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"

Real Time Economics: Dollar Strengthens as Turkey’s Troubles Rattle Currency Markets

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 a wild ride for currency markets, the economic outlook for the U.S., U.K. and Japan, and one high-class problem for a resurgent manufacturing sector—American factories are running short of parts. CURRENCY CRASH The dollar rose to its strongest point in more than a year while Turkey’s lira, Russia’s ruble and other currencies tumbled. Turkey: The lira has lost more than 20% over the week as international markets soured on the country’s capacity to repay its foreign-currency debts. Concerns about the health of Turkey’s financial system are rippling through global markets, Mike Bird writes.
Russia: U.S. sanctions roiled Russia’s currency and blue-chip stocks. Since 2014, Western sanctions have taken a severe toll on Russia’s economy, wiping out half of the ruble’s value, Continue reading "Real Time Economics: Dollar Strengthens as Turkey’s Troubles Rattle Currency Markets"

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"

Real Time Economics: The Labor Market Is Tight, the Economy Is Strong, and Companies Are Raising Prices

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 how companies are trying to expand the pool of potential workers, more fallout from tariffs, China’s shrinking trade deficit, and the economy’s strength and sustainability.  NO EXPERIENCE? NO DEGREE? NO PROBLEM! Employers are slowly abandoning preferences for college degrees and specific skill sets to speed up hiring and broaden the pool of job candidates. Only 23% of entry-level jobs now ask applicants for three or more years of experience, compared with 29% back in 2012, putting an additional 1.2 million jobs in closer reach of more applicants, Kelsey Gee reports. What’s happening? Many companies added requirements to job postings after the recession, when millions were out of work and human-resources departments were stacked with résumés. Now, the tightest job market in decades has Continue reading "Real Time Economics: The Labor Market Is Tight, the Economy Is Strong, and Companies Are Raising Prices"

Why Fourth Quarters Are the New Growth Laggards

The economy has often appeared weaker than it is at the beginning of the year because of how the government measures growth. But after years of grumbling from financial heavyweights, officials say they have have solved the problem. First-quarter gross domestic product growth from 2012 through 2017 has averaged an annual rate of 2.1%, according to fresh data the Bureau of Economic Analysis released Friday in a periodic revision. That is substantially higher than the previous 1.6% average, which made it the weakest of the four quarters. Changes to seasonal adjustment typically increase growth in some quarters at the expense of others with no impact on the year as a whole. That effect, along with other revisions, resulted in the fourth quarter now clocking the slowest average growth at 1.7%. When not seasonally adjusted, economic growth is typically slower in the first three months of a year Continue reading "Why Fourth Quarters Are the New Growth Laggards"

Real Time Economics: Did Trump Give Us a Hint on GDP? ‘If It Has a 4 In Front of It, We’re Happy’

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 U.S. economic growth, inflation expectations, Trump’s tactical shift on trade, slower growth in China and France, and how investors unfriended Facebook. TRUMP PREVIEWS GDP Hoping for a sneak peek of Friday morning’s GDP numbers? President Donald Trump outlined his expectations for the economic growth report: “Somebody actually predicted today, 5.3. I don’t think that’s going to happen; 5.3. If it has a 4 in front of it, we’re happy. If it has like a 3, but it’s a 3.8, 3.9, 3.7 we’re OK.” So, high 3s or low 4s? We’ll know for sure when the Commerce Department publicly releases its first official estimate of second-quarter gross domestic product at 8:30 a.m. ET. The president is privy to the report Continue reading "Real Time Economics: Did Trump Give Us a Hint on GDP? ‘If It Has a 4 In Front of It, We’re Happy’"

Real Time Economics: The U.S. Economy Is Absolutely Roaring—At Least For Now

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 the torrid pace of U.S. economic growth and why that might not last, new lows for the yuan and the rupee, the latest developments in President Trump’s trade policy, and the paltry personal saving rate of American consumers.  TAKE FIVE The U.S. economy is roaring, at least for now. Macroeconomic Advisers, which runs one of the more sophisticated forecasting models, is tracking a 5.3% growth rate in the second quarter. That would be the fastest pace in almost 15 years. A narrowing trade deficit, tax cuts coupled with more government spending, a resurgent consumer and decent business investment are all supporting what appears to be a strong rebound in growth. The Atlanta Fed’s GDPNow model shows a slightly less robust 4.5% growth Continue reading "Real Time Economics: The U.S. Economy Is Absolutely Roaring—At Least For Now"

