Publications

U.S. News

The Wall Street Journal reports that unconventional mortgages, once maligned for their role in the housing meltdown a decade ago, are becoming more common. Although lenders issued $34 billion of these “nonqualified” loans in the first three quarters of 2018 — marking a 24% increase from the same period a year earlier — industry executives claim they are far safer than their pre-crisis predecessors. WSJ

Chris Giles of the Financial Times reports that a group of representatives from emerging economies stated that the United States’ aggressive trade tendencies threaten the health of the global economy. The criticism, made by a former commerce minister from India, followed comments by Secretary of State Mike Pompeo that the U.S.-China trade relationship could be restored only if China met all U.S. demands. FT

According to the Financial Times, the Trump administration rejected an offer by two Chinese vice-ministers to travel to the U.S. this week for preparatory trade talks due to a lack of progress on key issues. The Trump administration has demanded both structural reforms to the Chinese economy and an end to forced technology transfers, two issues that could derail the talks and cause further volatility throughout financial markets. FT

U.S. Economic Indicators

Existing home sales decreased 6.4% to a seasonally adjusted annual rate of 4.99 million in December, and are 10.3% below year-ago levels. NAR notes that several consecutive months of rising inventory may contribute to a slowdown in home price appreciation, however there is still a lack of adequate inventory of lower-priced homes. NAR Report

U.S. News

Lingling Wei of the Wall Street Journal reports that China experienced its slowest pace of economic growth in nearly three decades last year with a growth rate of 6.6%. The author cites the trade conflict with the U.S as one of the primary headwinds, as the uncertain outlook for Chinese exporters causes companies to delay investing and hiring. WSJ

The Wall Street Journal reports that the IMF cut its forecast for world economic growth in 2019 from 3.7% to 3.5%, conceding that the global expansion has weakened. While a global recession may not be imminent, threats of high tariffs and stalling European economies have dragged on global growth prospects. WSJ

James Politi of the Financial Times writes that congressional Democrats have demanded changes to the new U.S.-Mexico-Canada Agreement (“USMCA”), setting up a potential clash with the White House and Republicans in Congress. Some Democrats have asked for stronger enforcement provisions for labor and environmental standards, while others have taken issue with the fact that steel and aluminum tariffs on Mexico and Canada remain in place. FT

U.S. Economic Indicators

The University of Michigan Consumer Sentiment Index slipped 7.6 points to 90.7 in the preliminary January reading, and is down 5.0 points on the year. The Index of Consumer Expectations declined 8.7 points to 78.3, while the Current Economic Conditions Index fell 6.1 points to 110.0. Report
 
Industrial production rose 0.3% in December (up 4.0% Y/Y), after increasing 0.4% (revised) in November.  Capacity utilization edged up 0.1 point to 78.7 in November.  Fed Report

U.S. News

The Wall Street Journal reports that U.S. officials are considering de-escalating tariffs on Chinese imports to calm markets and incentivize Beijing to make deeper concessions in the trade war. Treasury Secretary Steven Mnuchin reportedly proposed the idea to advance trade talks and win China’s support for longer-term reforms. WSJ

The Financial Times reports that the U.S. government shutdown is an emerging headwind to growth, according to New York Fed President John Williams. Williams also stated that the strong global growth, fiscal stimulus, and accommodative financial conditions that all contributed to the U.S. economy are diminishing. FT

According to the Financial Times, the E.U. is prepared to lower tariffs on imported U.S. cars as part of a trade deal, but is also warning that the bloc will retaliate if Washington levies punitive tariffs on Europe’s auto sector. Cecilia Malmstrom, the E.U.’s trade chief, said the willingness to engage on the issue would depend on what the U.S. puts on the table in negotiations. FT

U.S. Economic Indicators

Initial jobless claims fell 3,000 to 213,000 last week. The four-week moving average decreased 1,000 to 220,750. DOL Report

U.S. News

The Wall Street Journal reports that the Federal Reserve’s Beige Book, a collection of anecdotal information on current economic conditions, signals that optimism is fading among U.S. businesses due to the government shutdown, trade war, rising borrowing costs, and a volatile stock market. While the report is has a generally positive outlook of the U.S. economy, it reveals a sense of worry that Fed officials will have to consider during their next meeting. WSJ

Emre Peker of the Wall Street Journal reports that the European Union set restrictions on steel imports in response to disruptive trade policies taken by the U.S. Europe’s imports surged since the U.S. imposed a 25% tariff on steel imports into the U.S., and their new restrictions hope to balance protecting European steelmakers and avoiding harm to steel users. WSJ

According to the Wall Street Journal, the Federal Reserve has linked rising student debt to declining homeownership among young Americans. The Fed’s research found that homeownership among young people in the U.S. fell 9 percentage points, and 2 percentage points of that drop was tied directly to student debt. WSJ

U.S. Economic Indicators

The NAHB Housing Market Index rose 2.0 points to 58.0 in January, up from its two-year low in December. All the major components of the index posted gains this month, aided by falling mortgage rates, low unemployment, and solid job growth. NAHB Report

U.S. News

Nick Timiraos of the Wall Street Journal reports that Kansas City Fed president Ester George, one of the most hawkish members of the Fed, stated that the Federal Reserve ought to refrain from more interest rate hikes while it studies the effects of the policy normalization enacted to-date. George maintains that the pause in normalization is necessary to ensure monetary policy is not leading to an economic downturn and an undershooting of the Fed’s inflation target. WSJ

The Wall Street Journal reports that threats of a full-blown global trade war and rising political tensions between major world powers are the dominant global risks, according to a report by the World Economic Forum. The report also cites cyberattacks and climate change as potential hazards to global growth. WSJ

According to the Financial Times, the U.S. government shutdown has triggered ripple effects across the U.S. economy and risks hurting the confidence among companies already concerned about the trade war and stock market turbulence. Historically, government shutdowns have temporary economic effects, but Fed Chairman Jerome Powell has warned that a shutdown of this length could begin to have negative consequences. FT