WEBVTT - Inflation and Fed Independence 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.120 us live on YouTube. 0:00:27.200 --> 0:00:31.400 We welcome now Glenn Hubbard, who has defined the growth 0:00:31.440 --> 0:00:35.360 of the Columbia Business School. He stole Abby Joseph Cohen 0:00:35.760 --> 0:00:38.960 from Golden Sachs as well, but far more. He is 0:00:39.000 --> 0:00:42.480 a Republican of a different cut. You do not hear 0:00:42.520 --> 0:00:46.800 his name discussed by President Trump. Maybe that will change. 0:00:47.200 --> 0:00:51.080 Professor Robert, thank you so much for joining Bloomberg's leasure. 0:00:51.560 --> 0:00:55.240 Does he need to widen the reach of his view 0:00:55.280 --> 0:00:59.080 of potential chairman? Does he need to go beyond the 0:00:59.200 --> 0:01:04.040 comfortable Trump minions and look out to Clarida Hubbard and others. 0:01:05.000 --> 0:01:08.120 Look, I think the President's got reasonable names. He'll do 0:01:08.240 --> 0:01:10.840 what he's going to do. I think the show that 0:01:10.920 --> 0:01:13.680 we saw yesterday and other things are harmful for the 0:01:13.720 --> 0:01:17.080 Fed and for his own goals of getting lower interest rates. 0:01:17.120 --> 0:01:20.119 It's not obvious to me that FED policy is too 0:01:20.160 --> 0:01:21.840 tight at the moment. If you just look at a 0:01:21.880 --> 0:01:24.759 simple tailor rule. And it is obvious to me. If 0:01:24.800 --> 0:01:28.480 you continue to beat up the Fed, you risk raising 0:01:28.520 --> 0:01:32.600 inflation expectations, and you risk raising term creamium in long rates, 0:01:32.640 --> 0:01:33.959 and it's the long rates to count. 0:01:34.360 --> 0:01:38.840 You are definitive on a cogent discussion of supply side. 0:01:39.200 --> 0:01:43.319 The arc theme of the Trump administration is rate cuts, 0:01:43.440 --> 0:01:48.280 tax cuts will stimulate growth? Can tax cuts stimulate growth? 0:01:48.600 --> 0:01:52.360 Or is Powell bucked in boxed in by legislation. 0:01:53.840 --> 0:01:56.760 Well, tax cuts of the right kind can stimulate growth. 0:01:56.800 --> 0:02:01.040 In the OBBBA that just passed, we did have expensing 0:02:01.040 --> 0:02:03.600 a business investment. That's a good thing, better treatment of 0:02:03.720 --> 0:02:05.840 R and D, but we also had a big deficit 0:02:05.960 --> 0:02:09.560 finance tax cut. The best policies for growth would be 0:02:09.680 --> 0:02:15.040 changes in regulation, for permitting some housing reform, and frankly, 0:02:15.160 --> 0:02:18.320 high skilled immigration that the administration doesn't seem that interested. 0:02:18.480 --> 0:02:20.280 Glenn, when you came out of Florida, and I should 0:02:20.360 --> 0:02:23.520 point out, folks, if he's the second Hubbard in the family. 0:02:24.360 --> 0:02:27.079 The other Hubbard is with the band Sawyer Brown, which 0:02:27.200 --> 0:02:31.200 is annoyeded, which is noted Glenn, when you came out 0:02:31.240 --> 0:02:34.320 of Florida, you went to Harvard, you read Alan meltzer 0:02:34.400 --> 0:02:38.280 cover to cover, Alan did the two volume FED history. 0:02:38.639 --> 0:02:41.800 Are we at a point like at other moments, including 0:02:41.840 --> 0:02:45.960 the seismic McChesney Martin moment in nineteen fifty one where 0:02:46.000 --> 0:02:48.000 we risk FED independence. 0:02:49.160 --> 0:02:51.560 I think we are at that moment. I think a 0:02:51.560 --> 0:02:55.240 good FED chair will block that much as Chair Martin did. 0:02:55.639 --> 0:02:58.560 But I worry when President Trump says I'd like lower 0:02:58.680 --> 0:03:01.600 rates because I would like to help the fiscal situation. 0:03:02.120 --> 0:03:04.880 Presidents often say they want lower rates to help the 0:03:04.919 --> 0:03:08.240 economy grow or something like that. That's standard politics. This 0:03:08.400 --> 0:03:11.040 is something different, and I worry about it. 0:03:11.760 --> 0:03:14.880 And Glenn talk to us about just tariffs in general. 