WEBVTT - Ken Goldstein on August LEI Index (Audio) 0:00:00.840 --> 0:00:03.840 You're listening to Taking Stock with Kathleen Hayes and Pim 0:00:03.920 --> 0:00:08.640 Fox on Bloomberg Radio. Where is the economy heading? Is 0:00:08.640 --> 0:00:12.560 it heading for an interest rate increase in December? Or 0:00:12.720 --> 0:00:15.560 is it going to have to wait and see. That's 0:00:15.560 --> 0:00:18.160 why we're so happy to welcome back Ken Goldstein. He's 0:00:18.280 --> 0:00:20.800 economists with the Conference Board to take a look at 0:00:20.840 --> 0:00:24.960 the Leading Economic Indicators Index put together by the Conference 0:00:24.960 --> 0:00:27.640 Board every month. It's been had a bit of a 0:00:27.760 --> 0:00:30.280 rocky road. It was up at zero point five last month, 0:00:30.480 --> 0:00:33.400 down zero point two. If you look out and sort 0:00:33.440 --> 0:00:36.520 of average where it's going. It continues to uh point 0:00:36.560 --> 0:00:39.199 towards growth. The question is how much? And the question 0:00:39.280 --> 0:00:42.120 big question there enough for the Fed? So can let's 0:00:42.159 --> 0:00:44.680 start with what we're seeing in the latest l EI 0:00:44.800 --> 0:00:47.599 for the month of August really, in a sense, no 0:00:47.760 --> 0:00:50.920 change from what we've been looking at all through the spring, 0:00:50.960 --> 0:00:53.279 all through the summer, and now into the fall. You've 0:00:53.320 --> 0:00:56.240 got a weak industrial sector, You've got some strength and 0:00:56.360 --> 0:01:00.320 services because of the consumer and housing that really hasn't change. 0:01:00.360 --> 0:01:03.320 So while the number fluctuates from one month to the next, 0:01:03.600 --> 0:01:06.760 there's no sign here either of acceleration of growth. But 0:01:06.840 --> 0:01:10.560 certainly no sign here of deceleration of growth anytime soon? 0:01:11.440 --> 0:01:14.480 Can twenty seven? I think you've been doing this for 0:01:14.560 --> 0:01:19.440 twenty seven years? Correct? No, no, no, I thought since nine, 0:01:20.000 --> 0:01:25.280 since seventy even oh even better, well done, even better? Okay, 0:01:25.280 --> 0:01:28.800 all right, So in that context, as an economist, are 0:01:28.840 --> 0:01:31.720 there new tools? Are there new ways of looking at 0:01:31.720 --> 0:01:35.520 the economy that would be just as relevant because you're 0:01:35.520 --> 0:01:38.520 not just an economist, you're also someone that understands and 0:01:38.560 --> 0:01:41.240 has his pulse on kind of what's happening in the 0:01:41.360 --> 0:01:43.360 in the world. You have to be to stay on 0:01:43.440 --> 0:01:45.840 top of things. What kinds of tools because you say, 0:01:45.880 --> 0:01:48.240 all right, you know it's flat, a little more of 0:01:48.240 --> 0:01:51.400 the same, bad, so on. But how can you add 0:01:51.440 --> 0:01:53.400 some nuance to all of that? This is a great 0:01:53.440 --> 0:01:56.639 question because again, if you split between the industrial corps 0:01:57.120 --> 0:01:59.960 and we have really good metrics of the industrial coo 0:02:00.120 --> 0:02:01.720 or and that's where you get the you know, the 0:02:01.760 --> 0:02:04.080 boom and busted the economy. Give us some examples of, like, 0:02:04.160 --> 0:02:07.520 you know, what kind of great measurements in those kinds 0:02:07.520 --> 0:02:10.600 of businesses. You look at industrial production, you look at orders, 0:02:11.000 --> 0:02:13.720 which is a leading indicator about where industrial productions going. 0:02:14.040 --> 0:02:18.080 As really been soft. Um, you look at at business confidence. 