EVA, Kuttra Kacha, Bloomberg discussed on Politics, Policy, Power and Law

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And expectedly fell in December posting the worst drop in nine years in a sign of slower economic momentum at year end amid financial market turmoil and the government shutdown for more on this. We bring in Kuttra Kacha, Jimmy Dmitry, Eva and catchy. It's times. Like this. You start hearing. Whispers of the our word too soon. Yes. Absolutely. This is something we're we're hearing again today, as we call communists about these really scary numbers. Really? I mean to be honest. No, economists had expected this kind of a dip in retail sales for December. In fact, it was so bad that they even started questioning how much we should rely on these data when we have other data pointing to a pretty steady economy and these kind of came out of nowhere. But it is as you said one of the signals that we look for one of them as a consumer spending consumer sentiment, and when we talk about a recession and the potential for a recession, and you're hearing a lot more about this our word lately because whether it's the poll the Bloomberg poll that showed that recession expectations are two six year high. There's also people like, Paul Krugman, and Robert Schiller who are talking about the. The risks of a recession when we could potentially see one and see that contraction coming so far it's kind of late two thousand nineteen twenty twenty phenomenon. But this is one of the things that makes you take a step back and think okay, where where are we right now in the economy? What's your reaction to any c- director, Larry cudlow, telling reporters that this was likely a glitch Ghezzi? Yeah. Glitzy and the reason that he's saying that as well as a lot of other economists, he's definitely not alone in saying that it's a glitch or some aberration is because all the other indicators were seeing point to a strong consumer. So we had consumer sentiment for the month, which was pretty high. We had a lot of the job and wage numbers. Like, we just heard about the unemployment rather the jobless claims numbers that also came out today. And then we also had the monthly jobs report, which pointed to super solid payroll gains and continued wage gains. So in that kind of environment, you think okay, consumer strong consumers confident despite all these headwinds of the government shutdown and the trade war, they're still on solid footing. So where did this report come from, especially when we had private data from Redbook showing that it was the biggest holiday going back several years for for retail sales. So there is some doubt being thrown on this as well, as I mentioned, the seasonal factors and also the shutdown could have delayed something's this. This really did just come out of left field. It did. I mean aside from the fact that new economists were expecting it. We weren't really looking for this kind of a low reading either. So when you look through the data where did the drops come in? And it was all discretionary spending. Right. So we had gains in things like autos and building materials. These are things that are big things that people have to be really confident in order to buy and especially the building materials, you would think. Okay, housing sales housing starts you need a mortgage need a certain amount of money for this kind of a large purchase. So there is sort of a bit of a silver lining there. But that's really at everything else, you know, clothing going out groceries like it all across the categories fell for for the month. And so what's ahead? Does this number possibly get revised? Yes. So the other thing it's interesting you mentioned revisions because the prior month was also revised down and going forward. We're talking to analysts who are saying we expect these numbers to bounce back up. They're expecting for these numbers to be revised. And they're also expecting some sort of a note on why we had this kind of this kind of a dip the other risks though. I mean, there are still risks on the horizon, we're talking about potentially potentially another government shutdown. If things don't get worked out. We also are seeing some stories on the terminal today about tax refunds being a than expected. So if you have a lower than expected tax refund all that boost in spending you're making throughout the year. And that we saw in October November might not be might not be playing out kind of going forward, and broader sort of big picture. Economy is is is still solid footing. But we are expecting that to tick down across categories because remember we talked about the fiscal stimulus all the spending that provided last year that's not going to be continuing into into twenty nineteen. So this this definitely is is a red flag and something for the fed to watch out for when they're thinking about raising rates, or maybe even cutting some people expect so this is definitely something that they have to keep in mind in future conversations as well. So if this really is a recession indicator, what should be what should we be watching for to confirm this, right? So this is one of many so consumer spending a huge retail sales are huge they make up the majority of the economy. But then there's also things like the yield curve business sentiment manufacturing surveys and overall global growth because the US isn't an island were largest economy. But there's other countries out there. And so far what we're seeing on those indicators are not necessarily conclusive we had the yield curve earlier shows sort of. Showing us that there was three the probability of recession rose, but that's happened before without a recession. We also had business sentiment. That's been kind of up and down, especially small businesses are at least optimistic, but you know, that could be a one month phenomenon as well. We haven't seen we've seen sort of a salary outlook. But again, we've we've been here before and we're still historically at high levels and then manufacturing surveys, although they took a dip again, they're still historically pretty high. So if we do continue to see slumps across all of these then we'll start talking about a recession because like bigger expectations for a recession. I should say because that's business investment and consumer investment. So those two things together following in unison for a longer period of time is not good news. Our thanks to cut you Dmitri. Eva, Bloomberg news economy reporter. And of course, these numbers we will.

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