WEBVTT - Target Profit Rises 0:00:02.960 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.880 --> 0:00:15.040 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.080 --> 0:00:18.079 Eastern on Apple Car playing Android Auto with the Bloomberg 0:00:18.120 --> 0:00:21.440 Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.040 or watch us live on YouTube. 0:00:24.600 --> 0:00:27.240 We're talking about Target and looking at that Stott j 0:00:27.480 --> 0:00:30.440 TGT is to tick her to load into your Bloomberg terminal. 0:00:30.640 --> 0:00:33.839 Up eleven point seven percent today, So a nice move here. 0:00:33.920 --> 0:00:35.159 Jen Bartash just joins us. 0:00:35.320 --> 0:00:40.640 She covers all the retail industries for Bloomberg Intelligence. She's 0:00:40.680 --> 0:00:43.920 coming to us via zoom from our office down in Princeton. Jen, 0:00:44.080 --> 0:00:46.639 the street likes Target. What did Targets say to get 0:00:46.640 --> 0:00:47.800 the stock up so much today? 0:00:48.560 --> 0:00:50.840 Well, first, I had a good quarter, but they're also 0:00:50.840 --> 0:00:54.560 giving an investor update today and so they've really revealed 0:00:54.920 --> 0:00:57.800 their plan for growth over the next several years and 0:00:58.040 --> 0:01:01.840 that has been resonating well with investors. And it's all 0:01:01.880 --> 0:01:06.000 about recapturing top playing growth, traffic, market share, and they're 0:01:06.000 --> 0:01:08.200 a little bit more upbeat on where they see the 0:01:08.200 --> 0:01:09.119 consumer right now. 0:01:09.640 --> 0:01:12.039 And when we look at inventory being an issue that 0:01:12.160 --> 0:01:14.120 was such a big problem for Target back in the 0:01:14.160 --> 0:01:16.880 pandemic or during the pandemic. It does seem like that's 0:01:16.920 --> 0:01:19.360 being worked through. Kind of what's your expectation with how 0:01:19.400 --> 0:01:23.760 Target is handling their inventory ahead of schedule or not 0:01:23.800 --> 0:01:24.520 ahead schedule. 0:01:25.240 --> 0:01:29.000 Yeah, they've done a major pivot with inventory, and obviously 0:01:29.080 --> 0:01:32.360 they had huge issues a couple of years ago with markdowns, 0:01:32.680 --> 0:01:35.640 and they've really been able to write size inventory that's 0:01:35.680 --> 0:01:39.480 shown up where inventory right now is actually lower than 0:01:39.480 --> 0:01:41.960 it was last year, and yet in stocks are better 0:01:42.000 --> 0:01:45.080 than they've been. And so that focus on those retail 0:01:45.080 --> 0:01:47.480 fundamentals of making sure that you have things in the 0:01:47.520 --> 0:01:51.000 stores and in stock has really been playing through and 0:01:51.680 --> 0:01:54.840 driving some of the results that they've seen and a 0:01:54.920 --> 0:01:57.680 lot of that stems from inventory. And so right now 0:01:57.680 --> 0:02:01.040 they're very well positioned going into twenty twenty four and 0:02:01.280 --> 0:02:03.880 that should hopefully be a tailwind for them for for 0:02:03.920 --> 0:02:05.080 the rest of this fiscal year. 0:02:06.040 --> 0:02:08.280 An affinity card, can you explain what's going on there? 0:02:09.200 --> 0:02:12.960 Yeah, So they're they're they're kind of reimagining their loyalty program. So, 0:02:12.960 --> 0:02:16.080 so the baseline was Target Circle, which was free to join. 0:02:16.760 --> 0:02:19.360 They have one hundred million users that have have joined it, 0:02:20.280 --> 0:02:22.760 and that's where you can go in and save different 0:02:22.760 --> 0:02:25.120 offers and you get an extra ten percent off your 0:02:25.720 --> 0:02:29.320 your your paper towels, you know, that week and that brand. 