This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.
The global manufacturing slump may have bottomed out. IHS Markit’s preliminary purchasing managers indexes for Japan, the U.K. and Europe showed factory activity continued to contract in January but at a slower pace, a potentially promising sign for a struggling sector. “The worst of the manufacturing downturn looks to have passed and industry appears to be moving towards stabilisation,” IHS Markit’s Andrew Harker said of the latest readings from Europe. Manufacturers around the globe were hit hard last year by U.S.-China trade tensions, compounding a broader economic slowdown. The latest data suggest Japan’s economy may have contracted in the fourth quarter but appears to be on track for a mild rebound at the start of 2020.
The U.K. is following a similar path, with overall output growing at the fastest rate in 16 months as Brexit uncertainty recedes. The eurozone, by contrast, remains a global weak spot: A slight pickup in manufacturing was offset by softening service-sector activity, and the outlook suggests more slow growth and little economic momentum heading into the new year. U.S. data is out at 9:45 a.m. ET.
WHAT TO WATCH TODAY
The World Economic Forum in Davos, Switzerland, wraps up today. You can follow the WSJ’s coverage here.
IHS Markit’s preliminary U.S. manufacturing index for January is expected to tick down to 52.2 from 52.4 at the end of December. (9:45 a.m. ET)
The Baker Hughes rig count is out at 1 p.m. ET.
Hey Now Hey Now, FICO FICO Un-Day
Changes in how the most widely used credit score in the U.S. is calculated will likely make it harder for many Americans to get loans. Fair Isaac Corp., creator of FICO scores, will soon start scoring consumers with rising debt levels and those who fall behind on loan payments more harshly. It will also flag certain consumers who sign up for personal loans, a category of unsecured debt that has surged in recent years. The new FICO changes reflect a shift in U.S. lenders’ confidence in the economy, which has been expanding for more than 10 years. Consumer loan losses remain low compared with during the last recession, but consumer debts are at record highs, with many Americans forced to rely on debt to help fund their everyday lives, AnnaMaria Andriotis reports.
Knock it Off
The Trump administration is moving to curb the sale of imported counterfeit goods over the internet, warning electronic commerce platforms and warehouse operators of greater scrutiny and penalties if they don’t help ferret out fakes. The Department of Homeland Security is set to release a report Friday outlining its immediate actions and longer-term goals for combatting products that officials say undermine U.S. technology and manufacturing, harm bricks-and-mortar retailers and endanger consumers. The new initiative comes the same month as an initial trade agreement with China that requires Beijing to take steps against counterfeiters or risk enforcement actions that could trigger new tariffs, William Mauldin and Alex Leary report.
Off the Rails
Union Pacific plans to run its railroad with nearly 3,000 fewer workers this year as the company pushes ahead with a new operating plan that runs fewer, longer trains. The strategy, known as precision-scheduled railroading, is sweeping across the U.S. freight railroading industry. As recently as two years ago, Union Pacific was offering railroad workers signing bonuses of as much as $25,000 as it and other freight railroads were struggling to fill jobs. But the recent changes to the operating plan mean that Union Pacific can operate its network with fewer people, Paul Ziobro reports.
U.S. rail industry employment hit a postrecession high in early 2015 but has since dropped off. The sector shed 20,600 jobs in 2019 alone.
More than one-fifth of the world’s population could have access to digital money issued by central banks to pay for groceries, movie tickets and even homes in the next few years. One in 10 central banks surveyed in 2019 said it was likely to offer digital currencies within the next three years, covering about 20% of the world’s population, according to a report from the Bank for International Settlements. The rising popularity of electronic payments, and the boom in private cryptocurrencies like bitcoin, has prompted authorities to pay more attention to digital currencies, Anna Isaac and Caitlin Ostroff report.
Not so fast: Federal Reserve Chairman Jerome Powell said in November the U.S. central bank doesn’t currently have plans to launch a digital currency.
For a change, Europe’s fate isn’t top of mind at the World Economic Forum this year. The eurozone is no longer on the verge of collapse, Britain isn’t headed for a disorderly exit, and the populist surge has peaked for now. Yet throughout Davos you could pick up signs of another existential crisis brewing, driven by feeble growth, a more confrontational U.S., and unstable governments. That has left the eurozone poorly prepared for a trade war. President Trump and Treasury Secretary Steven Mnuchin spent their time in Davos threatening Europe with tariffs on cars and digital taxes. But much as Europe would like to break its dependence on the U.S., it lacks the requisite unity and strength, Greg Ip writes from Davos.
Staying negative: Underscoring the tepid outlook, the European Central Bank signaled it will leave negative interest rates in place for some time despite growing misgivings with the unconventional policy tool. Five years into the ECB’s experiment with negative rates, economic growth in the 19-nation currency union is sluggish, bank lending is falling and there are signs of asset-price bubbles, Tom Fairless reports.
WHAT ELSE WE’RE READING
Republicans and Democrats view the same reality through a different lens. “Perhaps, as a result, they hold different views about policies and what should be done to address economic and social issues. We also show that providing information leads to different reassessments of reality and different responses along the policy support margin, depending on one’s political leaning,” Alberto Alesina, Armando Miano and Stefanie Stantcheva write in a National Bureau of Economic Research working paper.
SIGN UP FOR OUR CALENDAR
Real Time Economics has launched a downloadable calendar with concise previews, forecasts and analysis of major U.S. data releases. To add to your calendar, please click here.
Read more: blogs.wsj.com