Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: So Alexis mentioned the math, I want to go over it,
Speaker 2: and Lindsay's going to tell me what to do with
Speaker 2: Lindsay pigs.
Speaker 3: This was Stefel nominal GDP last.
Speaker 2: Time around, ending September thirty was a China like eight
Speaker 2: point three percent, Paul. If you add in the one
Speaker 2: percent government shutdown, we go from five point one percent
Speaker 2: published nominal to six point one Ish.
Speaker 3: I'm going to say, there is Well.
Speaker 2: Joining us, the Queen of Ish in economics, Lindsay pigs
Speaker 2: joining us. What do you do with these numbers, Lindsay,
Speaker 2: how do you format the view forward? Given the plethora
Speaker 2: of data in the last ten minutes, Well, I think.
Speaker 4: When we dig through some of the details, we're going
Speaker 4: to see that it's pretty messy, particularly given that the
Speaker 4: economy was shut down for almost half of that three
Speaker 4: month period. Now the President says it shaved off about
Speaker 4: two points, the BA says it shaved off about one percent,
Speaker 4: So we know that there was a significant damping down effect,
Speaker 4: regardless of whether it's one or two percentage points. So
Speaker 4: parsing through some of the details, I think the more
Speaker 4: important figure to focus on right now. To really gauge
Speaker 4: the underlying momentum of the economy is let's strip out inventories,
Speaker 4: let's strip out trade. Let's look at real final sales
Speaker 4: to domestic purchasers, which rose at two point four percent,
Speaker 4: more in line with what we saw in the third
Speaker 4: quarter at two point nine percent.
Speaker 2: Well, that's like, that's brilliant and I really really buy
Speaker 2: this angle from years ago at Fidelity with Betina Dalton.
Speaker 3: And the bottom line, Paul is that's a pretty good number.
Speaker 5: I think it's a pretty good number. And how about
Speaker 5: the inflation outlook there, lindsay, if you give it that
Speaker 5: the economy is growing at a solid rate, what's the
Speaker 5: inflation story on top of that.
Speaker 4: Well, as you know, I have been long concerned about
Speaker 4: inflation and the Fed's lack of focus on inflation. So
Speaker 4: we see this pick up to two point nine percent,
Speaker 4: and that is in the direction we don't see this
Speaker 4: ongoing improvement of disinflation that the FED remains very optimistic
Speaker 4: that we're going to achieve getting back to two percent
Speaker 4: as the forecast by twenty twenty eight. Now, any improvement,
Speaker 4: of course, is welcome, but I do expect inflation to
Speaker 4: remain elevated nearer that three percent pace for some time,
Speaker 4: which will keep pressure on the Fed to remain on
Speaker 4: the sideline.
Speaker 3: She so under sells it.
Speaker 2: I mean she was my Economist of the year one
Speaker 2: year or two years, three years ago, I can't remember.
Speaker 3: Lindsay with Jim Bianco, was out front with Muhammad Larian.
Speaker 3: You know what, folks, Inflation is going to be resilient.
Speaker 3: She nailed it.
Speaker 5: So, Lindsay, talk to us about kind of how you
Speaker 5: think the Fed is digesting the numbers we had today,
Speaker 5: some of the labor data we had last week, the
Speaker 5: CPI data we had last week. How are they putting
Speaker 5: it all together?
Speaker 4: Do you think?
Speaker 2: Well?
Speaker 4: I think right now the Fed is looking at this
Speaker 4: moderate trend line in activity as a justification for their
Speaker 4: earlier decision to cut rates. Remember, over the past two years,
Speaker 4: we're now one hundred and seventy five basis points closer
Speaker 4: or arguably at now that neutral level. But the reacceleration
Speaker 4: in payrolls in the latest report, the pickup as we
Speaker 4: saw this morning in inflation is going to really solidify
Speaker 4: now their position on the sidelines.
Speaker 1: As we saw in the minutes yesterday.