0:02:29.919 --> 0:02:32.160 What they're doing is they're taking that, They're making it 0:02:32.200 --> 0:02:34.280 so you don't have to search and save. You get 0:02:34.320 --> 0:02:36.560 the things automatically when you when you scan, when you 0:02:36.639 --> 0:02:39.080 when you check out. And if you're a Red Card holder, 0:02:39.440 --> 0:02:44.000 for forty nine dollars, you know, you can get unlimited 0:02:44.240 --> 0:02:48.760 free delivery, same day free delivery to your house, and 0:02:49.160 --> 0:02:53.239 they're calling this Target three sixty. You can also subscribe 0:02:53.240 --> 0:02:55.120 to just that if you're not a Red Card holder. 0:02:55.520 --> 0:02:57.680 Also an introductory price of forty nine, but it will 0:02:57.720 --> 0:02:59.720 go up over time, although they didn't say to what. 0:03:00.639 --> 0:03:03.320 So it's a move where they're trying to get, you know, 0:03:03.440 --> 0:03:06.160 a little bit deeper into consumers' lives, you know, doing 0:03:06.200 --> 0:03:09.880 more home delivery. There's some additional perks in there where 0:03:09.919 --> 0:03:12.840 you can access all of what Ship does, which is 0:03:12.840 --> 0:03:15.440 their same day delivery service, and that includes being able 0:03:15.480 --> 0:03:17.680 to shop at other retailers. So that's kind of the 0:03:17.720 --> 0:03:21.919 differentiator here with regards to the membership program that once 0:03:21.960 --> 0:03:24.239 you have it, you could also have your your target 0:03:24.320 --> 0:03:30.200 run include something from Crossco for example. But it's early 0:03:30.280 --> 0:03:33.200 days and we'll see how much appetite consumers have for 0:03:33.280 --> 0:03:35.640 yet another membership that they have to pay for. 0:03:36.320 --> 0:03:37.800 Well, what are your expectations on that? 0:03:37.880 --> 0:03:41.080 Because I feel like everyone pays for Amazon Prime and 0:03:41.200 --> 0:03:43.320 Walmart Plus, I know has had a strong roll out 0:03:43.320 --> 0:03:46.040 and has partnerships with different credit cards. Like, what can 0:03:46.080 --> 0:03:49.120 Target really do to get people to pay another annual 0:03:49.200 --> 0:03:51.200 fee when it seems like, at least looking at the 0:03:51.240 --> 0:03:54.520 streaming platforms, they're struggling to maintain users. 0:03:55.640 --> 0:03:57.720 It's a great question, and I think that's one of 0:03:57.960 --> 0:03:59.840 the big questions that we're going to need to see 0:04:00.120 --> 0:04:04.360 they really talk about what differentiates this program because you know, 0:04:04.440 --> 0:04:06.960 forty nine dollars is cheap, but it is an introductory, 0:04:07.120 --> 0:04:09.320 introductory price, and there are a lot of people out 0:04:09.320 --> 0:04:13.680 there that do delivery, and so it's you know, when 0:04:13.680 --> 0:04:15.560 I look at it, I think in order for it 0:04:15.600 --> 0:04:17.400 to be a successful program, they're going to have to 0:04:17.560 --> 0:04:21.520 really do something extraordinary that appeals to people to prompt 0:04:21.560 --> 0:04:25.920 them to pay extra And historically, you know, Target's formula 0:04:25.960 --> 0:04:28.600 for success has never been mimicking others. It's been about 0:04:28.680 --> 0:04:31.360 kind of forging their own path. And I think This 0:04:31.440 --> 0:04:33.320 is an example where it's going to be very very 0:04:33.360 --> 0:04:36.280 important for them to do that, but it's not clear 0:04:36.360 --> 0:04:38.919 yet how that's going to fold, how that's going to 0:04:38.960 --> 0:04:40.880 be you know, realized. 0:04:41.200 --> 0:04:45.120 And we had Brent Shooty of Northwestern Mutual earlier on 0:04:45.160 --> 0:04:47.040 the show talking about a potential recession. 0:04:47.120 --> 0:04:50.000 How does Target play into a recession. 0:04:50.080 --> 0:04:52.000 Are they one of the companies that can weather the 0:04:52.000 --> 0:04:54.120 storm because of their loyalty or how does that play 0:04:54.120 --> 0:04:56.600 out just given their typical demographics. 