WEBVTT - Bloomberg Surveillance TV: May 30, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:35.840 Terminal and the Bloomberg Business app. 0:00:36.520 --> 0:00:39.000 There is a real question about whether the economic data 0:00:39.040 --> 0:00:41.560 actually justifies it, and someone who's been making that argument 0:00:41.800 --> 0:00:44.120 for quite a long time has been Neil Dada of Renmack, 0:00:44.159 --> 0:00:46.560 who does join us now? Neil, what did you make 0:00:46.840 --> 0:00:49.360 yesterday of the rhetoric coming out of the White House 0:00:49.360 --> 0:00:51.879 and the first in person meeting between j Powell and 0:00:52.080 --> 0:00:53.639 President Trump two point zero. 0:00:56.160 --> 0:01:00.240 President from once lower Race. I mean, that's not exactly 0:01:00.280 --> 0:01:01.560 breaking news in my opinion. 0:01:02.040 --> 0:01:03.920 There is a feeling, though, that there has been a 0:01:04.000 --> 0:01:07.840 number of data points, in particular yesterday's revision to GDP 0:01:08.080 --> 0:01:12.960 that shows personal spending personal income isn't necessarily keeping pace. 0:01:13.040 --> 0:01:16.039 We're expected to get core PC today. That does show 0:01:16.040 --> 0:01:20.640 that ongoing disinflationary trajectory. Do you think even with some 0:01:20.720 --> 0:01:22.760 of the on again off against tariffs, in the sense 0:01:22.800 --> 0:01:25.920 that companies have adapted and adjusted, there is a legitimate 0:01:26.000 --> 0:01:28.039 argument for the FED to be cutting more aggressively. 0:01:29.319 --> 0:01:31.800 I do, you know, I think the Fed's job is 0:01:31.840 --> 0:01:35.400 to make decisions with imperfect information, So just using uncertainty 0:01:35.440 --> 0:01:38.360 as a crutch to just wait everything out, it's sort 0:01:38.400 --> 0:01:42.920 of besides the point, you know, I do think that 0:01:43.000 --> 0:01:46.680 companies are probably you know, for the time being. I mean, 0:01:46.720 --> 0:01:51.720 I think they're eating much of the sort of inflationary 0:01:51.800 --> 0:01:54.520 impact of the of the terrorifts, they're eating the tariffs. 0:01:54.520 --> 0:01:57.240 They're the ones that are burying the cost margins are 0:01:57.280 --> 0:01:59.680 probably being squeezed. So it's not like it's a good thing. 0:01:59.760 --> 0:02:03.760 But I think the demand shock is more important to 0:02:03.760 --> 0:02:07.040 be focusing on. And this was going into a situation 0:02:07.080 --> 0:02:10.800 where the economy was already getting worse, and so you know, 0:02:10.800 --> 0:02:12.440 when I look at the data, I mean, to me, 0:02:12.960 --> 0:02:15.399 the most important thing that happened this week is that 0:02:16.639 --> 0:02:23.120 extended unemployment claims hit a fresh high. That's important. Job 0:02:23.160 --> 0:02:27.000 finding rates are low, and you know, even though initial 0:02:27.080 --> 0:02:30.720 layoffs are low too, the fact that those newly laid 0:02:30.720 --> 0:02:33.360 off people can't find any work is basically why the 0:02:33.440 --> 0:02:36.040 sort of ranks of the unemployed continue to grow. So 0:02:36.080 --> 0:02:38.840 I wouldn't be surprised to see, you know, the level 0:02:38.840 --> 0:02:43.079 of permanent job losers take up a bit more when 0:02:43.120 --> 0:02:46.760 the next unemployment sort of employment report comes out, So 0:02:46.880 --> 0:02:49.960 you can't rule out ongoing increases in the unemployment rate. 0:02:50.040 --> 0:02:52.640 The economy is growing below potential, and that's making it 0:02:52.720 --> 0:02:56.680 very difficult for laydoff people to find work, and as 0:02:56.720 --> 0:02:59.040 a result, the unemployment rate will keep rising. 