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Nov 26, 2018

Real Time Economics I WSJ.

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Real Time Economics
Will Britain's Parliament approve a new Brexit deal? That's not clear, creating more uncertainty for Europe's slowing economies.  
Good morning. Jeff Sparshott here to take you through key developments in the global economy. We'll look at rapid growth in America's second-tier cities, a strong start to the holiday shopping season, homeowners cashing in their equity, climate change, softening sentiment in Germany, and bitcoin's bursting bubble.

Now the Hard Part

European Union leaders approved a treaty outlining divorce terms with the U.K., a milestone in Britain’s bid to extract itself from the bloc. Now, Prime Minister Theresa May has to sell the deal to skeptical lawmakers in Parliament. Dozens of Mrs. May’s fellow Conservative Party lawmakers and some members of the opposition Labour Party have already trashed the deal, Max Colchester and Laurence Norman report.
Should Mrs. May fail to secure political backing at home, she might return to Brussels to try to get improved terms before the U.K. is due to leave the bloc March 29. Leaving with no deal could cause big disruptions to trade and security ties that, some fear, could even lead to food and medicine shortages in the U.K. and a breakdown of communications between the EU and Britain over suspected terrorists and other criminals. The U.K. Parliament is expected to vote on the deal in December.


Top Stories

Austin's Powers

New York? Bleh. Washington? Meh. Second-tier cities are thriving, and by some measures they are doing even better than their bigger rivals. Amazon might have passed them over for HQ2, but places like Austin, Texas, Raleigh, N.C., Dallas and Nashville, Tenn., have lower unemployment or are growing faster, Shayndi Raice reports.
Key to the city: Smaller size and greater affordability. As the economic expansion priced out companies in places like New York or San Francisco, some midsize or smaller firms went on the hunt for more affordable alternatives. At the same time, many of these cities worked on improving their quality of life, building up dynamic downtown neighborhoods that would be attractive for younger, educated professionals.

No One Goes There Anymore. It's Too Crowded.

Foot traffic to traditional stores continued its long decline during Thanksgiving and Black Friday but a surge in online shopping and higher spending by low-income Americans gave a lift to the start of the holiday season. Internet sales for Wednesday through Black Friday surged 26.4% from a year earlier to $12.3 billion, estimated Adobe Systems Inc.
Many lower-income Americans are finally feeling more flush a decade after the recession, say shoppers and retail executives. Lower gas prices and rising hourly wages are giving them extra cash to spend, a boon for Walmart, second-tier mall owners and other retailers that count on them for a large percentage of their sales, Sarah Nassauer and Khadeeja Safdar report.

This Can't Be Good

Rising mortgage rates are crushing much of the refinancing market. But Americans are still using refis to pull cash out of their homes. More than 80% of borrowers who refinanced in the third quarter chose the “cash out” option, withdrawing $14.6 billion in equity out of their homes, Ben Eisen and Christina Rexrode report. That is the highest share of cash-out refis since 2007.
The trend attests to the current state of the U.S. economy, which is more than nine years into an expansion that has lifted home values sharply but raised worker pay at a much slower pace. Now, many are finding their homes to be a tappable source of wealth.

It's Getting Hot In Here

It is hard to predict precisely the effects of a warming planet, but the world of business and finance is trying to put prices on it. Agriculture is among industries on the front lines because a warming climate changes the crops that farmers can plant, affecting the productivity and value of their land. Right now, warming temperatures are expanding regions suitable for corn, grapes and other crops.
Case study: Temperatures around La Crete, Alberta, are 3.6 degrees Fahrenheit warmer on average annually than in 1950 and the growing season is nearly two weeks longer. So farmers are switching from wheat, canola and barley to corn. The new prospect of warmer-weather crops is helping lift farmland prices, with an acre near La Crete selling for nearly five times what it fetched 10 years ago.

Germany Stuck in Low Gear

Germany isn’t rallying from last quarter’s contraction. That's a bad sign for the eurozone, which relies on its biggest member to drive growth. German business sentiment deteriorated for the third-straight month in November, as companies continued to scale back their business outlooks, the Ifo Institute said Monday. "The German economy is cooling down," Ifo president Clemens Fuest said. Manufacturers were less satisfied with their current situation but more companies reported plans to increase prices, Nina Adam reports.

Bubble, Bubble, Bitcoin and Trouble

Bitcoin has lost nearly a third of its value in seven days, one of its worst weekly selloffs on record. The digital currency has now fallen by about 80% since peaking near $20,000 late last year, Steven Russolillo reports.

Quote of the Day

But if we allow the current situation to go on, not only between China and the United States, but also between the U.S. and other countries and also on the multilateral front, there’s a real risk that the integrating global market might become fragmented.
Cui Tiankai, Beijing’s veteran ambassador to the U.S., in an interview with the WSJ

Up Next: Tuesday

The Bank of Japan releases measures of underlying inflation at 12 a.m. ET.
Fed Vice Chairman Richard Clarida speaks on data dependence and monetary policy at 8:30 a.m. ET.
The S&P/Case-Shiller home-price index for September is out at 9 a.m. ET.
The Conference Board's consumer confidence index for November, out at 10 a.m. ET, is expected to fall to 135.8 from 137.9 a month earlier.
The Chicago Fed's Charles Evans, Atlanta's Raphael Bostic and Kansas City's Esther George speak at the Clearing House's annual conference at 2:30 p.m. ET.

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