0:04:57.400 --> 0:05:00.600 Well, if there is a recession, you know, with their 0:05:00.640 --> 0:05:06.080 typical demographics, Target's customer base is extremely loyal but Target's 0:05:06.120 --> 0:05:09.679 you know, product mix does skew two more discretionary items, 0:05:10.320 --> 0:05:13.559 and so whenever there's a pullback and spending, it tends 0:05:13.560 --> 0:05:16.159 to have an outsized impact on Target versus other big 0:05:16.200 --> 0:05:19.880 box retailers. Now, Target has been really focused in the 0:05:19.920 --> 0:05:23.720 last eighteen months, especially on value. They've launched some new 0:05:23.720 --> 0:05:26.680 private label brands that are you know, meant to be 0:05:26.760 --> 0:05:29.960 the cheapest option in every category in the store. So 0:05:30.080 --> 0:05:33.159 they're trying to respond to that. So, you know, they 0:05:33.200 --> 0:05:35.960 have the breadth of category and they have the loyalty 0:05:35.960 --> 0:05:39.880 of consumers that they can weather a recession. But it 0:05:39.920 --> 0:05:42.200 will make it harder for them to get back to 0:05:42.279 --> 0:05:45.120 that top line growth and that expansion of margin that 0:05:45.120 --> 0:05:47.600 they're talking about today if we find ourselves in the 0:05:47.640 --> 0:05:48.600 midst of a recession. 0:05:49.200 --> 0:05:52.560 Hey, Jen, how do I differentiate how much shopper between 0:05:53.480 --> 0:05:54.520 Target and Walmart? 0:05:56.240 --> 0:05:59.839 It's all about perception, right when you think about Walmart 0:06:00.200 --> 0:06:03.360 is usually about lowest price. Walmart is a is an 0:06:03.480 --> 0:06:06.240 d l P. Every every day you get the lowest 0:06:06.240 --> 0:06:11.760 possible price. They've got a very big assortment, and you 0:06:11.760 --> 0:06:15.160 know it's uh and they have, you know, some some 0:06:15.279 --> 0:06:18.200 perks with regards to their Walmart Plus program. When people 0:06:18.240 --> 0:06:21.400 think of Target, they think a little bit more of discovery, 0:06:21.760 --> 0:06:24.800 they think a little bit more about inspiration versus function 0:06:24.960 --> 0:06:28.520 you know, than than functionality. And and that's where you 0:06:28.560 --> 0:06:31.000 really see the divergence between those two retailers. 0:06:31.320 --> 0:06:33.000 I will say, when I go to Target, I always 0:06:33.040 --> 0:06:34.640 end up buying more than I want, where if I 0:06:34.680 --> 0:06:35.800 go to Walmart, I'm kind of. 0:06:35.800 --> 0:06:36.359 In and out. 0:06:36.960 --> 0:06:39.640 Jen, question off of that comparison, I always talk up 0:06:39.640 --> 0:06:42.360 the fact that Walmart owned Sam's Club. When you look 0:06:42.400 --> 0:06:46.479 at the company, makeup, how much does that differentiate Walmart 0:06:46.560 --> 0:06:48.800 versus some of the other peers just given as you mentioned, 0:06:49.120 --> 0:06:53.400 Target potentially partnering with Costco if you're using their membership card. 0:06:54.600 --> 0:06:58.520 Yeah, so you know, obviously there's a there's a great 0:06:58.600 --> 0:07:02.279 benefit to Walmart of having both It's It's US Walmart 0:07:02.320 --> 0:07:04.840 stores as well as the Sam's Club stores because they 0:07:04.880 --> 0:07:08.880 really can capture they can capture spending by by different 0:07:08.880 --> 0:07:12.520 groups of people and for different shopping reasons. Now, when 0:07:12.560 --> 0:07:15.000 I talked about shipped, it's not so much that you 0:07:15.240 --> 0:07:18.320 get the benefits of a Costco membership, for example, with Target, 0:07:18.320 --> 0:07:21.320 it's just more that you can have your delivery person 0:07:21.400 --> 0:07:24.720 pick up purchases from other retailers, which is something that 0:07:24.800 --> 0:07:28.840 isn't embedded in a Walmart program for example. But you 0:07:28.920 --> 0:07:31.920 know that that Target membership fee is going to be 0:07:31.960 --> 0:07:34.880 competing with your Costco membership fee. It'll be you know, 0:07:34.920 --> 0:07:38.400 competing with a bja's membership fee along with all of 0:07:38.400 --> 0:07:42.080 your streaming services and everything else out there. So you know, 0:07:42.160 --> 0:07:45.080 Walmart definitely benefits from the scale of having both the 0:07:45.480 --> 0:07:49.880 Core stores and Sam's Club. But you know, it is 0:07:49.920 --> 0:07:51.680 a little bit of a different business model than what 0:07:51.720 --> 0:07:53.000 we're talking about with Target. 