0:03:14.919 --> 0:03:19.640 How do you when you're teaching your Classic Columbia, how 0:03:19.680 --> 0:03:22.240 do you talk to them about this? Tariffs in general? 0:03:22.560 --> 0:03:25.560 How should they be used? How are they not used? 0:03:25.639 --> 0:03:28.880 Well, that's a great question. I mean tariffs are at 0:03:28.919 --> 0:03:32.400 tax they're not really inflationary. There one time changes in 0:03:32.440 --> 0:03:35.400 the price level. I wouldn't recommend them, but I don't 0:03:35.440 --> 0:03:38.200 think inflation is the biggest reason. I think the reason 0:03:38.280 --> 0:03:40.920 is you're taxing and distorting supply chains. You know, people 0:03:40.920 --> 0:03:44.800 forget two basic things. One at tax on imports is 0:03:44.840 --> 0:03:47.560 actually a tax on exports, and the reason for that 0:03:47.720 --> 0:03:51.040 is two one movements in the dollar and second the 0:03:51.080 --> 0:03:54.520 fact that American imports are largely intermediate goods. You hurt 0:03:54.560 --> 0:03:57.160 manufacturing by doing it. The second point is it's not 0:03:57.240 --> 0:03:59.960 the current account, it's the capital account. All the current account. 0:04:00.080 --> 0:04:02.360 This is the mirror of the capitol account. You can 0:04:02.360 --> 0:04:04.120 put all the tariffs you want on. You're not going 0:04:04.160 --> 0:04:07.160 to change the current account until you change the capitol. 0:04:07.280 --> 0:04:09.520 For all of you nationwide. Glenn Hubbard with US of 0:04:09.520 --> 0:04:15.000 Columbia Business School, just an outstanding two decades there building 0:04:15.040 --> 0:04:18.520 out the jewel of the upper Upper west Side to Morningside, 0:04:18.800 --> 0:04:21.359 his professor Hubbard. In a few minutes we have left 0:04:21.360 --> 0:04:23.920 with you. I have to go back to the FED 0:04:24.480 --> 0:04:27.480 and look at this concept of descent of a younger 0:04:27.520 --> 0:04:31.040 Bank of England where Catherine Mann and others go after 0:04:32.120 --> 0:04:35.840 Governor Bailey. There was descent a bit Larry Meyer writing 0:04:35.880 --> 0:04:39.480 about it with Chairman Greenspan. Do we have a FED 0:04:39.680 --> 0:04:44.279 where whatever President Trump does into twenty twenty six, that 0:04:44.360 --> 0:04:47.960 the governors and the presidents can protect the FED by 0:04:48.040 --> 0:04:50.560 voting against a Trump chairman. 0:04:51.960 --> 0:04:56.000 That's certainly possible, And obviously if the chair had unwise 0:04:56.080 --> 0:04:59.400 policy decisions. I think likely. I think President Trump will 0:04:59.400 --> 0:05:02.560 wind up me making a good FED choice. My concern 0:05:02.680 --> 0:05:05.760 is really the atmospherics around the FED that really come 0:05:05.800 --> 0:05:06.960 from the President himself. 0:05:08.080 --> 0:05:10.440 Look, Glynn, just two more questions here. I want to 0:05:10.440 --> 0:05:13.000 get one, and I know Paul wants to speak to 0:05:13.000 --> 0:05:17.200 you as well. What is the best outcome for the 0:05:17.360 --> 0:05:20.600 advisors to the president sitting on the couch in the 0:05:20.640 --> 0:05:25.600 Oval office is what's the Hubbard recommendation to the Secretary 0:05:25.640 --> 0:05:28.640 of Treasury to guide the president's thinking? 0:05:29.520 --> 0:05:32.719 Pivot to growth? I mean the President has already said, look, 0:05:32.839 --> 0:05:36.080 I've got my OBBB done. Great. He says he'll have 0:05:36.160 --> 0:05:40.600 the tariffs done by September Labor Day. Okay, fine, I 0:05:40.720 --> 0:05:43.200 don't agree with them, but fine, pivot to growth and 0:05:43.200 --> 0:05:45.120 there's a list of things you could do to get 0:05:45.160 --> 0:05:48.120 the economy growing again. It's what Secretary Bessett talks about, 0:05:48.160 --> 0:05:50.520 It's what the President talks about. How about doing it right? 