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Real Time Economics | Getting Ready for First-Quarter GDP
Real Time Economics
Good morning. Jeff Sparshott here to
take you through key developments in the global economy. Send us your
questions, comments and suggestions by replying to this email.
Strong 1Q Growth May Mask Subdued Demand
Estimates for first-quarter growth, to be
officially released tomorrow, have risen steadily this month.
Macroeconomic Advisers was expecting an anemic 1.3% growth rate in late
March, but now thinks gross domestic product, adjusted for inflation,
expanded a relatively robust 2.8%. But look closer and a lot of the
upgrade comes from lower imports and higher inventories, neither a sign
of vigorous spending at home. Consumer spending has been revised up
while business investment has been revised down. So the firm thinks
final sales to domestic buyers—a popular measure of underlying
demand—grew just 1.7%, up only slightly from its early-April estimate. —Greg Ip
Highs and Lows
Economists polled by the WSJ are
forecasting a 2.5% pace of growth in the first quarter, a slight pickup
from the fourth despite a prolonged government shutdown, polar vortex
and slowing global growth, Harriet Torry reports.
Potential bright spot:
consumers. Spending got off to a slow start but appeared to accelerate
toward the end of the quarter, with retail sales in March growing at the
strongest pace in a year and a half.
Possible note of caution:
business investment. The 2017 tax overhaul gave business spending a
hefty boost in 2018. That likely moderated in early 2019. American
manufacturing, meanwhile, got off to a shaky start early this year.
residual seasonality. The Commerce Department has been dealing with
some wonky technical issues that, in the past, have depressed
first-quarter and boosted subsequent quarterly readings.
U.S. jobless claims are expected to rise to 200,000 from a fresh 50-year low of 192,000 a week earlier. (8:30 a.m. ET)
U.S. durable-goods orders for March are expected to rise 0.8% from the prior month. (8:30 a.m. ET)
The Kansas City Fed's manufacturing survey for April is expected to fall to 6 from a reading of 10 the prior month. (11 a.m. ET)
Japan's jobless rate for March is out at 7:30 p.m. ET, and industrial production and retail trade for March are out at 7:50 p.m. ET.
How to Earn $196,407 a Year
It was a fruitful year for the rank and file at oil-and-gas companies.
Houston-based Phillips 66 paid its median worker $196,407, the highest
of any company in the sector. Anadarko Petroleum followed at $183,445
and Exxon Mobil at $171,375. The lowest? Marathon Petroleum's $27,703.
But unlike other oil-and-gas producers, Marathon has about 40,000
employees working at its Speedway convenience stores. Most are part-time
and work lower-wage jobs, Patrick Thomas reports. That drags the
average salary down—a lot.
The Republican overhaul cut taxes for
nearly two-thirds of households, according to the Tax Policy Center. But
changes in tax liability didn’t automatically lead to bigger refunds.
What someone pays or gets with their return stems from the total taxes
owed but also how much was paid during the year through withholding and
estimated taxes, Richard Rubin writes. In the end, the aggregate result
in 2018 wasn’t too distant from the prior year, with the number of
returns filed and percentage of households with refunds little changed
Japan: Lower for Longer
The Bank of Japan revised its forward guidance
on Thursday, saying it expected to keep extremely low interest rates
until at least the spring of 2020. The central bank had previously said
it would keep low rates for an extended period but hadn’t specified any
dates. The revision suggest the BOJ wanted to clarify it isn’t raising
rates any time soon, in line with recent dovish statements from other
central banks, Megumi Fujikawa reports.
Canada: Join the Club
The Bank of Canada held its key interest
rate steady as it sharply lowered its growth forecast for this year.
Unlike previous communications, its statement didn’t include a reference
to future interest-rate increases, suggesting the BoC has joined other global central banks in pushing the pause button, Kim Mackrael reports.
South Korea: Retreat
South Korea’s economy unexpectedly
contracted in the first quarter. Gross domestic product fell 0.3% in the
first quarter from the preceding one—the worst performance in over a
decade. The economy had registered a solid 1% growth in the prior
quarter. The weak performance was blamed on shrinking investment in
construction and production facilities, and sluggish exports. The
export-led South Korean economy has been losing steam amid headwinds
from U.S.-China trade tensions and falling memory-chip prices, Kwanwoo
Switzerland: Making Bank
Switzerland’s banks had a good first
quarter. Switzerland’s central bank had a great one. The Swiss National
Bank reported a first quarter profit of 30.7 billion Swiss francs ($30.1
billion) as its massive holdings of foreign stocks and bonds benefited
from a recovery in global equities and easier monetary policies around
the globe. Last quarter’s profit equals about 4% of Switzerland’s entire
gross domestic product. But the SNB can’t cash out—doing so would put
upward pressure on the franc. That leaves the bank vulnerable to market
gyrations: The SNB earned 54 billion francs in 2017, then swung to a 15
billion franc loss last year. —Brian Blackstone
Capitalism in the Crosshairs
James Dimon and Ray Dalio are among the
most successful capitalists in the U.S. today. So when they worry aloud
about the future of capitalism, it’s worth listening.
believe that all good things taken to an extreme become
self-destructive and that everything must evolve or die. This is now
true for capitalism,” says Mr. Dalio, founder of hedge-fund manager
The two men love capitalism and aren’t apologizing for it.
But they recognize the system isn’t
working for everyone, and they have ideas for fixing it. Yet they fear
the federal government is hamstrung by intensifying partisanship. So
they are putting their money and reputations where their mouths are by
speaking out, backing local initiatives and hoping like-minded business
leaders join them, Greg Ip writes.
Quote of the Day
I would far rather live in a capitalistic society than a socialist society.