0:07:53.480 --> 0:07:55.320 Just for what's worth I put up the comp function 0:07:55.440 --> 0:07:57.880 c o MP for the last five years S and 0:07:57.880 --> 0:08:00.440 P five hundreds compound and annual growth rate about fourteen 0:08:00.480 --> 0:08:02.760 point six percent, So we all did pretty well there. 0:08:02.920 --> 0:08:06.240 Walmart's right spot online there fourteen point eight percent. Target 0:08:06.240 --> 0:08:08.680 a little bit better, just under twenty percent, So Target 0:08:08.720 --> 0:08:10.120 out performing Walmart over. 0:08:10.040 --> 0:08:11.840 The last five years a little bit. 0:08:11.920 --> 0:08:14.400 Jen Bartashas, thanks so much for joining us. Jenny is 0:08:14.400 --> 0:08:16.920 a senior retail annaly say. She has a very long title, 0:08:16.920 --> 0:08:18.880 but I just call her senior retail analys. I'm going 0:08:18.880 --> 0:08:22.800 with that. Bloomberg Intelligence joining us on zoom from the 0:08:23.120 --> 0:08:27.800 BI headquarters in Princeton, New Jersey's talking about Tarja had 0:08:27.840 --> 0:08:31.120 some some good numbers, got their inventory kind of in 0:08:31.240 --> 0:08:33.640 line here, and the stocks up about her eleven percent today, 0:08:33.720 --> 0:08:35.200 so a good move there. 0:08:36.800 --> 0:08:40.679 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:08:40.760 --> 0:08:44.280 weekdays at ten am Eastern on applecar Play and Android 0:08:44.320 --> 0:08:47.480 Auto with the Bloomberg Business. You can also listen live 0:08:47.559 --> 0:08:50.720 on Amazon Alexa from our flagship New York station. Just 0:08:50.800 --> 0:08:53.440 say Alexa playing Bloomberg eleven thirty. 0:08:54.200 --> 0:08:55.840 It's my data come in today. 0:08:56.280 --> 0:08:59.080 Services side a little bit weaker than expect although the 0:08:59.120 --> 0:09:01.199 new orders will hire. Let's break it down with Anthony 0:09:01.320 --> 0:09:06.720 Nievi's Chair of Ism Services Committee, joining us via zoom 0:09:06.760 --> 0:09:09.240 from Los Angeles. So, Anthony, I'm looking at the is 0:09:09.440 --> 0:09:12.160 some services data come in a little bit lower than 0:09:12.400 --> 0:09:14.400 last period, a little bit below expectations. 0:09:14.520 --> 0:09:15.360 What are your takeaways? 0:09:17.600 --> 0:09:19.880 Well, when you look at the composite index at fifty 0:09:19.920 --> 0:09:23.320 two point six, it's actually up slightly from the twelve 0:09:23.320 --> 0:09:26.680 month running total of fifty two point four. And what's 0:09:26.720 --> 0:09:30.320 actually dragging down the composite index is the contraction we're 0:09:30.360 --> 0:09:34.559 experiencing from the employment index as well as supplier deliveries, 0:09:35.080 --> 0:09:39.719 and that's attributed to deliveries. We have improved capacity, some 0:09:39.920 --> 0:09:44.680 logistical challenges, but overall less backlog than what we've seen 0:09:44.720 --> 0:09:48.080 in the past. Just improvements all across the supply chain. 0:09:48.600 --> 0:09:51.240 And the employment continues to be a mixed bag, with 0:09:51.400 --> 0:09:55.959 companies managing that variable expense as well as having difficulty 0:09:56.120 --> 0:09:58.560 in backfilling some of the open positions that have been 0:09:59.440 --> 0:10:02.760 within their specific companies. Respective companies, and. 0:10:02.679 --> 0:10:03.680 Anthony, I'm looking at it. 0:10:03.760 --> 0:10:07.319 Some demand measures those strengthening, So gauge of new orders 0:10:07.360 --> 0:10:10.840 placed with service providers increasing to fifty six point one 0:10:11.000 --> 0:10:14.200 that's the highest since August. When you look at that 0:10:14.360 --> 0:10:16.800 data point in some of the trends underlying it, What 0:10:16.840 --> 0:10:19.680 can we make from demanding those orders being placed with 0:10:19.679 --> 0:10:20.480 service providers. 