WEBVTT - US Factory Activity Shrinks, Fed Meeting, Amazon Earnings 0:00:02.920 --> 0:00:10.799 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.000 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:18.040 Eastern on Affo, Cardplay and Android Auto with the Bloomberg 0:00:18.079 --> 0:00:21.400 Business App. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:24.000 or watch us live on YouTube. 0:00:25.120 --> 0:00:29.160 IM manufacturing number, the price is paid. That's something and 0:00:29.280 --> 0:00:30.640 jumped quite a bit in March. 0:00:30.720 --> 0:00:34.080 Also, yeah, exactly, So I'm looking and so that data 0:00:34.120 --> 0:00:36.040 will break it down in just moments. But I'm looking 0:00:36.040 --> 0:00:38.360 at also the Jolts data data a little bit lower 0:00:38.400 --> 0:00:41.000 eight point five million the consensus with like eight point 0:00:41.040 --> 0:00:43.800 six to eight million. So the Jilt's opening has been 0:00:43.840 --> 0:00:45.640 a little bit fewer job openings out there. 0:00:45.720 --> 0:00:48.640 Yeah, so okay, we all brain paint the brush. We 0:00:48.680 --> 0:00:52.520 have a slow wing ish Yes, astronomy with inflation still 0:00:52.680 --> 0:00:56.040 ish high. Tim Feuory is the man behind the ism. 0:00:56.080 --> 0:00:59.360 He has chaired for the Institute for Supply Management. He 0:00:59.400 --> 0:01:01.560 breaks down all the data's force. We love giving you 0:01:01.600 --> 0:01:05.280 this instant analysis of the data as it crosses the terminal. Tim, 0:01:05.319 --> 0:01:08.360 always great to see you walk us through these numbers. 0:01:08.959 --> 0:01:10.040 Now, good morning everyone. 0:01:10.600 --> 0:01:12.720 Yeah, a little bit of a disappointment, but you know, 0:01:12.760 --> 0:01:15.360 don't overreact to it. There's so much emotion around the 0:01:15.400 --> 0:01:18.160 fifty point fifty one versus forty nine nine. 0:01:18.200 --> 0:01:20.120 So we came into forty nine two. We sagged a 0:01:20.160 --> 0:01:20.600 little bit. 0:01:21.160 --> 0:01:23.640 The four elements that I watched for demands, three of 0:01:23.680 --> 0:01:25.280 those weakened a little bit. 0:01:25.760 --> 0:01:27.360 But I think this is just a bump in the road. 0:01:27.680 --> 0:01:31.319 I believe we're still on the tract of expansion that 0:01:31.360 --> 0:01:34.800 we started in January. On the output side, the revenue 0:01:34.880 --> 0:01:37.640 was good. We're still destaffing, but not as much as 0:01:37.640 --> 0:01:39.280 we were in the prior months, which I think is 0:01:39.280 --> 0:01:41.920 the appropriate thing to do. And the big disappointment in 0:01:41.920 --> 0:01:45.000 this month was really the input side, where the suppliers 0:01:45.080 --> 0:01:47.440 are still delivering faster, which is a bit of a 0:01:47.440 --> 0:01:50.960 surprise at this point, and the manufacturing inventory account is 0:01:51.000 --> 0:01:53.120 still contracting again a surprise. 0:01:53.720 --> 0:01:55.920 As you mentioned, Alex. The price is number. 0:01:55.640 --> 0:01:58.920 Coming in at almost sixty one is you know, definitely 0:01:59.200 --> 0:02:02.000 an eye opener. So dit a bit of research on that, 0:02:02.120 --> 0:02:04.400 and it seems to be all commodity related. It's steel, 0:02:04.440 --> 0:02:08.840 it's illuminum, it's plastics, and to some extent, crude oil driven, 0:02:08.919 --> 0:02:13.079 petrochemical driven, but not as much as the basic foundational commodity. 0:02:13.200 --> 0:02:15.400 So you know, I think we hit a little bit 0:02:15.440 --> 0:02:17.720 of a bump here, but I still believe that we're 0:02:17.760 --> 0:02:19.080 on the growth rejectory. 0:02:19.440 --> 0:02:22.200 So, tim, do I interpret that price is paid? Again? 0:02:22.200 --> 0:02:24.480 It came in at sixty point nine versus a consensus 0:02:24.480 --> 0:02:27.919 of fifty five point four and number last period fifty 0:02:27.919 --> 0:02:31.200 five point eight, So the higher prices paid, So I 0:02:31.240 --> 0:02:32.760 take that as inflationary, right. 