Publications

U.S. Economic Indicators

The Conference Board’s Consumer Confidence Index declined from 126.6 in December to 120.2 in January. The decrease was driven by a worsening in the Expectations Index likely due to financial market volatility and the government shutdown.  Conference Board Report

U.S. News

The Wall Street Journal reports that cabinet-level delegations from the U.S. and China will continue trade negotiations on Wednesday, however both parties indicate they are sharply divided. The Chinese delegation plans to offer increased purchases of U.S. farm products and energy, in addition to reformed industrial policies, however they will fight deeper, structural reform of the Chinese economy. WSJ

Kate Davidson of the Wall Street Journal reports that the partial government shutdown that ended Friday will cost the economy about $3 billion in reduced output in 2019, citing a report from the Congressional Budget Office. The report estimates that the 35 day closure will cut about 0.4 percentage point from annualized growth in the first quarter of 2019. WSJ

The Wall Street Journal reports that U.S. Treasury Secretary Steven Mnuchin stated that the criminal charges against Chinese telecommunications firm Huawei will not complicate trade talks this week between the U.S. and China. Mnuchin elaborated, saying that forced technology transfers are part of trade discussions, however security issues will be dealt with separately. WSJ

According to the Wall Street Journal, the Government National Mortgage Association is increasing scrutiny of nonbank mortgage lenders over concerns these lenders could not survive stressed conditions. These changes come with the growing role of nonbank lenders in issuing mortgages and softening housing markets. WSJ

U.S. Economic Indicators

The Chicago Fed National Activity Index rose from +0.21 (revised) in November to +0.27 in December. The production and employment indicators contributed positively, while the sales, orders, and inventories category contributed neutrally and personal consumption and housing contributed negatively. Chicago Fed Report

U.S. News

Bob Davis from the Wall Street Journal reports that when U.S. and Chinese trade negotiators begin talks on Wednesday, the role of China’s state-owned companies in its economy will receive a lot of U.S. attention. State owned enterprises have dominated industries that U.S. firms want to enter and will be an obstacle for U.S. negotiators. WSJ

The Wall Street Journal reports that investors blame the stock market’s volatility on the Federal Reserve shrinking its bond portfolio, puzzling Fed officials because there is little volatility in markets where the Fed has actively intervened. The Fed is shrinking its $4 trillion portfolio by allowing Treasury and mortgage securities to mature without replacing them, with about $40 billion expiring per month in recent months. WSJ

According to the Wall Street Journal, a growing number of industrial companies said their sales are softening in China, putting a strong three-year run for U.S. manufacturers in China at risk. U.S. exports to China doubled over the past decade through 2017 to $130 billion per year, as American businesses bet heavily on expanding to China’s growing consumer market. WSJ

U.S. News

Nick Timiraos from the Wall Street Journal reports that Federal Reserve officials are close to deciding they will maintain a larger portfolio of Treasury securities than they’d expected when they first began shrinking their balance sheet two years ago. With a pause in interest rate hikes, planning for the Fed’s bond portfolio could be the center of the Federal Open Market Committee’s meeting next week. WSJ

The Wall Street Journal reports that top White House economic advisor Lawrence Kudlow said the administration will seek to fill two Fed Board of Governors vacancies with nominees who do not believe an accelerating economy has to fuel inflation. Kudlow stated that surging productive capacity means more people can work at higher wages without sharp increases in inflation. WSJ

U.S. Economic Indicators

Initial jobless claims fell 13,000 to 199,000 last week. The four-week moving average fell 5,500 to 215,000. DOL Report

The Conference Board’s Leading Economic Index declined 0.1% to 111.7 in December. The slight decrease suggests economic growth may be peaking. Conference Board Report

U.S. News

The Wall Street Journal reports that Mario Draghi, President of the European Central Bank, warned that Europe’s economy faces mounting headwinds, shifting from a statement in December that said economic risks were broadly in balance. Draghi cited uncertainties around threats of protectionism, vulnerable emerging markets, and volatile financial markets as reasons for the change. WSJ

According to the Wall Street Journal, the Trump administration’s top economist, Kevin Hassett, said that the U.S. economy may not grow at all in the first quarter of 2019 if the partial government shutdown continues. Hasset maintains, however, that the economy should recover any lost growth when the government reopens. WSJ

Peter Wells from the Financial Times reports that US commerce secretary Wilbur Ross stated that the U.S. and China are still “miles and miles” from a trade deal. Ross cited structural reforms and an intolerably large trade deficit with China as key sticking points. FT