0:02:59.200 --> 0:03:01.839 Well, let's talk about the next job's number. It's going 0:03:01.880 --> 0:03:03.320 to be Friday, June six. 0:03:03.400 --> 0:03:06.680 What are you expecting, Neil, Well, I mean, I wouldn't 0:03:06.800 --> 0:03:09.280 expect much. I mean I think I wouldn't rule out 0:03:09.320 --> 0:03:12.520 like a two tenth increase in the unemployment rate. You know, 0:03:12.560 --> 0:03:15.239 continuing jobless claims are basically sending you a message that 0:03:15.320 --> 0:03:17.920 the unemployment rate's going up. We may well be at 0:03:17.919 --> 0:03:23.840 the fed's unemployment rate forecast for Q four, a couple 0:03:23.840 --> 0:03:25.440 of quarters ahead of schedule. 0:03:26.000 --> 0:03:27.800 Would that be enough for the Fed to cut do 0:03:27.840 --> 0:03:30.200 you think, given the fact that they talk about the 0:03:30.280 --> 0:03:32.200 uncertainty of policy in Washington. 0:03:33.560 --> 0:03:35.280 I don't know that'll be enough for them to cut 0:03:35.320 --> 0:03:39.840 in June, but it'll probably get the markets betting on cuts, 0:03:40.560 --> 0:03:44.720 more cuts and sooner, So maybe it ups the odds of. 0:03:46.320 --> 0:03:46.600 July. 0:03:47.360 --> 0:03:51.280 But I think, you know, frankly, you can't rule out 0:03:51.280 --> 0:03:54.720 a scenario where, you know, it kind of looks like 0:03:55.600 --> 0:03:58.960 you know what we saw last year, where they're waiting, waiting, waiting, 0:03:59.000 --> 0:04:02.000 and then all of a sudden they make a very 0:04:02.400 --> 0:04:06.440 sort of abrupt pivot and do more than that expected. 0:04:06.600 --> 0:04:08.200 You know, why doesn't the long end of the yield curve? 0:04:08.240 --> 0:04:10.960 For you, the fact that some people believe that there 0:04:11.080 --> 0:04:13.400 is going to be longer term structural inflation and a 0:04:13.480 --> 0:04:16.800 term premium and the FED looking more accommodative will only 0:04:16.800 --> 0:04:17.440 expedite that. 0:04:18.960 --> 0:04:21.280 Sure, that's I mean again, I don't know that that's 0:04:21.320 --> 0:04:26.360 the reason why the long end is elevated. A lot 0:04:26.400 --> 0:04:28.320 of it I think has to do with what's going 0:04:28.320 --> 0:04:30.880 on globally. I mean, even if you look at some 0:04:31.000 --> 0:04:33.800 of the movements you know, in rates this year, it's 0:04:33.839 --> 0:04:37.480 been happening on days of some sort of like you know, 0:04:37.640 --> 0:04:41.279 some global development, whether it's a bad Japanese bond auction, 0:04:41.480 --> 0:04:45.840 bad inflation data overseas. What we know is not that 0:04:46.000 --> 0:04:49.960 people don't want to hold US long bonds. They don't 0:04:49.960 --> 0:04:51.560 want to hold long bonds. I mean, the curve is 0:04:51.839 --> 0:04:55.000 steepening everywhere. So I wouldn't lay that, you know, as 0:04:55.400 --> 0:04:58.200 purely like a US centric thing. I think the bigger 0:04:58.240 --> 0:05:00.600 story is that, you know, the markets have really had 0:05:00.600 --> 0:05:03.440 to come to grips with the idea that the economy 0:05:03.520 --> 0:05:07.040 might be slow in we haven't really had that one 0:05:07.080 --> 0:05:10.240 piece of very you know, bad hard data where it's like, 0:05:10.279 --> 0:05:13.520 oh aha, like sort of you know, recession risks are 0:05:13.560 --> 0:05:16.960 higher than we thought. Yeah, when that happens, I think 0:05:17.000 --> 0:05:20.599 you probably see, you know, mother nature kind of taking course, 0:05:21.480 --> 0:05:23.799 not only for equities, but with the fixed income market 0:05:23.839 --> 0:05:24.159 as well. 0:05:24.240 --> 0:05:26.479 Mother nature is a fickle creature, as you know. 0:05:26.600 --> 0:05:28.960 And there's been a change in the narrative recently, with 0:05:29.080 --> 0:05:32.880 the US Economics Surprise Index actually arising some of the 0:05:32.960 --> 0:05:33.880 highest levels. 0:05:33.600 --> 0:05:34.560 That we've seen in months. 