WEBVTT - KPMG's Hunter: Weak Corporate Investment Held Back GDP (Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg eleven brio to Washington,

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<v Speaker 1>d C, Bloomberg to Boston, Bloomberg twelve hundred to San Francisco,

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<v Speaker 1>Bloomberg nine to the countries when he's at JAM General

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<v Speaker 1>one nineteen and around the globe the Bloomberg Radio plusathen

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<v Speaker 1>Bloomberg dot com. This is taking Stock. I'm Kathleen Hayes

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<v Speaker 1>along with pim Fox. Janet Yellen speaks and says another

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<v Speaker 1>rate hike in the next few months appropriate we get

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<v Speaker 1>revised first quarter g D p PM. We've got a come,

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<v Speaker 1>got a triffic one to punch in this half hour

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<v Speaker 1>to look at all this stuff, what it means for

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<v Speaker 1>the economy, for the Fed and the markets. Yes, we'll

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<v Speaker 1>be speaking with Constance Hunter, chief economist at KPMG. Right now,

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<v Speaker 1>let's speak with Katherine Cowdery in the Bloomberg newsroom with

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<v Speaker 1>the Bloomberg Business Flash. Thank you him and Bloomberg. Taking

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<v Speaker 1>Stock is brought to you by National Realty Returns on

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<v Speaker 1>cash and rented real estate. Find them at n r I,

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<v Speaker 1>a dot net. Well stocks never their earlier advanced. The

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<v Speaker 1>dollaris send it as gains and treasuries fell after FED

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<v Speaker 1>Reserve Chair Janet Yellen said an interest rate increase in

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<v Speaker 1>the coming months may be appropriate. Echoing recently marks by policymakers.

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<v Speaker 1>Speaking at Harvard University, yell And stopped short of giving

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<v Speaker 1>an explicit hint that the FED would act next month.

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<v Speaker 1>Julian emanuel Us Equity and Derivative Strategy to V says

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<v Speaker 1>it is time for the Fed to take action. The

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<v Speaker 1>data is supportive, the economy is getting better on virtually

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<v Speaker 1>all fronts. The GDP was revised higher this morning. Housing

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<v Speaker 1>has been very strong, the confidence numbers are good, the

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<v Speaker 1>retail sales are good, and it's it's time for investors

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<v Speaker 1>who actually, perversely are are still very cautious right now. Uh,

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<v Speaker 1>They're going to realize that we check the markets every

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<v Speaker 1>fifteen minute throughout the trading day. DAL Industrial Average is

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<v Speaker 1>up twenty three points an eighth of a percent is

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<v Speaker 1>trading at seventeen thousand, eight hundred fifty one. Smp F

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<v Speaker 1>I Funded up five points at quarter percent to two

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<v Speaker 1>thousand ninety five. Fanasta ACT is up twenty three points

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<v Speaker 1>half a percent, trading at four West Texas Intermediate Crude

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<v Speaker 1>oil down twenty one cents a barrow for tens of

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<v Speaker 1>a percent at seven s about, gold is down eleven

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<v Speaker 1>dollars ten cents a ounce at twelve eleven sixty, and

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<v Speaker 1>the tenure Treasury is down six thirty seconds with the

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<v Speaker 1>yield of one point eight five percent. Among today's top

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<v Speaker 1>business stories, Key corps four point one billion dollar bid

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<v Speaker 1>to buy First Niagara Financial is apparently facing some questions

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<v Speaker 1>concerning a federal investigation into First Niagara's minority lending practices.

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<v Speaker 1>Two people familiar with the matter say the Justice Department

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<v Speaker 1>began examining more than two years ago whether First Niagara

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<v Speaker 1>violated a federal lauthor prohibits discrimination in issuing loans. It's

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<v Speaker 1>two thirty two on Wall Street. Let's get enough date

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<v Speaker 1>if some of the other stories were following. On Bloomberg

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<v Speaker 1>Radio today, Katherine, thank you from the Bloomberg News Room.

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<v Speaker 1>I'd Mark Crumpton, Egypt' chief investigator says this search for

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<v Speaker 1>the egypt airplane that crashed last week, killing all sixty

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<v Speaker 1>six people on board as narrowed to a three mile

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<v Speaker 1>wide area in the Mediterranean Sea that based on signals

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<v Speaker 1>from the plans emergency beacon. That information was from the

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<v Speaker 1>day of the crash. May nine, no new signals have

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<v Speaker 1>been received. President Obama made history today in Hiroshima, laying

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<v Speaker 1>a wreath at the site of the first to S

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<v Speaker 1>nuclear bomba attack. The President urged moral progress alongside scientific achievements,

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<v Speaker 1>mindset about war itself, to prevent conflicts through diplomas, and

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<v Speaker 1>strive to end conflicts after they've begun. Mr Obama is

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<v Speaker 1>the first sitting US president to visit Hiroshima. He didn't

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<v Speaker 1>apologize for the U S action, but said the memory

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<v Speaker 1>of the atomic bombing must never fade. Speaking at the

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<v Speaker 1>National Press Club today, CDC director Thomas Frieden said the

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<v Speaker 1>US now has its first case of a patient infected

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<v Speaker 1>with bacteria found to be resistant to all known antibiotics.

