1 00:00:07,920 --> 00:00:11,010 Jennifer Duke: Welcome to Fear & Greed, The Week Ahead. I'm Jennifer Duke 2 00:00:11,010 --> 00:00:14,849 Jennifer Duke: and I'm joined by economist Stephen Koukoulas. You'll find him at thekouk. 3 00:00:14,849 --> 00:00:17,699 Jennifer Duke: com, T- H- E- K- O- U- k. com, and 4 00:00:17,699 --> 00:00:20,849 Jennifer Duke: on X using the handle TheKouk. Stephen, good morning. 5 00:00:21,209 --> 00:00:23,430 Stephen Koukoulas: And a very good morning to you, Jen. Lovely to see you. 6 00:00:23,759 --> 00:00:25,919 Jennifer Duke: Thank you very much. I listen to these all the 7 00:00:25,920 --> 00:00:27,719 Jennifer Duke: time and I'm very pleased to be speaking to you 8 00:00:27,719 --> 00:00:28,859 Jennifer Duke: in Sean's absence. 9 00:00:29,010 --> 00:00:29,310 Stephen Koukoulas: Wonderful. 10 00:00:29,520 --> 00:00:32,729 Jennifer Duke: So, firstly, last week there was a lot of bank 11 00:00:32,729 --> 00:00:35,909 Jennifer Duke: data about. We had ANZ job ads, snap business conditions, 12 00:00:35,909 --> 00:00:39,000 Jennifer Duke: Westpac consumer sentiment, and then US CPI right at the end 13 00:00:39,000 --> 00:00:40,290 Jennifer Duke: of the week. Can you talk us through it a 14 00:00:40,290 --> 00:00:40,680 Jennifer Duke: little bit? 15 00:00:41,100 --> 00:00:45,360 Stephen Koukoulas: Yeah, it was interestingly, consumer sentiment remained gloomy. There was 16 00:00:45,360 --> 00:00:49,500 Stephen Koukoulas: no significant change in an index basis. It remains around 17 00:00:49,530 --> 00:00:52,739 Stephen Koukoulas: 80 points and remembering that the index at a hundred 18 00:00:53,100 --> 00:00:55,529 Stephen Koukoulas: is sort of where we've got enough optimists and pessimists 19 00:00:55,530 --> 00:00:58,200 Stephen Koukoulas: canceling each other out. So the fact that we're at 20 00:00:58,230 --> 00:01:02,760 Stephen Koukoulas: 80 means that we're 20 points below neutral, so consumers 21 00:01:02,820 --> 00:01:06,240 Stephen Koukoulas: remain in glum, cost of living pressures, interest rate pressures 22 00:01:06,240 --> 00:01:09,840 Stephen Koukoulas: on their mortgage repayments, higher rents. You can see why 23 00:01:09,990 --> 00:01:12,928 Stephen Koukoulas: consumers are gloomy. And that usually feeds into softer retail 24 00:01:12,930 --> 00:01:15,840 Stephen Koukoulas: spending, which of course we've seen. Business conditions, they were 25 00:01:15,840 --> 00:01:18,958 Stephen Koukoulas: quite resilient. And in fact, it wasn't necessarily the business 26 00:01:18,959 --> 00:01:22,109 Stephen Koukoulas: conditions, business confidence type numbers, it was some of the 27 00:01:22,170 --> 00:01:26,580 Stephen Koukoulas: subsets of the data that were interesting. Prices paid, some 28 00:01:26,580 --> 00:01:29,639 Stephen Koukoulas: of the labor costs results from the survey were ticking 29 00:01:29,639 --> 00:01:33,120 Stephen Koukoulas: back up. So we'd had six or nine months where 30 00:01:33,720 --> 00:01:37,110 Stephen Koukoulas: prices paid and costs were all going down, there was 31 00:01:37,110 --> 00:01:39,990 Stephen Koukoulas: an uptick there. So, again, one month, we don't want to get too 32 00:01:39,990 --> 00:01:42,809 Stephen Koukoulas: excited. But nonetheless, if this is a change of trend, 33 00:01:42,809 --> 00:01:45,810 Stephen Koukoulas: then maybe we just need a bit more caution about 34 00:01:46,920 --> 00:01:49,200 Stephen Koukoulas: declaring victory over the lower inflation rate anyway. 35 00:01:49,770 --> 00:01:52,050 Jennifer Duke: That's very interesting. Does that kind of tie into what's 36 00:01:52,050 --> 00:01:53,340 Jennifer Duke: going on in the US do you think? 