0:05:34.640 --> 0:05:38.800 You've seen consumer sentiment actually changed to up up. 0:05:38.680 --> 0:05:41.400 Itself to closer to some of the hard data. 0:05:41.520 --> 0:05:44.400 Will gives you confidence that, especially as some of these 0:05:44.440 --> 0:05:47.279 tariffs get rolled back from worst case scenarios, there will 0:05:47.320 --> 0:05:49.320 be a slowdown that is not showing up at a 0:05:49.320 --> 0:05:51.320 lot of the earnings that we're getting at a number 0:05:51.360 --> 0:05:53.920 of different companies that are managing to whether that's just fine. 0:05:55.520 --> 0:05:57.720 If you punch someone in the face over and over 0:05:57.760 --> 0:06:00.360 and over again, and then you decided not to them 0:06:00.360 --> 0:06:02.200 in the face, would that mean that they would be 0:06:02.240 --> 0:06:05.080 okay at that point? That's all the confidence data is 0:06:05.080 --> 0:06:07.440 telling you, right, I mean, we just I mean, I 0:06:07.440 --> 0:06:09.080 don't know that there's anything interesting, and that, to me, 0:06:09.160 --> 0:06:12.679 the most interesting data point within within the confidence survey 0:06:12.800 --> 0:06:16.000 was simply that consumer attitudes are on the labor market 0:06:16.080 --> 0:06:16.919 kept getting worse. 0:06:18.160 --> 0:06:18.359 You know. 0:06:18.440 --> 0:06:20.960 To me, all the confidence data are reflecting is the 0:06:20.960 --> 0:06:25.400 fact that equity prices rose nothing, nothing else. And you know, 0:06:25.440 --> 0:06:27.760 it's important for people to remember, even though the stock 0:06:27.800 --> 0:06:31.000 markets had a really good run over the last twelve eighteen, 0:06:31.200 --> 0:06:35.960 twenty four months, that hasn't stopped labor market conditions from 0:06:36.040 --> 0:06:39.359 continuing to cooled off. That hasn't helped. I mean, you 0:06:39.400 --> 0:06:43.200 talk about loose financial conditions, how about that. If financial 0:06:43.200 --> 0:06:46.080 conditions are so loose, why are home sales so weak? 0:06:47.200 --> 0:06:50.120 Because mortgages are still so high with the idea. 0:06:50.000 --> 0:06:51.240 Sorry, you go ahead. 0:06:51.000 --> 0:06:53.400 Well, mortgages are still too high for a lot of 0:06:53.440 --> 0:06:53.840 people to. 0:06:53.760 --> 0:06:55.560 Get on the property ladder exactly. 0:06:55.600 --> 0:06:57.800 So that means that financial conditions are in fact not 0:06:57.880 --> 0:06:59.840 that easy. 0:07:00.200 --> 0:07:00.400 Neil. 0:07:00.520 --> 0:07:03.560 This goes to the point of just how to interpret 0:07:03.640 --> 0:07:06.000 data that you say is unreliable. You think that the 0:07:06.000 --> 0:07:09.239 housing market data is actually the number one indicator to watch, 0:07:09.320 --> 0:07:11.800 as you did see pending home sales yesterday comes to 0:07:11.840 --> 0:07:12.840 some of the lowest levels. 0:07:13.640 --> 0:07:17.239 I do think it's important. I think what's important about 0:07:17.240 --> 0:07:20.840 this decline and residential investment that we're seeing right now 0:07:20.920 --> 0:07:23.680 is that it's coming alongside an ongoing decline and units 0:07:23.760 --> 0:07:26.320 under construction that didn't happen last time, right, So there's 0:07:26.400 --> 0:07:29.520 less building going on, and if there's less building going on, 0:07:29.560 --> 0:07:32.840 there may be less need for construction workers. Simultaneously, we 0:07:32.920 --> 0:07:36.720 also know that resale inventories are rising and that's weighing 0:07:36.720 --> 0:07:39.680 on home prices. Importantly, it's weighing on prices in the 0:07:39.680 --> 0:07:41.920 areas where the builders have been making the most homes. 0:07:42.560 --> 0:07:45.440 So again that goes back to the construction piece. But 0:07:45.480 --> 0:07:47.640 you know, again, it's important to kind of understand how 0:07:47.680 --> 0:07:50.920 the sort of some of these data points how the 0:07:50.960 --> 0:07:53.400 sausage is made. I mean you mentioned the surprise indicator. 0:07:53.440 --> 0:07:56.720 That's the city economic surprise indicator that you're probably mentioning. 