0:05:50.839 --> 0:05:53.039 Is Clariena on the short list? I mean, you two 0:05:53.160 --> 0:05:56.520 argued fought My Cats and Dogs at Columbia years ago. 0:05:56.560 --> 0:05:59.880 But as Richard Clarita on the shortlist for Glenn Hubbard. 0:06:00.360 --> 0:06:03.680 I think rich Clarita is a phenomenal economist. The only 0:06:03.720 --> 0:06:07.080 shortlist that matters is the President's Thank Cldhulbard. 0:06:07.320 --> 0:06:10.080 That is true, Thank you so much, greatly appreciate it. 0:06:10.120 --> 0:06:12.760 He's with Columbia at Business School and should be on 0:06:12.839 --> 0:06:14.680 any shortlist for the fit. 0:06:19.760 --> 0:06:23.320 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:06:23.400 --> 0:06:26.560 weekday afternoons from seven to ten am Eastern Listen on 0:06:26.640 --> 0:06:30.279 Applecarplay and Android Auto with the Bloomberg Business app, or 0:06:30.440 --> 0:06:32.040 watch us live on YouTube. 0:06:32.120 --> 0:06:35.160 There was a revolution in nineteen forty seven, which is 0:06:35.200 --> 0:06:40.039 sort of where modern statistics of economics came in vasily 0:06:40.120 --> 0:06:44.360 Leontifan and others. Before that, there was an art to 0:06:44.400 --> 0:06:48.080 it that was decided of vailue. The Conference Board had 0:06:48.080 --> 0:06:50.200 a lot to do with it, and another one was 0:06:50.279 --> 0:06:54.800 Jeffrey Moore. The Economic Cycle Research Institute. Latron Achathan has 0:06:54.839 --> 0:06:59.320 carried the torch forward here and releases today a jaw 0:06:59.400 --> 0:07:05.839 dropping future inflation grade going against consensus discuss. 0:07:07.000 --> 0:07:09.359 Well, we as you, as you said in the lead in, 0:07:09.400 --> 0:07:11.520 we're doing something a little different. What we're doing is 0:07:11.520 --> 0:07:16.160 looking at the direction of movement for growth, direction of 0:07:16.200 --> 0:07:19.920 movement for inflation on the latter point on this inflation cycle. 0:07:19.960 --> 0:07:23.840 It's different from cycles and growth. They are very clear cycles. 0:07:23.880 --> 0:07:27.160 They're totally different, they're unique. We have future inflation gauge, 0:07:27.160 --> 0:07:31.200 which anticipates the direction of travel. There news slash is 0:07:31.240 --> 0:07:35.880 it's down. Okay? Really yeah? So now our job is 0:07:35.880 --> 0:07:37.480 to figure out what does that mean? What the heck 0:07:37.520 --> 0:07:38.000 does that mean? 0:07:38.120 --> 0:07:40.880 Is Powell behind? Does a president have an argument that 0:07:40.960 --> 0:07:43.800 mister Powell and the feed is behind because of your 0:07:44.200 --> 0:07:46.240 future inflation gage? 0:07:46.520 --> 0:07:48.680 Well, let's say that there's not a big argument to 0:07:48.720 --> 0:07:53.400 be extra hawkish here, and so maybe for different reasons, 0:07:54.960 --> 0:07:59.040 the directional move here is to the downside. I know 0:08:00.040 --> 0:08:03.880 people are wondering, why, why, why listen to this indicator? Right? Look, 0:08:04.000 --> 0:08:07.720 it has nailed these directional calls as far as I 0:08:07.720 --> 0:08:10.440 can remember, which is roughly to the nineteen nineties when 0:08:10.480 --> 0:08:14.640 I started doing this, and big calls more recently would 0:08:14.680 --> 0:08:17.920 be in twenty one to the downside. Very critical call 0:08:18.360 --> 0:08:21.440 was in early twenty four that we were going into 0:08:21.480 --> 0:08:25.760 sticky inflation, which just messed up everybody. And here, with 0:08:25.920 --> 0:08:28.160 all the presumption that tariffs are going to bring this 0:08:28.240 --> 0:08:32.080 inflation spiral to the four, the indicators are moving to 0:08:32.160 --> 0:08:35.559 the downn side. So yeah, we had some goods inflation 0:08:35.640 --> 0:08:40.760 over the summer, but core inflation is just going to 0:08:40.840 --> 0:08:42.640 sit there and simmer for the time being. It's not 0:08:42.760 --> 0:08:47.120 running away. Services inflation is actually easing a bit here. 0:08:47.840 --> 0:08:51.160 I