0:02:34.280 --> 0:02:36.919 Well, it means that in the month people paid more, 0:02:36.960 --> 0:02:39.000 people paid higher prices than they did in the fire. 0:02:39.520 --> 0:02:42.360 So you could say that they're faced with higher prices 0:02:42.360 --> 0:02:42.880 for sure. 0:02:43.720 --> 0:02:47.400 And you mentioned him as commodity, so understood that. Okay, 0:02:47.480 --> 0:02:51.240 commodity pressures can be transitory, but nonetheless walk us through 0:02:51.280 --> 0:02:55.760 the inventory, production, and new order. So inventories are unchanged, 0:02:55.880 --> 0:02:59.320 production fell and new orders fell. So is that just 0:02:59.520 --> 0:03:02.840 that companies have restocked enough and they can hang tight 0:03:02.880 --> 0:03:05.200 for now or is it an end demand issue? 0:03:05.880 --> 0:03:08.520 No, they fell, but they're still expanding, so they slowed 0:03:08.520 --> 0:03:12.400 their rate of growth. Okay, on the production side, and 0:03:12.440 --> 0:03:14.040 we had a bit of a surprise I think last 0:03:14.120 --> 0:03:17.160 month on the production number being so strong from something 0:03:17.160 --> 0:03:18.400 that was slightly contracting. 0:03:18.440 --> 0:03:20.600 I think the prior month or that flat. 0:03:20.880 --> 0:03:22.440 So we're still expanding, but it's a bit of a 0:03:22.440 --> 0:03:25.480 slower rate, so that's positive. On the employment side, we're 0:03:25.520 --> 0:03:28.040 still contracting, but it is a slower rate, so we're 0:03:28.080 --> 0:03:30.359 not letting as many people go, which I think is 0:03:30.400 --> 0:03:32.600 appropriate too at this point. You know, at the end 0:03:32.600 --> 0:03:34.519 of April, if the second half of the year is 0:03:34.520 --> 0:03:36.320 going to be stronger than the first, and at some 0:03:36.360 --> 0:03:38.440 point you got to stop letting people go. And I 0:03:38.480 --> 0:03:40.880 think we talked about that last month, and I think 0:03:40.880 --> 0:03:41.720 that's happening now. 0:03:41.800 --> 0:03:44.000 So nothing unusual. On the output side. 0:03:44.040 --> 0:03:45.920 I think I would love to see a much more 0:03:46.000 --> 0:03:48.760 robust production number, but it just wasn't to be in April. 0:03:49.080 --> 0:03:52.000 I remember, April's a pretty strong manufacturing month. It's really 0:03:52.000 --> 0:03:55.040 the beginning of some pretty heavy outputs. So there's some 0:03:55.080 --> 0:03:57.280 seasonal factors in here, but I'm not going to say 0:03:57.280 --> 0:03:59.240 that that's the issue. I think we had a bit 0:03:59.280 --> 0:04:02.760 of a bump. I'm still optimistic about may you know. 0:04:02.920 --> 0:04:05.240 The pricing number is obviously concerning. We've had a couple 0:04:05.280 --> 0:04:08.800 of months here on growth. It's foundational, which on one hand, 0:04:08.800 --> 0:04:11.200 you could argue, Okay, that's because demand is coming back 0:04:11.240 --> 0:04:15.080 and prices are stabilizing and in some cases growing. If 0:04:15.080 --> 0:04:16.919 that's the case, all right, fine, but you still have 0:04:16.960 --> 0:04:18.200 to deal with the inflation number. 0:04:18.800 --> 0:04:21.320 Great stuff, Tim, really appreciate it. Thanks for the ins analysis. 0:04:21.320 --> 0:04:22.600 You know you have a busy day for you, Tim 0:04:22.640 --> 0:04:27.240 Fiory of the ISM Manufacturing team, he's the chair of 0:04:27.240 --> 0:04:29.680 that ISM Manufacturing coming a little bit light prices pay 0:04:29.800 --> 0:04:33.600 jumping a to over sixty. Although, Tim trying to even 0:04:33.600 --> 0:04:35.920 it out, so you know it's a bump. Relax, make 0:04:36.000 --> 0:04:37.599 it still be good. Let's not overreact. 0:04:37.680 --> 0:04:39.599 Yeah, we'll play by her so again, looking for the 0:04:39.640 --> 0:04:43.040 trend there, but a little bit of a concern there. 