0:02:18.080 --> 0:02:20.880 Are they confident enough to say, okay, go ahead, let's 0:02:20.919 --> 0:02:23.799 green light that project. You know. So we're looking at 0:02:23.840 --> 0:02:27.519 capital investment, we're looking at industrial production, we're looking at orders, 0:02:27.600 --> 0:02:30.560 and all of it tells us not that it's falling apart, 0:02:31.240 --> 0:02:33.959 even though in the oil patch it's beginning to improve 0:02:33.960 --> 0:02:36.880 a little bit, but elsewhere there's really no change, not 0:02:37.000 --> 0:02:39.680 since the spring, maybe not since the winter. It's in 0:02:39.720 --> 0:02:42.639 the service sector that we keep saying, you know, we 0:02:42.680 --> 0:02:45.919 need new measures. We didn't have this back in seventy 0:02:45.919 --> 0:02:48.760 one or earlier. But the service sectors don't have that 0:02:48.800 --> 0:02:51.920 boom and bust. If you look at it regionally, you 0:02:51.960 --> 0:02:53.840 want to pick up what's going on in the Midwest, 0:02:53.880 --> 0:02:56.200 what's going on in the South. You don't want to 0:02:56.200 --> 0:02:59.320 look here at the Northeast quarter because it's a service 0:02:59.360 --> 0:03:01.239 economy and they just said you don't get the boom 0:03:01.280 --> 0:03:03.720 and busted it. So you want to look at sectors. 0:03:04.000 --> 0:03:06.000 You also want to look at regions, and all of 0:03:06.040 --> 0:03:09.119 that is telling us. You know, what we're getting here 0:03:09.360 --> 0:03:13.079 is relatively modest or moderate growth, whatever adjective you want 0:03:13.080 --> 0:03:15.840 to use. It's not soft, but it certainly isn't strong. 0:03:16.360 --> 0:03:20.200 And more important, there's no sign here of an acceleration separate. 0:03:20.200 --> 0:03:22.839 Separate from that is the difference between some of these 0:03:22.840 --> 0:03:26.760 measures and jobs. Jobs are very good, much better than 0:03:26.800 --> 0:03:28.359 some of the rest of it. And so there's a 0:03:28.360 --> 0:03:30.880 little bit of a puzzle here, which number do you follow, 0:03:30.960 --> 0:03:33.120 especially if you're the FED, look at jobs or look 0:03:33.120 --> 0:03:35.160 at some of the rest of this. In your view 0:03:35.160 --> 0:03:37.119 as somebody again who has watched the economy for many, 0:03:37.120 --> 0:03:41.920 many years, uh, is it your sense that whatever the 0:03:41.960 --> 0:03:45.520 economy needs to grow faster, whatever businesses need to actually 0:03:45.560 --> 0:03:48.880 start investing again, business investment has been so weak the past, 0:03:49.160 --> 0:03:51.400 not just in the US, that's a global store. Okay, 0:03:51.400 --> 0:03:56.800 So is this something that is receptive to fixable through 0:03:57.240 --> 0:04:01.040 can be affected by monetary policy? And so so then 0:04:01.160 --> 0:04:03.560 the the point so this is okay, no, why then 0:04:03.560 --> 0:04:06.040 tell me why? Because I think there's an assumption, certainly 0:04:06.040 --> 0:04:08.560 among central bankers that they can affect this by keeping 0:04:08.600 --> 0:04:12.840 stimulus paddle to the metal. You know, Look, what you 0:04:12.920 --> 0:04:15.360 need is demand. You need enough demand to push the 0:04:15.400 --> 0:04:18.360 product out. You need enough demand to get a price increase, 0:04:18.640 --> 0:04:21.640 so you generate the funds to generate that investment. So 0:04:21.760 --> 0:04:24.960 even though the Fed and Central banks have been very 0:04:25.000 --> 0:04:29.160 accommodative and remain so, and money is as cheap as possible, 0:04:29.839 --> 0:04:33.200 but you're not seeing the investment because they don't see 0:04:33.200 --> 0:04:36.680 the growth and they don't see the the the price 0:04:36.720 --> 0:04:39.440 increase to be able to justify our rate to return 0:04:39.520 --> 0:04:42.520 to that new investment. And again it's not new. It's 0:04:42.560 --> 0:04:44.880 not a U S story. You see that across the globe. 