think the consumer the economy just can't bear it, 0:08:51.880 --> 0:08:55.480 and so try as they may, and they will try. 0:08:55.520 --> 0:08:58.960 All the businesses are going to try. They're not going 0:08:59.040 --> 0:09:00.959 to be able to push it too hard. Consumers may 0:09:01.040 --> 0:09:04.040 ultimately pay the price here, but inflation is not going 0:09:04.120 --> 0:09:04.840 to run away. 0:09:04.880 --> 0:09:07.800 Interesting, So I mean, so does that suggest that again, 0:09:08.559 --> 0:09:12.720 whoever through the supply chain, the importers, the distributors, the wholesalers, 0:09:13.000 --> 0:09:15.960 the retailers, are they kind of all in some way, 0:09:16.160 --> 0:09:19.040 shape or form eating that margin. 0:09:18.840 --> 0:09:21.920 Along the way. I think eventually it gets to the consumer. Okay, 0:09:22.160 --> 0:09:24.280 look at the end of the day, we all pay right, 0:09:24.600 --> 0:09:27.559 and we are there's no free lunch, Sure we are, 0:09:27.600 --> 0:09:32.440 But the inflation spiral, which is that's the bogeyman for 0:09:32.480 --> 0:09:34.319 the Fed. They're free. They're like, wait, wait, wait, is 0:09:34.360 --> 0:09:36.959 there some if we have a step up in inflation, 0:09:37.000 --> 0:09:39.959 does this the beginning of many steps up? The answer, 0:09:40.240 --> 0:09:42.080 as far as we can see with the cyclical stuff 0:09:42.280 --> 0:09:44.959 is no Now. Remember you're talking about regime change. I'm 0:09:44.960 --> 0:09:46.840 looking at the screens. They're all regime change on some 0:09:47.080 --> 0:09:50.920 way or another. Think back to the early seventies. I 0:09:50.960 --> 0:09:53.120 want to go to old times for Tom here. Okay, 0:09:53.320 --> 0:09:57.400 think back to the early seventies. So so Nixon comes in, 0:09:57.440 --> 0:09:59.720 He's doing all this stuff. Everybody said, this is superinflation. 0:09:59.760 --> 0:10:04.040 Are it? Ultimately was, but not right away and on 0:10:04.080 --> 0:10:06.319 a cyclical basis, we're looking at a few quarters. 0:10:06.760 --> 0:10:09.840 That's not the trade and latsy. What's so important here 0:10:10.000 --> 0:10:14.439 is how the corporations adapt. You're basically saying, everybody, calm down, 0:10:15.160 --> 0:10:19.240 what's the history you see at the Economic Cycle Research Institute, 0:10:19.480 --> 0:10:22.679 all those corporate clients that think your God, your religion, 0:10:23.000 --> 0:10:24.160 how do they adapt to this? 0:10:24.480 --> 0:10:27.240 Make hay while the sun's shining. I think the wheels 0:10:27.240 --> 0:10:29.800 aren't coming off right here. I think there is a 0:10:29.800 --> 0:10:32.560 little pricing power with the sticky inflation such as it is. 0:10:33.080 --> 0:10:35.439 Take advantage of it as best you can. And you're 0:10:35.440 --> 0:10:38.120 seeing some of the companies you were just reporting trying 0:10:38.120 --> 0:10:40.959 to do the best they can there for the time being. 0:10:41.520 --> 0:10:46.040 The consumer writ large, that's wealthy households and lower income 0:10:46.080 --> 0:10:52.000 households are bearing it. Okay, I am not sugarcoating what's 0:10:52.000 --> 0:10:54.480 going on with the lower income households. They are under 0:10:54.640 --> 0:10:57.079 a great deal of stress here and that's not going away. 0:10:57.360 --> 0:10:58.120 That'll continue. 0:10:58.520 --> 0:11:02.400 Retail sales going to get that today, still calling for 0:11:02.480 --> 0:11:06.920 some decent growth in retail sales. I kind of guess 0:11:06.960 --> 0:11:07.439 that goes to. 0:11:07.440 --> 0:11:10.400 Your call on the consumer there. Yeah, they're gonna Nobody 0:11:10.440 --> 0:11:14.480 stopped yet, nobody stopped buying yet, and so you still 0:11:14.559 --> 0:11:17.520 have jobs growth even though it's it's it's in an 0:11:17.559 --> 0:11:19.160 easy trend. It's not collapsing. 