Real Time Economics: The U.S. Economy Is Revving Up, But So Are Trade Tensions

This is the web version of the WSJ’s economic newsletter. You can sign up for daily delivery here. Good morning! Today we look at strong U.S. economic growth—and how that’s leaving the rest of the world behind—President Trump’s decision to go ahead with another $50 billion in tariffs on Chinese goods, and sweet relief for students buried under a mountain of school loans. MY ECONOMY IS RED HOT… The U.S. economy is revving up just as others lose steam. Growth is on track to exceed a 4% pace in the second quarter, which would be the fastest in almost four years. The Federal Reserve is aware, and tapped the brakes with a small increase for interest rates this week. Underscoring the renewed vigor, spending at U.S. retailers saw the biggest jump in six months in May, Josh Mitchell reports. Consumers, spurred by tax cuts and the lowest unemployment in Continue reading "Real Time Economics: The U.S. Economy Is Revving Up, But So Are Trade Tensions"

Swiss Are World Sports Champs…When It Comes to GDP

When it comes to economic statistics, economists love “core” readings. These strip out volatile factors to give a cleaner picture on underlying trends. That’s why we have core inflation readings that strip out food and energy prices. And retail sales that exclude automobiles. Or durable goods excluding transportation. Switzerland has taken this a step further by reporting gross domestic product excluding…sports? That’s right. The Swiss economics ministry reported that first-quarter gross domestic product rose a solid 0.6% on a quarterly basis, or 2.2% from the same period a year ago. But it also said that, excluding sporting events, GDP grew a more modest 0.4% on a quarterly basis. It isn’t that Switzerland is particularly sports crazed. Rather, it is home to a lot of international sports organizations like the International Olympic Committee and International Federation of Association Football, known as FIFA, which organizes soccer’s World Cup. The Continue reading "Swiss Are World Sports Champs…When It Comes to GDP"

Despite Attempts to Fix the Data, First-Quarter GDP May Still Mislead

U.S. first-quarter growth has often looked weaker than it is, a result of measurement quirks government economists have worked to fix. A growing body of research suggests that work’s not done. In real terms, economic growth is typically slower in the first three months of a year because of harsher weather or other regular spending patterns. The Bureau of Economic Analysis attempts to adjust for this to give a better sense of underlying economic activity. Still, at the start of 2018, gross domestic product rose at an annual rate of 2.3%, weaker than the 3% pace averaged in the previous three quarters. Analysts anticipated the slowdown in part because first-quarter readings have historically been weak when compared with the rest of the year, even when other data point to a much stronger economy. BEA has taken multiple steps since 2015 to rework the way it calculates gross domestic Continue reading "Despite Attempts to Fix the Data, First-Quarter GDP May Still Mislead"

Real Time Economics: Merkel’s Last-Ditch Pitch to Trump | Europe’s Economic Soft Patch | U.S. Homeownership Rebounding

This is the web version of the WSJ’s daily economic newsletter. You can sign up for daily delivery here. Good morning! Today we look at the high stakes for Angela Merkel‘s visit to Washington, signs Europe’s economy stumbled to start the year, the double-edged sword of rising oil prices, a new low for U.S. jobless claims, and the forces bending U.S. homeownership rates. THE ANGELA AND DONALD SHOW German Chancellor Angela Merkel is in Washington for a high-stakes meeting with President Donald Trump: It’s a last-ditch effort to avoid the biggest trade conflict in years between the U.S. and the European Union. European officials expect the White House to make good on its threat to impose higher tariffs on steel and aluminum from EU countries, including France, Germany and the U.K., Bojan Pancevski, William Mauldin and Emre Peker report. That would trigger retaliatory tariffs on a list of Continue reading "Real Time Economics: Merkel’s Last-Ditch Pitch to Trump | Europe’s Economic Soft Patch | U.S. Homeownership Rebounding"

Real Time Economics: Check-In On the U.S. Economy | U.S.-China Chilling Effect | Prepare to Pay More for Your Next TV

