The State of the American Consumer
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Welcome inside economics. I'm Marks and the cheap economist of moody analytics, and i'm joined by a bevy of my colleagues, my two trusted cos r denita. An Christies. Hi guys. Mark.

mark, happy pretty thanksgiving indeed.

Were taping this early arts. We no a literally right. It's tuesday, tuesday before thanksgiving so well in advance when we typically tape.

I think we're put this out tomorrow morning too. So before black friday, and that gets to the topic at hand, we're going to talk about the american consumer. And to help us with that, we've got scotchy.

Hey, Scott, hey, work.

You know, that was, that was pretty party weak, I thought going to .

try again.

whatever OK. I don't know. good. So what did you that was be here? Are you excited to be here? Or .

what .

course? I'm good to be waiting. mark. right? Very ved up.

What do you guys do for thanksgiving? Are you your mom? 三百， 六百。 O K.

I have a friends coming into town today and today.

a very good cook. Turkey, or I think we had this discussion.

No, no, no, no. turkey. You got me wait for making shelf. Sh, do instead of a turkey. I called you weird, but that's, of course.

and nothing new.

What did I called her weird? yeah. Or that he is weird? Mean, wow, wow. This is.

come on, the .

the cast.

Or what are you do? Eat turkey .

on thanksgiving.

are we? So, yes, yeah. Who cooks? You were .

your on my way for, in this case, actually my daughter, and was going to be cooking the turkey.

Very cool, very cool.

I roasted, you know, bait.

yeah. Not so fancy. No, no. Depriving or no, no, no. SHE spit up really nicely.

Well, that sounds good. After getting hungry already. Can't wait.

Can't wait to my person food and that's all we have the thanking although my new son in law, who's 呃 uh a very good cook uh is gonna to cook the turkey。 And I think we're having that tomorrow oh the day before thanksgiving so look for that yeah look for to that yeah. Anyway, um we thought this would be this.

I thought this would be a good time. Talk about the american consumer, uh, you know, given the word getting into the teeth of the Christmas buying season and uh, like things to talk about there. But maybe we start with the kind of an open ended conversation around the the state of the american consumer. What do you thinks y how? How would you care across the state in american consumer?

I think very good consumer spending has been contributing powerfully to G, D. P. growth.

Consumers are spending, you know fairly aggressively. But IT manageably, uh, I think the overall state consumers is good. I currently there are pockets of weaknesses i'm sure will get into. It's not one hundred percent uniform, but in everyday, I think it's started good.

So, you know this is a polar game to kind of predict forecast the uh increase or I guess decrease in and if Christmas sales， not all Christmas sales, you know uh, not stripping out inflation but overall Christmas cells I use that used to be a big deal. I recall maybe this seems like it's gotten to be less sive a deal. Mary, is that just me not paying attention or is IT less of a deal?

This is certainly gets discuss a fair bit of I think part of the problem is that nearly everybody who puts out a number of measures differently, so it's very difficult to compare. And he that makes IT harder to track and follow.

I guess I think is Christmas sales are a smaller shared overall sales during the year. I mean, you to be about wrong about that. I think that's right, right.

Maybe a little bit. I don't note that is I mean, it's still to make a break season for retailers.

This sport out more though, doesn't it's put out hearts in july?

Well, I mean, clearly, retailers are trying to do that. And there was the whole point of you know, when amazon introduced prime day and stuff like that was to try and spread and clearly its less senate on individual days and in black friday is now a week or more. It's not a day.

But that doesn't mean that quality spending in aggregate isn't a big part of the year. Consumers I am for retailers. I mean, decembers, they are biggest month and jane is their smallest month. I mean, that certainly still true.

still true. okay. So i'm sure you have a an estimate of forecast for Christmas sales and they .

take any on how you measure IT the two and a half to three percent range o oh okay mean meaning .

two half if you measure one way, three if you measured the other way.

Um yeah depends on what you include. I think you looking at raw retailer, you're looking at specific you know court holiday segments.

right? Does that mean does that mean real retail cells after Christmas cells after inflation is zero because inflations two and a half right or or retail good Prices, they are flat down or something?

Yeah, goods Prices right now are flat to down. So no, we're talking the ominous and real are very similar. So that's strong two and five percent.

three percent you and all uh two after .

three .

percent real after inflation are the same thing two and after to three that's that's so that's that's a good .

Christmas is absolutely OK. I like though yeah again you have to be careful of your perspective. I mean, they're been a lot of years recently, we are non all sales growth has been higher than that as we've come out of the so IT IT depends a little bit on your perspective from an economist perspective.

Yes, I would definitely all IT strong from a retailer perspective. Who saw you know two or three years is sit or in the high single digital, the double digits as we came out of the pandemic. IT doesn't looked that strong.

Yeah, yeah. I guess I mean, because sales fell during the pandemic, so you know expect some catch up after you came back. But two, three percent that feels like for as you say for an economist perspective, from a macro economic perspective, write down the strikes down doesn't IT.

I mean that that that solid growth that means the economy will continue because consumers are so key to the brother economic that the economy will continue move forward. But it's not so strong that IT would raise fears that economy is going to overheat. Inflation remain the persistent of that have to stop cutting rights, right?

So this kind, absolutely, I plex agree with that OK.

There are more outsider downs risk .

that number ers.

if you're wrong?

Yeah, I don't know. I think it's fairly baLance in the near term. I mean, I have negative risks. I think further out the holiday, it's fairly mixed because consumers stilling people a lot of cash, they could do more, no more given their negative attitudes and stuff that will be talking about may, maybe they stay conservative. So I think the but the holiday season are fairly baLanced. And if you're talking next year, I probably screw him to the downside, but not the next couple of month OK.

