WEBVTT - Stocks Jump after October Jobs Report 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money, whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.800 at Bloomberg dot com. Well, we saw from today's data 0:00:21.880 --> 0:00:25.440 that more people are working, they are getting higher wages, 0:00:25.600 --> 0:00:28.280 and presumably they are spending more. That is good for 0:00:28.400 --> 0:00:32.479 the retail business and deep global payments business. To give 0:00:32.560 --> 0:00:34.640 us a sense of how that's playing out in the 0:00:34.680 --> 0:00:38.280 retail space, we welcome Jeff Sloan, CEO of Global Payments. Jeff, 0:00:38.280 --> 0:00:39.800 thanks so much for joining us here on our Bloomberg 0:00:39.800 --> 0:00:42.320 Interactive Brooker Studio. So again, we had a really strong 0:00:42.400 --> 0:00:45.600 job numbers today. I would think for your business, which 0:00:45.680 --> 0:00:48.560 traffics in the payments business, that's got to be good 0:00:48.560 --> 0:00:51.519 backdrop for your business. Absolutely it is. We actually reported 0:00:51.640 --> 0:00:55.480 very good third quarter numbers yesterday with revenues up, margin 0:00:55.600 --> 0:00:59.160 up eight basis points, earnings up eighteen percent year over year. 0:00:59.480 --> 0:01:02.040 That follow down the heels of Massacre and Visa essentially 0:01:02.080 --> 0:01:05.120 reporting the same thing. So we already saw a very 0:01:05.120 --> 0:01:07.119 good same store sales left here in the United States, 0:01:07.160 --> 0:01:09.839 about three and a half percent same store sales growth 0:01:09.840 --> 0:01:11.480 in the third quarter for US, which is towards the 0:01:11.560 --> 0:01:14.039 high end. I think our record was about four, so 0:01:14.240 --> 0:01:15.840 right near the high end high end of that. And 0:01:15.840 --> 0:01:18.520 I think our numbers, as well as the unemployment numbers, 0:01:18.560 --> 0:01:21.479 mimic that. So I was looking at some of the 0:01:21.600 --> 0:01:25.280 earnings and some of your comments afterwards, in particular as 0:01:25.319 --> 0:01:28.960 it related to new partnerships with City Group and the 0:01:29.000 --> 0:01:32.679 Canadian Cooperative as Jarden's Group, and I'm wondering you said 0:01:32.720 --> 0:01:35.280 that the City relationship in particular is the first of 0:01:35.360 --> 0:01:38.399 many that I foresee us doing among money center banks. 0:01:38.400 --> 0:01:40.800 Can you talk a little bit about that relationship and 0:01:41.240 --> 0:01:43.520 which banks you're you're looking to partner with. So one 0:01:43.520 --> 0:01:45.760 of the fastest growing things in our business is what 0:01:45.840 --> 0:01:48.280 we call omni channel you speak called e commerce. Now 0:01:48.320 --> 0:01:50.920 there's really no difference, which means you can buy something 0:01:50.960 --> 0:01:53.120 from Lulu Lemon, for example, on your phone saying at 0:01:53.120 --> 0:01:55.720 a pool of Christmas, pay with your face and your thumb, 0:01:56.040 --> 0:01:57.960 have a delivered to your house. You don't like the size, 0:01:57.960 --> 0:02:00.560 you go return, you order another one. So that kind 0:02:00.600 --> 0:02:04.000 of friction less commerce for the consumer and ease of 0:02:04.120 --> 0:02:06.640 use is where the market is going. This partnership with 0:02:06.720 --> 0:02:09.600 City partners us with one of the largest money center 0:02:09.639 --> 0:02:12.680 banks in the world to provide those kinds of services 0:02:12.720 --> 0:02:16.400 to multinational corporates cross border and both the physical and 0:02:16.520 --> 0:02:20.440 virtual world, to allow their customers, their multinational customers to 0:02:20.520 --> 0:02:24.160 provide those services to their consumers on a seamless basis. 