0:10:22.400 --> 0:10:24.280 Yes, when you look at new orders and it tells 0:10:24.360 --> 0:10:27.120 us what's in the pipeline. The one thing we have 0:10:27.240 --> 0:10:30.120 to keep in mind is that the cycle time for 0:10:30.360 --> 0:10:33.800 orders on services is it's less than what you would 0:10:33.800 --> 0:10:36.040 see on the manufacturing time just from the nature of 0:10:36.080 --> 0:10:39.600 the different businesses that make up the industries and the 0:10:39.600 --> 0:10:43.160 industries that comprise the sector. But overall it does tell 0:10:43.240 --> 0:10:46.200 us going forward. It is a leading indicator that we'll 0:10:46.200 --> 0:10:49.480 see this continued trend. We've seen this composite index stay 0:10:49.520 --> 0:10:52.559 in the middle to low fifties over the last twelve months, 0:10:53.080 --> 0:10:56.080 and it's just that sustainable levels and we've not seen 0:10:56.160 --> 0:10:59.640 any head fakes or anything that might distort the picture 0:10:59.679 --> 0:11:00.240 going far forward. 0:11:02.200 --> 0:11:06.360 So, Anthony, we know services are critical to this US economy, 0:11:06.440 --> 0:11:09.520 probably approximately seventy percent of the US economy. Here are 0:11:09.559 --> 0:11:14.199 there regional differences that you see in your data. 0:11:14.320 --> 0:11:17.680 We don't measure it regionally, but we can tell by 0:11:17.720 --> 0:11:21.520 the companies that comprise our survey committee. So we can 0:11:21.520 --> 0:11:25.000 see the different areas, and we know that certain things 0:11:25.080 --> 0:11:29.120 will impact demand as well as the throughput, and it's 0:11:29.160 --> 0:11:32.840 based on the geographic location and the effects of weather 0:11:33.600 --> 0:11:37.720 and different variables such as that. But overall, the way 0:11:37.760 --> 0:11:41.920 that we comprise this survey, it's based on contribution to 0:11:42.000 --> 0:11:46.439 GDP percentage wise, and it's small, medium, and large companies 0:11:46.520 --> 0:11:49.679 across all of the eighteen industries, so we really mirror 0:11:49.720 --> 0:11:53.839 what we see on the trailing GDP figures, so it 0:11:54.240 --> 0:11:56.920 maps closely over a time How about. 0:11:56.679 --> 0:12:00.360 That services employment data. The employment data came in at 0:12:00.400 --> 0:12:03.640 forty eight on the index. The consensus was fifty one 0:12:03.679 --> 0:12:07.880 point four. Last period was fifty point five, so noticeably lower. 0:12:08.080 --> 0:12:08.680 What do you make of that? 0:12:10.600 --> 0:12:12.920 Yeah, I look at it, and I see that we 0:12:13.000 --> 0:12:16.160 had decent number in November. It pulled back in December. 0:12:16.200 --> 0:12:18.240 To me, that was more about cycle time and the 0:12:18.240 --> 0:12:22.079 holiday season and things kind of slowed down traditionally there historically, 0:12:22.640 --> 0:12:25.000 and we had a nice little pop up in January. 0:12:26.040 --> 0:12:29.240 Now it looks like it's a combination of wariness. And 0:12:29.280 --> 0:12:31.520 I'm getting this from responding comments. They're saying they're a 0:12:31.520 --> 0:12:34.000 bit wary as to what's going on, and so they're 0:12:34.040 --> 0:12:36.560 managing that expense, and others are saying they're just having 0:12:36.600 --> 0:12:40.679 difficulty finding applicable workers to their open positions. 0:12:41.080 --> 0:12:44.040 And the individual data points are important, but the underlying 0:12:44.080 --> 0:12:46.840 trends are really what kind of drive expectations? What are 0:12:46.920 --> 0:12:49.079 you keeping an eye on, and what trends stand out 0:12:49.120 --> 0:12:52.160 to you when you put this February data point batch 0:12:52.160 --> 0:12:54.360 of February data points into context. 