0:11:19.640 --> 0:11:19.800 Uh. 0:11:19.880 --> 0:11:23.560 These are all parts. So so we we have the 0:11:23.720 --> 0:11:27.880 stag part right, things are slowing. Ye, don't have the 0:11:27.920 --> 0:11:31.360 inflation cycle, right, we know no inflation, no inflation part right here. 0:11:31.840 --> 0:11:34.440 So if you're in the federal reserve, I mean, yeah, 0:11:34.640 --> 0:11:35.040 I just. 0:11:35.080 --> 0:11:37.400 I guess it's another reason to just sit on your. 0:11:37.280 --> 0:11:39.960 Hands, right, He's going yeah, I mean, look, you know, 0:11:40.080 --> 0:11:42.440 sit on your hands. He's gonna take it because he's he's, 0:11:42.600 --> 0:11:45.120 you know, as the he's the lightning rod for the 0:11:45.160 --> 0:11:47.440 moment he does a job, he still has a job. 0:11:47.520 --> 0:11:51.640 He'll he'll ride it out. Ultimately, the president will appoint 0:11:51.640 --> 0:11:54.280 someone more dubbish. It's his remant to do that. 0:11:54.280 --> 0:11:55.040 He's going to do that. 0:11:57.200 --> 0:12:00.320 You know, really big picture, do you want I want 0:12:00.360 --> 0:12:02.320 the administration capturing the Fed? 0:12:02.600 --> 0:12:02.760 Yeah? 0:12:02.880 --> 0:12:05.559 Probably not. And that's what the market gets freaked out about. 0:12:05.679 --> 0:12:08.200 So yesterday you see the reaction, and today there's a 0:12:08.240 --> 0:12:10.200 sigh of relief. I mean, you don't want to be 0:12:10.840 --> 0:12:13.199 Turkey today. You don't want to be the Fed. Back 0:12:13.240 --> 0:12:14.319 in the twenties, we. 0:12:14.320 --> 0:12:15.960 Got to run. I want to get a summer in this. 0:12:16.000 --> 0:12:19.320 So you have no recession call within all your different cycles. 0:12:18.920 --> 0:12:21.520 Not no, no, no. In fact, there's a few right 0:12:21.559 --> 0:12:22.360 spots ail. 0:12:22.160 --> 0:12:23.080 There, like a year ago. 0:12:23.280 --> 0:12:27.320 Yeah, everybody calm down, Yeah, everybody calmed down. 0:12:28.240 --> 0:12:30.200 Okay, love turn on Tom. Thank you so much. 0:12:30.679 --> 0:12:34.600 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:12:34.600 --> 0:12:37.640 starting at seven am Eastern on Apple Corplay and Android 0:12:37.640 --> 0:12:40.679 Auto with the Bloomberg Business App. You can also listen 0:12:40.760 --> 0:12:44.040 live on Amazon Alexa from our flagship New York station, 0:12:44.600 --> 0:12:47.240 Just say Alexa play Bloomberg eleven thirty. 0:12:47.559 --> 0:12:50.680 I was on Fifth Avenue sort of uptown a little 0:12:50.720 --> 0:12:54.000 bit looking down and there's a Lewis Viuten store. They did. 0:12:54.040 --> 0:12:56.760 It's like a luggage thing. They redid it to get 0:12:56.760 --> 0:12:59.840 an update here in the summer on the state of retail, 0:13:00.080 --> 0:13:04.440 and Telsea joins US Telsey Advisory Group. Luxuries a little 0:13:04.440 --> 0:13:07.880 bit weak, Dana, are the fancy people shopping at Walmart? 0:13:09.280 --> 0:13:11.480 There is a trade down And frankly, thank you Tom 0:13:11.520 --> 0:13:14.240 for having me. Hope your summer's going well. Yes, there 0:13:14.240 --> 0:13:16.880 has been a trade down that's going on. Look what 0:13:16.920 --> 0:13:19.760 you've even heard Walmart say where some of the biggest 0:13:19.760 --> 0:13:22.800 parts of their growth are coming from their hire income consumers. 0:13:23.080 --> 0:13:25.920 But you know, you've had two reports last week. You've 0:13:25.960 --> 0:13:31.119 had Brunello Cucinelli who talked about double digit sales. Yesterday 0:13:31.160 --> 0:13:35.120 you had Richmond. Yeah, the jewelry business overall was up 0:13:35.160 --> 0:13:39.680 eleven percent, continued the momentum from the prior quarter. And frankly, 0:13:39.840 --> 0:13:43.240 every region in the world was up six Every channel 0:13:43.960 --> 0:13:47.559 was up six percent in terms of wholesale retail on online. 