What would be the biggest downside thread to your kind of baseline outlook for the consumer? You're kind of sing when you for the consumer, what would upset that? You don't tell me jobs because you I want reduced form. Give me, give me something meeting.

Are you talking the next two months? Are you talking?

Are you wanted define IT how you want to define IT?

I mean, I think if you're looking out on return, but I think energy Prices.

that always, always a big right, I guess.

yeah yeah. If we get a Spike in energy Prices that he and his spending power and in his confidence and that 加付 的 唯一 and have a neck， if you packed particularly on real spending, make less omand.

But I think about that is you you would say that if I asked that question years ago, ten years ago, thirty years ago, you give me that same answer, right? 嗯， 哼 OK。 So like i'm i'm raising the bar here, little IT.

So give me something that is more idiosyncratic to the current period, like is something out there and maybe there is nothing, but is there something out there that makes you a little uncomfortable? This why there's some disquiet there? You know anything?

嗯， i guess the availability .

credit really lending .

standards have been tightened, borrowings old and low and is suffering. And if they if they keep they they keep going back, maybe it's it's spreads. I don't know. It's it's a hard i'm i'm i'm struggling and reaching for straws because I don't think I think things are pretty good and IT is hard to come up .

with an answer question OK. Let me this way, you know, and I just followed this in a cursy way, I assume flow more carefully. But you know target, the big retailer reported earnings and IT was they were good uh, in the stock Price fell very sharply.

Uh, and that's in the context of one more I think we find wrong reporting very strong earnings and cells. So these retailers seem to be going in different directions. Is that signaling anything broadly about the consumers? Is that just idiots in cradle to the to those two retailers?

I honestly think that's mostly idiotic crap. And I think rolls t is doing a good job of appealing to a wide variety customers. I mean, they were talking in the earnings release about how a lot of their growth is coming from higher end customers. So I think they're vanagon to pull everybody in right now um whether target, I think, is losing some of its cash a and having more trouble, you know, hitting the sweet spot with its target customers.

Okay, right. okay. So this feels like a be very sangin, which makes me very nervous that you are so say, yeah, yeah.

But what about what about you? Do you heard his character zone about the consumer brother? Any push back there? Is that do you think .

so the the just opposition between one Martin target. Do you think you don't think that, that represents consumers sort of trading down on Price point? Or do you think there's any evidence of that? I actually got this question from the client the other day. Then maybe you know, we always say the consumers there, they're spending, they're not acting the way there saying they feel about the economy. But is there any evidence that people are kind of trading down on quality and Price point?

And just to make this because I don't know this very carefully, but we are saying target higher and a little bit higher income and the typical walmart customer. So if the high end is under little bit of pressure, maybe you're saying there.

就是 就是 trading down。

O, K, I mean.

some of that going on, but I also think some of IT is because consumers are still emphasizing service spending.

What about the luxury segment is a weakness and that part of IT? So that seems .

to be doing pretty well. O K, I retell us. O, K, I mean, the higher consumers are still doing well.

Dark Prices as highest. They are house Prices as I C. R. So I think the very high end is doing well. I think there are some trading from the middle and middle high down, but I think some of that is to make room for service spending, both because service Price inflation is still on a big issue and just because no, no, the trend is towards more, more service spending.

So are you saying target is more sensitive to the to to the, shifting the composition of spending toward services and more is， is that what you're suggesting? The the the kind of the uh, consumer uh, that typically goes to war to excuse me to the target is a little higher and there and there for more likely be traveling. And because they're traveling, they're not spending. So what you're saying.

some of IT, I mean, I as I said of the start, I think a lot of IT though is just the one words hitting what the customers are looking for Better than targets. I think I think a chunk of IT is ideal synthetic OK. I don't want to try and read .

too much into IT OK. alright. okay. Well, first back to my question on consumer. That bug you large. I mean, if you like scot, you know the consumers on pretty solid and will continue to do their thing and keep the economy going forward.

Yeah I mean, there's there's certainly evidence. If you look across different lines of credit diluent cy rates are high, right? For credit cards, consumer finance loans, I guess the good news there is they have stopped rising probably like they've kind of flatten out.

But dingus, ency rates on credit cards are higher than they have been sense twenty twelve, I think um this is from data that we get from active fax, right? So there's there's clearly some stress there. Some of that may be more recently um originated lines of credit on card. So cards that were happens during the pandemic or shortly after the pan dec, we know, are going bad faster than older vintages. And that that's kind of a idio c credit IT videos syn racy of the lending that happened during the pandemic.

But clearly.

there's some pockets of stress, right? And and it's likely at the low end where those consumers have been hit harder from inflation. And we don't see a lot of evidence of interest strates coming down despite the fed lowering rates by seventy five basis points, right? We've been looking at mortgage rates.

We ve been looking at the ten year yell. These things are not much changed or maybe even a bit higher in the past month than they were prior to the fed last rate cut. So there not a ton of relief on the interest rate front coming there for those consumers.

