By Tory Newmyer
Factory employees install a dashboard at the Mack Truck Inc. plant in Macungie, Pa. (Luke Sharrett/Bloomberg News)
The World Bank in its latest forecast cut expectations for global growth this year by .2 percent — to 2.5 percent — citing “fragile” conditions brought on by ongoing trade uncertainty and a slowdown in investment. That would amount to a tiny improvement over 2019, which saw the worldwide economy expand by 2.4 percent, the slowest pace since the 2008 financial crisis.
The development bank left room for rosier outcomes but warned that “downside risks predominate, including the possibility of a re-escalation of global trade tensions, sharp downturns in major economies” and disruptions in the developing world.
The outlook closer to home is gloomier. The World Bank sees U.S. growth stumbling from the unspectacular 2.3 percent growth it notched in 2019 to 1.8 percent this year — on its way down to 1.7 percent in both 2021 and 2022. That would amount to a significant underperformance measured against President Trump’s promise to deliver at least 3 percent growth.
And the World Bank’s forecasters aren’t alone. Economists gathered at the American Economic Association’s annual meeting last week shared a “dark” mood, according to the New York Times’s Jim Tankersley and Jeanna Smialek.
“They warned one another about [Trump’s] trade war, about government budget deficits and, repeatedly, about the inability of central banks to fully combat another recession should one sweep the globe anytime soon,” they write. “Underlying their sense of foreboding was a widespread sentiment that the current expansion is built on a potentially shaky combination of high deficits and low interest rates — and when it ends, as it is bound to do eventually, it could do so painfully.”
Former Federal Reserve Chair Janet Yellen. (AP Photo/Jacquelyn Martin)
The most bullish point on which most forecasters are able to agree is that recession risks, both globally and in the U.S., have tempered over the last several months. At home, a strong November jobs report, stalwart consumer spending and the detente between the Trump administration and Beijing on trade have made the possibility of an outright economic contraction more remote. Oxford Economics now pegs the threat at 25 percent, for example, though it still sees the economy losing steam this year, projecting growth of 1.7 percent.
The team at High Frequency Economics pegs 2020 growth at a similar level — 1.8 percent. The macroeconomic forecasters point to good news in the form of a robust labor market, rising wages, and housing sector strength. But the firm notes tariffs have wreaked havoc on the manufacturing sector and sapped business confidence, taking a bite out of investment. Plus, fiscal stimulus from big federal spending packages and the 2017 tax cuts are tailing off with little indication lawmakers will move to keep that tap flowing, though they themselves could feel the hangover effects. As Rubeela Farooqi, the shop’s chief U.S. economist, notes. “The slowdown in GDP in an election year will not be favorable for incumbents.”
Traders work on the floor at the New York Stock Exchange. (Reuters/Brendan McDermid)
"The Dow Jones Industrial Average 161.41 points, or 0.56%, to 28,745.09, the S&P 500 gained 15.87 points, or 0.49%, to 3,253.05, and the Nasdaq Composite added 60.66 points, or 0.67%, to 9,129.24."
Is investor bullishness a red flag? Bloomberg News's Sarah Ponczek: "The rebound from an overnight rout that topped 1.5% has some investors breathing a sigh of relief, but another cohort point to mounting signs that the comeback is a sign of complacency among bulls. 'This is a market looking through fundamental data, looking through corporate guidance and data points, looking through Fed guidance itself,' Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management, told Bloomberg Television. 'It is a market that wants to go up in the short term. That is what makes it so profoundly dangerous.'"
TRUMP TRACKERTRADE FLY-AROUND:
Chinese Vice Premier Liu He. (AP Photo/Andrew Harnik, File)
"Beijing’s ambassador to Washington, Cui Tiankai, will also attend the signing ceremony, currently scheduled to take place next Wednesday at 11:30 a.m. EST at the White House, according to the people. Some 200 people, including representatives from major American trade groups, are expected to be in attendance."
— Meghan and Harry aren’t the only cross-Atlantic drama: “The United States is making a final pitch to Britain ahead of a UK decision on whether to upgrade its telecoms network with Huawei equipment, amid threats to cut intelligence-sharing ties, people with knowledge of the matter told Reuters,” Reuters’s Jack Stubbs and Alexandra Alper report.
“Britain is expected to make a final call on how to deploy Huawei equipment in its future 5G networks later this month, weighing U.S.-led allegations that the equipment could be used for Chinese state spying against Britain’s relationship with Beijing and industry warnings that banning the firm outright would cost billions of dollars.”
Treasury Secretary Steven Mnuchin. (Jacquelyn Martin/AP)
“The issue has emerged as a sticking point in recent weeks as Treasury Secretary Steven Mnuchin and key senators have been negotiating draft legislation to move the Secret Service back to his department, its historic home. Mnuchin has balked at Democratic demands that the bill require the Secret Service to disclose the costs related to the travel of the president and his adult children within 120 days after it is passed, according to people with knowledge of the talks. Mnuchin has agreed to Democrats’ push for a requirement that the Secret Service report its travel expenses but wants such disclosures to begin next year.”