0:07:56.760 --> 0:07:59.160 If you look at other measures like your own Bloomberg 0:07:59.200 --> 0:08:01.600 Economic surprise and dex it doesn't really show that. So 0:08:01.960 --> 0:08:04.760 it's important to kind of know which indicators to look 0:08:04.800 --> 0:08:07.120 at and why those numbers are going up. I mean, 0:08:07.320 --> 0:08:11.080 you saw a very large increase in consumer confidence, and 0:08:11.120 --> 0:08:14.000 that delta is probably why these surprise indicators moved up. 0:08:14.000 --> 0:08:15.680 But when you sort of peel back the onion and 0:08:15.680 --> 0:08:18.880 take a look, you know the things that actually move more, 0:08:19.440 --> 0:08:23.680 you know, slowly, like labor market conditions, that shows you 0:08:23.720 --> 0:08:25.280 that things are continuing to get worse. 0:08:25.440 --> 0:08:27.760 Neil, I will never look at some of the consumer 0:08:27.800 --> 0:08:30.680 confidence data in the same way after the punch in 0:08:30.680 --> 0:08:32.680 the face analogy that you just drew. 0:08:32.720 --> 0:08:34.240 Neil Deta of run MAAC, thank. 0:08:34.120 --> 0:08:46.080 You so much for being with us. A lot of 0:08:46.160 --> 0:08:49.760 investors are really watching what company CEOs have to say 0:08:49.800 --> 0:08:53.640 in the conference boards. Measure of CEO confidence fell to 0:08:53.720 --> 0:08:56.880 its lowest level since Q four of twenty twenty two, 0:08:56.920 --> 0:08:59.520 seeing the largest quarter of her quarter decline in nearly 0:08:59.600 --> 0:09:02.800 fifty years. According to the survey, the majority of CEOs 0:09:02.840 --> 0:09:05.520 are bracing for a recession in the next twelve to 0:09:05.600 --> 0:09:08.360 eighteen months. Dana Peterson of the Conference Board joins US 0:09:08.360 --> 0:09:09.040 now Data. 0:09:09.160 --> 0:09:11.160 Thank you so much for being with us. I want 0:09:11.200 --> 0:09:12.160 to talk about how. 0:09:12.000 --> 0:09:14.240 Surprised you were to see this data given the fact 0:09:14.480 --> 0:09:17.199 that a lot of sentiment data among consumers has been 0:09:17.240 --> 0:09:20.040 ticking up and we have gotten pretty good results in 0:09:20.120 --> 0:09:21.840 terms of earnings from a lot of companies. 0:09:23.160 --> 0:09:24.920 Well, I wasn't terribly surprised. 0:09:25.360 --> 0:09:27.520 Certainly, since the beginning of the year, there have been 0:09:28.000 --> 0:09:30.600 there's been a lot of volatility coming out of Washington 0:09:30.640 --> 0:09:34.200 in terms of policies around trade, around regulation and spending, 0:09:34.600 --> 0:09:38.240 and I think it just really spooked many CEOs, especially 0:09:38.280 --> 0:09:44.199 those who are very dependent upon trade for their businesses. 0:09:44.240 --> 0:09:47.720 And so we did notice that were the responses that 0:09:47.760 --> 0:09:52.120 were before May twelfth, where where we had this deta 0:09:52.320 --> 0:09:56.200 between China and the US on trade, and those afterwards. 0:09:56.360 --> 0:09:58.360 The ones afterwards were a little better, but they were 0:09:58.400 --> 0:10:02.080 still negative. The idea of how to read this and 0:10:02.120 --> 0:10:05.120 how much of a forward indicator these surveys traditionally have 0:10:05.240 --> 0:10:09.160 been how much has a CEO confidence index really been 0:10:09.440 --> 0:10:12.479 something of a harbinger of a change in economic trajectory 0:10:12.600 --> 0:10:14.840 versus kind of noise. The way that we have seen 0:10:14.880 --> 0:10:19.640 a lot of the consumer confidence surveys well over the 0:10:19.760 --> 0:10:23.880 well since we've been doing this almost fifty years, when 0:10:23.880 --> 0:10:27.360 the measure drops below fifty, which is you know, that 0:10:27.400 --> 0:10:30.760 means it's pessimism as opposed to optimism, it has done 0:10:30.800 --> 0:10:34.600 a pretty good job of signaling recession. Now when we 0:10:34.640 --> 0:10:38.040 look at the measure today versus what it did back 0:10:38.080 --> 0:10:39.960 in twenty twenty