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Real Time Economics | Is the Economy in a ‘Delicate Moment’ or a ‘Good Place?’
Real Time Economics
The IMF's outlook dimmed, Boeing's 737 sales dried up, and Brexit faces another pivotal day. 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.
The International Monetary Fund cut its forecasts for global economic growth. Nearly the entire world economy is stumbling
amid trade tensions and tariff hikes between the U.S. and China, a
decline in business confidence, tighter financial conditions, and higher
policy uncertainty. "This is a delicate moment for the global economy,"
said IMF Chief Economist Gita Gopinath.
The IMF’s latest economic forecasts
cut the outlook for growth in 2019 to 3.3% from estimates of 3.5% in
January and 3.7% in October. Economic growth appears on course to slow
nearly everywhere: forecasts dropped
0.5 percentage points from January for Germany, Italy and Mexico, 0.6
points for Latin America as a whole, 0.4 points for Canada, 0.3 points
for the U.K., and 0.9 points for the Middle East, Josh Zumbrun reports.
Through much of 2018, the U.S. had been an
outlier, posting strong growth while the rest of the world stumbled.
Now it's clear the U.S. is slowing too. Gross domestic product advanced
at a 4.2% pace in the second quarter of 2018 but then tapered off. For
all of 2018, the economy grew 2.9% from a year earlier. The IMF
forecasts 2.3% this year and 1.9% next.
Despite the slowdown, the Federal Reserve has been relatively upbeat. "The U.S. economy is in a good place," Chairman Jerome Powell said just last
Suttle Economics's Phil Suttle explains:
"The new Fed mantra has been that the US economy is 'in a good place;'
the new IMF mantra is that the global economy is at a 'delicate
moment'—a bit more pessimistic, but also reflective of the major concern
that the most challenging aspect for the global economy at the moment
is that populist governments will (continue to) act like bulls in a
What to Watch Today
The European Central Bank releases a policy statement at 7:45 a.m. ET, and ECB President Mario Draghi holds a press conference at 8:30 a.m. ET.
European Union leaders meet in Brussels to discuss an extension beyond April 12 for Britain's exit from the EU.
The U.S. consumer-price index
for March is expected to rise 0.3% from a month earlier. Excluding food
and energy, prices are forecast to rise 0.2%. (8:30 a.m. ET)
The Federal Reserve releases minutes of its March 19-20 meeting at 2 p.m. ET. Look for
details on views toward the economy, inflation and the Fed's balance sheet. Read Nick Timiraos's preview here.
The U.S. budget deficit for March is expected to narrow to $149 billion from $208.7 billion a year earlier. (2 p.m. ET)
Fed Vice Chairman Randal Quarles speaks at a Financial Stability Board roundtable at 11:50 a.m. ET, and the Dallas Fed's Robert Kaplan speaks in a moderated conversation
with former Fed Chairwoman Janet Yellen at 7:05 p.m. ET.
China's consumer-price index for March is out at 9:30 p.m. ET.
Greetings From Washington, D.C.
The annual meetings of the International
Monetary Fund and World Bank are under way this week, with Group of 20
finance ministers also gathering on the sidelines. While officials often
make major statements at these meetings, this spring could be a time to
lay low. First, the U.S. is getting close to resolving its dispute with
China, and nobody wants to rattle that cage. The European Union and
U.K. are preoccupied with Brexit. The World Bank has already made major
news, with the selection of a new president. And the Japanese, rarely
instigators of international drama, are chairing the G-20 and pursuing a
quiet agenda. Still, we'll hear a lot of chatter from major officials
before the week is over, so one never knows. —Josh Zumbrun
The meetings take
off in earnest Thursday with IMF Managing Director Christine Lagarde's 9:30 a.m. ET press conference.