0:04:43.080 --> 0:04:43.800 We'll take a look at it. 0:04:45.080 --> 0:04:48.960 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:04:49.040 --> 0:04:52.080 weekdays at ten am Eastern on Apple car Play and 0:04:52.080 --> 0:04:55.000 Android Auto with the Bloomberg Business app. You can also 0:04:55.080 --> 0:04:58.279 listen live on Amazon Alexa from our flagship New York 0:04:58.320 --> 0:05:01.039 station Just Say Alexa playing Bloomberg e. 0:05:02.960 --> 0:05:06.520 Dennis Lockhart Joints is here, former Atlanta FED President joining 0:05:06.560 --> 0:05:09.800 us from Atlanta. Dennis, I have to ask before we 0:05:09.839 --> 0:05:12.280 even start, if you tell me your office is located 0:05:12.320 --> 0:05:14.520 on Peachtree Street, I'm going to jump out the window. 0:05:14.760 --> 0:05:16.440 Is it on a Peachtree Street? 0:05:17.040 --> 0:05:17.760 Indeed it is. 0:05:17.880 --> 0:05:22.920 See my current office, which is my home, is on 0:05:23.000 --> 0:05:28.000 Peachtree Street, and it's about five or six miles north 0:05:28.320 --> 0:05:31.200 of the Fed Office, which is also a tenth and 0:05:31.279 --> 0:05:31.840 Peach Tree. 0:05:31.960 --> 0:05:32.239 See. 0:05:32.320 --> 0:05:35.400 I mean before there was Google Maps or I got 0:05:35.440 --> 0:05:39.400 lost in Atlanta every single time because every single street 0:05:39.720 --> 0:05:42.159 is Peachtree Road, Peachtree Street, Peachtree. 0:05:41.760 --> 0:05:43.520 Avenue, north east, southwest. 0:05:43.520 --> 0:05:46.919 I don't know every handle you can put on the 0:05:46.920 --> 0:05:48.600 word peach Tree is used. 0:05:48.400 --> 0:05:56.200 To like, yes, Peachtree, it's it's a phenomenon just specific 0:05:56.279 --> 0:05:58.120 to Atlanta. I don't know it's I know they've got 0:05:58.160 --> 0:06:00.840 they've got a secret code down there. Dennis, what do 0:06:00.920 --> 0:06:03.000 we going to hear from our Federal Reserve today at 0:06:03.000 --> 0:06:03.960 two pm wall Stree time? 0:06:05.839 --> 0:06:08.440 Well, I think, first of all, I don't think the 0:06:08.520 --> 0:06:11.480 statement is going to break new grounds. So I think 0:06:11.520 --> 0:06:16.120 it's really a question of Pal's press conference. I think 0:06:16.279 --> 0:06:20.640 he needs to kind of thread the needle here, come 0:06:20.760 --> 0:06:24.240 off as a bit balanced. I don't think he wants 0:06:24.320 --> 0:06:28.919 to encourage any expectation of a near term cut, meaning 0:06:29.000 --> 0:06:33.320 at the June and July meetings. But I don't think 0:06:33.360 --> 0:06:37.920 he also wants to abandon the idea that this year 0:06:38.040 --> 0:06:42.320 we will see some rate cuts, and to add to that, 0:06:42.839 --> 0:06:47.320 he probably cannot take off the table the scenario in 0:06:47.440 --> 0:06:50.600 which there is a rate hike. So to me, he's 0:06:50.640 --> 0:06:55.360 got to come across as balanced and measured in a 0:06:55.839 --> 0:06:58.679 certain sense, non committal, which. 0:06:58.520 --> 0:07:00.800 I'm sure he's going to try very hard at all 0:07:00.839 --> 0:07:04.160 the seventeen thousand questions that ask about a hike to 0:07:04.320 --> 0:07:09.200 do that? How in your experience, and you're taking a 0:07:09.240 --> 0:07:11.280 look at the economy and the data that's coming in 0:07:11.440 --> 0:07:17.080 which is showing some softness, How quickly can an economy cool? 0:07:17.200 --> 0:07:20.400 How soft can an economy get? Knowing the data points 0:07:20.480 --> 0:07:21.240 we have right. 