This is the web version of the WSJ’s daily economic newsletter. You can sign up for daily delivery here. Good morning! Today we look at what to expect in the first-quarter GDP report, fallout from U.S.-China commercial tension, deregulation amid economic expansion, Angela Merkel‘s upcoming visit with President Trump, and the languishing startup scene in the U.S. WHY IS THE U.S. ECONOMY SLOWING? The U.S. economy grew at a 1.8% pace in the first quarter, according to forecasts, a marked slowdown from the 3.1% average of the prior three quarters. Don’t worry. It’s not out of whack with the first quarter of 2017 (1.2%) or 2016 (0.6%). Since 2007, gross domestic product growth has averaged 0.2% in first quarters and 1.9% in all others. The Commerce Department tries to adjust for seasonal quirks (construction is down in the winter, retail Continue reading "Real Time Economics: Check-In On the U.S. Economy | U.S.-China Chilling Effect | Prepare to Pay More for Your Next TV"

Real Time Economics: U.S. Economic Growth Downgraded | Trump Takes Aim at China | Senate Rolls Back Bank Rules

This is the web version of the WSJ’s daily economic newsletter. You can sign up for daily delivery here

In today’s issue, first-quarter GDP is looking weaker and weaker, the Trump administration targets China on trade, U.S. allies are still seeking wiggle room on steel and aluminum tariffs, the Senate rolls back financial regulations, the Federal Reserve’s preferred inflation gauge still looks tame, and Lawrence Kudlow gets the nod as White House economic adviser.

DOWNGRADING THE ECONOMY

A booming start to the year has turned into a damp squib.

Forecasters issued another round of downgrades for the economy after Thursday’s disappointing retail sales numbers. The Atlanta Fed’s first-quarter GDPNow tracker was above 5% in February but has since dropped to 1.9%. Macroeconomic Advisers had estimated growth as high as 2.5% but that’s now 1.7%. J.P. Morgan moved to 2% from 2.5%. Morgan Stanley is Continue reading “Real Time Economics: U.S. Economic Growth Downgraded | Trump Takes Aim at China | Senate Rolls Back Bank Rules”

Why Productivity Growth May Be Poised to Recover

Weak productivity growth has been a head-scratcher for economists in recent years, but a new study argues the tide is poised to turn, and the next wave will be driven by digitization. The diffusion of new technologies into everyday use holds promise for bringing back the kinds of annual 2% productivity growth seen in the past but digitization is still at an early stage in many industries, according to the latest study from the McKinsey Global Institute. Looking at the past half-century, it estimates the time from commercial availability of new technologies to 90% adoption ranges from about eight to 28 years. It’s a matter of some urgency. U.S. worker productivity grew below its long-run average for the seventh straight year in 2017, advancing a meager 1.2% last year from 2016. Labor productivity—real economic output divided by the numbers of hours worked—is key for economies to grow, Continue reading "Why Productivity Growth May Be Poised to Recover"

Why The Oil Bust Is Still Troubling Southern Louisiana’s Economy

When oil prices tanked in 2014 and 2015, cities situated along the Gulf of Mexico’s rim lost tens of thousands of jobs, but southern Louisiana may have seen the worst of the economic trouble. One of Louisiana’s largest and southernmost metropolitan areas, Houma-Thibodaux, has shed almost 20,000 jobs since 2014, almost 10% of the area’s population, according to data recently released by the Labor Department. At the same time, the economy contracted, wages fell and some of the area’s residents left. “One word: Oil. Houma has [previously] been one of the fastest growing areas in Louisiana until 2015 for decades,” said Stephen Barnes, an economics professor at Louisiana State University. “It’s a region that has played a central role in the development of oil and gas resources in the Gulf.” The area’s proximity to the Gulf coast made it prime real estate for oil exploration, driving job creation and Continue reading "Why The Oil Bust Is Still Troubling Southern Louisiana’s Economy"

