Publications

U.S. News

According to the Wall Street Journal, Boston Fed President Eric Rosengren maintains that further rate cuts are unwarranted at present, though he would be open to lowering rates if the economy worsens. The Fed lowered interest rates by 25 basis points in July due to concerns surrounding global growth and trade conflicts, but Rosengren worries that cheaper borrowing costs could cause excessive domestic risk-taking while remaining ineffective in fixing economic weakness abroad. WSJ

The Wall Street Journal reports that the People’s Bank of China has decreased benchmark lending rates in an attempt to support struggling small businesses. China has largely refrained from lowering borrowing costs even as other central banks cut interest rates, as such a move could inflate property bubbles and drive up debt levels. WSJ

The Washington Post reports that White House officials have discussed pushing for a temporary payroll tax cut to confront an economic slowdown. The policy would favor middle-income earners, further boosting robust consumer spending in the face of trade disputes that have dampened business and consumer confidence. WaPo

U.S. News

The Wall Street Journal reports that shipments of recreational vehicles — a reliable indicator for predicting recessions — have fallen about 20% so far this year after a 4.1% drop in 2018. While consumer demand for such luxury items tends to wane at the first sign of economic anxiety, many components of recreational vehicles are sensitive to tariffs imposed on Chinese goods. WSJ

Adam Samson reports for the Financial Times that the U.S. will grant licenses for companies to do business with Huawei for 90 days amid uncertainty over whether the telecom company would face a ban. The licenses will allow companies to export to Huawei if they are selling updates or repairs to existing products. FT

U.S. Economic Indicators

Privately-owned housing starts dropped 4.0% in July to a seasonally adjusted annual rate of 1.19 million (up 0.6% year-over-year). Housing permits surged 8.4% to a 1.34 million annual pace in July and are up 1.5% from last year. Census Bureau Report
 
The University of Michigan Consumer Sentiment Index fell 6.3 points to 92.1 in the preliminary August reading and is down 4.1 points from August of last year. The Index of Consumer Expectations dropped 8.2 points to 82.3 while the Current Economic Conditions Index eased 3.3 points to 107.4. University of Michigan

U.S. News

Heather Long of the Washington Post writes that nine major countries — including several key U.S. trading partners — are in a recession or on the verge of one, stoking fears that the U.S. economy may be dragged into contraction as well. Long points out that most of these at-risk countries have export-dependent economies that have suffered due to escalating trade tensions between the U.S. and China. WaPo

The Wall Street Journal reports that despite the partial scaling-back of the newest round of tariffs on Chinese goods, consumers likely will still face higher prices for goods such as apparel, electronics, and sporting goods. Analysis shows that the partial de-escalation of the new tariffs will still result in higher tariffs on more than half of all consumer goods imported from China starting September 1st and higher tariffs on virtually all Chinese goods starting December 15th. WSJ

U.S. News

Greg Ip reports for the Wall Street Journal that the recent spate of nationalist and populist backlash against globalization in countries such as the U.S. and Britain is pushing the global economy towards recession. The rise of unilateralism has weighed heavily on global confidence as businesses and investors, uncertain what rules will govern international commerce, retreat from risky investments. WSJ

According to the Wall Street Journal, Beijing considers the delay in new U.S. tariffs on Chinese goods as an important step towards a trade truce, increasing the likelihood that China will send negotiators to continue trade talks in September. China may also resume purchases of U.S. agricultural products ahead of the next round of talks, a boon for struggling American farmers. WSJ

The Financial Times reports that the spread between the 10-year and 2-year U.S. Treasurys has turned negative for the first time since the lead-up to the 2008-09 recession, an ominous signal often perceived by investors as a sign of impending recession. A similar inversion in the U.K. underscores the extent to which U.S.-China trade tensions and weakening Chinese and German industrial output are weighing on the world economy. FT

U.S. Economic Indicators

The NFIB Small Business Optimism Index rose 1.4 points to 104.7 in July as seven components improved, two weakened, and one was unchanged. Capital spending plans and employment expectations improved, while plans to increase inventories were unchanged and expectations for credit conditions eased. NFIB Report

Consumer prices rose 0.3% in July (up 1.8% from a year ago). The “core” CPI, which excludes food and energy, increased 0.3% in July and is up 2.2% from last year. BLS Report

U.S. News

The Wall Street Journal reports that the U.S. has announced it will delay imposing new 10% tariffs on certain Chinese products — including cellphones, laptops, and toys — until December 15, and will remove other goods from the tariff list entirely. The delay softens the impact on U.S. retailers dependent on imports from China and gives negotiators additional time to strike a deal before the new levies go into effect. WSJ