0:02:24.440 --> 0:02:25.880 So the reason I said I think we'll see more 0:02:25.919 --> 0:02:27.720 of those is that's where the world is going. That's 0:02:27.720 --> 0:02:31.520 where the trend is. Zero friction for consumer commerce, and 0:02:31.600 --> 0:02:34.880 even the most the largest, most complicated fis in the world, 0:02:34.919 --> 0:02:37.200 like City, I think, have come to the realization that 0:02:37.200 --> 0:02:38.640 they can't do it on their own, that they need 0:02:38.720 --> 0:02:41.840 a payments technology partner, and we're pleased to be that 0:02:41.880 --> 0:02:44.920 partner for City. So I know you've recently closed a 0:02:45.000 --> 0:02:48.000 big acquisition pieces twenty one billion dollars. Tell us about 0:02:48.040 --> 0:02:51.200 that deal and what's the strategy behind that deal. So 0:02:51.240 --> 0:02:53.840 in our business, it's really all about scale. So processing 0:02:53.880 --> 0:02:56.920 the next transaction should be cheaper than the last transaction. 0:02:56.960 --> 0:02:59.720 The transaction after that even less expensive than the current one. 0:02:59.760 --> 0:03:03.120 So our partnership with Tiesis takes our scale to fifty 0:03:03.160 --> 0:03:06.880 billion plus transactions a year. It doubles the size of 0:03:06.919 --> 0:03:09.079 the company to about fifty billion dollars stay a little 0:03:09.080 --> 0:03:11.600 bit over that uh in market cap. It extends our 0:03:11.639 --> 0:03:15.679 geographic presence from sixty countries today to a hundred. A 0:03:15.760 --> 0:03:18.520 hundred countries is part of Tisis, and it gives us 0:03:18.560 --> 0:03:20.960 the largest e commerce and omni channel business in the 0:03:20.960 --> 0:03:23.640 world that a billion of revenue, the largest owned software 0:03:23.639 --> 0:03:25.359 business in the world, that a billion of revenue in 0:03:25.440 --> 0:03:28.680 payments um, and the largest integrated partnered software business the 0:03:28.680 --> 0:03:31.560 world also a billion dollars in payments. So we couldn't 0:03:31.560 --> 0:03:34.440 be more excited about our partnership with Teessis and where 0:03:34.480 --> 0:03:36.560 it's taking that company. I think you saw that reflected 0:03:36.920 --> 0:03:39.520 and yesterday's trading and our outlook for the rest of 0:03:39.600 --> 0:03:42.160 nineteen and twenty. So when you came in this morning, 0:03:42.240 --> 0:03:43.800 I said, you know, thank you for being here. You said, 0:03:43.800 --> 0:03:45.640 I'm excited to be here, and I don't doubt it. 0:03:45.680 --> 0:03:48.400 I'm looking right now at your share price. It is up. 0:03:48.520 --> 0:03:50.920 The total return on your shares are up. At sixty 0:03:51.000 --> 0:03:54.160 six percent year to date, up more than one percent today, 0:03:54.440 --> 0:03:57.880 two point two percent yesterday. Go through the days it's green. 0:03:58.120 --> 0:04:01.080 I'm trying to figure out who you're biggest competitor is 0:04:01.360 --> 0:04:04.400 and what it will take to sustain this kind of growth. Sure, well, 0:04:04.480 --> 0:04:07.640 it varies by geography, because our business is really geographic centric. 0:04:07.680 --> 0:04:09.640 I think we have the far, by far the broadest 0:04:09.640 --> 0:04:13.160 breath geographically multinationally of anybody. But here in the United 0:04:13.160 --> 0:04:16.880 States of Fidelity Post Information Systems POST our purchase of 0:04:16.880 --> 0:04:21.000 World Pay five serve Post their purchase first data. Some 0:04:21.080 --> 0:04:23.560 of the domestic banks here in the United States JP Morgan, 0:04:23.640 --> 0:04:25.840 who I think does a fantastic job and what they 0:04:25.880 --> 0:04:28.960 do Bank of America which announced recently that they were 0:04:29.000 --> 0:04:32.840 recreating their own payments business away from one of our competitors. 