So I think there's pockets of stress, but I would agree with scopes overall. Take that. I mean, when you look at IT in the aggregate looks pretty good. I head and I just .

on the upside .

of things. I wonder if consumers feel there. They're obviously feeling a little bit Better as a result of the election, right? We we now have two readings on confidence post election um but I do do wonder and we talked about this, I think on the last podcast, if any spending will be pulled forward in an anticipation that inflation might be higher, say, next year, just given what we know about um the incoming administration plans to put significant tariff sun imports. So you know there's been some talk of should you buy big ticket items now, should you make purchases on things like cars and appliances and that kind of stuff. Um so I wonder if if that spending on that kind of stuff might .

be front loaded. Are you are you if you change your behavior all in anticipated? Rs, no, no cause of you.

no. But i've had i've heard books you say you know they're planning by referral or sometime next year they're going to do IT.

Now I can push IT ford. yeah. I don't I .

don't know that, that's widespread. And I think it's only for someone who already had that kind of plan in place and they're just kind of moving IT ahead a few months. But I don't know that IT suddenly triggering a consumer to say, hey, i'd Better do this now, right? I had no intention to buy everything, but i'm going to do IT now because I have because micheli .

think I think that's a lot more likely when you something concrete. I mean, what was the washers in the first trip administration when they now server with terrace and people moved? I think what is just nebula there? There may be higher, terrible, and that may push up Prices. But you know how much on what when are all unanswered questions? And I don't think you're going to see a big, big shift until IT becomes more concrete.

Right, right. First, what about you? I mean, in terms of the general story here about consumer anything, I mean, you're on board with the with scotch perspective. yeah.

If anything, in the short term, I actually more optimistic. I think we have seen that confidence jump up. Um I think this will be a good holiday season.

Um yeah, so I think uh, I think consumers are going to go out there and spell the telecom crazy because of the interesting environment is more to mention. But uh, I think of anything though, push things ahead here. Maybe maybe it's not I think that tariff talk may actually condition their psychology a little bit. Maybe not the maybe doesn't cause them refrigerator, but at least people are talking about in so might be something that they think about. Um so on the margin, you might see some of that spending .

old for a right. The same question. You anything on the downside that is out there that also mentioned the liquid?

See raids? Skate, skate. Scot, where did you mention? What is your concern? Uh.

let's concerned about like.

okay, yeah anything Chris can say, delicate cy rates.

I can't .

take gas Prices. Oh, that was what good sky t that wasn't IT was scot as oil Prices.

a big bike in oil Prices, certain the same deal? Yeah, I think so. Well, the other thing, of course, this is just still the geo pogey politics, right, ukraine situation in china.

So what .

what do .

you think that does to spending?

Well.

if you did eric Prices mean that would .

be the most direct out. But then even even if things are you know heading up, let's say, um I think you will see folks getting a little bit more concern and perhaps being a little bit more conservative and they're spending right.

You know, I don't think so.

I think the american consumer is a dollar in the pocket. They're na spend.

I mean, less IT has direct implications on the supply chain. My availability to get something or Prices. I'm not going to change my spending patterns because of what's going on in ukraine.

right? How to say the thing that worries me the most about the consumer is high asset values. They feel like stock Prices, last degree housing values, crypto Prices, which you know all about Chris, you know gold Prices are all really very high going from Richard value to meaningly overvalue, bordering on frost in a rising interest rate environment and twenty yellow are up quite a bit uh, over last couple of months IT.

This feels like we could see a meaningful correction in asset Prices that and it's been the higher consumer power by the circled wealth effects that have really been critical to keeping spending moving forward. Here, i'm going to talk about just a second. So in my mind that that stands out as a you know, right now, it's all nothing but a tail when with Prices, equity Prices, housing values, they are but IT feels like you that's a bo significant vulnerability here going forward.

How much of a decline do you need to take people off their path?

But um it's got to be significant. I don't think like people you would say a typical correction. The stone person mean that nothing you know.

But if IT goes down twenty or thirty percent and then and then then has to stay down, I can be one of those things that goes down and then you get people coming in buying again and IT goes right back up. I'm not that IT goes down twenty percent, twenty five, thirty percent. That's a deal. I know if he stays down for a while.

So real black friday.

a real like, yeah, exactly. Big, big I get. Would that be a black friday or red friday? Blood on the street kind of friday? Yeah, like friday, right friday.

I think I think the same. Where applies to both? Oh, doesn't. And then in another context.

it's a was was nineteen twenty eight crash gotten that was that a black friday? Think black friday? Yeah yeah very confusing .

yeah because the context is a good .

day is a good right .

yeah never thought of .

IT right about bonuses. I mean, well, we're kind of at the coming up on the time of year here when people get bonuses paid to them often and does haven't .

bearing .

on consumer spending or the outlook and spending over the next few months.

Why suppose if they're different than typical made, they are much smaller or much bigger. But why would that why would you expect that to be different in the current contact? Yeah.

everyone has an opinion on matter. There has been any chatter of that now mean the .

employment cost index that the key probably the best measure of wages is a lot of different reasons that we ve talked about the past that includes benefits and you know any you know a bonuses. You I don't get a sense that there's anything feels like everything on track there. You know, get the sense of things come on, come on off the rails. No reason to expect that.

And certainly stock market is is IT. Is you think wall street bone would .

be pretty good? So right, right, right. okay. So we're all pretty motion agreement here. Christmas is gonna good. The fundamental for the consumer are solid.

And everything all the train lines here going into next year look fine, no problem, right? Anyone disagree? no.

Okay, right. Well, there's a few things around the consumer that you know kind of bug me. You know i'm trying to find the right word to describe IT Normalize. I don't think that's the right word.

