China’s top trade negotiator Liu He talks to Lighthizer, Mnuchin about ‘resolving core issues’

The leaders of the U.S.-China trade negotiations held another phone call on Tuesday morning, China’s Ministry of Commerce said in an online statement.

“Both sides discussed resolving core issues of common concern, reached consensus on how to resolve related problems (and) agreed to stay in contact over remaining issues for a phase one agreement,” the Chinese-language statement said, according to a CNBC translation.

Liu He, China’s top negotiator on trade, spoke with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, the statement said.

Also joining the call were Chinese Commerce Minister Zhong Shan, People’s Bank of China Governor Yi Gang and Ning Jizhe, vice chairman of China’s top economic planning body, the National Development and Reform Commission, according to the Commerce Ministry. (…)

U.S. Firms Pull Back on Investment Capital spending by S&P 500 companies grew less than 1% in the third quarter, and would have fallen without Apple and Amazon

(…) Companies slow capital investment for a variety of reasons, and few have explicitly tied their cutbacks to trade, typically citing slowing demand or project delays instead. Still, economists and analysts point to timing: The pullback began in third-quarter 2018, just as the U.S. and China began threatening and then imposing significant tariffs on one another’s goods. (…)

Capital spending by S&P 500 companies rose in the third quarter by just 0.8%, or a combined $1.38 billion, from the second quarter, according to data from S&P Dow Jones Indices covering companies reporting through the middle of the month.

But even that modest increase can be chalked up to a few big spenders: Amazon.com Inc. and Apple Inc. alone raised capital spending by $1.9 billion during the quarter. Without them, total spending by the 438 other companies that have reported so far would have shrunk slightly.

And overall spending would have shrunk by 2.2% absent increases from three others: Intel Corp. , Berkshire Hathaway Inc. and NextEra Energy Inc. Together, the five companies increased their capital budgets by $4.7 billion, or 30%, from the second quarter to third, the SPDJI data show. (..)

The biggest pullback among S&P 500 companies came in the industrial sector, where total spending fell $1.8 billion, or 10%; and in financials, where spending fell $951 million, or almost 8%. Spending rose by 4.5%, or $1.2 billion, among communications-services companies. (…)

The percentage of small businesses planning to increase investment in the next 12 months rose slightly to 39% in November, from 35% the prior month but remains well below 45% a year ago, according to a monthly survey of almost 800 small firms for The Wall Street Journal by business-advisory firm Vistage Worldwide Inc. Half the companies said they expect no change to investment. (…)

BTW:

How Tariffs Lead to More Tariffs Steel makers asked for protection. A keg maker did next. Now brewers?

(…) At the behest of steel makers who griped about foreign competition, President Trump last year imposed a 25% tariff on imported steel. At that time, we reported on the collateral damage to American Keg Co., which says it’s the only U.S. maker of stainless-steel beer kegs. With metal prices rising, American Keg divulged it had laid off a third of its 30 workers. “We’re very concerned,” the CEO said, “that this could put us out of business.”

Now the Trump Administration is swallowing the spider. The Commerce Department, at the behest of American Keg, is dinging imports with antidumping duties—taxes up to 18.5% on Mexican kegs, and 7.5% on German and 77.1% on Chinese kegs. Those last two border taxes received final approval on Friday from the International Trade Commission, which held: “The establishment of a U.S. industry is materially retarded by reason of imports of refillable stainless steel kegs from China and Germany.”

This is purportedly a reaction to the “dumping” of foreign kegs into the U.S. at prices below “fair value.” But before Mr. Trump’s steel tariffs, American Keg seemed to be holding its own. Its dumping petition was filed in September of last year. Did Mexican keg makers suddenly cut their prices? Were they dumping all along? (…)

What’s next? If kegs are more expensive, that can’t help American brewers, whose employment is already going flat.

Direct and indirect jobs in the beer business are down 40,000 since 2016, trade groups said this spring. The Beer Institute’s CEO has called Mr. Trump’s aluminum tariffs “an anchor on a vibrant industry.” The logical conclusion is to fizz up breweries by levying tariffs on foreign beer: Corona, Heineken, Sapporo, you name it. Our teetotalling President won’t mind.

It isn’t only kegs and suds. Since June the Commerce Department has advanced retaliatory measures on structural steel, steel propane tanks certain steel wheels, steel staples, steel racks, steel threaded rod and steel file cabinets. Under investigation are steel fittings and steel wind towers. Most of these are from China, but the countries also include Thailand, Mexico, Korea, India, Vietnam, Taiwan and Canada. (…)

This is how Donald’s Trump protectionism, like Barack Obama’s overregulation, gradually leaches economic growth with compounding political intervention.

Powell Says Fed’s Rate Cuts Reflect More Bearish View of Economy Central bank’s policy move based on trade uncertainty, global growth as well as shifting economic assessment, chairman says

(…) Mr. Powell said he saw no reason why the economic expansion, which is in its 11th year and is the longest since the U.S. began keeping records in the mid-19th century, couldn’t continue. (…)

“At this point in the long expansion, I see the glass as much more than half full,” he said. “With the right policies, we can fill it further.” (…)

BTW:

• Chicago Fed National Activity Index Declines Again

The Federal Reserve Bank of Chicago reported that its National Activity Index fell to -0.71 during October from an unrevised -0.45 in September. It was the lowest level in six months. The three-month moving average smoothes out volatility in the monthly figures. It deteriorated to -0.31 last month, the lowest level since April. The figure remained below the December 2017 high of 0.51. During the last twenty years, there has been a 70% correlation between the Chicago Fed Index and the q/q change in real GDP.

The National Activity Diffusion Index, which measures the breadth of movement in the monthly series, was little changed at -0.22. It remained below the peak of 0.51 in December 2017. (…)

The CFNAI is a weighted average of 85 indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.

From Advisor Perspectives:

When the CFNAI-MA3 value moves below -0.70 following a period of economic expansion, there is an increasing likelihood that a recession has begun. Conversely, when the CFNAI-MA3 value moves above -0.70 following a period of economic contraction, there is an increasing likelihood that a recession has ended.

• What Does the Market Know About the Consumer That We Don’t?

Refinitiv says that “63 retailers have already mentioned their concern around the upcoming December tariffs. Accordingly, 23 retailers have provided negative guidance for the fourth quarter vs. only 5 positive preannouncements.”

  Christmas Spending Intentions Remain Strong

Americans expect to spend $846 on Christmas gifts this holiday season, a $52 increase over a year ago and, along with 2015 and 2017, one of the best readings in the past decade. The increase from 2018 portends a strong holiday spending season this year. (…)