0:04:32.880 --> 0:04:34.960 Those are our partners, but those are also our competitors. 0:04:34.960 --> 0:04:38.360 And then outside the United States, it really varies by geography. 0:04:38.440 --> 0:04:41.880 So in the UK, for example, Barclay's Royal Bank of 0:04:41.920 --> 0:04:45.440 Scotland both have big payment businesses are partner. There is 0:04:45.560 --> 0:04:49.520 HSBC in the United Kingdom, so seemed to be a 0:04:49.560 --> 0:04:52.719 lot of M and A in your business. Give us 0:04:52.720 --> 0:04:55.599 a sense of how your business, your industry structure right now, 0:04:55.600 --> 0:04:56.960 do you think you're gonna see more M and A 0:04:58.360 --> 0:05:00.680 and beyond and specifically for your company, do you feel 0:05:00.680 --> 0:05:02.720 like you have the scale that you need? The answer 0:05:02.720 --> 0:05:04.920 I think is absolutely to all those things. So the 0:05:04.920 --> 0:05:07.320 first thing I'd say is it's always been in consolidating business. 0:05:07.640 --> 0:05:10.960 Anytime you're in a scale economics business, more scale is better, 0:05:11.640 --> 0:05:13.720 less scale is worse. So that's what tends to drive 0:05:13.760 --> 0:05:16.680 the transactions number one. Number two I would say is 0:05:16.720 --> 0:05:19.000 we're not done yet at Global Payments. Our balance sheet 0:05:19.040 --> 0:05:20.960 is in a very healthy position. We're only about two 0:05:20.960 --> 0:05:23.960 and a half times levered today as we announced yesterday 0:05:23.960 --> 0:05:26.880 coming out of the deal, so firmly investment grade. Once 0:05:26.960 --> 0:05:28.839 we have our sea legs under us, call it the 0:05:28.880 --> 0:05:31.880 spring of twenty. As a managerial matter, In terms of 0:05:31.880 --> 0:05:34.440 the integration with Tjesis, I think we feel very good 0:05:34.480 --> 0:05:39.200 about re engaging on the murger side. Uh And certainly 0:05:39.520 --> 0:05:42.800 our door is open today for additional transactions. There's no 0:05:42.839 --> 0:05:45.599 reason we can't double yet again as we did post 0:05:45.600 --> 0:05:47.960 the murder with Heartland about four years ago. Just real 0:05:48.040 --> 0:05:50.400 quick here, I'm wondering what the barrier of entry is 0:05:50.480 --> 0:05:53.520 for some of these big financial institutions to create their 0:05:53.520 --> 0:05:56.600 own payments system rather than partnering with you. Well, I 0:05:56.640 --> 0:05:59.039 think you saw yesterday in the context of Desjardin in 0:05:59.120 --> 0:06:02.040 Canada and to here in the United States, even the largest, 0:06:02.080 --> 0:06:05.280 most complicated financial institutions in the world need the right 0:06:05.360 --> 0:06:08.360 access to market leading technology. And what it's all about 0:06:09.160 --> 0:06:12.039 is technology UM and related software in the in the 0:06:12.040 --> 0:06:16.280 payments business that couple with distribution. Distinctive distribution or sales 0:06:16.360 --> 0:06:18.680 is really what we sell. So the largest guys out 0:06:18.680 --> 0:06:21.159 there have concluded they don't yet have the scale or 0:06:21.160 --> 0:06:24.320 the time UM to get to market the way we 0:06:24.400 --> 0:06:26.560 are from a technology point of view. So there are 0:06:26.560 --> 0:06:29.520 there are great barriers in what we do now everyone 0:06:29.560 --> 0:06:31.760 takes payments today, So I'm not suggesting that going to 0:06:31.800 --> 0:06:34.000 the dry cleaner um that there's a lot of barriers 0:06:34.080 --> 0:06:37.120 necessarily for