two, late twenty twenty two or early 0:10:40.000 --> 0:10:43.839 twenty twenty three, we saw similar numbers where many CEOs 0:10:43.920 --> 0:10:45.600 were afraid that there was going to be a shortened, 0:10:45.600 --> 0:10:48.959 shallow recession. We didn't get a shortened shallow recession because 0:10:49.000 --> 0:10:53.040 consumers continued to work. And the reason why is because 0:10:53.080 --> 0:10:56.320 companies didn't let them go. Companies cut elsewhere, and we 0:10:56.360 --> 0:10:58.680 think that, you know, certainly this time around, there's just 0:10:58.760 --> 0:11:01.480 a lot of noise, a lot of volatility, and it 0:11:01.559 --> 0:11:04.680 really spooked a lot of CEOs. We still hear a 0:11:04.679 --> 0:11:07.079 lot of them saying, well, we're going to raise prices, 0:11:07.400 --> 0:11:09.360 you know, because these tariffs are going to affect us. 0:11:09.960 --> 0:11:11.960 But we haven't heard much about them saying they're going 0:11:12.000 --> 0:11:14.680 to let people go. Still, in all, if we do 0:11:14.720 --> 0:11:18.040 see these tariffs stay and even intensify, you know with 0:11:18.080 --> 0:11:21.839 some of these other investigations, that you may see some 0:11:22.160 --> 0:11:23.640 unemployment rates rise. 0:11:24.320 --> 0:11:24.520 Well. 0:11:24.520 --> 0:11:26.880 I found most interesting about the survey that most CEOs 0:11:26.880 --> 0:11:29.400 anticipate no change at all on the size of their 0:11:29.400 --> 0:11:32.839 workforce for the next twelve months. So doesn't that show 0:11:32.920 --> 0:11:34.880 that they can weather this storm? 0:11:36.120 --> 0:11:36.600 I think so. 0:11:37.240 --> 0:11:39.400 But we also need to remember that there's still labor 0:11:39.400 --> 0:11:43.000 shortages going on. You still have many, many people, thousands 0:11:43.000 --> 0:11:45.960 of people retiring every day, and you have you know, 0:11:46.040 --> 0:11:49.440 younger workers, but they have less experience. So I think 0:11:49.480 --> 0:11:51.960 that you know, that's that story is still there, that 0:11:52.080 --> 0:11:56.440 narrative is still there. Companies will cut other places, cut 0:11:56.480 --> 0:12:02.240 investment because indeed the investment measures were worse, and they'll 0:12:02.320 --> 0:12:04.000 raise prices, but they're not going to let go over 0:12:04.080 --> 0:12:04.720 their workers. 0:12:05.280 --> 0:12:08.679 We have almost mixed reviews when it comes to Corporate 0:12:08.679 --> 0:12:10.600 America in terms of how they're dealing with the tariffs. 0:12:10.679 --> 0:12:14.320 Costco yesterday, they're sourcing more locally produced mattresses and pillows, 0:12:14.559 --> 0:12:18.080 and they seem to be weathering this brilliantly almost gap. 0:12:18.280 --> 0:12:20.760 On the other hand, they're anticipating as much as three 0:12:20.840 --> 0:12:23.720 hundred million dollars in a tariff impact. But I want 0:12:23.720 --> 0:12:26.280 to get a sense from you. Do you think Corporate 0:12:26.360 --> 0:12:29.480 America is using terrafts sometimes as an excuse for other 0:12:29.520 --> 0:12:30.600 issues in their business. 0:12:32.720 --> 0:12:35.960 That's always possible, but I would say in general that 0:12:36.520 --> 0:12:40.120 most people will most companies and CEOs understand what tariffs are. 0:12:40.280 --> 0:12:43.600 Tariffs are attacks on their imports, and they're not going 0:12:43.679 --> 0:12:46.800 to absorb those costs, and so they just keep passing 0:12:46.800 --> 0:12:49.319 it down to the wholesale, to the retailer and ultimately 0:12:49.679 --> 0:12:54.040 the customer. And so you know, you know, retailers that 0:12:54.160 --> 0:12:56.880 sell clothing, most clothing is not made here in the US, 0:12:56.920 --> 0:12:59.760 so it makes absolute sense that they'd be more nervous 0:13:00.040 --> 0:13:04.360 versus maybe other types of entities that can source things 0:13:04.400 --> 0:13:07.320 from the United States. So I think that, you know, 0:13:07.400 --> 0:13:09.640 maybe some companies may use it as an excuse, but 0:13:09.679 --> 0:13:11.920 in general, this is a real thing. This is a 0:13:11.920 --> 0:13:14.760 real risk for many companies, and you know, they have 0:13:14.840 --> 0:13:16.640 to figure out a way to weather this, and a 0:13:16.640 --> 0:13:19.000 lot of it is going to be to raise prices. 