make their exports cheaper on world markets. The U.S., by contrast, allows the value of the dollar to be determined by global financial markets. As a candidate, Mr. Trump repeatedly promised to designate China a currency manipulator—a label that would potentially open the country up to economic penalties. But his Treasury Department has three times declined to do so. The action would come in one of the Treasury’s semiannual foreign exchange reports; the next one is scheduled for October. Treasury hasn’t labeled any nation a manipulator because none of them meets its three-part test. These are the three components: 1. Continue reading "Why Treasury Hasn’t Labeled China, EU as Currency Manipulators"