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U.S. inflation data is on tap, U.K. lawmakers vote on the latest Brexit deal, White House budget forecasts are falling short on revenue, and economic growth is looking a bit wobbly at the start of the year. Good morning. Jeff Sparshott here to take you through the day’s top economic news. Send us your questions, comments and suggestions by replying to this email.
The White House’s $4.7 trillion budget proposes sharply reducing spending on safety-net and many discretionary government programs, while boosting defense and border-protection funding. While the new budget isn’t likely to become law—Congress ultimately writes spending bills that the White House can approve—it lays out an executive branch vision for government, Kate Davidson reports.
The Trump administration’s budget proposal shows revenues are down from levels projected just two years ago—before its signature tax cut became law—despite an economy that has largely performed in line with projections of 3% annual growth.
Consider: In 2017, the Trump administration said its policies would result in a $488 billion deficit in the fiscal year that begins this October. On Monday, its budget proposal projected the deficit for the same year would reach $1.1 trillion. Around half the increase is because of higher spending, and the other half because of lower-than-anticipated revenue.
The upshot: Rising deficits aren’t only because of unrealistic projections for spending cuts. The Trump administration two years ago projected that revenues through 2024 would total nearly $33 trillion. On Monday, their projections for the same period forecast revenues lower by $2 trillion. —Nick Timiraos
WHAT TO WATCH TODAY
U.S. consumer prices for February are expected to rise 0.2% from the prior month. The forecast excluding food and energy is the same. Economists expect to see a 1.6% year-over-year gain in the headline CPI and a 2.2% rise in core prices. (8:30 a.m. ET)
Fed governor Lael Brainard speaks at a National Community Reinvestment Coalition conference at 8:45 a.m. ET.
U.S. Trade Representative Robert Lighthizer appears before the Senate Finance Committee to discuss trade. (10:15 a.m. ET)
U.K. lawmakers are scheduled to vote for a second time on a Brexit deal. The U.K. is due to leave the bloc on March 29.
U.S. economic growth is looking a little shaky for the first quarter. Retail sales recovered only modestly in January following a sharp pullback in December. The aftermath: Forecasting firm Macroeconomic Advisers revised its first-quarter gross domestic product tracker down to a 1% growth rate; the Atlanta Fed’s GDPNow tracker dropped to 0.2%.
On the bright side: “The backdrop for consumers still looks consistent with solid growth in spending, suggesting some catch-up in the next few months….we expect the extra weakness in Q1 to be offset by catch-up in Q2, and we are raising our estimate for Q2 to 3.2% from 2.3%,” says Jim O’Sullivan, chief economist at High Frequency Economics.
TAPPING THE BRAKES
President Trump’s threat to impose tariffs on car imports is facing increasing headwinds amid congressional opposition, legal challenges and the prospect of consumer opposition. Three weeks after the Commerce Department submitted a report on possible auto tariffs, the administration has yet to address the issue publicly—an uncharacteristically quiet approach that has trade experts concluding the White House isn’t eager to launch another grueling trade battle as the 2020 election campaign gets under way, William Mauldin reports. Mr. Trump last year warned that cars imported from abroad would be slapped with tariffs of up to 25%.
China’s economic slowdown has been a lot steeper than reported by Beijing. A new study looking at official and alternative measures for gross domestic product finds government data are overoptimistic—China’s growth since 2008 has been about 1.7 percentage points lower annually than reported. Two years stand out: 2008, when official numbers started significantly overestimating growth, and 2013, when the variance became especially large.
What happened? In 2008, with the global economy collapsing, China put in place a massive spending and lending program that saved the country from the depth of the downturn. The political imperative was to show the strength of the Chinese economy. In 2013, President Xi Jinping launched a vast drive against corruption. That effort made local officials wary of signing investment deals, but official figures failed to capture a lower level of investment, Bob Davis reports.
WHERE’S THE RECESSION?
Germany barely missed a recession at the end of 2018. Italy inched into one. Turkey looks like it’s going off the deep end—its economy contracted 3% in the fourth quarter and appears set to fall further this year. That’s a sharp change of fortune for an economy that expanded 7.3% at the end of 2017, David Gauthier-Villars reports. Jason Tuvey, an emerging-market economist at Capital Economics, forecasts a recession of 2.5% this year. “The recovery is likely to be slow and bumpy,” he says.
WHAT THEY’RE SAYING ABOUT BREXIT
“Now is the time to come together, to back this improved Brexit deal, and to deliver on the instruction of the British people.” —Prime Minister Theresa May
“The Prime Minister’s negotiations have failed. Last night’s agreement with the European Commission does not contain anything approaching the changes Theresa May promised Parliament, and whipped her MPs to vote for.” —Labour Party leader Jeremy Corbyn
“It’s this deal or Brexit may not happen at all.” —European Commission President Jean-Claude Juncker
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TWEET OF THE DAY
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WHAT ELSE WE’RE READING
Some 44% of all homeless people older than 50 hit the streets for the first time after they turned 50. “The study’s finding speaks to the danger of a shrinking ability of people to adequately save money and make other arrangements for retirement, [UCSF’s Margot] Kushel said. And it indicates, she said, that there is too little help in place to catch them before they fall into homelessness when hard times hit,” Kevin Fagan writes in the San Francisco Chronicle.
Pollution is bad for your brain, part 1. Economists Jennifer Heissel, Claudia Persico and David Simon find that students in schools subject to higher levels of traffic pollution “experience decreases in test scores, more behavioral incidents, and more absences” than peers in schools with less pollution.
Pollution is bad for your brain, part 2. Economists Wes Austin, Garth Heutel and Daniel Kreisman find that cutting school-bus diesel emissions improves students’ respiratory health, and test score gains in English and math. “Results suggest that engine retrofits can have meaningful and cost-effective impacts on health and cognitive functioning.”
UP NEXT: WEDNESDAY
Eurozone industrial production for January is out at 6 a.m. ET.
U.S. durable-goods orders for January are expected to drop 0.6% from the prior month. (8:30 a.m. ET)
U.S. producer prices for February are expected to rise 0.2% from the prior month. Excluding food and energy, the forecast is also for a 0.2% increase. (8:30 a.m. ET)
U.S. construction spending for January is expected to rise 0.5% from the prior month. (10 a.m. ET)
China’s retail sales, industrial production and fixed-asset investment for January and February are out at 8 p.m. ET.
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