Boeing Sales Stall
Boeing didn’t book any commercial orders for its 737 jetliner in March,
the first month without a sale of the aerospace giant’s best-selling
aircraft in almost seven years. The disclosure highlights the mounting
uncertainty among customers, Boeing investors and suppliers about when
the new MAX version of the 737 might return to flight following the
global grounding of the plane after two fatal crashes, Doug Cameron
JP Morgan estimates the 737 MAX accounts for one-quarter of domestic
U.S. aircraft production. If production is halted, that would take about
percentage point off the quarterly annualized growth rate of GDP in the
quarter in which production is stopped, bank economists Michael Feroli
and Daniel Silver say.
This Isn't What It Looks Like
The Trump administration sought to play down the broader significance of a new plan to impose tariffs on $11.2 billion in imports
from the European Union. The Trump administration has previously
imposed tariffs on European steel and aluminum, and President Trump has
threatened similar duties on EU cars. But officials say the latest move
is part of a distinct dispute over aviation subsidies rather than an
effort to apply pressure in fraught negotiations toward a possible EU
trade deal, William Mauldin and Josh Zumbrun report.
EU Strong-Arms China
The U.S. isn't the only one bothered by China's industrial policies. A
European Union-China summit in Brussels Tuesday was meant to bolster
cooperation, especially against controversial policies of President
Trump. Instead, it is highlighting differences, led by growing trade
tensions. Europe pressed China on unfulfilled promises.
China agreed with the EU to end forced technology transfers and
strengthen international rules on industrial subsidies. But, the WSJ's
Emre Peker asks, will China deliver?
Hope for the Best...
European Union leaders are preparing to grant British Prime Minister Theresa May more time to win backing for an agreement to leave the bloc.
Mrs. May has asked for a second delay in Brexit until June 30. Were the
EU not to grant an extension, the U.K. could leave the bloc without a
deal as soon as Friday, raising the prospect of significant economic
damage for Britain and some EU economies. EU leaders appear ready to
grant an extension but haven’t settled for how long. European Council
President Donald Tusk said he believes an extension of at least a year
remains a good option, Laurence Norman and Stephen Fidler report.
...Plan for the Worst
Treasury Secretary Steven Mnuchin said a disorderly Brexit would likely cause significant market and trade disruptions. “We need to be prepared for a hard Brexit
as a very realistic outcome,” Mr. Mnuchin told lawmakers Tuesday. He
emphasized he has been working closely over the past two months with
financial regulators to ensure U.S. banks are prepared, Kate Davidson
U.K. Economy Chugs Along
The U.K. economy grew at a slow but steady pace in the three months
through February, aided by a pickup in demand for British-made goods
from buyers nervous about the effect on supplies of Brexit. Gross
domestic product advanced at a 1.1% annualized rate from December
through February, Jason Douglas reports.
“It’s hard for me to imagine he’d be confirmed.” —Sen. Kevin Cramer (R., N.D.)
“Everything I’ve seen so far looks like it’s got an uphill climb.” —Sen. Mike Braun (R., Ind.)
“The White House needs to consult with the Senate before they make nominations
because it’s not a given that everybody they nominate is going to be confirmed.” —Sen. John Cornyn (R., Texas)
"I think Mr. Cain while he’s a friend and a fine person is far too much of a partisan to be in that role.” —Sen. Mitt Romney (R., Utah)
What Else We're Reading
About 2.3 million young adults are out of work.
"In theory, the path to employment providing financial security in
adulthood is simple: finish high school, enroll in and complete college
or training that is affordable and a good fit, gain some work experience
along the way, and launch a career. But given that 17% of young adults
ages 18 to 24 are out of work in mid to large cities in the U.S....this
path does not appear to work equally well for all," the Brookings
Institution's Martha Ross and Natalie Holmes write in a new report.
China began restricting commercial logging in
its own natural forests two decades ago. Domestic supply was
constrained, demand was not. Now: "From the Altai Mountains to the
Pacific Coast, logging is ravaging Russia’s vast forests, leaving behind
swathes of scarred earth studded with dying stumps," Steven Lee Myers
writes in the New York Times.