0:12:55.520 --> 0:12:58.760 The key things are and looking at the four indexes 0:12:58.800 --> 0:13:01.559 that make up the composite, and we know that employment 0:13:01.679 --> 0:13:04.920 also drives this sector. But I also look at some 0:13:04.960 --> 0:13:09.480 of the specific industries the top four as well as 0:13:09.640 --> 0:13:12.920 the wholesale trade because this sector is so reliant on 0:13:13.040 --> 0:13:18.640 the intermodal as well as the distribution channel, so it 0:13:18.679 --> 0:13:20.880 tells me what kind of activity. So looking at the 0:13:21.000 --> 0:13:24.080 leading indicator of new orders and everything else, And to 0:13:24.120 --> 0:13:27.280 your point earlier when you set out the demand, the 0:13:27.320 --> 0:13:30.600 demand is still there and we're still seeing this sustainable 0:13:30.679 --> 0:13:33.360 growth moving forward here for this sector. 0:13:33.840 --> 0:13:36.000 All right, Anthony, thanks so much for joining us. Appreciate 0:13:36.000 --> 0:13:38.800 getting your thoughts here. Anthony Niavis he's the chair for 0:13:38.960 --> 0:13:43.240 im Services Business Committee, joining us from Los Angeles via zoom. 0:13:43.280 --> 0:13:46.959 And again, the ISM Services index came in at fifty 0:13:47.000 --> 0:13:50.400 two point six and put that into context. The consensus 0:13:50.520 --> 0:13:53.559 was fifty three, so a little bit below consensus, and 0:13:53.640 --> 0:13:56.560 it was about fifty three point four last period, so 0:13:56.679 --> 0:13:59.480 below last period. Although it was Anthony, it's pointed out 0:13:59.480 --> 0:14:02.800 it's higher than the twelve month trailing average of fifty 0:14:02.800 --> 0:14:06.120 two point four, so staring some consistency of nothing else. 0:14:06.160 --> 0:14:09.600 And again the key point, it's above fifty, showing that 0:14:09.640 --> 0:14:13.280 the services economy is growing. So so breaking down the 0:14:13.320 --> 0:14:13.760 news there. 0:14:16.200 --> 0:14:20.080 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:14:20.160 --> 0:14:22.840 weekdays at ten am Eastern on fo Car Playing and 0:14:22.960 --> 0:14:25.840 broyd Otto with the Bloomberg Business app. Listen on demand 0:14:25.920 --> 0:14:29.520 wherever you get your podcasts, or watch us live on YouTube. 0:14:30.800 --> 0:14:33.400 I'm gonna talk about global shipping it's impact on the economy, 0:14:33.440 --> 0:14:35.040 and man, we've got a good guest for that. Chris 0:14:35.080 --> 0:14:38.080 Williamson JOINANTCE is chief business Economists for S and P 0:14:38.200 --> 0:14:41.280 Global Market Intelligence, based in London, but we got them 0:14:41.280 --> 0:14:41.960 here in the States. 0:14:43.080 --> 0:14:46.560 Chris, what brings you to the USA? You were at 0:14:46.600 --> 0:14:47.240 a conference, right? 0:14:47.320 --> 0:14:47.600 We did? 0:14:47.720 --> 0:14:48.560 Yeah down in La. 0:14:48.920 --> 0:14:52.560 The CPM we say out in La, out in La. 0:14:53.040 --> 0:14:53.800 That's how you do it. 0:14:54.040 --> 0:14:58.320 Sure foreigner in this land. Yeah yeah, out in La 0:14:58.360 --> 0:15:01.320 the GM conference, the big annual shipping conference that the 0:15:01.400 --> 0:15:06.080 General Commerce which smones is holding. So fantastic opportunity to 0:15:06.160 --> 0:15:09.520 speak to the shippers and the shipping companies about what's 0:15:09.560 --> 0:15:10.720 happening right now in the world. 0:15:10.760 --> 0:15:11.280 In the Red Sea. 0:15:11.560 --> 0:15:13.520 Boy, let's start right there, because I mean, Bailey and 0:15:13.560 --> 0:15:15.200 I have been talking about, you know, just over the 0:15:15.360 --> 0:15:17.640 less several months, that what's happening in the Red Sea 0:15:17.640 --> 0:15:20.120 and it's impact on shipping on the Bloomberg Terminal. We 0:15:20.160 --> 0:15:23.080 have a function called map go map and you can 0:15:23.280 --> 0:15:25.280 link it to shoe where all the container ships are 0:15:25.320 --> 0:15:26.840 and oil tankers are around the world. 0:15:27.160 --> 0:15:28.920 I could take where they're not. They're not in the 0:15:28.960 --> 0:15:31.800 Red Sea, they're not in the Zeez Canal. Where are 0:15:31.840 --> 0:15:35.280 we with that whole situation? How's that impacting the economy? 