Observations, you know, things that are just little weird and you know just I want to throw them out there and at first take a conversation, get people sense of IT. The first is uh around the saving rate. We have kind of talked about this um and more round about way personal savings rate uh in the U S. Is uh consumer saving rate is down for more IT was pretending. Mic, so what is IT sky or five percent.

something like that five years over five .

in prepense. Mic, IT was seven, eight.

seven for the five year average. The pen sex. okay. And so we've .

seen this kind of a big step down, but to step down and saving. And if you go and I just got back from europe and they were hand ringing about the same rates are rising in europe.

And if you look across the globe, but does feel like consumers are kind of their back heels, I can take, look, the chinese consumer for example, uh, you know the the saving rates are up and you don't see that here in the U S, uh, the least in aggregate and listen aggregate. So that that feels like a bit of anomaly, right? Uh, how would you explain, do I did character ze that? Right, Scott? Uh, yeah, I did. okay. And how do you explain that?

What's going on? I attributed to wealth effects. The back that house Prices are up so much, that the sock markets up so much, that no consumers are spending some of that new fd wealth and that he shows up the anger is statistics as less satis.

Right, right. But you know why not? I mean, stock markets do not up in the rest the world. What you know why? Why are we think 看？

Yeah, I I guess I don't have a good and explanation for the U. S verses. The rest of the world, I tend to focus more on U. S. But I just see that as the consumers, they have the cash because IT, especially at the high end because they in the pandemic.

And so they can they can easily and without either having to sell anything, no take advantage of the new found wealth and they're just doing that. And and in a measured way, I mean, it's not like the saving great drop three or four points is just down. You know a point yourself.

right? right. I guess this this you you are basing this on our calculation of savings rates across different demographics, including income. And you can see that the saving rate for folks, the higher income has come down. And that's what's driving the overall saving rate to actually the bulk of savings done by people on the top part.

very top part of yeah high income folks are the dominant savers as well as being the dominant vendors there. More important for the accurate statistics.

right? And you I think you are referred to so called excess saving. Were you in the in the previous comment number saving?

I do I don't like that turn more, but can but you.

you, you kind of refer to that to help to explain why higher consumers are still still spending and drag down their saving.

right, right? All basically, they still have cash lifted over that they accumulated during the pandemic. The are all access savings and in like reforms. And so therefore, seeing in their money market accounts.

in their checking account liquid form.

correct. So they see their stock portal, you go up, they think, and oh, maybe you know, that means I should spend a little more. They only can have to go and sell one of their assets to do that.

They can just draw down that cash. IT makes IT incredibly easy on to to spend. And so they're doing IT.

right? okay. What's going on with the low income consumer was regard to saving.

Well, they appeared to have burn through the the extra cash they accumulated during the pandemic. And so ah they are the ones that are you know taking on credit card debt or trying to take on credit card debt and then have a 装备 back。 Um so there you know they're back at at zero or negative, but they work well cause .

I look at the state very carefully. I was quizzed when I knew the answer yeah what what's going on is the saving rate for focus on the top, say, third of the distribution of income, really the top ten twenty percent, that, that saving way is still very high up compared everyone else. But IT has come down meaningly over the last year two.

And that is powering the overall spending, whether the saving rate for the focus on the bottom party income tribute that was very negative. If you go back to three years ago because that's when they were borrowing against their cards to supplement their income to maintain their purchasing power in the face of the high station, but they are not doing that now. In fact, the saving rates for the group has gone from big time negative to three years ago to close to zero. So they have actually become more cautious in their spending, you know, more circumspect in their spending.

right IT? Or basically, they've just stop spending accumulated cash because they don't have IT anymore.

H I am i'm not following that. Well.

at one point they have the accumulated castrating, the pandemic.

Well, that was long gone. That was gone many, many moons ago right now.

Yeah, yeah. And so for first season, they tried to keep maintaining their their standard of living despite the high inflation and by borrowing. And then after a while, they couldn't do that anymore. And so saving comes back up to zero.

right? A so, uh, Chris, what do things going on here across the world? I mean, why do you think I mean, I I think kind of nailed in terms of asset Prices are high.

I think one biggest thing to the us. Other countries is stock nerve is just much more important here in the U. S.

Than you know, maybe it's important the U. K, but it's not important in certainly not in china, certainly not in the rest of the E, U. Other places.

So you don't see the same kind of stock wealth effects that you see here in the U. S. So I think that's right. But there something else going on. Why why would american consumers be much more willing to drop down saving compared to the but consumers in the rest of the world?

Yeah, I think I think it's wealth plus the economic growth in the U. S. And prospects for growth next year. And they were after that real to all the parts of the world.

You have to that strong growth or expectation for continued growth in order to be willing to a go head, do a little less saving, do little more spending. And the U. S.

Is just exceptional rates. G, D, P, growth rate has been barks are passing what we see, europe, other countries around the globe. So I think that's a big part of IT as well. They have the the the vacation because of the wealth and then they have the willingness to do IT because of the confidence said like labor market, maybe you a little bit weaker, but it's gona continue to power through growth. Looks pretty good.

So so so you saying people are nervous here, but there there there are good, downright gloomy overseas and the precautionary savings. So got precautionary savings a lot higher. They feel like there's gonna more is more like they feel like it's highly likely there's going a rainy day.

They are gna need that saving and therefore, they're saving. Where is the U. S? You know, no one says I feel great, but they're not feeling gloomy and they're not saving for that. That's right. That makes sense to make a certain ly the case in china, I think for sure uh, you we can see that in the sentiment survey I mean ah but I that's what I heard in europe to same kind ideal yeah eating that on this conversation on saving rates, this particular kind of development that were focused on merci a yeah I think .