all the small merchants, But in what we do, 0:06:37.160 --> 0:06:39.520 which is distinctive, which is what city in de Jardin 0:06:40.160 --> 0:06:42.599 h noted yesterday, than certainly I think those things are 0:06:43.200 --> 0:06:45.560 do with high barriers. Jeff Sloan, thank you so much 0:06:45.560 --> 0:06:48.760 for paying with us and for correcting my pronunciation. Pronunciation 0:06:48.880 --> 0:06:51.760 of de Jardine, which I absolutely butcher Jeff Sloan, chief 0:06:51.760 --> 0:06:54.720 executive Officer of Global Payments, joining us here in our 0:06:54.760 --> 0:07:12.080 Bloomberg Interactive Brokers Studios. Well, you gotta like the numbers 0:07:12.080 --> 0:07:16.480 out today, much better than expected jobs numbers, suggesting that 0:07:16.520 --> 0:07:19.520 the consumer remains very very strong. Indeed, and that kind 0:07:19.560 --> 0:07:22.480 of devetails with what we heard from the Federal Reserve yesterday. 0:07:22.800 --> 0:07:24.840 Let's get a sense of kind of where this all 0:07:24.920 --> 0:07:27.080 plays out, of how this all plays out with Steven Blitz, 0:07:27.160 --> 0:07:30.040 chief US economist at T. S. Lombard. He joins us 0:07:30.080 --> 0:07:32.840 here in our Bloomberg Interactive Broker Studios. So, Steven, thanks 0:07:32.880 --> 0:07:35.520 so much for joining us. Let's first just get your 0:07:35.560 --> 0:07:37.720 thoughts on kind of what you took away from the 0:07:37.800 --> 0:07:41.080 jobs number today. Well, I think in terms of the 0:07:41.080 --> 0:07:43.600 Fed's perspective that the economy is in a good place 0:07:43.640 --> 0:07:46.400 is certainly underscores their point of view. I think you 0:07:46.400 --> 0:07:49.080 can still look through and see the same problems, which 0:07:49.120 --> 0:07:53.240 is that the economy just continues to create these low 0:07:53.280 --> 0:07:58.520 wage service sector uh jobs like in hospitals and healthcare 0:07:58.640 --> 0:08:02.200 and restaurants, which really doesn't move the needle very much 0:08:02.200 --> 0:08:04.400 in terms of earning. So and then when you look 0:08:04.440 --> 0:08:08.480 at average real averagereally earnings are nominal versus where the 0:08:08.520 --> 0:08:11.720 unemployment rate is. This the disconnect that the FED is 0:08:12.160 --> 0:08:14.720 really trying to push. Why they can't seem to get 0:08:14.720 --> 0:08:17.560 a higher wage growth for the given very low level 0:08:17.560 --> 0:08:19.960 of unemployment. There's also a disconnect when it comes to 0:08:19.960 --> 0:08:23.200 the manufacturing sector and when it comes to consumers. There's 0:08:23.200 --> 0:08:27.400 consumer strength manufacturing weakness. We saw that today. Yet again, 0:08:27.600 --> 0:08:30.000 the sectors where there were job gains were the more 0:08:30.080 --> 0:08:33.360 service sectors UH and manufacturing took a hit. We saw 0:08:33.360 --> 0:08:35.120 that with the I s M number coming in weaker 0:08:35.120 --> 0:08:40.040 than expected, a recession in that particular sector. How long 0:08:40.280 --> 0:08:45.200 can these two industries totally diverge before one pulls the 0:08:45.200 --> 0:08:48.079 other in a in a direction. Well, if one's gonna 0:08:48.080 --> 0:08:50.599 pull any in any which way direction, it's gonna be 0:08:50.640 --> 0:08:55.880 manufacturing will pull the service sector. Um. But the when 0:08:55.960 --> 0:08:58.800 you get back to the employment number itself, remember that 0:08:58.800 --> 0:09:03.120 that decline in manufacturing is the most part the general 0:09:03.160 --> 0:09:06.640 motors and the strike. So that so that forty thousand 0:09:06.720 --> 0:09:10.880 is gonna come back next month. The job So that's 0:09:10.880 --> 0:09:13.520 why