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<v Speaker 1>Medicine cabinet is empty for some patients. It is the

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<v Speaker 1>end of the route for antibiotics unless we act urgently.

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<v Speaker 1>City Bike says it topped to daily ridership record on Wednesday,

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<v Speaker 1>when more than fifty three thousand people took out bikes.

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<v Speaker 1>It also happened to be the warmest day in the

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<v Speaker 1>city since last fall. The previous record was fifty two thousand,

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<v Speaker 1>seven oh six set last September. Global News twenty four

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<v Speaker 1>hours a day powered by our twenty four hundred journalists

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<v Speaker 1>in more than one hundred fifty news deuros around the world.

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<v Speaker 1>From the Bloomberg news Room by Mark Crumpton, Catherine, thank you,

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<v Speaker 1>and recapping down industrial leverages up twenty three points, trading

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<v Speaker 1>at seventeen thousand, eight hundred fifty one s andp f

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<v Speaker 1>I funded up five point to two thousand. Nassack hired

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<v Speaker 1>by twenty three trading at four And that's a Bloomberg

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<v Speaker 1>business flash. You're listening to Taking Stock with Kathleen Hayes

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<v Speaker 1>and Pimpbox on Bloomberg Radio. Speaking at a panel discussion

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<v Speaker 1>at the Ratcliffe Institute for Advanced Study at Harvard University,

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<v Speaker 1>fed A Reserve Chair town At Yelling said that a

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<v Speaker 1>rate increase would be a p opriate probably in the

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<v Speaker 1>coming months, if the economy and labor market continue to strengthen.

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<v Speaker 1>Let's find out more and get her thoughts on Chair

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<v Speaker 1>Yellen's conversation. Want to introduce Constance Hunter, Chief Economist KPMG.

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<v Speaker 1>You can follow Constance Hunter on Twitter at Constance Hunter. Alright,

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<v Speaker 1>Constance Hunter, what do you make of Chair Yellen's conversation

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<v Speaker 1>and comments about the appropriate increase in interest rates probably

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<v Speaker 1>in the coming months. Yeah, Hi, pam Um Kathleen. He's

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<v Speaker 1>just just tweeted and asked me if I thought her

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<v Speaker 1>comments were hawkish, dovish, wonkish or impish, and uh, I'm

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<v Speaker 1>gonna go with dovish, because if she were hawkish, she

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<v Speaker 1>would be saying things like it's appropriate for the SAID

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<v Speaker 1>to raise now because it takes time for monetary policy

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<v Speaker 1>to work through the system. She'd be legitimizing a rate

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<v Speaker 1>hike um in in more concrete and um assertive lane

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<v Speaker 1>which and she's definitely in a wait and see mode.

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<v Speaker 1>But let me prepare you that there's a very good

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<v Speaker 1>chance we will raise, right, So she doesn't want to

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<v Speaker 1>be the markets to be surprised if the Said does

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<v Speaker 1>raise in June or July, and I think they probably will.

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<v Speaker 1>The thing that could hold them back is what's going

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<v Speaker 1>on in the UK with the vote for England to

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<v Speaker 1>remain or leave the European Union. Because should that vote

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<v Speaker 1>go for UH route leaving the European Union, and it

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<v Speaker 1>happens just the day after the meeting, um, so they,

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<v Speaker 1>depending on how the polling is, they may wait to

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<v Speaker 1>find out that result because it would cause havoc in

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<v Speaker 1>the market to New yor term. So let's take a look.

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<v Speaker 1>And I'm happy hear you say that, because we're kind

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<v Speaker 1>of joking the top of the show. I would have

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<v Speaker 1>lost money if I was a trader this afternoon because

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<v Speaker 1>I was listening to her, going gosh, she doesn't sound

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<v Speaker 1>talkished to me. She almost sounds stublish. So I'm happy

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<v Speaker 1>that you are an expert FED watcher, and that's how

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<v Speaker 1>you're taking it on it too. But there are people

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<v Speaker 1>who think that she was on the hawker side GDP

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<v Speaker 1>though zero. The talk is to the she talk is

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<v Speaker 1>compared to expectations, right, there's an expectation was that the

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<v Speaker 1>FED was on you know, hold for the whole year.