I think labour market in the U. S. Is stronger than IT is to and I mean you you certainly europe and china, good examples but I mean, even look at canada, know the canadian economy is weaker confidence since shake your there. I mean I I just think the the fundamentals of our economy here are Better than almost any any where are you look around the world. So that has to be know a plus for consumer spending here.

yeah. Okay, good. okay. That's Normally you guys something a Better work for what i'm doing here. It's not it's not really and Normally it's it's what it's observation.

I don't know you what is point point, point of the interest is a point of interests. That's a good one. Yeah point of interest. okay. The second point of interest, which you also kind of dance around a bit, is around confidence and this kind of duck tales back into the the discussion on saving rate, you know sentiment, consumer sentiment is at least by some measures, has been pretty dark. I mean, the interest michigan survey h which has been around since began a time is been incredibly low, consistent with kind of recessionary conditions.

You know you know uh uh there's A A kind of a clear consensus that the reason why uh uh former present trump one reelection is because of anx around the economy created by the previously high inflation in the higher Prices, people paying for groceries and rent and gasoline and staples um yet consumers keep on bending and you know two after three percent Christmas cells growth nal real. I mean, what's the deal that is feels like that's that's an anomaly, that's a point of interest, but that's also an anomaly. Isn't IT. You know, how do you square that that circle? Uh, mercer, start with you.

How do you square that circle? Well, I I, I take, okay, I can. We talked a lot about michigan last yeah last podcast right on friday because he had just come out.

And I use that as my statistics. And we think, IT, the responses to the survey are very partisan, depending on which political party you affiliate, what they ask you, what political party you affiloir with. So what kind of gets people in that artisan mindset when they answer? And you certainly saw that this enormous increasing confidence among republicans in the first post election survey.

So um you know is that is IT just that? Or is there something more fundamental going on about the way people feel about the economy mean, I think, that people don't like higher Prices and like talking about IT and IT really bothers them. But at the end of the day, they're still paying them.

And so these cases are still high because there hasn't been a revolt. And I think maybe there are some circumstances where their husband, but I mean, for the most part, people are complaining about that, but they're still paying IT. And so companies are still going to charge what they can and get away with IT until consumers actually pulled back and stop spending.

And that's why, you know this previous conversation we had about the warm mark versus target. You know, one of the hypotheses was where people are, people stopping spending on higher Price goods and trading down to lower Price goods. And that was a question that I had in a question of client asked me a week ago.

I didn't know the answer to IT, but IT sounds like you you're saying no that there's not a ton of evidence out there that that happening. Is that do I have that red Scott? yeah.

And I mean, I think I agree with what you're saying. I think I might put IT in in different terminology in that from, to use an economist, lego consumers don't understand the difference between Normal and real.

I mean, they hate the fact that Prices a rock, whatever is twenty five percent or something, in reality, their income is up twenty five percent, so they can still spend and they still are spending in their, you know, seeing that in their budget in doing IT, but they're still orrible ed, at the fact that Prices are up twenty five percent. So so for if that you ask somebody how they are feeling about the economy, they're gone to say terrible. But then they they look at their budgets and they can still buy what they were buying four and a little bit more. And so they are.

And what you're saying is they can hold two things in their minds at the same time. One, I really hate having to pay higher Price for this these groceries and for this rent but uh but the same time i've got got income I can spend and .

i'm gonna end IT exactly yeah no this .

is I resonate the explanation.

IT does I blame my social media?

Social media? Yes, that's a good point. right?

Social media, but right.

yeah. And we know. But the political fracturing has played a all right. I mean, given was that you are telling us, uh, mercer, about the last podcast by university gan, republican democrat dependent .

yeah the the all of a sudden the expectations for the future among republicans shot up by, I forget now I don't remember oh, I haven't actually still written right in front of me by almost three points yeah which is one of the biggest, if not the biggest, increase we've seen in a post election survey as far back. As I can look at the data.

right, right? I can see anything, and you mention this most, but put a pin in IT is measured, right? Because if I look at the conference board we've been focused on in the michigan survey consumer, but there is also another tried and true measure of confidence called the uh put put up. But the conference, what has been around forever, and that shows no kind of it's kind of typical right, is right around where conference has been on average. So we ve got a data .

point today anyway.

Yes, yeah yeah.

And IT and IT rose. And so now confidence kind of the highest it's been in three years, but it's still not IT. IT doesn't show the same.

It's not bad things above ever.

It's above right, like it's been it's been in an OK place for a while. Where is michigan? People have been saying I feel worse about the economy than I felt in in April of twenty twenty when we were at the start of a pandemic, right, which which seemed just like a wild response but yeah, the conference sports been like chicken along.

Gong is still a twenty.

right? Yeah I was going to say it's trucking along, but it's certainly not consistent with the way mark you, for example, describing this economy is one of the best .

ever or .

anything like that. It's OK with a muddling through you know very weak growth kind of economy. It's not consistent with you know with with this economy's pooling. Everything's great, wonderful um you know way you know more for example have been describing IT. So so in even there, I think the the animal stands just to a lesser degree.

Yeah okay, any eating else on this? Uh one in the interest is sonali unconfidence. No, I think we formulating a title for the podcast, I think, but go head go.