0:13:47.720 --> 0:13:50.920 When you look at the regions, Japan was down because 0:13:50.960 --> 0:13:54.520 of a fifty nine percent comparison. You have Asia Pacific 0:13:54.720 --> 0:13:58.360 right basically with flat even including a seven percent drop 0:13:58.480 --> 0:14:02.480 in China, and you've had the Americas being pretty solid 0:14:02.840 --> 0:14:06.200 along with Europe. So it's the halves and the have nots. 0:14:06.280 --> 0:14:08.880 Right now, I agree with that, and I totally buy 0:14:08.920 --> 0:14:11.760 into it. Lisa was talking to me, Lisa Matteo, and 0:14:11.800 --> 0:14:13.880 you know, she and I remember back, you know, and 0:14:14.040 --> 0:14:17.240 well she doesn't remember. I remember the nineteen seventies and 0:14:17.320 --> 0:14:21.120 at Richemonk Cardier comes out with the Love Bracelet, the 0:14:21.280 --> 0:14:25.080 Medium model. This is a love collection. It's an iconic symbol. 0:14:25.360 --> 0:14:29.920 It's six one hundred dollars on your risk. That stuff's moving, Dana, 0:14:30.080 --> 0:14:31.400 isn't it. 0:14:31.400 --> 0:14:35.600 It is that stuff is moving. Iconic heritage means something. 0:14:35.920 --> 0:14:38.000 It can be sold. I think you're going to see 0:14:38.040 --> 0:14:41.720 that from her mez Alsough. But overall, the rate of 0:14:41.800 --> 0:14:45.600 growth for many of these companies still is slowing from 0:14:45.600 --> 0:14:46.600 what had happened. 0:14:46.840 --> 0:14:49.720 If Lisa Matteo had the Love Bracelet from Cardier, are 0:14:49.760 --> 0:14:52.160 you telling me she'd sell it at the real reel? 0:14:53.640 --> 0:14:55.080 I think you want to keep it. Why do you 0:14:55.120 --> 0:14:56.600 ever want to sell the Love bracelet? 0:14:56.680 --> 0:14:57.239 Exactly? 0:14:57.880 --> 0:15:00.480 Dana, talk to us about kind of the you know, 0:15:00.640 --> 0:15:02.480 the other side of the equation, the folks that are 0:15:02.520 --> 0:15:06.200 maybe on struggling a little bit economically. How do we 0:15:06.240 --> 0:15:09.200 see that in retail sales? Because I had a pretty 0:15:09.240 --> 0:15:12.080 solid retail sales number just here a couple of minutes ago. 0:15:12.960 --> 0:15:15.120 I know I've saw the retail sales number two. It 0:15:15.160 --> 0:15:18.120 is solid. I think overall what you've seen, you've seen 0:15:18.160 --> 0:15:21.320 that trade down, whether it's the dollar stores, whether it's 0:15:21.360 --> 0:15:25.760 the discounters and off price. Value is definitely winning and 0:15:25.800 --> 0:15:29.680 that lower income consumer, the strength of a labor market 0:15:29.840 --> 0:15:33.760 allows them the ability to spend, but perhaps the discretionary 0:15:33.800 --> 0:15:37.640 spend isn't as great. It is spending on essentials where 0:15:37.880 --> 0:15:40.960 you're seeing prices go up. We have a pricing tracker 0:15:41.000 --> 0:15:44.320 that we put out every Tuesday, eighty different items, the 0:15:44.360 --> 0:15:46.600 same eighty items. We've been doing it since the middle 0:15:46.640 --> 0:15:50.680 of April, and we haven't seen such a big change yet. 0:15:50.880 --> 0:15:54.800 We saw some footwear changes on the ons and the 0:15:54.880 --> 0:15:57.840 hookahs and the ugs, but you haven't seen a lot yet. 0:15:57.920 --> 0:16:01.320 And as we move through, we think the higher priced 0:16:01.360 --> 0:16:04.120 inventory will come in and then you'll see some changes, 0:16:04.120 --> 0:16:05.040 but that's still to come. 0:16:05.320 --> 0:16:08.880 Dana Telsea, with immense respect to your family's heritage, re 0:16:08.920 --> 0:16:13.120 apt around Bergdorf Goodman. Where is the department store across 0:16:13.160 --> 0:16:14.960 this nation in five years? 