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<v Speaker 1>She's not hawk ish, but she's dove is compared to

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<v Speaker 1>four rate hikes as of September. She's dove is compared

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<v Speaker 1>to some of the other members of the f O

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<v Speaker 1>M c UM. But I don't think that means if

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<v Speaker 1>she raises in June July, there's a big good chance

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<v Speaker 1>they only have one rate hike this year. So the

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<v Speaker 1>GDP number, what do you have to say about that?

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<v Speaker 1>We know she's concerned about low productivity. She mentioned how

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<v Speaker 1>output has been unusually low in this recovery. But what

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<v Speaker 1>do you see constance as you pull apart all these

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<v Speaker 1>signals in that report and others. How how much are

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<v Speaker 1>you going to pick up in the second and third

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<v Speaker 1>quarters in the FED chair watching that? Yeah? Absolutely, so,

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<v Speaker 1>so let me go through. There's there's the there's this

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<v Speaker 1>sort of not such great components of GDP which is

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<v Speaker 1>exactly what you mentioned, and and that stems from corporate

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<v Speaker 1>investment which has been really weak. And if we looked through,

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<v Speaker 1>you know, there's a bunch of different components of corporate investment,

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<v Speaker 1>so UM, there's investment in structures equipment UM, and and

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<v Speaker 1>that is where we see real weakness from the fall

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<v Speaker 1>in the in the oil price and the fall and

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<v Speaker 1>investment in the oil and gas sector. But there's another

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<v Speaker 1>section so that could be viewed as temporary, and it

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<v Speaker 1>certainly had a big drag on GDP UM in almost

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<v Speaker 1>seventy four bases points. So we had that not fallen

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<v Speaker 1>as much we were to see much younger growth last year.

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<v Speaker 1>But there's another component that is intellectual property products, so

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<v Speaker 1>software research and development UM, entertainment, literary and artistic UH

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<v Speaker 1>investment and those first two software research and development have

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<v Speaker 1>not been as strong as we would like to see,

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<v Speaker 1>and those are the things that help determine future productivity growth.

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<v Speaker 1>So she has reason to be concerned there. How some

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<v Speaker 1>wage increases, if there are any tell us about that

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<v Speaker 1>and how that figures into your thinking. So well, when

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<v Speaker 1>we think about um reaches and the relationship between inflation

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<v Speaker 1>and the relationship between growth, which is what the FED

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<v Speaker 1>is looking at, we need to look not just at

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<v Speaker 1>wrage wrage growth, but we need to add waste growth

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<v Speaker 1>to jobs growth to get total income games because that

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<v Speaker 1>is where the pressure comes through the economy and impacts inflation.

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<v Speaker 1>So when we look at those two things together, we

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<v Speaker 1>get about a four and a half percent increase year

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<v Speaker 1>over year, and that's what we were getting last year.

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<v Speaker 1>We're looking to continue to get that this year, and

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<v Speaker 1>that is enough, UH in my view, to support some

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<v Speaker 1>pressure on prices. Now, the most reclent PC gator released

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<v Speaker 1>this morning doesn't necessarily support that, and that's because goods

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<v Speaker 1>costs have gone way down in the last quarter UM.

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<v Speaker 1>But when you look at at the consumptument is happening,

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<v Speaker 1>we're seeing households in the last two quarters really shift

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<v Speaker 1>a lot of their consumption to services and that pressure

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<v Speaker 1>on services prices. We are services economy is I think

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<v Speaker 1>what's going to push the FED over the edge to

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<v Speaker 1>raving to raving rates sooner and that is the summer

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<v Speaker 1>juno July for the hike. Is that the only one

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<v Speaker 1>this year or will it be more September. I think

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<v Speaker 1>it's pretty likely that's the only one this year. One

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<v Speaker 1>of the things that Yellen has said consistently is if

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<v Speaker 1>we go sooner, we can go slower. If we wait

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<v Speaker 1>too long, we're going to have to go faster. And

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<v Speaker 1>I think, all things being equal, for preferences to go

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<v Speaker 1>sooner and slower, slower and sooner. Well, thanks very much,

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<v Speaker 1>Constance Hunter, Chief Economist, KPMG. Again, pm I feel a

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<v Speaker 1>little bit vindicated that I was not the only person

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<v Speaker 1>listen to Janet yelling. You thought, gee, she didn't Sunhawk.

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<v Speaker 1>I think maybe she sounded bevish. Well, but we are.

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<v Speaker 1>We're gonna put this another very Another person who watches

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<v Speaker 1>all of this very closely will probably ask us about

0:10:49.160 --> 0:10:50.839
<v Speaker 1>every guest on this show today what they made a

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<v Speaker 1>Janet Yellen? And if you want to tweet to at

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<v Speaker 1>pim Fox, at caltheen underscore Hayes Feel Free. This is

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<v Speaker 1>Limberg Radio. This Hampton's Commuter Minute is brought to by Landrover.

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