0:15:35.760 --> 0:15:38.440 Well, it seems that a lot of the IMPACT's already gone. 0:15:38.480 --> 0:15:41.840 It's been and gone, So late December January was the 0:15:42.400 --> 0:15:44.880 peak impact really, because what you've got to remember here 0:15:45.040 --> 0:15:48.440 is there's no capacity been taken out of global shipping. 0:15:49.240 --> 0:15:50.280 It just had a delay. 0:15:50.640 --> 0:15:52.400 So it's one One. 0:15:52.640 --> 0:15:57.160 Shipping company told me that their clients when all this hit, 0:15:57.480 --> 0:16:02.080 they missed one week's delivery. Everything was re routed. But 0:16:02.200 --> 0:16:04.720 now they're getting deliveries every week again. So yeah, it's 0:16:04.760 --> 0:16:07.680 costing a little bit more, so it slight inflationary impact, 0:16:07.960 --> 0:16:10.280 but it's not huge. And the impact is it's kind 0:16:10.320 --> 0:16:12.080 of been and gone, it seems. And we saw this 0:16:12.240 --> 0:16:15.960 with our the Global Manufacturing Peermise Supplies Delivery Times Index. 0:16:16.040 --> 0:16:18.400 Now that was an index that joined the pandemic, was 0:16:18.480 --> 0:16:22.560 one of the real worrying signals. Its spiked higher unprecedented levels, 0:16:23.000 --> 0:16:25.880 pushing prices higher. So that rose again in January for 0:16:25.920 --> 0:16:29.120 the first time in the year, signaling longer shipping times, 0:16:29.720 --> 0:16:32.280 but then it fell back in January again, so another 0:16:32.320 --> 0:16:34.800 sign that this is kind of it's all over, really yep. 0:16:35.160 --> 0:16:37.720 And working through that, were there regions that were more 0:16:37.760 --> 0:16:41.440 impacted than others, like in terms of US, Europe. 0:16:41.320 --> 0:16:44.680 UK indeed indeed, yeah, yeah, So when I say it's 0:16:44.680 --> 0:16:46.680 all over, it's all over on a global basis, but 0:16:46.760 --> 0:16:51.160 there are some impacts still. Obviously in Europe. The UK's 0:16:51.560 --> 0:16:54.280 is by far the biggest hit. It's an island, right, 0:16:54.400 --> 0:16:57.360 so there's lots of research from the pandemic showing islands 0:16:57.760 --> 0:17:00.800 have always been bigger hit by this sort of So 0:17:01.000 --> 0:17:03.520 the UK has got quite severe delays and that's feeding 0:17:03.600 --> 0:17:06.639 through to quite a bigger price spike in goods in 0:17:06.720 --> 0:17:10.480 the UK and also the Mediterranean countries because they're they're 0:17:10.520 --> 0:17:13.119 fed less by land than the likes of Germany for example. 0:17:13.320 --> 0:17:15.800 Are there goods or industries that are more impacted in 0:17:15.920 --> 0:17:18.000 terms of looking at the UK, like, are their products 0:17:18.080 --> 0:17:20.680 that have faced longer delays or have had kind of 0:17:20.760 --> 0:17:22.800 greater hurdles or greater inflationary impact. 0:17:23.200 --> 0:17:27.480 Yeah, there is, but again it's it fits the sort 0:17:27.480 --> 0:17:31.120 of narrative of what you normally ship. So these are 0:17:31.200 --> 0:17:33.880 you know, the big expensive goods to move, so they're 0:17:33.920 --> 0:17:36.200 not moved by air, they're moved by ship. It's the lumber, 0:17:36.240 --> 0:17:39.240 it's the construction materials. There's lots of big white goods 0:17:39.320 --> 0:17:41.399 and so forth. So those are the sectors that have 0:17:41.480 --> 0:17:44.440 been hard hit. But again I would urge some caution 0:17:44.560 --> 0:17:46.679 into reading too much into this because while the UK 0:17:46.840 --> 0:17:49.600 has been disproportionately hit and there was quite a significant 0:17:49.680 --> 0:17:52.080 lengthening of delivery times in the UK and in the 0:17:52.280 --> 0:17:55.680 likes of Italy and Greece, these are you know, it's 0:17:55.840 --> 0:17:57.920 likely to be short lived, it should fade. 0:17:58.160 --> 0:18:02.000 So what you're with the shut industry, what are they 0:18:02.080 --> 0:18:04.360 seeing in terms of the global economy, because there's a rule, 0:18:04.640 --> 0:18:06.080 as you well know, there's a lot of folks that 0:18:06.080 --> 0:18:09.359 are just unsure where this economy is going on a 0:18:09.400 --> 0:18:09.960 global scale. 