0:16:16.720 --> 0:16:21.000 Smaller than what it is today? But smaller it's getting 0:16:21.040 --> 0:16:24.440 even smaller. And look what you're seeing. You're seeing brands 0:16:24.480 --> 0:16:29.000 themselves open up their own stores and becoming much more 0:16:29.640 --> 0:16:33.760 integrated with figuring out who their core customer and community is. 0:16:34.080 --> 0:16:36.920 There's still going to be a place for relevant department stores, 0:16:37.240 --> 0:16:41.560 and certainly blooming Dale's what we're seeing Nordstrom do. They're 0:16:41.600 --> 0:16:45.800 having the opportunity to capture more contemporary brands and they're 0:16:45.800 --> 0:16:49.320 taking advantage of that right now. So I think it 0:16:49.400 --> 0:16:52.840 will be smaller and they'll know their customer better and 0:16:52.880 --> 0:16:55.440 hopefully be more relevant for some of them than they 0:16:55.440 --> 0:16:56.000 are today. 0:16:56.160 --> 0:16:57.960 There's the operative Dana Telsea. 0:16:57.960 --> 0:17:03.600 Exactly to every major retailer around the world, how are 0:17:03.640 --> 0:17:05.800 they What are they telling you in terms of their 0:17:05.840 --> 0:17:10.400 ability to maybe take these tariff costs into their own 0:17:10.440 --> 0:17:13.640 P and L versus maybe passing along to their consumers. 0:17:13.680 --> 0:17:14.240 What are you hearing? 0:17:15.600 --> 0:17:17.879 I'm hearing about a third to third a third. What 0:17:17.920 --> 0:17:20.560 I'm hearing is that a third of the change is 0:17:20.600 --> 0:17:23.720 going to be diversifying your sourcing. For example, whether you 0:17:23.800 --> 0:17:27.359 go from China, whether it's Cambodia, whether it's Vietnam, and 0:17:27.440 --> 0:17:29.720 knowing that every place is going to have some type 0:17:29.720 --> 0:17:32.200 of a tariff attached to it. But with the one 0:17:32.240 --> 0:17:34.439 thing they're all saying is you can't come to the 0:17:34.560 --> 0:17:38.400 US because the prices would go up that much. The 0:17:38.440 --> 0:17:42.360 second third of it is sharing the cost with the manufacturers, 0:17:42.840 --> 0:17:46.920 and the third third of it, the remainder, is raising prices, 0:17:46.960 --> 0:17:49.160 which none of them want to do. And that's why 0:17:49.160 --> 0:17:52.240 I don't think I'm seeing it in my pricing tracker yet. 0:17:52.560 --> 0:17:55.879 But the level of price increases that we're hearing at about, 0:17:56.280 --> 0:17:59.600 is it a mid single digit price increase with US? 0:17:59.600 --> 0:18:02.000 We're going to continue with Dana Tel's just Scott Kirby 0:18:02.560 --> 0:18:06.680 pilot for United Airlines coming up after MS Telsa, Bloomberg 0:18:06.720 --> 0:18:10.200 surveillance on your commute across the nation, Bloomberg surveillance on 0:18:10.280 --> 0:18:14.000 an elevator at Bergdorf Goodman. Right now, Dana, help me 0:18:14.040 --> 0:18:17.400 with where the Chinese are shopping? Like Reachmont comes out 0:18:17.440 --> 0:18:20.040 and they're all going to come out? Is it basically 0:18:20.359 --> 0:18:23.879 the zeitgeist says, Oh, China's flat on its back, except 0:18:23.920 --> 0:18:27.480 they're all shopping in Tokyo and Kuala Lumpar. How does 0:18:27.520 --> 0:18:28.000 that work? 0:18:28.960 --> 0:18:29.120 Well? 0:18:29.119 --> 0:18:33.120 Overall, they may still be shopping, but Japan has slowed 0:18:33.160 --> 0:18:36.400 because you're going up against the huge comparisons. They may 0:18:36.440 --> 0:18:39.720 still be going to Japan, but it's not an additional 0:18:39.840 --> 0:18:42.600 uptick from what you're saying there. And also it's the 0:18:42.640 --> 0:18:45.520 same thing with Europe and the Americas. A lot of 0:18:45.560 --> 0:18:48.400 them are shopping more within China than they are shopping 0:18:48.840 --> 0:18:52.800 outside of China, and it's something that's being watched very closely. 