37 00:01:53,580 --> 00:01:57,120 Stephen Koukoulas: Yes, indeed. We saw the US CPI numbers last week, 38 00:01:57,120 --> 00:01:59,670 Stephen Koukoulas: late last week, and they were actually pretty much on 39 00:01:59,670 --> 00:02:04,229 Stephen Koukoulas: expectations, both core and the headline month- on- month CPI was 0. 40 00:02:04,229 --> 00:02:07,290 Stephen Koukoulas: 2%. In fact, some people who look at the second 41 00:02:07,290 --> 00:02:11,310 Stephen Koukoulas: decimal point said that they were 0.7 and 0. 16, so they were actually a 42 00:02:11,310 --> 00:02:12,960 Stephen Koukoulas: little bit below 0. 2 if you want to be 43 00:02:13,050 --> 00:02:17,160 Stephen Koukoulas: an optimist. But basically it's confirming the trend down in 44 00:02:17,160 --> 00:02:22,199 Stephen Koukoulas: inflation, it's being locked in. It probably gives the Fed 45 00:02:22,199 --> 00:02:24,480 Stephen Koukoulas: pause for thought for a moment. Have they done enough? 46 00:02:24,480 --> 00:02:26,760 Stephen Koukoulas: And as we know, there are long and variable lags 47 00:02:26,760 --> 00:02:29,910 Stephen Koukoulas: in interest rate settings and their impact on the economy. 48 00:02:30,300 --> 00:02:32,460 Stephen Koukoulas: Market consensus is that the Fed's on hold for a while 49 00:02:32,460 --> 00:02:34,261 Stephen Koukoulas: now and these inflation numbers confirm that. 50 00:02:34,261 --> 00:02:36,389 Jennifer Duke: And we've obviously got a bit of a big week 51 00:02:36,389 --> 00:02:39,359 Jennifer Duke: coming up. There's some wage price index, labor force data 52 00:02:39,360 --> 00:02:41,699 Jennifer Duke: out from the ABS and also the RBA I think 53 00:02:41,699 --> 00:02:43,980 Jennifer Duke: has some minutes. What should we be expecting, do you think? 54 00:02:44,580 --> 00:02:48,120 Stephen Koukoulas: Look, the minutes from the RBA board meeting in August, 55 00:02:49,350 --> 00:02:51,209 Stephen Koukoulas: that's the meeting they held rates steady for a second 56 00:02:51,210 --> 00:02:54,389 Stephen Koukoulas: straight month, and from what we've heard, it was a 57 00:02:54,389 --> 00:02:57,540 Stephen Koukoulas: line ball decision on whether they should hike or keep 58 00:02:57,540 --> 00:02:59,879 Stephen Koukoulas: them steady. So it'll be interesting to see what weight 59 00:02:59,879 --> 00:03:02,820 Stephen Koukoulas: they're putting on our own inflation data, what they're seeing 60 00:03:02,820 --> 00:03:05,850 Stephen Koukoulas: in the labor market. That wage price spiral that they 61 00:03:05,850 --> 00:03:09,750 Stephen Koukoulas: talk about, yeah, well that gets to the very point 62 00:03:09,750 --> 00:03:12,540 Stephen Koukoulas: of your next observation that we do have these wage 63 00:03:12,540 --> 00:03:15,540 Stephen Koukoulas: numbers coming out during this week, the wage price index. 64 00:03:16,169 --> 00:03:20,370 Stephen Koukoulas: Market consensus is for a rise of just under 1% 65 00:03:20,669 --> 00:03:24,180 Stephen Koukoulas: for the quarter on quarter. The annual figure approaches 4%, 66 00:03:24,450 --> 00:03:28,019 Stephen Koukoulas: just a little bit below actually. So any upside to 67 00:03:28,020 --> 00:03:30,960 Stephen Koukoulas: those wage numbers will be greeted with a bit of 68 00:03:30,960 --> 00:03:34,109 Stephen Koukoulas: concern from the RBA, I'm sure. But I suppose it 69 00:03:34,109 --> 00:03:36,090 Stephen Koukoulas: says any downside then I suppose we can kiss the 70 00:03:36,090 --> 00:03:40,080 Stephen Koukoulas: wage price spiral argument