0:13:19.240 --> 0:13:21.199 Dana Kann into this year, there was a tremendous amount 0:13:21.200 --> 0:13:26.439 of optimism and companies were talking about capex spending, mergers, acquisitions. 0:13:26.720 --> 0:13:28.200 Do we have a sense on. 0:13:28.120 --> 0:13:31.120 A holistic level of how much they've actually goes back 0:13:31.360 --> 0:13:34.000 in a more sort of sustained way as a result 0:13:34.040 --> 0:13:35.359 of some of the policy uncertainty. 0:13:36.360 --> 0:13:36.600 Sure. 0:13:36.720 --> 0:13:38.600 I mean at the beginning of the year, I think 0:13:38.640 --> 0:13:43.240 a lot of companies were anticipating deregulation, maybe some tax 0:13:43.320 --> 0:13:48.040 cuts for corporations, and then you know, the script flipped. 0:13:48.280 --> 0:13:49.280 We were, you know. 0:13:49.360 --> 0:13:51.840 Less worried about that, and I mean, uh, you know, 0:13:51.880 --> 0:13:55.400 those kinds of benefits faded away with the trade with 0:13:55.480 --> 0:13:59.360 the trade wars, and we did notice that there was 0:13:59.760 --> 0:14:03.120 a in the number of ceo saying that they were 0:14:03.160 --> 0:14:08.280 going to increase their capex investments. But I think many 0:14:08.320 --> 0:14:10.760 companies are on pause. They're waiting to see what's going 0:14:10.800 --> 0:14:14.800 to happen. And there unless you have some kind of 0:14:14.840 --> 0:14:18.160 long term project where you know, politics doesn't matter as much, 0:14:18.480 --> 0:14:20.080 I think a lot of companies are going to remain 0:14:20.120 --> 0:14:23.360 on hold until they see what's really going to happen. 0:14:23.400 --> 0:14:26.360 And also a number of companies are probably concerned about 0:14:26.360 --> 0:14:29.320 demand destruction. We think we're actually going to see some 0:14:29.360 --> 0:14:32.720 weakness and consumer spending, maybe even starting in the most 0:14:32.760 --> 0:14:36.080 recent data, but certainly in the third quarter, and that's 0:14:36.120 --> 0:14:40.320 going to be very gnarly from many CEOs and many companies. 0:14:40.600 --> 0:14:43.080 Dani Pittersoner of the Conference Conference Board, thank you so 0:14:43.160 --> 0:14:55.200 much for being with us. Joining us now is Lindsay 0:14:55.240 --> 0:14:58.840 Pie of Stephel Lindsay, what's your take on that resilient 0:14:58.880 --> 0:15:01.600 consumer and how much their incomes rose as well as 0:15:02.000 --> 0:15:04.800 their ability to spend on an inflation adjusted a basis. 0:15:05.680 --> 0:15:09.160 Well, certainly welcome support from that organic component of income 0:15:09.560 --> 0:15:13.000 supplementing consumer's ability to go out into the marketplace and spend, 0:15:13.080 --> 0:15:16.720 albeit at a reasonably reduced pace. We are seeing some 0:15:16.960 --> 0:15:20.160 loss of momentum, so the consumer is still resilient, but 0:15:20.240 --> 0:15:23.840 again it is at less robust levels than what we've 0:15:23.880 --> 0:15:26.840 seen over the past couple of years. And this supports 0:15:26.880 --> 0:15:30.920 exactly what we've seen in the price index, that deceleration 0:15:31.160 --> 0:15:35.280 in headline costs reflecting the fact that businesses aren't able 0:15:35.320 --> 0:15:39.280 to pass on further price increases to the consumer to 0:15:39.320 --> 0:15:42.120 the end user without the risk of losing market share. 0:15:42.440 --> 0:15:47.120 So while consumers are outspending, they are becoming increasingly cost sensitive. 