0:18:53.280 --> 0:18:56.120 I think that as we move through the earning season, 0:18:56.600 --> 0:18:59.440 I think there'll be more discussions about, well, when does 0:18:59.480 --> 0:19:02.480 the compare and stabilized so you get to flat and 0:19:02.520 --> 0:19:04.320 we're not there yet, Dana. 0:19:05.240 --> 0:19:10.360 Most of America, Walmart target those types of places. What's 0:19:10.440 --> 0:19:12.359 the business like there these days? 0:19:13.640 --> 0:19:16.400 Feels very solid when you think about Walmart, and Walmart 0:19:16.520 --> 0:19:20.160 keeps taking share. You're seeing it with new brands, You're 0:19:20.160 --> 0:19:23.280 seeing it with pricing. You think about what they can 0:19:23.320 --> 0:19:27.159 do also with online. Look at sixty percent of Walmart's 0:19:27.160 --> 0:19:31.960 sales or food, so they're destination for goods and for essentials, 0:19:32.359 --> 0:19:35.520 and it seems like they're a share gainer, as are 0:19:35.680 --> 0:19:40.040 the off pricers. I think Target overall is still working 0:19:40.119 --> 0:19:43.880 to find it's footing given the miscues that it's had. 0:19:45.080 --> 0:19:47.439 Let me the blue Button the Detroit Lions Blue button. 0:19:47.560 --> 0:19:49.960 I got to get this in for Lisa Mateo. Dana 0:19:50.000 --> 0:19:54.000 Telsey Gingham is so in what is sex that they 0:19:54.000 --> 0:19:56.160 have that they're doing with Gingham this summer. 0:19:56.440 --> 0:19:59.720 For Lisa Mateo, I think you're get to see more 0:19:59.720 --> 0:20:01.679 gig him. It is popular, But you know what the 0:20:01.720 --> 0:20:09.359 hottest trend is absolutely have you heard about La boo boos? 0:20:09.560 --> 0:20:12.879 Is Joe Feldman? Is Joe Feldman covering La boo boos? 0:20:13.920 --> 0:20:18.320 No, he's not covering labuobus. But it's basically there's la boufous, 0:20:18.400 --> 0:20:20.399 which are the fakes, there's La boo boos, which are 0:20:20.440 --> 0:20:23.160 the reals, and try to get your hands on one 0:20:23.600 --> 0:20:27.400 not so easy. But that is the hottest trend out 0:20:27.400 --> 0:20:30.760 there lately, and it just started in twenty nineteen. 0:20:30.960 --> 0:20:34.600 I held in my hands last night a gift from Shanghai, 0:20:34.720 --> 0:20:38.800 China to afterthought. She was so happy. It's a light 0:20:39.000 --> 0:20:42.840 blue it's like a rarer La boo boo and she's 0:20:42.920 --> 0:20:46.080 worried of wearing it on her bag because it's not 0:20:46.160 --> 0:20:49.320 the bag will get stolen after thoughts doing product? Are 0:20:49.359 --> 0:20:52.080 you kidding that way? But you know the laboo boo 0:20:52.119 --> 0:20:55.240 is the issue Dana Telsey, thank you for that nugget. 0:20:54.880 --> 0:20:56.600 Is information, absolutely great. 0:20:56.760 --> 0:20:59.520 She is the best. Dana TELSEI on the retail pulse 0:20:59.560 --> 0:21:02.960 of America, from Joe Felman's Big Boxes over to what 0:21:03.080 --> 0:21:10.880 luxury is doing here a black Away on Fifth Avenue. 0:21:11.520 --> 0:21:15.440 This is the Bloomberg Surveillance Podcast. Listen live each weekday 0:21:15.480 --> 0:21:18.520 starting at seven am Eastern on Apple Corplay and Android 0:21:18.520 --> 0:21:21.520 Auto with the Bloomberg Business app. You can also watch 0:21:21.600 --> 0:21:24.560 us live every weekday on YouTube and always on the 0:21:24.560 --> 0:21:25.680 Bloomberg terminal. 0:21:25.880 --> 0:21:29.760 This is a conversation of the day on multiple fronts. 0:21:30.240 --> 0:21:35.359 Francis Donald's work is exquisite in RBC Capital markets and 0:21:35.400 --> 0:21:38.760 now we're going to overlay all of the research abilities 0:21:38.800 --> 0:21:44.000 of the Royal Bank of Canada. Francis on tariffs that 0:21:44.119 --> 0:21:49.040 are eighteen percent bundled down from twenty percent bundled. That 0:21:49.160 --> 0:21:53.199 number will change tomorrow, but it's not three percent. You 0:21:53.280 --> 0:21:57.000 and your company are living this across the border down 0:21:57.040 --> 0:22:02.000 to windsor across the British Columbia. Are these double digit 0:22:02.240 --> 0:22:04.000 new tariffs doable? 0:22:05.680 --> 0:22:07.600 Well, We're gonna find out tom. 0:22:07.520 --> 0:22:09.760 And it's a great experiment. 0:22:10.080 --> 0:22:11.560 And what I. 0:22:11.520 --> 0:22:14.760 Think is critical is we are in the largest trade 0:22:14.760 --> 0:22:17.119 shop in one hundred years for the United States and 0:22:17.200 --> 0:22:19.760