0:07:21.160 --> 0:07:25.520 Now, short of a shock of some kind of supply 0:07:25.680 --> 0:07:29.600 shock is what we've experienced recently, I think the cooling 0:07:29.760 --> 0:07:35.000 will be gradual, and it will you know, it will 0:07:36.360 --> 0:07:41.000 be in a way fighting something that seems to be 0:07:41.200 --> 0:07:45.080 fueling the current resilience in the economy, and that is 0:07:45.240 --> 0:07:48.400 that we have a very good employment economy. When people 0:07:48.480 --> 0:07:53.360 are employed, they tend to have confidence in their income stream, 0:07:54.000 --> 0:07:58.080 and consequently they tend to consume. And that's what's as 0:07:58.200 --> 0:08:02.160 simplistically at least, that's what's driving the current strength of 0:08:02.240 --> 0:08:05.680 the economy, so we're gonna have to see some consumption 0:08:05.960 --> 0:08:08.920 slow down, which so far we really haven't seen a 0:08:09.000 --> 0:08:09.360 lot of. 0:08:10.760 --> 0:08:12.920 Dennis, there are some folks out there that are making 0:08:12.960 --> 0:08:15.840 the argument that the Fed pivot, if you will, in 0:08:15.920 --> 0:08:19.400 December to a more caution more dubbish tone that actually 0:08:19.480 --> 0:08:21.800 contributed to some of the inflation we're seeing here in 0:08:21.840 --> 0:08:23.280 the first quarter of twenty twenty four. 0:08:23.800 --> 0:08:28.840 Do you buy that, well, inflation expectations have risen a 0:08:28.880 --> 0:08:32.280 little bit. That's always a red flag for the Committee. 0:08:32.320 --> 0:08:38.840 They get concerned when they see expectations rising, and we've seen. 0:08:38.679 --> 0:08:40.400 That happen. 0:08:42.160 --> 0:08:46.560 That on balance, you know, should be a cautionary note, 0:08:47.760 --> 0:08:52.559 and you know that means they're going to maintain their 0:08:52.760 --> 0:08:58.319 posture of I would say slight hawkishness in these circumstances. 0:08:59.440 --> 0:09:01.040 To build on that point, I mean, you look at 0:09:01.040 --> 0:09:04.160 financial conditions Index like it's not tight. So when the 0:09:04.200 --> 0:09:09.840 Fed says things like we think that we're restrictive enough policy, 0:09:10.559 --> 0:09:11.520 why do they think that? 0:09:13.080 --> 0:09:16.040 I have a very good question. It may very well 0:09:16.280 --> 0:09:22.199 be a question that they're reconsidering. I think, you know, 0:09:22.640 --> 0:09:27.439 we just we've seen the economy tolerate this level of 0:09:27.559 --> 0:09:33.240 interest rates with apparently very little problem. The economy continues 0:09:33.360 --> 0:09:38.640 to move along very robustly even with the current setting 0:09:38.720 --> 0:09:44.080 of policy. So it wouldn't surprise me at all if individuals, 0:09:44.120 --> 0:09:47.959 at least in their fedspeak after the meeting, say that 0:09:48.120 --> 0:09:52.079 they're not so sure that the setting of policy is 0:09:53.440 --> 0:09:56.800 as restrictive as they thought. Now, one thing to keep 0:09:56.840 --> 0:09:59.280 in mind is the ten year has moved from about 0:10:00.320 --> 0:10:06.600 thirty ish too or sixty five to seventy, and that's tightening. 0:10:07.000 --> 0:10:10.880 That's not tightening policy, but that's tightening financial conditions. And 0:10:11.120 --> 0:10:12.760 we've seen that in the last few weeks. 0:10:12.960 --> 0:10:14.480 Yeah, to be fair, I mean, this is why I 0:10:14.559 --> 0:10:17.040 take notes, Paul, because this was an IRA Jersey thing 0:10:17.080 --> 0:10:19.120 from yesterday and I was like, that's a brilliant question. 0:10:19.200 --> 0:10:20.480 I'm stealing it and I'm writing it down. 0:10:20.559 --> 0:10:20.959 So there you go. 0:10:21.480 --> 0:10:22.040 That's why I do it. 0:10:23.200 --> 0:10:26.320 Is there a scenario here for twenty twenty four where 0:10:26.320 --> 0:10:27.360 there are no rate cuts? 0:10:28.840 --> 0:10:31.240 I don't think you can you can dismiss that idea 0:10:31.400 --> 0:10:35.040 of I don't think it's a base case at the moment, 0:10:35.320 --> 0:10:39.520 and I don't think the Committee importantly has abandoned the 0:10:39.640 --> 0:10:43.559 outlook or the view that they will ultimately cut rates 0:10:43.679 --> 0:10:47.800 later in the year, but I don't think I think 0:10:47.880 --> 0:10:51.880 it's a non zero probability that there are no rate 0:10:51.960 --> 0:10:52.559 cuts this year. 0:10:54.440 --> 0:10:55.240 So well off. 0:10:55.679 --> 0:10:57.719 I mean, I guess two o'clock we'll hear from the 0:10:57.800 --> 0:10:59.959 Fed here. I guess also that is just real quick. 