Publications

U.S. News

According to the Financial Times, U.S. companies are facing increased retaliation in China as the trade dispute between China and the U.S. intensifies, leading many to consider cutting investment in China or relocating to other countries. In addition to tariffs, American companies report facing backlash in the form of slower customs clearance, more inspections, and delayed approval for licenses. FT

The Wall Street Journal reports that St. Louis Fed President James Bullard said the Fed may need to cut interest rates if inflation fails to rise back to desired levels. He also dismissed concerns of a domestic or global recession happening in the next year and China harming global markets by selling off its U.S. Treasury holdings. WSJ

The Washington Post reports that top administration officials and a group of bipartisan congressional leaders have begun talks aimed at reaching a two-year budget deal to suspend the debt ceiling ahead of the September 30 government shutdown deadline. Although discussions are at an early stage, they appear to aim for the most comprehensive budget package in recent years. WaPo

According to Bloomberg, the number of retirees receiving Social Security payments grew 3.0% last year, outpacing the 1.9% growth of the U.S workforce. Given the low birth rate, increasing number of retirees, and life expectancies in the mid-eighties, reserves set aside in the Social Security Trust Fund are expected to be exhausted by 2035. Bloomberg

U.S. Economic Indicators

Existing home sales edged down 0.4% to a seasonally adjusted annual rate of 5.19 million in April and are down 4.4% compared to a year ago. NAR notes that moderate growth is expected in the near term as buyers start to take advantage of historically low mortgage rates and solid wage growth. NAR Report

U.S. News

According to the Wall Street Journal, the OECD announced Tuesday that conflicts between the U.S. and its trade partners have weakened global business investment and threaten future global economic growth. The OECD estimates that, if continued, the latest round of U.S. tariff hikes and retaliatory Chinese levies would shrink the U.S. and Chinese economies by 0.2%-0.3% by 2021. WSJ

The Financial Times reports that Federal Reserve Chair Jerome Powell stated that although historically high debt burdens could severely strain businesses during a downturn, the current level of business debt is not a threat to overall financial stability. He expressed confidence that the financial system is strong enough to handle potential losses, tempering fears of an imminent corporate debt meltdown. FT

U.S. Economic Indicators

The Chicago Fed National Activity Index fell from +0.05 (revised) in March to -0.45 in April. The sales, orders, & inventories and employment categories contributed positively, while the production and housing & consumption categories contributed negatively. Chicago Fed Report

U.S. News

According to the Wall Street Journal, spending on factories, equipment, and other capital goods by large U.S. firms slowed in the first quarter of 2019, suggesting that a key driver of economic growth may be fading. Lingering trade tensions with China are making companies and customers cautious, raising the likelihood of slower growth later this year and into 2020. WSJ

The Financial Times reports that the quality of big U.S. banks’ commercial lending portfolios is deteriorating for the first time in nearly three years amid a sudden rise in the proportion of non-performing loans. Although the level of non-performing loans remains historically low, the sudden uptick is concerning given low interest rates and strong economic growth. FT

U.S. Economic Indicators

The University of Michigan Consumer Sentiment Index rose 5.2 points to 102.4 in the preliminary May reading and is up 4.4 points from a year ago. The Index of Consumer Expectations surged 8.6 points to 96.0, while the Current Economic Conditions Index rose 0.1 point to 112.4. University of Michigan

The Conference Board’s Leading Economic Index (“LEI”) increased 0.2% to 112.1 in April, the third consecutive monthly increase. Strong stock prices, sound financial conditions, and an elevated consumer outlook buoyed the index, however continued weakness in the manufacturing sector suggests growth is likely to moderate toward 2% by year’s end. Conference Board Report

U.S. News

The Wall Street Journal reports that the U.S. has announced it will delay a final decision on whether to impose broad tariffs on automobile and auto part imports for 180 days. The White House said negotiations with the E.U. and Japan regarding auto tariffs would continue as part of ongoing attempts to negotiate bilateral trade agreements. WSJ

According to the Wall Street Journal, the share of foreign-born U.S. workers reached its highest level in decades in 2018, driven by steady immigration and a decline in the native-born birthrate. Foreign-born workers accounted for 17.5% of all U.S. employees last year, and median wages and average education levels of foreign-born workers are rising. WSJ

U.S. Economic Indicators

Initial jobless claims decreased 16,000 to 212,000 last week. The four-week moving average rose 4,750 to 225,000. DOL Report

Privately-owned housing starts rose 5.7% in April to a seasonally adjusted annual rate of 1.24 million (down 2.5% year-over-year). Housing permits rose 0.6% to a 1.30 million annual pace in April but are down 5.0% compared to a year ago. Census Bureau Report

U.S. News

According to the Wall Street Journal, the latest round of tariff increases on Chinese exports to the U.S. will likely cause a modest and temporary boost to U.S. inflation, as Americans spend significantly more on services than on goods. Conflicting forces make the overall impact of the tariff increases hard to anticipate, but it is unlikely that the Federal Reserve will raise interest rates in response. WSJ

The Financial Times reports that E.U. exports to both China and the U.S. rose in the first quarter of 2019, reducing fears of a deceleration caused by an economic slowdown in China and an intensifying trade war with the U.S. European exports to China are mainly consumer goods, a sector in which demand has been less affected by the U.S.-China trade conflict. FT