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Jan 22, 2019

Real Time Economics: The Global Economy Is Growing Slower Together.

The Wall Street Journal.
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Real Time Economics
The partial government shutdown enters its 32nd day, China's economy is growing at the slowest pace in nearly three decades and Britain's path out of the European Union is as muddled as ever.
Good morning. Jeff Sparshott here to take you through key developments in the global economy. Let us know what you think by replying to this email.

Together Forever

The global economy is in synch again. Unfortunately, it’s components are slowing together, not speeding up. U.S. output is projected to revert closer to the 2% annual growth trend of its long expansion. China, stung by U.S. tariffs, is decelerating. You can add Europe, hit by Britain’s rocky exit from the European Union and Italy’s fiscal troubles. Germany saw industrial production fall in November, a sign of the sweep of the brewing synchronized slowdown, Jon Hilsenrath writes.
None of this spells an end to the global expansion. The U.S. economy has a healthy consumer sector: Low unemployment, rising wages, and falling taxes and oil prices should support continued spending for an engine of world growth. 

What to Watch Today

The World Economic Forum annual meetings are in Davos. You can follow the WSJ's coverage here.
U.S. existing-home sales for December are expected to fall to an annual pace of 5.25 million from 5.32 million a month earlier.

Top Stories

Slower but Not Actually Slow

China’s economic expansion languished to its slowest pace in nearly three decades last year, as a bruising trade fight with the U.S. exacerbated weakness in the world’s second-largest economy. The uncertain outlook for Chinese exporters caused companies to delay investing and hiring and in some cases even to resort to layoffs—a practice often discouraged by China’s stability-obsessed Communist Party rulers, Lingling Wei reports.
The slowdown hasn't gone unnoticed in Washington: "China posts slowest economic numbers since 1990 due to U.S. trade tensions and new policies. Makes so much sense for China to finally do a Real Deal, and stop playing around!" President Trump said on Twitter. 

Made In China

The U.S. Chamber of Commerce and the American Chamber of Commerce in China say there is evidence of “a deep, concerted and continuing effort” by provincial officials to pursue the central government’s Made in China 2025 plan, which seeks to make China a leader in electric vehicles, aerospace, robotics and other frontiers of manufacturing. A White House investigation into Chinese trade practices last year concluded the program created an unfair playing field for American companies, including by making their trade secrets vulnerable to Chinese competitors, Bob Davis and Lingling Wei report.
The report gives U.S. negotiators more evidence to press for changes during talks with their Chinese counterparts. The next round is set for Jan. 30 in Washington.

Shutdown Blues

The government shutdown isn't helping the U.S. economy. But a strong labor market offers alternatives to federal workers going without pay. The share of clicks on job-search site from Internal Revenue Service workers is up over 30% from mid-December, research director Martha Gimbel says. Transportation Service Administration and other Department of Homeland Security employees are also clicking at an elevated rate—in past years mid-December to mid-January searches had fallen slightly.

Fly the Friendly Skies

U.S. aviation officials say the government shutdown hasn’t jeopardized air-traffic-control safety. New data indicate that serious traffic-control deviations—incidents of planes coming dangerously close to each other in the air or on the ground—have remained flat from levels a year ago, Andy Pasztor and Alison Sider report. Air-traffic controllers are among the federal workers who have continued working without pay.
Absences among airport-security screeners have been rising, reaching 10% of the workforce on Sunday, according to the Transportation Security Administration, almost three times the rate a year ago. There have been sporadic episodes of long lines at some airports.

Running Down the Clock

Prime Minister Theresa May Monday laid out her new plan for leaving the European Union. It strongly resembles the old one. Last week, a deal she spent months negotiating was rejected by a historic margin in the U.K. Parliament. 
Mrs. May is betting that, with a few changes to the deal, her lawmakers will eventually fall into line. The U.K. is still due to leave the EU at the end of March and most lawmakers want a deal to smooth its exit. Mrs. May is now running down the clock, Max Colchester writes.

Always Look on the Bright Side of Life

The U.K. economy continued to add jobs as 2018 drew to a close. The number of people in work in the three months through November was up 141,000 on the previous three-month period, raising the employment rate to 75.8%, a record high. The jobless rate stayed at its lowest level for four decades, Paul Hannon reports.

Quote of the Day

The party is facing sharp and serious dangers of a slackness in spirit, lack of ability, distance from the people, and being passive and corrupt. This is an overall judgment based on the actual situation.
President Xi Jinping, speaking to top provincial leaders and ministers in Beijing (via Bloomberg)

What Else We're Reading

Last year, 26 people owned the same wealth as the 3.8 billion people who make up the poorest half of humanity. Oxfam's annual report highlighting disparities between the wealthiest and poorest calls for higher taxes and other policies to shrink the growing wealth gap.
Canada’s decision to legalize marijuana should lead to a 4% to 5% decline in the size of the underground economy. The Center for Economic Policy Research notes cash in circulation falling “quite materially” around the time marijuana was legalized last October. “A key driver is likely to have been Cannabis users switching from cash payments for illegal purchases to using standard recordable electronic payments for their purchases, which have now become legal,” the authors wrote.

Up Next: Wednesday

The World Economic Forum annual meetings are in Davos. You can follow the WSJ's coverage here.
The Bank of Japan releases a policy decision.
Eurozone consumer confidence is out at 10 a.m. ET.
The Richmond Fed manufacturing survey for January is out at 10 a.m. ET.

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