0:11:00.679 --> 0:11:02.920 A rate hike, is that something that you think will 0:11:02.960 --> 0:11:05.680 be discussed or was discussed yesterday and today. 0:11:05.720 --> 0:11:14.160 I think at this time they chair pal and the 0:11:14.200 --> 0:11:19.800 committee overall probably don't want to entertain a rate hikes 0:11:20.120 --> 0:11:24.559 as they don't want want to create the market aftermath 0:11:24.640 --> 0:11:27.199 that would occur if there was a serious discussion of that. 0:11:27.840 --> 0:11:30.640 But at the same time, Palell can't take it off 0:11:30.679 --> 0:11:33.679 the table because he's got to keep I think the 0:11:33.760 --> 0:11:37.559 committee's options open to deal with whatever develops in the 0:11:37.679 --> 0:11:38.280 coming months. 0:11:38.760 --> 0:11:41.319 All right, Dennis, really great perspective. Thank you so much. 0:11:41.400 --> 0:11:43.960 As Lockhart, former Atlanta FED President, joining us from out 0:11:44.000 --> 0:11:46.360 Peachtree Street, we decided, yeah. 0:11:46.240 --> 0:11:49.080 So in the bio page, I mean, it's it's Peachtree 0:11:49.120 --> 0:11:52.280 and it's p Stree Street, Peachtree Road, Peachtree Avenue, and 0:11:52.360 --> 0:11:57.120 it's not just that northwest, southeast, northeast, and so literally 0:11:57.800 --> 0:11:59.559 and you'd be sitting there and you give your the 0:11:59.640 --> 0:12:01.920 capture an address, and you know, if you didn't have 0:12:02.000 --> 0:12:05.400 it exactly perfect, he take you to a completely different 0:12:05.440 --> 0:12:07.920 part of town, oh like forty minutes away. 0:12:08.440 --> 0:12:10.600 I mean it was crazy. I'm like, you know he'd 0:12:10.640 --> 0:12:14.040 be taking me somewhere. It's like, this isn't investco You're like. 0:12:14.320 --> 0:12:17.000 This is somewhere very different the things we learn here 0:12:17.320 --> 0:12:18.520 in Bloomberg Intelligence. 0:12:20.960 --> 0:12:24.800 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:12:24.920 --> 0:12:28.000 weekdays at ten am Eastern on Affo, CarPlay and Android 0:12:28.000 --> 0:12:31.040 Auto with the Bloomberg Business app. Listen on demand wherever 0:12:31.160 --> 0:12:34.320 you get your podcasts, or watch us live on YouTube. 0:12:35.880 --> 0:12:39.640 I'm Alex Steel alongside Paul Sweeneymer Live Interactive Brokers Studio 0:12:39.760 --> 0:12:42.600 right here in midtown Manhattan. This is the Bloomberg Intelligence 0:12:42.720 --> 0:12:45.240 radio show where we cover all the top economic and 0:12:45.320 --> 0:12:47.840 financial news for you with a lens through a Bloomberg 0:12:47.920 --> 0:12:52.320 Intelligence analyst. They have an amazing coverage scope two thousand companies, 0:12:52.360 --> 0:12:54.719 one hundred and thirty industries all around the world. We 0:12:54.840 --> 0:12:58.400 also tap our super solid lineup of external guests as well, 0:12:58.480 --> 0:13:00.640 who really knee deep in all the data that we're 0:13:00.679 --> 0:13:04.040 getting the latest is at ism. Manufacturing data disappointing. The 0:13:04.120 --> 0:13:06.719 Jolts number also coming in a little bit lighter, but 0:13:06.800 --> 0:13:10.880 yet still relatively strong. Jeffrey Cleveland is chief economist over 0:13:10.920 --> 0:13:14.520 at Peydon Regal. He joins US now from Los Angeles. Jeffrey, 0:13:14.880 --> 0:13:17.480 it is FED day. It is a big day. A 0:13:17.559 --> 0:13:20.480 success for j. Powell would probably be a nothing burger. 