Speaker 4: There were some members that we're considering that we're willing
Speaker 4: to consider a rate hike scenario. I don't think we're
Speaker 4: there quite yet. This is a FED that has been
Speaker 4: willing to tolerate above target inflation for years.
Speaker 1: So simply maintaining this.
Speaker 4: Three ish percent isn't going to move the needle. But
Speaker 4: they are sending the signal to the marketplace that they're
Speaker 4: focused on inflation and that should help rein in market.
Speaker 1: Excuse me, inflation expectations.
Speaker 2: We have a PhD in economics. You can say ish, yep,
Speaker 2: with quality, lindsay, I mean, I mean. The bottom line
Speaker 2: here is it's a K shaped economy. We're going to
Speaker 2: get all sorts of mail. You guys are nuts. You
Speaker 2: have no idea the struggle out here after fourteen minutes
Speaker 2: of analysis. How case shape is our K shaped America?
Speaker 4: Well, I would argue it's not necessarily a K shaped,
Speaker 4: but more of an E shaped recovery.
Speaker 1: It's going to be uneven.
Speaker 4: Certainly, there is this dichotomy across classes, particularly as we
Speaker 4: see household net worth significantly increase for those at the
Speaker 4: upper end of the income spectrum as a result of
Speaker 4: a run up in asset prices via the housing market
Speaker 4: the equity market, a benefit which the middle class and
Speaker 4: the lower end of the income spectrum has not benefited from.
Speaker 4: But we do see other stimulants coming out into the economy,
Speaker 4: the One Big Beautiful Bill Act averting a reset to
Speaker 4: a higher tax rate. This won't necessarily provide a windfall
Speaker 4: to spending, but it will help to maintain the current
Speaker 4: levels of expenditures across those different rungs in the E
Speaker 4: shaped recovery so on, even yes, but not necessarily a
Speaker 4: K shaped where some are particularly perpetually i should say,
Speaker 4: doing better and others are losing momentum.
Speaker 5: How much of an impact are you expecting, Lindsey from
Speaker 5: some of the President's legislation, the One Big Beautiful Bill,
Speaker 5: I mean, are you factoring that into your GDP forecast,
Speaker 5: your consumer spending forecast? How is that impacting it things?
Speaker 4: Well, we're looking at the overall impact on the economy
Speaker 4: for twenty twenty six to be upwards of several tenths
Speaker 4: of a percentage point. Now, that doesn't seem like a lot,
Speaker 4: but again, as we're looking at an economy at a
Speaker 4: growth rate at two point two percent last year, any
Speaker 4: additional boost to consumers or businesses it is a welcome
Speaker 4: step in the right direction. But right now, I think
Speaker 4: the biggest factor is going to be how much of
Speaker 4: a dampening effect does that overheating of elephanty prices take
Speaker 4: out of consumer's ability to spend out in the marketplace.
Speaker 2: So help us here with what Alexis said, and she
Speaker 2: took her queue from the President of the United States.
Speaker 2: He's out with the tweets saying it costs two points
Speaker 2: a shutdown, lindsay, pigs are just back of the Steifel
Speaker 2: Nicholas envelope.
Speaker 3: How much do you.
Speaker 2: Add on to real GDP to get where we are now?
Speaker 4: I think the President may be looking at this overly.
Speaker 4: It may be accounting a bit more for the shutdown
Speaker 4: then I would assign. I would say, maybe in line
Speaker 4: with the ba's forecast of about one percent. But remember
Speaker 4: whatever we lost at the end of the year, we
Speaker 4: typically regain when the government reopens, and so if there
Speaker 4: was a one percent loss, we're likely going to see
Speaker 4: an even stronger one percent boost across the first quarter.
Speaker 4: Now this time it is a little more complicated because
Speaker 4: we did see that second round shutdown, although it was
Speaker 4: much shorter and much less disruptive.
Speaker 1: But I would expect that to be reclaimed.
Speaker 4: Anything that was lost at the end of the year
Speaker 4: to be reclaimed at least within the first half of
Speaker 4: twenty twenty six.
Speaker 3: Doctor Peterson thinks so much