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By WSJ 4.11.19 • April 15, 2019

The Middle Class is Shrinking

Falling Behind...

A report by the Organization for Economic Cooperation and Development said the loss of middle-class economic power has been driven by “dismal” income growth and rapidly rising costs for many of the goods and services that are key to middle-class lifestyles, especially housing, Paul Hannon reports.

The threat: Middle-income households are carrying more debt and feeling less secure in their status, and younger generations are less likely to join the group at all.

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And Staying Home...

In the U.S., young women are living at home at the highest rate on record and men aren't far behind. The chart below shows a steady decline after World War II, a gentle recovery after 1970 and a sharp rise following the 2001 recession. Mr. Kimbrough's theory on the cause: "housing costs combined with cratering economic growth and significantly deteriorated labor market conditions for young adults." 

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Two Steps Forward...

China sweetened an offer to open its cloud-computing sector to foreign companies. In face-to-face talks in Washington last week, Chinese negotiators revised an earlier offer on cloud-computing access, proposing to issue more licenses that businesses need to operate data centers and to lift the 50% equity cap that limits ownership for certain foreign cloud-service providers, Yoko Kubota and Lingling Wei report. The fresh concessions are aimed at reaching a compromise as both sides work toward a trade deal.

Separately,  Treasury Secretary Steven Mnuchin said the U.S. and China have agreed on an enforcement mechanism for their potential trade deal, suggesting one of the key stumbling blocks had been cleared. “We’ve agreed that both sides will establish enforcement offices that will deal with the ongoing matters,” Mr. Mnuchin said on CNBC.

...Six Months Back

European Union leaders agreed to postpone Brexit until Oct. 31. The extension avoids the U.K. crashing out of the EU on Friday without a separation agreement. But it does little for businesses looking for clarity over Brexit, and offers no clear path toward getting a deal through Britain's House of Commons, Laurence Norman and Max Colchester report.

Next: The new date gives British Prime Minister Theresa May more time to try to get the U.K.’s Parliament to approve a Brexit deal. She returns to the U.K. Thursday to continue discussions with the Labour Party on a possible compromise.

Ready to Spring into Action

At a news conference, Mr. Draghi said Europe’s economic slowdown would continue this year, in part because of the uncertainty facing businesses as a result of U.S. threats to raise tariffs on automobiles and other imports from Europe. The ECB’s caution echoes that of the Federal Reserve, which stepped back from further interest-rate hikes in recent months, Tom Fairless and Paul Hannon report.

Standing Pat

We already knew Federal Reserve officials voted to hold rates steady at their March 19-20 meeting. Minutes from the gathering add key details: The Fed has set a high bar to raising rates again because of greater risks to the U.S. economy from a global growth slowdown, and after a muted inflation reading took officials by surprise. But the minutes also show officials didn’t see any need to cut their benchmark rate absent a broad deterioration in the economy, Nick Timiraos reports.

Key quote: “A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year.”

Searching Inflation

Low inflation readings have puzzled central bankers around the world—and are one reason the Fed is in a holding pattern. The latest data provide little urgency for higher rates.

U.S. consumer prices rose 1.9% from a year earlier in March, compared with a 1.5% annual gain in February. Volatile oil prices drove the latest increase. Excluding food and energy, so-called core prices rose 2% on the year, the slowest annual gain since early 2018. Overall, the numbers suggest inflation pressures remain tame, Sarah Chaney reports. 

Germany’s inflation rate eased in March on the back of a slowdown in food prices. The annual inflation rate slipped to 1.4% from 1.7% in February, the Federal Statistical Office said Thursday.

China's consumer prices accelerated last month. March’s consumer-price index rose 2.3% from a year earlier, compared with a 1.5% gain in February. A hefty increase in pork prices and more expensive oil led the way, Grace Zhu reports.

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Fiscal Firepower

The U.S. budget gap widened in the first half of the fiscal year as spending rose faster than revenue. The $691 billion deficit from October through March is 15% higher than during the same period a year earlier despite relatively strong economic growth. The Treasury estimated the full-year deficit will top $1 trillion in fiscal 2019, the first time breaching that level since 2012.

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