In Labor vs. Capital, Manufacturing Plays an Outsize Role, Report Says

The decline in the U.S. industrial base over the past couple of decades is the main factor eroding the share of American national income that goes to middle-class workers, according to consultants at McKinsey & Co. For decades, labor’s share of gross domestic product has shrunk—while the share that goes to capital like profits, interest and rent, has risen. The McKinsey Global Institute, the firm’s research arm, finds that manufacturing accounts for more than two-thirds of the overall decline in labor’s share of gross domestic product since 1990. That, in turn, has harmed the prospects of the middle class and widened income inequality. Yet it’s not inevitable that the U.S. manufacturing industry’s decline will continue, according to the authors of a new report. The study found the manufacturing industry remains relevant: It makes up just 9% of U.S. employment and 12% of GDP, but drives 35% of Continue reading "In Labor vs. Capital, Manufacturing Plays an Outsize Role, Report Says"

The U.S. Economy Has Been a Little Stronger Than We Thought

U.S. economic growth over the past three years was a bit more robust than initially thought, according to newly revised government data. The Commerce Department on Friday released its annual set of revisions to data on gross domestic product, a broad measure of U.S. economic output, going back to 2014. The agency separately released its report card on GDP growth during the second quarter of 2017: a 2.6% seasonally adjusted annual growth rate, up from the first quarter’s 1.2% growth pace. The revisions for recent years were fairly minor and didn’t shift the economy’s overall trajectory. The average annual growth rate for GDP from late 2013 to late 2016 was 2.2%, up from an earlier estimate of 2.1%. Growth in 2014 was revised higher on stronger business and inventory investment, 2015 growth was revised up on better consumer spending and 2016 growth was marked Continue reading "The U.S. Economy Has Been a Little Stronger Than We Thought"

Why First-Quarter Growth Is Often Weak

The U.S. economy is off to a slow start. Again. First-quarter gross domestic product is expected to expand at a 1% seasonally and inflation-adjusted annual rate. The figure would be a disappointment alongside strong job creation and soaring consumer optimism following the election of Donald Trump. A weak reading, however, wouldn’t be a surprise. Slow first quarters followed by rebounds have been common in recent years, generating short-term consternation but leaving the overall economic trajectory little changed. Since the latest recession ended, first-quarter growth has averaged a 1% pace. The remaining three quarters have averaged 2.5%, leaving the overall rate of growth at a familiar 2.1%. That means there is a good chance a poor first-quarter reading on GDP will be another head-fake. It also means it’s harder for policy makers and economists to decipher potential warning signs in the real-time GDP data. There are some pretty Continue reading "Why First-Quarter Growth Is Often Weak"

Is the U.S. Economy’s Slow Growth ‘As Good As It Gets’?

The U.S. economy is stuck in a rut. New research suggests that isn’t about to change. The last recession ended in mid-2009. Since, the expansion has been the third-longest in U.S. history but also the  slowest of the post-World War II era—perhaps longer. Economists and observers have cited the depth of the downturn, its financial roots, demand shortfall, misguided government policies, uncertainty and a small host of other factors as root causes. Lackluster growth, however, may stem from trends that started before the Great Recession and are continuing largely unabated. “The growth seen during the recovery might, for a while, be as good as it gets,” the Federal Reserve Bank of San Francisco’s John Fernald, Stanford University’s Robert Hall, Harvard University’s James Stock, and Princeton University’s Mark Watson said in a study to be presented among Brookings Papers on Economic Continue reading "Is the U.S. Economy’s Slow Growth ‘As Good As It Gets’?"

Economists React to Fourth-Quarter GDP: ‘Be Wary of Reading Too Much Into the Slowdown’

The U.S. economy lost momentum in the final three months of 2016, growing at a 1.9% annual rate, down from the prior quarter’s 3.5% pace.  Here are early reactions from economists and analysts: “The economy’s advance in the fourth quarter was lukewarm—much as expected—but we should be careful not to assume that the economy will grind slower moving forward. For years, it’s been all about household spending, and consumers still look well-positioned today for further spending growth. Renewed business optimism about the potential for tax and regulatory reform has the potential to be a greater source of strength, but will hinge on actual policy change and not just campaign bluster. Thus far, President Trump has shown no signs of backing away from his pledges. The next few months will prove to be enlightening and should provide a greater sense of what his administration will be able Continue reading "Economists React to Fourth-Quarter GDP: ‘Be Wary of Reading Too Much Into the Slowdown’"