Publications

U.S. News

The Washington Post reports that the Federal Reserve is almost certain to cut interest rates this week despite historically low unemployment. Many economists are concerned that interest rates are already too low for a cut to have much of an impact, while others believe that cutting sooner rather than later is the only way to prolong the current expansion. WaPo

Josh Zumbrun and Chao Deng report for the Wall Street Journal that trade talks between the U.S. and China are set to continue in Shanghai this week and are expected to address a number of smaller issues rather than the major points that led to the breakdown of negotiations in May. Areas in which the two countries are likely to make progress include China committing to increase purchases of U.S. agricultural products and the U.S. agreeing to relax the ban on U.S. companies selling to Huawei. WSJ

U.S. Economic Indicators

The advance estimate of Q2 GDP indicates that the U.S. economy expanded at an annualized rate of 2.1%, down from 3.1% in the first quarter. The reading reflects positive contributions from consumer and government spending, offset by negative contributions from private inventories, exports, and nonresidential & residential investment. BEA Report

U.S. News

The Wall Street Journal reports that state and local pensions have less than 73% of the assets needed to fund future obligations to public workers, according to a recent survey. A potential side-effect of such a shortfall is increased risk-taking by funds to fulfill their obligations to beneficiaries. WSJ

Tom Fairless reports for the Wall Street Journal that the European Central Bank has signaled it is preparing to reduce short-term rates and restart a bond-buying program as it seeks to insulate the eurozone from headwinds such as trade tensions and Brexit. The ECB’s willingness to ease monetary policy puts pressure on the Fed to follow suit and cut rates in July for the first time in over a decade. WSJ

U.S. Economic Indicators

New orders of manufactured durable goods increased 2.0% in June after falling 2.3% (revised) in May and are unchanged compared to a year ago. Excluding transportation, new orders rose 1.2% (up 1.1% from last year). Census Bureau Report

The U.S. Census Bureau Advance Economic Indicators Report shows that the goods deficit narrowed to $74.2 billion in June from $75.0 billion in May. Meanwhile, wholesale inventories rose 0.2% and retail inventories fell 0.1%. Census Bureau Report

Initial jobless claims fell 10,000 to 206,000 last week. The four-week moving average fell 5,750 to 213,000. DOL Report

U.S. News

According to the Wall Street Journal, a new study found that a higher Fed inflation target ahead of the 2007-09 recession likely would have given the central bank more room to lower interest rates, resulting in a much faster economic recovery. The research suggests that raising the Fed’s current inflation target to 3% or 4% could substantially improve the Fed’s ability to fight future recessions. WSJ

The Financial Times reports that the E.U. has released a report urging the U.S. to join forces in countering China’s attempts to take the lead on setting global standards for the technologies of the future. The statement reflects concerns that Chinese state-backed companies are extending their influence into international bodies that set technical criteria for sectors such as telecoms and the internet of things. FT

U.S. Economic Indicators

New home sales rose 7.0% to a seasonally adjusted annual pace of 646,000 in June and were 4.5% above the June 2018 rate. The median sales price rose to $310,400, and the inventory of new homes fell to 6.3 months at the current sales rate. Census Bureau Report

U.S. News

The Financial Times reports that U.S. officials will travel to China next week to resume trade talks with China’s Vice Premier Liu He. The U.S. has recently relaxed some restrictions on sales by U.S. companies to Huawei, while Chinese officials have moved to increase purchases of U.S. farm products, possibly signaling an easing of tensions ahead of the latest round of negotiations. FT

Kate Davidson reports for the Wall Street Journal that the two-year federal spending deal announced by Congress this week is unlikely to result in a significant rise in spending, muting its impact on overall economic growth. Spending under the proposed budget deal would increase federal government spending in 2020 by just 3.5% and taper off further in 2021. WSJ

U.S. Economic Indicators

Existing home sales fell 1.7% to a seasonally adjusted annual rate of 5.27 million in June and are down 2.2% compared to a year ago. NAR notes that there is a persistent shortage for mid-to-lower priced homes, which is pushing up home prices overall. NAR Report

The FHFA House Price Index shows that U.S. house prices rose 0.1% in May and were up 5.0% from year-ago levels. Year-over-year house price changes were positive in all nine census divisions. FHFA Report

U.S. News

The Financial Times reports that the latest IMF Economic Outlook names a no-deal Brexit along with U.S. trade policy top threats to global economic growth in 2019. The latest IMF report forecast global growth will slow to 3.2% in 2019, the weakest rate of expansion in a decade. FT

According to the Wall Street Journal, a new study by Harvard economists Nathanial Hendren and Ben Sprung-Keyser found that government programs for low-income children more than pay for themselves over time, while those for adults generally do not. The most effective programs supported children’s medical care and education, which improved their health and likelihood of attending college, boosting their taxable income and earning power when they entered the workforce. WSJ