I'm focused on service sector, not even thinking about 0:09:13.559 --> 0:09:16.080 the good side of the employment numbers today, because we 0:09:16.080 --> 0:09:18.800 know that's gonna flip back some way, shape or form. 0:09:18.960 --> 0:09:22.800 Now to your other point, manufacturing matters, Okay, it is 0:09:22.840 --> 0:09:25.679 still the largest single industry in the United States in 0:09:25.800 --> 0:09:28.439 terms of its real value add to real GDP, it's 0:09:28.520 --> 0:09:31.840 around four now. The service sector as a whole is 0:09:31.920 --> 0:09:35.120 larger than manufacturing. But the service sectors made up a 0:09:35.200 --> 0:09:37.800 lot of different industries. The one we're sitting in right now, 0:09:37.840 --> 0:09:40.600 the one I work in healthcare. I mean, there's a 0:09:40.640 --> 0:09:43.559 lot of different restaurants. There's a lot of different industries 0:09:43.600 --> 0:09:47.400 there that have different sensitivities to the business cycle. So 0:09:47.640 --> 0:09:51.960 the spending thrown off by manufacturing does matter now going forward, 0:09:52.080 --> 0:09:55.280 which is really what we're thinking about the FEDS actions, 0:09:55.280 --> 0:09:57.680 in particular what it did on the balance sheet and 0:09:57.760 --> 0:10:00.599 finally getting the funds right below the two year and 0:10:00.720 --> 0:10:03.640 today the markets realizing maybe the Fed's not wrong. So 0:10:04.000 --> 0:10:06.800 we're seeing a re steepening of the curve again. The 0:10:06.960 --> 0:10:09.920 low funding rates, the steepening of the curve, a little 0:10:09.920 --> 0:10:13.360 bit of a weaker dollar should aid manufacturing going forward, 0:10:13.400 --> 0:10:16.560 to should aid the emerging markets, and that also should 0:10:16.559 --> 0:10:21.319 in turn aid manufacturing as well as export exporters in 0:10:21.360 --> 0:10:24.280 the United States. So, um, when you look at that 0:10:24.320 --> 0:10:27.400 in terms of the good place, that's a forward dynamic 0:10:27.440 --> 0:10:29.760 that's positive as opposed to the one that's weighed on 0:10:29.800 --> 0:10:33.720 manufacturing looking backward. Are you of the opinion, based upon 0:10:33.760 --> 0:10:38.280 what you heard yesterday from Chairman Pal that there's one 0:10:38.280 --> 0:10:40.960 more rate cutting and that might not not even come 0:10:40.960 --> 0:10:43.640 to maybe mid next year. Yeah, I don't think there's 0:10:43.640 --> 0:10:46.000 any more rate cuts coming. I think I think he 0:10:46.440 --> 0:10:49.080 told you there has to be a material change in 0:10:49.120 --> 0:10:52.440 their view. So that means that uh, and and then 0:10:52.520 --> 0:10:55.160 and the risk and danger in that, okay, is that 0:10:55.200 --> 0:10:58.120 what we're obviously we're thinking about cuts instead of increases. Right, 0:10:58.520 --> 0:11:01.680 So the material change change and the risk in that 0:11:01.920 --> 0:11:07.079 phrase is that, oh, employment now is falling, which means 0:11:07.160 --> 0:11:09.560 by definition, they're going to be too late to cut. 0:11:09.960 --> 0:11:12.720 So this year you could argue they were preemptive. In fact, 0:11:12.880 --> 0:11:15.600 that's how I characterized it last December, that they would 0:11:15.640 --> 0:11:19.360 be preemptive this year and they were. Now it's less 0:11:19.360 --> 0:11:22.360 a chance of than being quote unquote preemptive because they 0:11:22.360 --> 0:11:25.240 didn't want a material change, and that's really the risk 0:11:25.280 --> 0:11:28.599 in terms of their phrasing, what's a chance of procession 0:11:28.720 --> 0:11:31.600 in the next twelve months. I think you have to 0:11:31.640 --> 0:11:34.719 put it in fifty fifty. WHOA, that's