And I was going to say that the one thing I would point out and think is getting over work. And we've been talking about confidence rising post direction and clearly, the conference what did and michigan .

is in a yeah a lot of yeah .

but IT was up a little bit in november compared to our tober yeah, but the preliminary report had a bigger in increase and actually the way the timing work, the preliminary report was nearly entirely respondents free. The election and the final and all virtually all of the additional respondents were post direction. So the fact that IT was revised down um I was in a little over a point actually suggest that IT that a little bit post direction well.

you know, guys, this this is like we're really in the weeds now you guys like to me but he imposed revision. I mean, okay um okay what okay what you what you what's why making that why you bring that up? Because I bring .

that I am not sure we can state as definitively has been the confidence rose in aggregate post election 啊。 OK I made conference sport was up a couple of points, but michigan SE down a point over a point. yeah.

So I think and not neither, the moves are probably statistically significant. So right. You know, I I, I, I would somewhat disagree with the point of confidence rose after the election. I think rose a lot for republicans.

fell for I think I was talking about this. This difference between political party affiliation is is a regardless of revisions, right?

Yeah, oh yeah. No, no. I'm not contradicting your point.

BaLance on IT didn't do much over the month because the two baLanced each other out because confidence spell for democrats, right right? We are all agree .

we .

shouldn't be paying attention alist confidence 没事。

you want to predict .

in any of them.

Just thank you.

I know well, I I like I personally like the conference for when IT moves in a big way. You know, it's moving down in a big way for me. That's a good uh, I hate hesitate, a full proof, but a very good leading indicative recession because if you see the conference board survey coming down five, ten, fifteen points in a given months for two or three months, that signals list from my perspective, consumers are running for the bookers.

They're gona stop spending. Recession is at hand. You know, within a few .

months you're probably .

seeing U I .

claims rising that oh no.

no, no. There's more than that. It's more you know at, in my humble opinion, a recession is a is a psychological of that is a loss of faith.

So there something has to trigger that loss of faith. And that's the U. I claims people, business train way off, then IT takes on a life of its own, and people go, oh my god, these things going down the tubes.

I'm going to stop spending because a job onus wages are going to, and that's recession. That's you go from a top economy to a recession ary one. And I I use a conference board survey as a going to be a promoter of that loss of faith.

So you know, I think in typical times, I totally agree with you. You can explain the up downs and consumer confidence with U I. Inflation, gas Prices, no, maybe the stock market.

But you know in those times when things are going south, you know, I think that when IT becomes more valuable, please, that's the way I I view IT you're smile, agree with ching, I agree with the whole construction. I just don't think we're measuring well. That worked for me quite well in this recent are fool around recession.

I mean, people are screaming recession the year two ago. And one reason why I was more saying when was because the conference porto rate. Hang in there, right? Never, never broke south.

Never, never took a dive, right? So right I, well, I need more data point of you convince me I convent you yeah probably probably couple more da points, which will take two decades for that to happen. Uh, but anyway, OK help you.

I yeah, I hope so. I hope so. I hope you right. Let's do one more point of interest, dynamic observation, and they will to play the game, the that game I did, you come prepared to play so that game I did. Okay, very good. Uh and um this this this observation is around the composition of spending.

And if you uh let me just describe IT up for the listener, if you look at overall consumer spending, uh the growth in uh p pandemic, you just take go back propane mic brief five years before the pandemic, take a look at what the growth rates of that spending were uh and extrapolate out what spending should be today. Spending today in aggregate across good services, all shit matches is almost precisely where you would expect you to be is very consistent with that prepense mic trim. Does that make sense .

the way I just .

describe that? Real, real, real, real after inflation, uh, if I do the same thing for goods spending on goods, you know everything from food, clothing, furniture, electronics and uh, take a look at the three pandemic, a trend extra that out the current level of spending is higher than IT was pretend that this is actually bringing up a chart to show the point.

Uh, so for focus on youtube, you can see this uh for services you know everything from health care to financial services to travel uh that the again you take the pretender mic trend in service spending, uh consumer spending on services extra that out uh the current level spending on services is not quite back to what needs to be or should should be compared to prevent the mic trend. So the question is where the anomaly the observation is um you know what's going on? Why is this case? How do you explain this? And I know know, Scott, I ask you this question a couple months of you done some work around this. I I can't remember what you figured out, but would you figure out .

um I i'm actually not convinced that is that much of an anomaly because I think going into the pandemic, I think spending real spending growth not not but real was a bit weaker than average and real good spending growth was a bit stronger. And that if you your chart basically assumes the two and a half percent trend for both components, I think if you take the separate prepare damage trends for each of the components, no, no.

no, no, no. I took good as trend in good spending. Prepare dec and services. Yeah, no.

I did IT. They came out about in line .

recently, maybe period .

of which you calculated the .

trend Normally？

yeah. I I don't think yeah, I don't think there's a big point of interest here. In fact, to me, the point of interest is that we are basically back to where we were before that you know that the and and therefore, we don't need there's no more sort of returning to Normal from pane delic that were we're basically done with that at this point.

We've Normalized spending, Normalized. yes. K, O, K, O, K, were there? I know you broke this this this calculation by different components of good spending and service spending. Anything that stands out there is anything higher than IT was to prepare based on prepare electro n or lower than and IT was due to uh, compared to prepare emco. Anything that stands out?

No, you just take h that's okay.

I mean, if you nothing you don't remember probably that big deal.

Yeah I I mean one thing I did notice was that um real um medical spending, good spending on medical goods um is high.

I really yeah is that pharmaceuticals .

and like medical equip and .

arms udal. Yeah yeah could be a yeah ah .

yeah actually we should do a podcast and olympic you .

know one of these because that's a big deal.

It's a really and transportation related, particularly transportation service render .

is lower than the world. What what is that? Is that like people aren't .

taking cabs .

or .

you know what is that .

we are in community?