IMPEACHMENT MINUTE: A speed read on the latest from the congressional impeachment process.
Sen. Dianne Feinstein (D-Calif.). (J. Scott Applewhite/AP)
"Senate Democrats break with Pelosi over impeachment trial." By Politico's Burgess Everett and Heather Caygle
The Ukrainian Boeing 737-800 UR-PSR plane that crashed is seen in 2018. (Oleg Belyakov/AP)
“The Ukraine-bound 737-800 crashed shortly after takeoff from Tehran’s main international airport, killing all 176 on board. Early reports from Iranian state media attributed the crash to engine failure. Ukraine’s embassy in Iran at first concurred, issuing a statement ruling out terrorism but then removed it without explanation. A later statement from the embassy said a panel has begun an investigation and ‘any statements about the causes of the accident before the decision of the commission are not official’ … The plane has faced regulatory scrutiny recently. In early October, the Federal Aviation Administration told airlines to inspect more than 1,900 Boeing jets after cracks were found in some of the aircraft’s wings. Dozens of them were later grounded after cracks were found in a part of the plane that connects the wings to the fuselage.”
— Ghosn emerges with wild news conference: “Former auto executive Carlos Ghosn proclaimed his innocence in his first public appearance since escaping from Japan, complaining of what he said was a conspiracy to bring him down and decrying the country's justice system as corrupt, inhumane, anachronistic and hostile,” my colleagues Simon Denyer and Liz Sly report.
“Ghosn complained of a ‘systematic campaign by a handful of malevolent actors to destroy my reputation and impugn my character’ because of his plans to deepen the alliance between Nissan and Renault. He also denounced his detention under a ‘corrupt and hostile system that presumed my guilt from Day One …’ But Japanese Justice Minister Masako Mori said Ghosn was propagating false information about Japan's justice system and warned that his decision to run away from a criminal trial could be a crime in itself.”
— Federal government rolls out new self-driving car rules: “The White House and the Transportation Department announced a revamped self-driving car policy at CES in Las Vegas, outlining efforts to get more than three dozen federal agencies working together on the potentially revolutionary technology,” my colleague Ian Duncan reports.
“In a speech at the show, a vast annual get-together for tech companies, Transportation Secretary Elaine Chao said the new policy would ensure that the United States is at the forefront of innovation … The policy, which is the fourth version issued by the federal government, largely continues on a path of letting private companies take the lead on developing the technology with limited input from the government. That approach has been challenged as established automakers and start-ups have tested increasingly advanced self-driving cars on public streets where rules are still being set.”
— Macy’s closing 29 stores: “Macy’s, which has been trying to attract new shoppers with quirky new concept stores and Backstage outlets, is returning to a familiar strategy after a tepid holiday season: store closures,” my colleague Abha Bhattarai reports.
“The Cincinnati-based department store chain said it will shutter 28 namesake stores and one Bloomingdale’s store in the coming weeks, according to a company spokesperson who declined to provide further details. The retail giant has shuttered dozens of underperforming stores, many of them in declining shopping malls, since 2016 as it invests more in its most lucrative properties. Even so, it has struggled to win over customers who are increasingly buying online.”
Bed Bath & Beyond shares plunge: “Bed Bath & Beyond withdrew its fiscal 2019 outlook … saying that it would reveal its strategic plans in early 2020,” CNBC’s Amelia Lucas and Lauren Thomas reports.
“The retailer also reported third-quarter earnings and revenue that fell short of Wall Street’s expectations. The company’s new CEO Mark Tritton called the results ‘unsatisfactory’ in a statement and said that the company has to create a durable business model for long-term profitable growth. The stock plunged 8 percent in extended trading on the report.”
Democratic presidential candidate former South Bend Mayor Pete Buttigieg. (Mary Schwalm/AP)
"I like Buttigieg and would be happy to endorse him . . . 20 years from now, after he has proved himself. Today, however, he is not ready, and I have a sickening fear that much of his impressive fundraising is driven by the moneyed interests who profit from the current system and think his lack of experience will lead to a preservation of the status quo ... Democrats need to decide whether they just want to beat Trump or whether they want a credible candidate who has the vision, commitment and proven skills to truly reform our government. They have plenty of experienced candidates to choose from. Joe Biden and Elizabeth Warren stand out as two candidates with strong records of public achievement. Please give me someone to vote for."
Federal Reserve Board Governor Lael Brainard. (Reuters/Brian Snyder)
"The comment appeared aimed at a rival proposal unveiled last month by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. that sparked a rare public rift between financial regulators. The OCC and the FDIC moved forward with their proposal without reaching consensus with the Federal Reserve and is giving the public 60 days to comment on their plan, rather than the typical 90 days."
- The National Economists Club hosts a talk by former Treasury economist Ken Austin on trade deficits.
- KB Home, Synnex Corp. and WD-40 Co. are among the notable companies reporting their earnings