much higher than 0:11:34.760 --> 0:11:39.280 the consensus. Well, okay, that doesn't bother me. You know, 0:11:39.520 --> 0:11:41.960 It's just that you're you're you're dancing so close to 0:11:42.000 --> 0:11:45.600 the edge here, right, you have weak manufacturing. How how 0:11:45.600 --> 0:11:47.240 can we say that we're danding close to the edge? 0:11:47.240 --> 0:11:49.480 We're talking about how great the employment number is, the 0:11:49.520 --> 0:11:51.760 strength that you're seeing in services, and we're close to 0:11:51.800 --> 0:11:54.600 the edge. Well, we're close to the edge because the 0:11:54.640 --> 0:11:57.400 economy is only growing around one and a half two percent, 0:11:57.520 --> 0:12:00.480 so it's growing below trend, right, And let's face it, 0:12:00.559 --> 0:12:03.520 the multiple in the equity market is reflecting not just 0:12:03.679 --> 0:12:06.600 earnings or anying expectations, but the liquidity that the FED 0:12:06.720 --> 0:12:09.720 is putting into the system. And so the risk is 0:12:10.120 --> 0:12:14.320 that there's some unforeseen accident, which is obviously you know, 0:12:14.360 --> 0:12:19.120 I'm all accidents are unforeseen, right, But it's an unforeseen 0:12:19.200 --> 0:12:22.120 accident that hits the equity market that the FED can't 0:12:22.120 --> 0:12:26.200 get the equity market to bounce back up. Consumers, households 0:12:26.200 --> 0:12:29.520 are overinvested in equities. It's a whole long story, which 0:12:29.520 --> 0:12:31.880 I know we don't have time for here. But because 0:12:31.920 --> 0:12:36.080 of that, that will feed directly into consumption, directly into 0:12:36.080 --> 0:12:39.080 slowing the economy. And that's that's the risk. So we 0:12:39.160 --> 0:12:43.120 need a period of six to twelve months of earnings, 0:12:44.000 --> 0:12:47.440 of the earnings supporting the multiples in the equity market 0:12:47.520 --> 0:12:50.120 more so than the FED, and then things are on 0:12:50.120 --> 0:12:52.920 a more solid ground than that. Fifty fifty drops way 0:12:52.920 --> 0:12:55.280 back down on the number. Today we had wage growth 0:12:55.360 --> 0:12:58.480 of three. That seems to be the range that this 0:12:58.559 --> 0:13:01.520 economy is in. And is that is that just as 0:13:01.679 --> 0:13:04.160 because of the types of jobs that are being added 0:13:04.160 --> 0:13:06.960 you mentioned earlier, kind of you know, service jobs, whether 0:13:07.000 --> 0:13:10.120 it's healthcare, fast food. Is that just kind of it 0:13:10.320 --> 0:13:13.920 for this economy? Uh? It is for now? Sure, I 0:13:13.960 --> 0:13:17.480 think that the idea was that at some point here 0:13:17.520 --> 0:13:20.880 and then all this trade stuff between the US and 0:13:20.960 --> 0:13:23.959 China put the kabash on it, is that at some 0:13:24.000 --> 0:13:27.120 point here you need to get a growth in capital 0:13:27.160 --> 0:13:29.800 spending a right, So we we have an old cycle 0:13:29.840 --> 0:13:32.560 in terms of age, but not in terms of the 0:13:32.600 --> 0:13:37.160 cycle itself, right in terms of having that leverage spending 0:13:37.640 --> 0:13:42.160 to build capital. Once that gets going, wage growth will 0:13:42.160 --> 0:13:45.439 accelerate because you'll begin to increase employment in what are 0:13:45.480 --> 0:13:48.840 traditionally higher wage jobs. But at the moment, this is 0:13:48.880 --> 0:13:52.079 what the economy is going to deliver. Look of the 0:13:52.600 --> 0:13:57.240 odd thousands of service sector jobs that were created, fifty thousand, 0:13:57.280 --> 0:13:59.400 I'm just talking top of my head around numbers. Fifty 0:13:59.400 --> 0:14:04.360 thousand was healthcare and in restaurants. So that's not going 0:14:04.400 --> 0:14:07.240 to move the needle on on wage growth. Steven Blitz, 0:14:07.240 --> 0:14:08.880 thank you so much for being with us. Thank you 0:14:08.920 --> 0:14:12.880 for having me. Stephen Blitz at Chief US Economist at T. S. Lombard, 0:14:13.320 --> 0:14:31.120 Thank you for for being here in the studios. Lots 0:14:31.120 --> 0:14:35.080 of economic data day today, better than expected jobs numbers. Uh. 0:14:35.120 --> 0:14:37.160 The I s M came out with their manufacturing numbers. 