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Real Time Economics: Will Recession Worries be Self-Fulfilling?
Real Time Economics
Prime Minister Theresa May faces a no-confidence vote, business
executives worry about a recession, U.S.-China trade talks inch ahead,
the ECB heads for a milestone and the U.S. gets a key inflation reading
ahead of next week's Fed meeting.
morning. Jeff Sparshott here to take you through key developments in
the global economy. Buckle up, it's another busy day for economic news.
John Maynard Keynes long ago noted, businesses are often driven by
animal spirits, not hard cold analysis. So when a survey by Duke
University finds almost half of U.S. chief financial officers believe a recession will strike the U.S.
economy by the end of 2019, it's worth wondering whether they will act
on that belief, for example by curbing investment and hiring, and thus
make such an outcome more likely. The yield curve is approaching
inversion (when long-term rates drop below short term rates), another
reliable recession predictor. Interestingly, this too may be due to
psychology: a survey by the Federal Reserve in October found most bank loan officers would see a prolonged inversion as a reason to tighten
What to Watch Today
The U.S. consumer-price index
for November, out at 8:30 a.m. ET, is expected be unchanged from a
month earlier. Core prices, which exclude food and energy, are expected
to tick up 0.2%. That would put headline and core prices up 2.2% from a
year earlier. CPI isn't the Fed's
favorite inflation index, but it's an important barometer of price
pressure ahead of the central bank's Dec. 18-19 policy meeting.
U.S. federal budget
figures for November are out at 2 p.m. ET. The Congressional Budget
Office estimates a $203 billion deficit for the month, up $64 billion
from a year earlier.
British Prime Minister Theresa May is set to face a no-confidence vote Wednesday after members of her own party rebelled against her Brexit plan.
Beijing's top trade negotiator told U.S. officials China was planning to reduce auto tariffs and boost purchases of soybeans
and other crops. But it is unclear if the early pledges will pave the
way for a deal by the March 1 deadline, Bob Davis and Lingling Wei
Under pressure: The
talks come amid rising U.S. demands, including calls for China to
protect U.S. intellectual property and to stop pressuring U.S. firms to
hand over valuable technology. Beijing has never acknowledged applying
such pressure. Washington is readying measures against China, including
criminal charges against hackers, export controls, indictments and other
For a Few Dollars More
A Canadian judge granted bail to Huawei Technologies CFO.
The judge’s decision Tuesday frees Meng Wanzhou after more than a week
in detention, though it requires her to submit to a curfew, electronic
monitoring and a limited range of travel in the Vancouver area. Bail was
set at 10 million Canadian dollars ($7.5 million). She now awaits
possible extradition to the U.S., where she could face multiple criminal
charges that each carry up to 30 years in prison, Jay Greene
Trump told Reuters he could intervene on behalf of Huawei's CFO if it
bolstered national security or helped secure a trade deal with China.
His reach for leverage with U.S. criminal and civil investigations
involving Chinese nationals and companies such as ZTE and Huawei is a very Chinese way of doing things:
Beijing has long viewed the legal system as a tool to be used for
political or mercantile ends—and ignored when necessary. That should be
worrying for investors. Assuming a long period of economic
and strategic competition, U.S. executives in China could increasingly
find themselves used as pawns in trade or even security tussles,
Nathaniel Taplin writes.
Case study? Chinese state-security officials on Monday detained a former Canadian diplomat. Michael
Kovrig is now a senior adviser with Brussels-based nonprofit International Crisis Group.
The European Central Bank is nearing a landmark decision to wind down its $3 trillion bond-buying program.
But it comes at an awkward time for Europe, whose economy slowed last
quarter to its weakest level in four years. ECB officials are expected
to confirm plans to end new bond buying, known as quantitative easing,
at their meeting Thursday. The ECB will thus become the third leading
central bank to wind down QE, after the Federal Reserve and Bank of
England. The bank’s program was originally designed to last 18
months and total around €1 trillion. It has ended up lasting almost four
years and costing €2.6 trillion ($2.96 billion), Tom Fairless and Brian
think QE for the ECB has been economically a success and politically
almost a disaster,” said Stefan Gerlach, chief economist at EFG Bank.
one in 11 Americans age 50 and older lacks a spouse, partner or living
child, Janet Adamy and Paul Overberg report. That's about eight million
people in the U.S. without close kin, the main source of companionship
in old age. Policy makers are concerned this will strain the federal
budget and undermine baby boomers’ health. Researchers have found that
loneliness takes a physical toll, and is as closely linked to early
mortality as smoking up to 15 cigarettes a day.
Up Next: Thursday
The European Central Bank releases a policy statement at 7:45 a.m. ET.
U.S. jobless claims, out at 8:30 a.m. ET, are expected to slide to 225,000 from 231,000 a week earlier.
U.S. import prices for November, out at 8:30 a.m. ET, are expected to fall 1.1% from the prior month.
European Union leaders meet Thursday and Friday to discuss Brexit, budget, migration and other issues.
China retail sales, industrial production and investment figures for November are out at 9 p.m. ET.