0:18:10.000 --> 0:18:11.440 What are they seeing just from their perspective. 0:18:11.640 --> 0:18:13.560 Yeah, Well, it's interesting because at this conference is where 0:18:13.560 --> 0:18:15.840 a lot of people do their deals, fixing the prices 0:18:15.920 --> 0:18:18.920 of shipping for the next year. So everyone seems to 0:18:18.920 --> 0:18:21.200 fix their rates in the next month or so. And 0:18:21.320 --> 0:18:24.280 the last two years it's very much been a sort 0:18:24.280 --> 0:18:28.080 of buyer's market that we've had low shipping volumes because 0:18:28.080 --> 0:18:31.359 of the manufacturing malaise we've had. We've had two years 0:18:31.480 --> 0:18:34.679 now of virtually no growth in global manufacturing, we had 0:18:34.720 --> 0:18:37.960 two years of falling exports. So this has led to 0:18:38.080 --> 0:18:41.600 some really quite soft shipping rates. But this year seems 0:18:41.640 --> 0:18:43.439 to be the first time where things are coming more 0:18:43.480 --> 0:18:47.800 into balance, So you're seeing some hardening of those shipping rates, 0:18:47.880 --> 0:18:52.200 and the consumer goods companies in particular, I think bracing 0:18:52.280 --> 0:18:55.560 themselves for some tough negotiations this year. 0:18:56.080 --> 0:18:59.200 And was that just a dumb question in person before? 0:18:59.320 --> 0:19:01.399 Like in terms of of getting back out of COVID. 0:19:01.440 --> 0:19:03.560 Were you in l A last year, No. 0:19:03.680 --> 0:19:04.120 I wasn't. 0:19:04.200 --> 0:19:07.200 No, No, that's this is the first time that I've 0:19:07.280 --> 0:19:10.760 been there, so no, but it's yeah, fascinating conference. 0:19:10.840 --> 0:19:12.960 What are they saying about China because that's also in 0:19:13.080 --> 0:19:17.120 the news again, just people really concerned about that economy 0:19:17.240 --> 0:19:20.040 and sort of the shippers. I mean, obviously, you know, 0:19:20.119 --> 0:19:22.399 in Gene Succora from the Port of Los Angeles, we 0:19:22.440 --> 0:19:24.200 have as a guest all the time, and he's a 0:19:24.240 --> 0:19:26.840 good read for us on ship you know, shipping and 0:19:26.960 --> 0:19:28.920 volume and experts out of China to the rest of 0:19:28.960 --> 0:19:29.280 the world. 0:19:29.359 --> 0:19:31.320 What do some of the shippers say about. 0:19:31.160 --> 0:19:37.040 China, Well, in the most broadest context, really you when 0:19:37.080 --> 0:19:40.320 you talk about China, very soon the words come to 0:19:40.880 --> 0:19:44.639 diversification and resilience in the same conversation, right, So the 0:19:45.240 --> 0:19:49.800 focus is very much on diversify your supply chains to 0:19:50.359 --> 0:19:54.280 ensure that you maintain a constant supply and the ability 0:19:54.400 --> 0:19:59.439 to switch suppliers quickly if one country or one shipping 0:19:59.520 --> 0:20:04.000 route becomes a problem, then you've got other options where 0:20:04.040 --> 0:20:09.000 you've already got contracts and relationships in place. And obviously 0:20:09.160 --> 0:20:13.000 China is really at the forefront of that diversification away 0:20:13.040 --> 0:20:18.000 from China towards especially the other Asian economies, and closer 0:20:18.040 --> 0:20:19.199 to home towards Mexico. 0:20:19.520 --> 0:20:21.639 So I was going to ask just in terms of 0:20:21.800 --> 0:20:23.639 diversification away, it does seem like a lot of that 0:20:23.680 --> 0:20:26.680 would be in South and Central America, which, in turn, 0:20:27.040 --> 0:20:29.240 if an event like the Red Sea, everything that's going 0:20:29.280 --> 0:20:30.720 on with the Red Sea, you would be able to kind. 0:20:30.600 --> 0:20:31.200 Of bypass that. 0:20:32.040 --> 0:20:32.240 Yeah. 0:20:32.359 --> 0:20:36.239