0:14:37.160 --> 0:14:39.280 To get the latest on that, we welcome Tim Fury, 0:14:39.560 --> 0:14:42.480 chairman of the Manufacturing Business Survey at the Institute for 0:14:42.560 --> 0:14:45.400 Supply Management. Uh. Tim, thanks so much for joining us. 0:14:45.400 --> 0:14:47.600 Give us. What are your key takeaways from this I 0:14:47.840 --> 0:14:51.440 s M manufacturing data today? Yeah? Thanks Paul. So the 0:14:51.480 --> 0:14:54.800 report for the month of October was more positive than 0:14:54.840 --> 0:14:57.000 it was in September. I think although we were selling 0:14:57.040 --> 0:15:00.960 a contraction mode, the contraction rate has slow and maybe 0:15:00.960 --> 0:15:04.560 more importantly, the new order number which kind of sets 0:15:04.560 --> 0:15:08.960 the drum beat. UH improved pretty substantially from the prior month, 0:15:09.120 --> 0:15:12.320 up one point eight point still in a minor contraction mode, 0:15:12.400 --> 0:15:16.200 but with indications in the right direction, supported by the 0:15:16.240 --> 0:15:18.800 fact that new export orders they go into an expansion 0:15:18.800 --> 0:15:22.360 mode again, almost a nine actually nine point four point 0:15:22.480 --> 0:15:25.640 change from the prior month. So those are the positives 0:15:25.680 --> 0:15:29.120 on the NAZI positive on demand, our backlog continued to 0:15:29.120 --> 0:15:32.320 contract at faster rates than it did last month, which 0:15:32.360 --> 0:15:35.360 is a little bit concerning, and the customer inventory account 0:15:35.440 --> 0:15:38.760 grew closer to the about right, which is not a 0:15:38.760 --> 0:15:42.080 positive thing for future output. So but overall the report 0:15:42.160 --> 0:15:46.120 was much better than September. Still contracting, but we seem 0:15:46.160 --> 0:15:48.240 to have stabilized, supported by the fact that the new 0:15:48.320 --> 0:15:52.120 order number is close to fifty. How much of a 0:15:52.240 --> 0:15:54.600 lagging number is this? And I see this in the 0:15:54.640 --> 0:15:57.000 context of the headline that we just got the w 0:15:57.120 --> 0:15:59.960 t O proving three point six billion dollars in China 0:16:00.160 --> 0:16:04.640 trade sanctions on the US. That should, all things being equal, 0:16:05.200 --> 0:16:08.840 slow at some of the exports from the United States. 0:16:08.880 --> 0:16:11.680 How long would it take for that to get into 0:16:11.680 --> 0:16:14.760 the data? Yeah, that could impact our new export orders. 0:16:14.920 --> 0:16:17.080 The orders come in. They could be for immediate delivery, 0:16:17.120 --> 0:16:19.280 or they could be for delivery three or four months out. 0:16:19.360 --> 0:16:22.080 So it's going to depend. Uh, you know that. I 0:16:22.120 --> 0:16:24.680 don't know that that's a really big number anyway. So 0:16:25.520 --> 0:16:27.160 you know, I would think that our new expert or 0:16:27.200 --> 0:16:28.640 at least in the short term here, is going to 0:16:28.760 --> 0:16:31.120 stay about where it is. I don't know why it 0:16:31.120 --> 0:16:33.920 would drop unless there's an escalation in the trade issues, 0:16:34.680 --> 0:16:36.600 you know. I think the other the other story here 