0:13:20.920 --> 0:13:22.120 What kind of burger do you want? 0:13:23.520 --> 0:13:26.120 Well, okay, I was hoping for some more excitement. Actually, 0:13:26.200 --> 0:13:29.280 happy Fed Day to you out. I mean, we're not 0:13:29.320 --> 0:13:31.840 going to get any move on rates. I don't see 0:13:32.000 --> 0:13:34.080 a lot of incentive for the Fed chair to try 0:13:34.160 --> 0:13:37.240 to to try to move markets. Markets have moved towards 0:13:37.760 --> 0:13:41.120 a more hawkish stance, removing a lot of the policy 0:13:41.120 --> 0:13:43.120 accommodation that we saw priced in at the start of 0:13:43.120 --> 0:13:45.160 the year. So I don't know if he needs to 0:13:45.200 --> 0:13:47.640 do much, but I was hoping maybe just to stir 0:13:47.800 --> 0:13:50.280 up something, we could get an announcement on the balance sheet, 0:13:51.200 --> 0:13:53.560 so put her aside rates And they have been doing 0:13:53.640 --> 0:13:56.800 this quantitative tightening for most of the last two years, 0:13:57.120 --> 0:14:00.280 and they said, or at least Chair Paler said he 0:14:00.320 --> 0:14:05.079 wanted to fairly soon begin the process of slowing the 0:14:05.240 --> 0:14:08.280 pace of balance sheet contraction, if you can follow that. 0:14:08.360 --> 0:14:12.079 So that could be something that's announced today to start 0:14:12.120 --> 0:14:14.880 in June, or maybe they put that announcement off told June. 0:14:14.880 --> 0:14:18.240 I don't know, but that's one idea for some excitement today. 0:14:18.760 --> 0:14:20.320 So, Jeffrey, from. 0:14:20.120 --> 0:14:23.440 Your perspective, looking at the economic data that you see, 0:14:23.920 --> 0:14:25.000 what do you think the Fed. 0:14:25.200 --> 0:14:26.000 Should do. 0:14:27.920 --> 0:14:30.080 Nothing at all? I think on the funds rate, they 0:14:30.440 --> 0:14:34.040 just sit here. Yeah, I mean, there's no compelling case 0:14:34.480 --> 0:14:38.240 to cut interest rates at this point. That GDP report 0:14:38.840 --> 0:14:40.840 you know last week, if you exclude some of the 0:14:40.920 --> 0:14:45.000 volatile components, we still see the underlying pace of growth 0:14:45.200 --> 0:14:48.400 in this country at around three percent. We think we 0:14:48.440 --> 0:14:50.360 could get a figure like that at an annualized rate 0:14:50.400 --> 0:14:53.240 in Q two, which would be excellent. The unemployment rates low, 0:14:53.760 --> 0:14:56.400 all the inflation data, all the inflation data in the 0:14:56.480 --> 0:14:59.800 first quarter picked up relative to what everyone had hoped for. 0:15:00.080 --> 0:15:04.240 So whether we're talking CPI or PCE or ECI from 0:15:04.360 --> 0:15:07.480 yesterday right, everything's picked up. So there's no compelling case 0:15:07.880 --> 0:15:09.800 here to cut rates. I don't know that there would 0:15:09.840 --> 0:15:12.400 be a it would take a few months. If I'm 0:15:12.440 --> 0:15:15.240 a policy maker, Paul, I want to see it leans 0:15:15.320 --> 0:15:19.160 three months of inflation data. That's much cooler than we've 0:15:19.160 --> 0:15:21.920 been witnessing. So I think that rules out doing anything 0:15:22.000 --> 0:15:23.880 for now. That's why I thought the balance sheet would 0:15:23.880 --> 0:15:25.560 be something they could do with their time in the interim. 0:15:26.560 --> 0:15:28.960 We are just talking about this in the previous segment. 0:15:30.120 --> 0:15:32.880 Why does the Fed and do you agree that the 0:15:33.000 --> 0:15:36.240 policy is actually restrictive enough? When you take a look 0:15:36.240 --> 0:15:38.760 at financial conditions, they are so lose. So what gives 0:15:38.800 --> 0:15:41.840 them the confidence to say policy is at a restrictive 0:15:41.960 --> 0:15:42.520 enough point. 