0:15:47.640 --> 0:15:49.800 But for the FED, this is good news. 0:15:49.840 --> 0:15:50.280 We have a. 0:15:50.240 --> 0:15:54.840 Resilient economy, resilient consumer and inflation that has been decelerating 0:15:54.880 --> 0:15:56.480 now for the past couple of months. 0:15:56.680 --> 0:15:59.200 Is it enough for the Fed to, potentially, if inflation's 0:15:59.240 --> 0:16:01.080 coming down, to think about cuts this year? 0:16:01.840 --> 0:16:04.640 Well, I think the Fed is already thinking about rate cuts, 0:16:04.720 --> 0:16:08.480 but the window of opportunity for action is very limited. 0:16:08.840 --> 0:16:11.800 Against the backdrop of negative growth in the first quarter, 0:16:11.920 --> 0:16:15.600 against the backdrop of that deceleration of price pressures, the 0:16:15.640 --> 0:16:19.560 FED could act to cut rates and minimally maybe two 0:16:19.720 --> 0:16:23.000 twenty five basis point cuts mid year, But as we 0:16:23.120 --> 0:16:25.720 look out towards the second half, further out towards the 0:16:25.760 --> 0:16:29.640 fourth quarter, I do expect a more positive impact, a 0:16:29.680 --> 0:16:33.000 stronger impact from some of these trade policies, from tariffs 0:16:33.320 --> 0:16:38.600 to set into price pressures, risking upside momentum in costs 0:16:38.880 --> 0:16:41.880 and really removing any window of opportunity for rate cuts 0:16:41.920 --> 0:16:45.920 and potentially shifting the conversation back to rate hikes by 0:16:45.920 --> 0:16:46.600 the end of the year. 0:16:46.880 --> 0:16:48.840 Wow, rate hikes at the end of the year. 0:16:48.920 --> 0:16:51.400 And that's driven by what exactly, because the concern of 0:16:51.440 --> 0:16:53.720 in inflation driven by tariff policy. 0:16:54.360 --> 0:16:56.360 Well, again, right now, the Fed is walking a very 0:16:56.400 --> 0:17:00.480 delicate line as we saw in the FOMC meeting. There 0:17:00.520 --> 0:17:03.720 are downside risks to growth and employment, which we've already 0:17:03.720 --> 0:17:05.960 seen that storyline playing out, as I said, in the 0:17:06.000 --> 0:17:08.919 first quarter, and likely to see very minimal momentum in 0:17:08.920 --> 0:17:11.560 the economy in the second But by the second half 0:17:11.600 --> 0:17:15.359 of the year, those upside risks to inflation, I do 0:17:15.400 --> 0:17:18.080 think are going to become more prominent, and the FED 0:17:18.240 --> 0:17:21.960 has to focus on getting inflation back under control. Now, 0:17:21.960 --> 0:17:25.040 the numbers this morning in the PCE were favorable, that 0:17:25.119 --> 0:17:28.280 headline is moving closer to two percent, but the core 0:17:28.400 --> 0:17:32.560 numbers still remain stubbornly sticky, up at two and a half, 0:17:32.600 --> 0:17:35.240 and again the risk is to the upside. 0:17:35.600 --> 0:17:38.240 Lindsay Neil Dotta was talking earlier this morning that the 0:17:38.240 --> 0:17:40.280 housing market is kind of the fly in the ointment 0:17:40.320 --> 0:17:41.000 for this argument. 0:17:41.080 --> 0:17:43.000 That you've seen a real fall off in terms of. 0:17:42.960 --> 0:17:45.720 Activity people on its ability to buy homes. You've seen 0:17:45.760 --> 0:17:48.240 even prices come down in certain regions for the first 0:17:48.240 --> 0:17:51.680 time in years. There's a feeling that that aspect of inflation, 0:17:51.720 --> 0:17:54.119 which is a massive one, is really going to be 0:17:54.160 --> 0:17:56.240 more of a drag than some sort of boost, and 0:17:56.240 --> 0:17:59.600 that financial conditions have actually been incredibly tight in that area. 0:18:00.080 --> 0:18:02.720 Make of that argument, well, I think when we look 0:18:02.720 --> 0:18:05.040 at the inflation numbers, it's going to be very difficult 0:18:05.040 --> 0:18:07.760 for the FED to achieve a sustainable two percent level 0:18:07.800 --> 0:18:11.800 without further reprieve in housing costs. Remember CPI shelter costs 0:18:11.840 --> 0:18:14.760 are still up over four percent, so that's double what 0:18:14.800 --> 0:18:18.960 the Fed's intended