0:16:36.840 --> 0:16:38.920 is that we had a little bit of a shift 0:16:39.120 --> 0:16:41.440 in our industry sectors that were contributing to the p 0:16:41.600 --> 0:16:44.640 m I. There's no surprise that the transtation equipment sector 0:16:44.720 --> 0:16:48.520 actually contracted faster than had the prior month, primarily because 0:16:48.520 --> 0:16:51.240 of the you know, the GM strike and you know, 0:16:51.280 --> 0:16:53.600 we have some uncertainties there on the MAX. But we 0:16:53.680 --> 0:16:57.240 actually had the chemical industry go into a contraction mode too, 0:16:57.360 --> 0:17:00.760 from a moderate expansion in the prior month. And we 0:17:00.840 --> 0:17:04.119 had the computer electronics industry sector go from a minor 0:17:04.600 --> 0:17:07.600 contraction in the prior month to an expansion. So we've 0:17:07.600 --> 0:17:10.040 got some shifting going going on here in our top 0:17:10.080 --> 0:17:13.119 three industry sectors. The three of those together make up 0:17:13.160 --> 0:17:18.480 somewhere around manufacturing GDP. I would expect transportation equipment to 0:17:18.520 --> 0:17:20.440 get better next month because we no longer have to 0:17:20.480 --> 0:17:23.560 strike U. And I would hope that the chemical industry sector, 0:17:23.600 --> 0:17:26.040 where we're bound a bit. There's a lot of factors 0:17:26.080 --> 0:17:28.400 probably a play there. We have an advantaged cost base, 0:17:29.000 --> 0:17:31.560 we probably have a disadvantage here on counter tariffs as 0:17:31.560 --> 0:17:35.000 well as the currency issues. So, Tim, this marks the 0:17:35.040 --> 0:17:39.080 third consecutive month of the print below fifty. When does 0:17:39.160 --> 0:17:42.199 this become a trend that might be worsomed to you 0:17:42.200 --> 0:17:45.159 and your economists? Well, I mean this, this is in 0:17:45.240 --> 0:17:47.200 no way isn't look at anything like ten years ago. 0:17:47.240 --> 0:17:50.040 And the reason is that although we are contracting, you know, 0:17:50.080 --> 0:17:52.960 the fifty is the number, we're not contracted really strongly. 0:17:53.359 --> 0:17:56.000 You know, if we were in the low forties, high thirties, 0:17:56.119 --> 0:17:59.359 and it would be very concerning. But you know, I 0:17:59.359 --> 0:18:02.000 think you know you're talking. Remember this is month a month. 0:18:02.080 --> 0:18:04.440 We start every month at a fifty point, So we're 0:18:04.440 --> 0:18:08.680 slightly off of last month. Uh not heavily off, slightly 0:18:08.760 --> 0:18:11.440 off meaning you know, even less than five percent. So 0:18:11.920 --> 0:18:14.040 and I think now that we've kind of bounced a bit, 0:18:14.080 --> 0:18:16.800 we went to forty nine point one in August, forty 0:18:16.840 --> 0:18:19.720 seven point in September, now at forty eight point three. 0:18:19.800 --> 0:18:22.280 Although we're up a half a point, there's no reason 0:18:22.359 --> 0:18:25.000 to believe that we can't get back to fifty in 0:18:25.000 --> 0:18:28.040 the short term. Here, Timothy Fury, thank you so much 0:18:28.080 --> 0:18:30.880 for being with us. To Furious, chairman of the Manufacturing 0:18:30.920 --> 0:18:33.359 Business Survey at the I s M. Thanks for listening 0:18:33.440 --> 0:18:35.840 to the Bloomberg P and L podcast. You can subscribe 0:18:35.840 --> 0:18:38.600 and listen to interviews at Apple Podcasts or whatever podcast 0:18:38.640 --> 0:18:41.439 platform you prefer. I'm Paul Sweeney. I'm on Twitter at 0:18:41.440 --> 0:18:44.119 pt Sweeney and Lisa bram Woyds. I'm on Twitter at 0:18:44.160 --> 0:18:46.960 Lisa bram Woit's one before the podcast. You can always 0:18:46.960 --> 0:18:49.040 catch us worldwide. I'm Bloomberg Radio.