0:04:44.880 --> 0:04:47.400 In fact, in some sense we're in better shape than 0:04:47.440 --> 0:04:49.840 a lot of the rest of the world. I want 0:04:49.880 --> 0:04:52.440 you to expand on that idea if you can, because, 0:04:53.080 --> 0:04:56.159 as you noted, it is a changed economy and a 0:04:56.320 --> 0:04:59.200 changed world. And sometimes we are too attuned and can 0:04:59.240 --> 0:05:02.200 convince our els that certain things are true. What are 0:05:02.240 --> 0:05:05.200 some of the misconceptions out there that you are seeing 0:05:05.240 --> 0:05:09.440 and that you hear documented? But he raises a red 0:05:09.480 --> 0:05:11.880 flag with gold team in a conference Yeah, one of 0:05:11.920 --> 0:05:13.920 the things we have the conference board, have been preaching 0:05:13.960 --> 0:05:16.880 for forever and it's more true now than it ever was. 0:05:17.080 --> 0:05:19.800 You have to innovate or is the great economist Bob 0:05:19.839 --> 0:05:22.440 Dylan once said he was not busy being born as 0:05:22.480 --> 0:05:26.119 busy dying. Where's the innovation and where's the investment dollar 0:05:26.240 --> 0:05:29.320 backing up that innovation. But again, I mean, you know, 0:05:29.360 --> 0:05:32.360 if the demand isn't there, the price isn't there, where's 0:05:32.360 --> 0:05:35.360 the money, where's the way to return? That's the missing piece, 0:05:35.920 --> 0:05:38.360 and where's the confidence on the part of business to 0:05:38.520 --> 0:05:40.720 go ahead and bite the bullet and say, you know, 0:05:40.800 --> 0:05:43.880 let's try this, let's see where it goes. Let's economy. 0:05:44.839 --> 0:05:48.159 We're in a mature economy, um, And the question is 0:05:48.200 --> 0:05:51.000 are you know, are we at the late stage of 0:05:51.080 --> 0:05:54.560 maturity or the early stage? Well, the answers both. Can 0:05:54.880 --> 0:05:59.320 fiscal spending make the difference? Government of Okay, what kind 0:05:59.360 --> 0:06:02.560 of fiscals infrastructure and happy to help somebody innovate a 0:06:02.560 --> 0:06:05.680 new tech quality because that's where the infrastructure is. That 0:06:05.680 --> 0:06:08.479 that's where the railroads and the highways and the tunnels 0:06:08.520 --> 0:06:11.000 and the bridges for tech companies or services. But you 0:06:11.040 --> 0:06:13.000 do need a grid that can handle all of that, 0:06:13.080 --> 0:06:15.560 and we don't have that. You don't remember something we 0:06:15.640 --> 0:06:17.720 had that blackout back in what was it seventy five 0:06:17.839 --> 0:06:20.479 or something. They told us it would cost fifty billion 0:06:20.560 --> 0:06:22.679 dollars to fix it, so that would never happen again. 0:06:22.880 --> 0:06:26.200 We've never invested depending on that, Thank you, very much. 0:06:26.360 --> 0:06:28.359 Always a pleasure to have you with us. Ken Goldstein 0:06:28.560 --> 0:06:32.320 is economist for the Conference Board. Uh, well, we know 0:06:32.520 --> 0:06:35.880 it was down zero point two in the month of August. 0:06:36.360 --> 0:06:38.919 You're listening to taking Stock. I'm pim Fox, my co 0:06:39.000 --> 0:06:41.880 host Kathleen Hayes, and this is Bloomberg.