Yeah actually so yeah yeah and accommodations as well and .

still yeah OK, which I think .

he's probably much more, I mean, in theory, should be measuring these spending more than business spending. But i'm sure they have trouble separating them. So it's as much business travelled as these are travelling that's getting .

picked up OK. Well, i've got a couple more points of interest, anonymous, these things to consider. We still don't think i've got the right word for ripes grapes.

You know, things are bugging me around the consumer well, but I bring them up after we play the game. We play the game, uh, the stats can we put for the stat? Uh, rest.

The group tries to figure out out with questions, clues to doctor reasoning, the best that this one is not easy. We never get IT one that's not so hard that we would, no, but that's so easy that we get IT. A mean one that I said so many times, I can I screw this up.

That's not so hard that we never get IT. If is that proposed to the topic at hand? Uh, all the Better. Uh mera uh, tradition has IT that you go first so you're up.

okay? There are two statistics, four point nine .

percent and inflation expectations.

Yes, she's the way. How root is that? Sorry.

sorry .

you.

It's univer, michigan.

So it's the conference board and the university michigan. So conference ford expectations for inflation for twelve months ahead is four point nine percent and the michigan twelve months ahead inflation expectations is two point six percent. And there always this very large gap between the two that I don't why understand. So I bring I bring IT up kind of as a anomaly of a wire inflation expectations in the two surveys. So different and they have they've always been there's always this big gap between the two.

You know I didn't even do. You know, this might be surprising, but I didn't even know that come from people ask the question around.

They ask a lot of the interesting questions that don't get a ton of coverage. They also ask people like what they're expectation what their odds of a recession are in the next year.

That's that's new. They're only been doing in that the last couple years.

Yeah but I said no time, time .

wow.

two O O K.

but you know IT sounds Better .

when you say all time. Well, yes.

you know why I said at that way, but still .

tize things to their advantage.

So how long is is the question around inflation expectations been around a long time? yes. IT has has always been meaningful ly higher than the union.

Gan obviously makes more sense. I mean because inflation is about in the mid too. You know, depending on I measure IT uh I don't know that uh that's bizarre, is .

really weird.

No that yeah yeah the warning is .

the question and and what questions come before and after IT can can influence. thanks. So why so I doubt would be my h i'm not answering IT, but i'm suggestion probably where to look for a good place to work for the answer.

Should we ChatGPT .

with ChatGPT know .

the answer .

and the but I think Scott's point is, is probably correct that IT is probably the way in which they're asking the question even though the two statistics are reported to be the same. You know what what are your inflation expectations over the next twelve months? IT might vary depending on how they ask. Like for example, if maybe perhaps in one survey they tell you what inflation has been. You know, like inflation has .

been oh yeah like .

two point eight percent. What do you think that will be next? False months. And maybe they don't do that in another survey. So people have no ideas that are picking up a wide number, right?

I don't know.

I don't know if that's the case, but but yeah we should find what the survey questions are.

No is not not rely on .

the surveys yeah, but both are .

twelve th ahead service .

intel k go.

Um yes um i'm trying to decide what to do here because um is still half of my statistic. I M the inflation expectations.

You had the same one. I.

I had the same one, although I was going to do IT differently. I had, I had two numbers. I had her two, six. But then I also had three point two.

Oh, what's three? Was that three, two, three ahead or something?

Yeah that's the the michigan ks one hundred and five .

years five right.

And what's interesting what I found interesting about that is that um the um one year had the two point six um is the lowest in nearly four years. But the five year ahead jumped up to three point two, which is the highest in over year. And I think exactly.

I think a crisis point. I think this is a bunch of noise.

Well, I actually I think IT, but I think I may play into the the terrifying ment. The consumers are seeing tf down the road, but they're not really about IT .

in the short term. Oh really H I don't know, you're really in we scotsmen. I'm just tell you to get out, you stop smoking that weed.

you know okay well anyway and he still my my primary statistic. I i'll go to my backup. P, um.

you didn't think I was funny. Sky, I thought that was great. You know what?

You know, everyone, you didn't think I was funny. I thought I was so good. Way I did that. No, absolutely.

I thought you guys like .

to be in the weight. Yeah I you know, you know, smoke you you do the gamers that's what's going on on oh, now you like OK. Now you let's got no, let's got definitely not.

Uh, just joking. Um, of course. Uh, okay, one one more lost. Oh, oh, did you I OK my .

sorry. Okay um three point nine .

percent A A state that came out this week .

a little over a week ago. I had to reach a little bit for my back out a.

uh, inflation .

related, uh, no consumer related.

you related detail .

sales related.

Yeah I probably .

retail sales, they that's not europe tail control retail sales.

it's core core .

retailer sales.

core .

being x auto, x gas.

right?

Okay okay, three point nine percent year over a year through the month of october. Yes, no, yeah. Why are you delaying?

I actually I at the first three point eight three .

come different in the world .

for getting .

IT right. Oh yeah, you still get credit. But my, my, my point was where we started out that with no inflation were talking about something close four percent in real, real core reach, our sales growth. That's that's good to october.

yeah.

And that's just testifies to the to the strength of consumer spending that we're seeing right now. And that IT seem good. It's not just in services.

Well, the the there is a circle concept of control retail cells, which exclude building spending on in building materials, right? Because that goes the that controls that what goes into consumer spending in the GDP reports. So when trying to calculate consumer spending for GDP, what would you .

know if that is buying chance? Just very OK.

very OK, right? Always do one more. Chris, what's your .

that alright? This one is about me because it's always about me. Three dollars and twelve cents.