0:15:44.800 --> 0:15:47.240 Well, there's this hypothetical thing they have where they look 0:15:47.280 --> 0:15:49.120 at the neutral rate, they look at the policy rate 0:15:49.200 --> 0:15:51.440 relative to that, they say, we must be we must 0:15:51.480 --> 0:15:54.240 be at a restrictive setting. Lots of bond people will 0:15:54.320 --> 0:15:57.040 also look at real rates. So if you look at 0:15:57.080 --> 0:16:00.080 your tips imply your real rates, or you look a 0:16:00.200 --> 0:16:03.280 nominal yield minus some measure of inflation, it's positive. Now 0:16:03.760 --> 0:16:07.160 it's been negative for quite some time, so people think 0:16:07.240 --> 0:16:10.040 that's a restrictive. I'm a simple man, so I just 0:16:10.120 --> 0:16:14.680 look at growth, inflation, the unemployment rate, and I think 0:16:14.720 --> 0:16:17.720 the jury is still out, Alex. It's tbd whether we're 0:16:17.920 --> 0:16:21.960 actually that restrictive. I just got back from Europe. I 0:16:22.080 --> 0:16:24.040 was in Germany, a lot of clients over there asking 0:16:24.120 --> 0:16:27.120 that question, and one thing I said was, Hey, maybe 0:16:27.360 --> 0:16:29.840 interest rates are just going to take more time to bite. 0:16:30.480 --> 0:16:33.120 The US consumer is more insulated from rates. We've got 0:16:33.160 --> 0:16:36.240 thirty year fixed mortgage for example. Many of my corporate clients, 0:16:36.360 --> 0:16:38.760 you know, they've turned out their debt and they're earning 0:16:39.280 --> 0:16:42.920 income on their assets, their savings that they've accrued, So 0:16:43.040 --> 0:16:45.880 they're actually earning income at higher rates here. So maybe 0:16:45.880 --> 0:16:49.760 they're more insulated from the interest rate increases that we've seen. 0:16:49.920 --> 0:16:52.160 So the U economy is very resilient. I think it's 0:16:52.360 --> 0:16:54.600 tough to make the case. Things are very restrictive at 0:16:54.640 --> 0:16:55.040 the present. 0:16:55.600 --> 0:16:58.760 Jeff we had some Jeffrey, we had some ISM data 0:16:58.840 --> 0:17:01.800 come out earlier this morning. Forty nine point two was 0:17:01.840 --> 0:17:04.239 a headline number versus a consensus of fifty. We had 0:17:04.280 --> 0:17:07.440 Tim Fury, who heads up the ISM, saying he's not 0:17:07.600 --> 0:17:10.800 too concerned about it. It's a data point. How do 0:17:10.880 --> 0:17:14.639 you think about just kind of the overall economy here today? 0:17:14.760 --> 0:17:18.160 Is it strong enough from your perspective that the Fed 0:17:18.240 --> 0:17:21.879 in fact can just kind of wait, yeah, it is. 0:17:22.359 --> 0:17:24.240 You know, I got excited when we jump back above 0:17:24.280 --> 0:17:27.520 fifty on IC we've been lingering below that. I gotta admit, 0:17:27.600 --> 0:17:29.440 you know, that was an exciting moment for us. We 0:17:29.480 --> 0:17:32.040 did a chart of the week on that. But probably 0:17:32.080 --> 0:17:35.639 the most worrisome aspect of that is m POL price 0:17:35.720 --> 0:17:38.159 is paid. Ye correct me if I'm wrong, but I 0:17:38.480 --> 0:17:40.879 believe they leapt back up to sixty point nine on 0:17:40.960 --> 0:17:45.200 that gage. So again, maybe the real story here. You know, 0:17:45.280 --> 0:17:47.800 we've had some manufacturing weakness for some time, so that's 0:17:47.840 --> 0:17:51.520 not really new. But the resurgence of some price pressures 0:17:51.560 --> 0:17:53.480 that might be the real story here. And that's consistent 0:17:53.520 --> 0:17:56.200 with some other price gauges in Q one, right. 0:17:56.160 --> 0:17:57.960 And that's something that the FED can't do anything about, 0:17:58.119 --> 0:18:00.240 Like if that's a commodity pass through thing, if it 0:18:00.240 --> 0:18:02.720 stays higher, they can't do anything about that. Point in essence, 0:18:03.359 --> 0:18:07.000 here's my question from earlier. If we don't get a 0:18:07.200 --> 0:18:10.000 cut this year, could that be seen as a de 0:18:10.119 --> 0:18:10.960 facto hike. 0:18:12.560 --> 0:18:16.680 Well, it's definitely a tighter policy than financial market participants 0:18:16.720 --> 0:18:18.800 had anticipated. You know, at the start of the year. 0:18:18.800 --> 0:18:21.200 I remember on this program