goodbye. I think because we had 71 00:03:40,080 --> 00:03:42,540 Stephen Koukoulas: a very tight labor market for the last year or 72 00:03:42,540 --> 00:03:45,719 Stephen Koukoulas: two, which brings us to the, on Thursday we get 73 00:03:45,719 --> 00:03:50,249 Stephen Koukoulas: the labor force numbers. Employment's been lovely and resilient. We've 74 00:03:50,250 --> 00:03:55,170 Stephen Koukoulas: been averaging 30, 35,000 jobs per month, getting a side of 75 00:03:55,170 --> 00:03:58,470 Stephen Koukoulas: the month- on- month volatility. That's about the level of 76 00:03:58,470 --> 00:04:01,350 Stephen Koukoulas: the growth in the labor force, the working age population. 77 00:04:01,350 --> 00:04:03,780 Stephen Koukoulas: So that's why the unemployment rate's been steady at a 78 00:04:03,780 --> 00:04:09,120 Stephen Koukoulas: lovely 3. 5%. Again, any deviation from what's a really 79 00:04:09,299 --> 00:04:11,039 Stephen Koukoulas: good set of labor force, we tend to be a 80 00:04:11,039 --> 00:04:13,350 Stephen Koukoulas: bit gloomy about the economy as we were saying before. 81 00:04:13,830 --> 00:04:16,650 Stephen Koukoulas: One of the legacies that we've got now is basically 82 00:04:16,650 --> 00:04:18,719 Stephen Koukoulas: something close to full employment, and that's got to be 83 00:04:18,720 --> 00:04:21,779 Stephen Koukoulas: a good thing. Will it continue? It seems unlikely with 84 00:04:21,779 --> 00:04:22,890 Stephen Koukoulas: the economy slowing down. 85 00:04:23,309 --> 00:04:25,230 Jennifer Duke: Fingers crossed though that we don't have too much of 86 00:04:25,230 --> 00:04:27,270 Jennifer Duke: a hard landing. I feel like soft landing is the 87 00:04:27,270 --> 00:04:29,279 Jennifer Duke: term that we need to ditch after the next few years. 88 00:04:29,279 --> 00:04:32,610 Stephen Koukoulas: It does. And I think, look, the economy's slowing down. It had 89 00:04:32,610 --> 00:04:35,190 Stephen Koukoulas: to. We've got to just put that into context. Where 90 00:04:35,190 --> 00:04:37,529 Stephen Koukoulas: we were a year ago, the economy was really strong. 91 00:04:37,529 --> 00:04:40,260 Stephen Koukoulas: As the lockdowns ended, we all came out and spent 92 00:04:40,260 --> 00:04:43,170 Stephen Koukoulas: money, we had decent savings and well, until May last 93 00:04:43,170 --> 00:04:46,469 Stephen Koukoulas: year, rates were still incredibly low, and so we had 94 00:04:46,469 --> 00:04:48,690 Stephen Koukoulas: to have a slow- down. We're having that right now. 95 00:04:48,690 --> 00:04:52,080 Stephen Koukoulas: And the question is, what's the trajectory for that slowing? 96 00:04:52,080 --> 00:04:55,001 Stephen Koukoulas: Is it towards that hard landing, soft landing? The (inaudible) 97 00:04:55,001 --> 00:04:56,729 Stephen Koukoulas: this week will sort of put a bit more 98 00:04:56,970 --> 00:04:57,960 Stephen Koukoulas: flesh on those bones. 99 00:04:58,620 --> 00:05:00,900 Jennifer Duke: Thank you very much, Stephen. Have a great week. 100 00:05:01,200 --> 00:05:01,919 Stephen Koukoulas: Thanks, Jen. You too. 101 00:05:02,160 --> 00:05:05,068 Jennifer Duke: That was economist Steven Koukoulas, better known as The Kouk. 102 00:05:05,070 --> 00:05:07,560 Jennifer Duke: You can find him at thekouk. com and follow him 103 00:05:07,560 --> 00:05:11,070 Jennifer Duke: on X using the handle TheKouk. I'm Jennifer Duke, economics 104 00:05:11,070 --> 00:05:13,830 Jennifer Duke: correspondent at Capital Brief and filling in for Sean Aylmer 105 00:05:13,830 --> 00:05:16,890 Jennifer Duke: while he is on holiday. And this is Fear & Greed, The Week Ahead.