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Real Time Economics | Manufacturing Shows Signs of Life
Real Time Economics
U.S. economic growth in the first quarter is starting to look
stronger, a welcome turnaround after some fairly miserable forecasts
earlier in the year. Good morning. Jeff
Sparshott here to take you through the day's top economic news. Send us
your questions, comments and suggestions by replying to this email.
It's Getting Better All the Time
Manufacturing activity in the world’s two
largest economies perked up in March, an antidote to financial-market
fears of a coming global recession. The rebound for purchasing manager surveys
in the U.S. and China sparked a rally in U.S. stocks and sell-off for
supersafe government bonds. That reversed a so-called inverted yield
curve, in which short-term rates are higher than long rates, a precursor
to past downturns, Paul Kiernan and Paul Hannon report.
Canary in a coal mine: Though
manufacturing accounts for a fraction of U.S. output, it is seen as a
bellwether for the broader economy. New orders were particularly strong
in March, boding well for U.S. factory activity in the coming months.
In the old country: While the U.S. and China rallied,Europe stumbled, suggesting pockets of weakness remain in the global economy.
What to Watch Today
U.S. durable goods orders
for February are expected to fall 2.1% from the prior month. Monday’s
purchasing manager surveys for the U.S. were good news. Watch to see if
underlying business investment is following the same trajectory. (8:30
The Caixin China composite purchasing managers index for March is out at 9:45 p.m. ET.
Not Too Shabby
First quarter gross domestic product isn't
looking so bad after all. Monday's manufacturing surveys boosted
investor sentiment. But nitty gritty data on retail sales, business
inventories and construction spending boosted estimates of first-quarter
output. J.P. Morgan Chase revised its GDP forecast to a 2% pace of
growth from an earlier estimate of 1.5%. Macroeconomic Advisers jumped
to 1.7% from 1.3%. The Atlanta Fed's GDPNow model moved to 2.1% from
1.7% last week—and a paltry 0.3% on March 1.
The U.K.'s House of Commons failed for a second time to agree on an alternative to Prime Minister Theresa May Brexit plan.
Without a resolution, the current default is for the U.K. to leave the
EU without a deal on April 12, Max Colchester and Stephen Fidler report.
Corporate decision makers in the U.K. are struggling to navigate the uncertainties surrounding Britain’s planned departure
from the European Union, leading to investment delays, lower cash flows
and lagging sales growth. Investment plans in the services and
manufacturing sectors—the pillars of the U.K. economy—are at their
lowest level in eight years, according to a survey by the British
Chambers of Commerce.
Rep. Terri Sewell (D., Ala.) favors
raising the federal minimum wage, just not as fast in her district as
New York City or San Francisco. She wants a tiered system,
under which the federal minimum in the cities with the highest cost of
living would slide to more than $15 an hour by 2024. Places with the
lowest cost of living, including Tuscaloosa, Ala., would have a minimum
of $11.50 an hour in 2024. The entire country would eventually reach
$15, but not likely until 2033.
Reality bites: The proposal is a break from Democratic leadership, which backs a bill calling for a $15 an hour national minimum
by 2024. If a $15 an hour minimum “does no harm, then why not say
$25?,” Ms. Sewell tells the WSJ's Eric Morath. “The reality is going too
quickly could have adverse effects.”
Thanks, But No Thanks
The International Monetary Fund has some
advice for Switzerland: spend some of your budget surplus. “To increase
policy space, the current balance between the utilization of monetary
and fiscal policies—stretched monetary policy and underutilized fiscal
policy—should be adjusted,” the IMF said in its latest report.
Switzerland’s response: no.
Countries with large deficits, like the U.S., are in little hurry to
reduce them. Those with surpluses such as Switzerland seem uninterested
in spending them even with their central banks stretched and interest
rates super low or negative. —Brian Blackstone
You Down With MMT (Yeah You Know Me)
Investors and voters should come to grips with modern monetary theory.
It creates the financial framework for left-leaning policies like a
jobs guarantee, Medicare for all and the Green New Deal. A core tenet:
The economy and inflation should be managed through fiscal policy, not
monetary policy, and government should put the unemployed to work.
Instead of the Fed cutting rates in a recession, the government should
spend more; rather than raise rates during a boom, the government should
raise taxes or spend less.
The WSJ's James Mackintosh
sees a problem
with MMT: Traditional monetary policy has the enormous advantage of
making macroeconomic decisions at arm’s length from party politics. MMT
is essentially an argument about politics, not economics.
Quote of the Day
Finance Twitter is getting to be not
interesting because it’s just angry people, the angry zealots of modern
monetary theory. Anybody raises any questions about it, that
demonstrates you must not understand it.