in January we were talking 0:18:21.240 --> 0:18:23.320 I think there was one hundred and fifty basis points 0:18:23.359 --> 0:18:26.520 of rate cuts priced in that definitely had an impact 0:18:26.600 --> 0:18:28.520 on financial conditions, whether you're looking at a two year 0:18:28.600 --> 0:18:31.040 yield or a ten year yield. So the consequence of 0:18:31.119 --> 0:18:35.000 the removal of those rate cuts is, yeah, tighter financial 0:18:35.040 --> 0:18:37.880 conditions across the board. But you know, I just keep 0:18:37.920 --> 0:18:40.240 coming back to it when talking to clients. It's happening 0:18:40.320 --> 0:18:42.879 for a good reason. It's because growth is holding up. 0:18:42.920 --> 0:18:45.720 The economy is more resilient. We're talking three percent growth. 0:18:46.480 --> 0:18:49.080 That's not a terrible environment. I guess if we went 0:18:49.160 --> 0:18:52.320 back I don't know, five, six, seven years, and I 0:18:52.440 --> 0:18:54.639 told you we'd wake up in twenty twenty four with 0:18:54.760 --> 0:18:58.080 three percent growth, three point eight percent unemployment rate, it's 0:18:58.119 --> 0:18:59.920 a little bit higher. It's a three percent in place. 0:19:00.600 --> 0:19:02.840 You would take that deal. I think it would be 0:19:02.960 --> 0:19:07.240 okay for corporate earnings overall. So I don't know, it's 0:19:07.240 --> 0:19:10.840 a disastrous scenario here. It's disappointing if you expected a 0:19:10.920 --> 0:19:13.720 lot of rate cuts, which we did not, So not. 0:19:13.760 --> 0:19:15.159 Too disappointed, Jeffrey. 0:19:15.200 --> 0:19:17.560 How about the US consumer. We're gonna get some earnings 0:19:17.720 --> 0:19:20.399 starting next week from some of the retailers. How do 0:19:20.400 --> 0:19:22.720 you think the US consumers is doing out there because 0:19:22.760 --> 0:19:25.040 there's boy, there's a lot of crosswinds out there. 0:19:25.080 --> 0:19:29.200 It'seah tough, but certain parts are doing okay. How do 0:19:29.200 --> 0:19:29.960 you view the consumer? 0:19:30.920 --> 0:19:32.600 I think, you know, I talked to a little, you know, 0:19:32.640 --> 0:19:34.320 a lot, a wide range of clients, and some of 0:19:34.359 --> 0:19:37.040 my clients tell me, hey, I don't care that inflation 0:19:37.200 --> 0:19:40.359 is cooled off. You know, Jeffrey's it was six percent 0:19:40.520 --> 0:19:42.960 on this core measure you're talking about. Now it's three percent. 0:19:43.080 --> 0:19:46.479 You know, big deal prices are still high, Paul, That's 0:19:46.520 --> 0:19:48.240 what they tell me. It's the price level that I 0:19:48.280 --> 0:19:50.520 think they're referring to. That's the term we would use, right, 0:19:51.040 --> 0:19:53.560 and so that's still I think that's still weighing on 0:19:53.640 --> 0:19:55.800 a lot of consumers. There are consumers that are seeing 0:19:55.840 --> 0:19:58.280 pretty good wage gains, but not all and we think 0:19:58.480 --> 0:20:00.280 you're seeing that show up in some areas. So we're 0:20:00.320 --> 0:20:02.720 seeing that in credit card delinquencies, We're seeing that in 0:20:02.800 --> 0:20:05.560 some of the auto delinquency numbers. So it's something more 0:20:05.680 --> 0:20:08.720 watching very carefully. I have to tell you though, in 0:20:08.840 --> 0:20:13.960 aggregate when I see aggregate nominal consumer income still growing 0:20:14.119 --> 0:20:16.879 at around six percent year on year through the latest 0:20:16.880 --> 0:20:19.679 month of data, that is pretty good that can smooth 0:20:19.720 --> 0:20:21.520 over a lot of the other problems that we see 0:20:21.560 --> 0:20:21.840 out there. 0:20:21.880 --> 0:20:23.560 So some signs of. 0:20:23.600 --> 0:20:27.800 Weakness, but overall, US can consumer is in still great shape. 0:20:27.840 --> 0:20:28.160 I think. 0:20:28.320 --> 0:20:30.000 So before we let you go, it is the question 0:20:30.280 --> 0:20:32.240