targeted. So intended target is and so 0:18:19.080 --> 0:18:21.479 it's going to be very difficult for the FED to 0:18:21.600 --> 0:18:24.960 achieve again that broader measure of price stability without further 0:18:25.000 --> 0:18:28.000 reprieve in the housing market. That being said, we haven't 0:18:28.080 --> 0:18:31.879 yet seen a sizeable amount of relief. Now price pressures 0:18:31.920 --> 0:18:36.320 have slowed, but nominally prices are still very elevated, as 0:18:36.400 --> 0:18:40.000 would be home buyers face a near record low affordability rates, 0:18:40.000 --> 0:18:43.879 so there's still a lock out effect, and existing homeowners 0:18:43.880 --> 0:18:47.159 are still facing a lock in effect whereby they're largely 0:18:47.200 --> 0:18:51.480 precluded from offloading their existing property for fear of resetting 0:18:51.480 --> 0:18:53.119 to significantly higher rates. 0:18:53.359 --> 0:18:54.359 Remember, even if you're. 0:18:54.240 --> 0:18:57.760 Buying a lower cost nominal asset, if you're resetting from 0:18:58.200 --> 0:19:01.840 sub three percent up near seven percent, well that's going 0:19:01.880 --> 0:19:05.080 to result in a sizable increase in your monthly payment, 0:19:05.160 --> 0:19:08.600 which most Americans simply cannot afford, so that lack of 0:19:08.640 --> 0:19:12.040 mobility both into and out of the housing market, I 0:19:12.080 --> 0:19:14.720 think is going to slow any further progress for the 0:19:15.440 --> 0:19:17.640 price pressures that we're seeing in the shelter component. 0:19:17.840 --> 0:19:20.560 There's a theory out there that the tariffs and trade 0:19:20.560 --> 0:19:23.800 debates will dampen growth, and that we're seeing that on 0:19:23.880 --> 0:19:26.879 the margins, whether it's people getting more concerned emotionally and 0:19:26.880 --> 0:19:30.120 maybe not in their spending habits, as well as companies 0:19:30.119 --> 0:19:33.240 that aren't hiring as robustly or doing capital investment plans 0:19:33.280 --> 0:19:35.120 the way that they have been in the past. Why 0:19:35.160 --> 0:19:37.080 do you think that won't be enough of a dampening 0:19:37.080 --> 0:19:40.879 effect to counterbalance some of the inflationary pressures and strength. 0:19:40.880 --> 0:19:44.120 Frankly that we're seeing in the consumer well. 0:19:44.080 --> 0:19:46.160 I think the biggest impact that we've seen thus far 0:19:46.280 --> 0:19:49.280 has been on the soft data on the confidence numbers. 0:19:49.600 --> 0:19:52.960 Consumer confidence has fallen into a multi year low as 0:19:53.000 --> 0:19:57.240 consumers are anticipating these dire conditions coming down the pipeline, 0:19:57.400 --> 0:20:02.159 driving inflation expectations up to a multi decade high. But 0:20:02.240 --> 0:20:04.600 on the business side, we've also seen that we've seen 0:20:04.600 --> 0:20:09.160 that impact on confidence come down to a multi month low, 0:20:09.560 --> 0:20:12.119 with ninety percent of businesses saying now is not a 0:20:12.359 --> 0:20:14.040 good time to hire, Now is not a good time 0:20:14.080 --> 0:20:16.439 to invest. But as we saw this morning when we 0:20:16.480 --> 0:20:20.639 look at that hard data, consumers are still spending, businesses 0:20:20.760 --> 0:20:24.240 are still investing. So it's as if we're vocalizing more 0:20:24.280 --> 0:20:28.000 concern than we are actually changing behavior, and so again 0:20:28.160 --> 0:20:32.000 that's going to perpetuate this resilient notion for the economy, 0:20:32.280 --> 0:20:34.880 both on the consumer and the corporate side, and help 0:20:34.920 --> 0:20:38.040 to offset that impact on inflation and still leave us 0:20:38.080 --> 0:20:41.880 facing significant upside risks in terms of price pressures. 0:20:41.920 --> 0:20:54.280 Lindsay Paxstepaul, thank you so much. I am still pleased 0:20:54.320 --> 0:20:57.760 to say joining us now. United Airlines Executive vice president 0:20:57.760 --> 0:21:01.280