It's not gas Prices because of a gun regular. And let IT I know pressure, three bucks, twelve cents.

I think it's under three now.

right? Is this is IT under three? I haven't looked recently.

Is IT under three? I saw under .

three recently? I don't know that. Well, that's not like A A cup of your weird coffee is IT.

Oh, i'm gonna IT to that computer. T no, no.

it's the Price of, what is the Price .

of coffee? Oh, well, real, twelve cents a pound.

Okay, I I think I was close.

That's close enough. It's a record high going back to the seventies and up seventy five percent over .

the last year, whether or or later weather .

related in brazil is drought and coastal ica. Their sword. So but but i'm a big coffee consumers.

And so this this is personal. What about it's not worried at all, isn't a big point like one hundred thousand dollars or something?

Now I got close and then IT backed off.

Oh, oh, so you feel poor now. Now he feels poor. Listen, hundred k on that big coin.

Yeah, that's a good one. Good, good. okay. Well, I got A A couple other points of interest anomalies. Uh, baby will do. Those were called podcast. Some of good idea was that you know was that I think we you know I think move on yeah I very good yeah yeah yeah not that I had one but it's not that good in you know um I think we we got I got my film of the game yeah so let me forward. Uh here's the other here's another point of interest salomy the retail space market。

So you know the the smooth online spending has crushed the demand or list IT had crushed the demand for space uh retail space, particularly mls um and uh that appears to be over. Um if you look at um the you know Price for retail space dollars per square fit, which we calculate based on actual transaction value, IT held up really well you know in last couple years. I mean, if you look get like Prices for multifamily, that's down from the peak two years ago over two years ago, now down White rumbling from month risk like twenty twenty five percent, this is down like fifteen twenty percent.

But for retail, basically flat, you know over last couple three years. So you you know in that seems of this feels a little weird in the context of, uh, continued move to online retAiling. So what what things gone on there, Chris, what do you have you on that?

Yeah, I think you have a couple of things going on. One is just the lack of building or supply. I haven't built a lot of retail over this time period.

So um .

that's that's only a factor. And then demand, I think that there has been a resurgence in demand for in person retail experiences. So I think that's you know part of IT.

Um you also talk about some of the repair posing and the retail that's going on, some these multi um purpose facility. So you have mixed use a properties cropping up between apartments with three tail uh underneath. Those are certain ly popular these days.

So I think you have a number of things here. And yeah, I think that's the reason why we keep seeing this. This market .

pretty demand, supply always demand and supply .

pretty much.

Yeah that Scott.

No, I think every with cc, I mean I think on the on on demand side, um if you look at the sense spirals estimates of longline retail, um it's come and he has come back in from its pandemic peek. That's probably no surprise. But if you do the same thing that we were looking here with real spending and you'd look at the prepare am a trend and where IT is now, it's above that.

But it's actually, to me, surprisingly little above that. The gap is not that wide. Um so we really yeah we had a bit of a level shift towards um online spending as a result of the pandemic. But I really wasn't as fake as I at least I expected as big based .

on the number of packages are showing up at my door that this doesn't resonate with me.

You know, I tend to feel the same way. But if you look at the, if you look at the statistics that that's .

what i'm one OK OK finally last kind of thing, that smug in me observation, uh, for looking terrorist. How big a deal uh, is this? Uh you know obvious depends to to significant gree on the terror, you know how how big whom White products for them, so on.

But what do you think we buckin? Is this a role? This is going to be this is going to the consumer mera or or not.

I I really don't you don't think so. No, I I don't. It's just it's so unclear what the bread and magnetite these are going to be.

Keep hearing numbers, right? But I don't think that, that i'm not putting a lot of stake and what we're hearing because I think a lot of that might be just sort of negotiating tactics. And who knows what the final impact will be and on what kinds of goods.

I mean, I think the fear is that it'll be much more targeted toward consumer goods. Perhaps the nondurable consumer is that IT was in the last round where there was a lot of terrifying honduras goods and on intermediate like building materials and that sort of thing. And if IT is more targeted toward and use consumer goods than that could have real implications for consumer spending. But I just I have very little confidence in predicting what it's gonna like at this point. 嗯。

right, right. Chris sky, anything on that?

Yeah, I feel the same way. I don't know what to expect. I mean, I think I think there's a real risk because I think if we do get terrified that move the middle on Prices, material ally um consumers have clearly demonstrated that their sensitive Prices and so IT, it's gonna have an effect, you know not just on budgets ts, but on confidence I I whether that's going be housing shake out of the end of the day. And I am highly certain.

Chris.

I think it's a deal a particular given the channel of the housing market I have building material costs go up at the same time that we have higher wages for construction workers, higher interest rates and around I think we could see a sharp production in housing starts. And we know that a big driver of retail overall, right? Every house we build rates, a lot of economic activity.

So that would be one channel. Certainly, i'd be worried about if if those billing material cost really go up significantly as a result. Terrace.

although, Chris, I I don't know that IT affects aggregate spending as much as that affects the composition of spending. I mean, do you really think consumers, if they're not, you know, relocating and and fixing up their new home, that they're not going taking extraction or speak up the home you've got or buy something else? And I guess I am not convinced. I definitely see the compositional effect, but I west convinced of the effect on error expanding.

Yeah no.

I I think H I think housing as I do think that there will be a pull back. I don't know that I think if someone sees the Price going up gonna say OK, I got to save more now for the downs yet or I have to delay that, I don't know that they're na say, okay, forget the housing dream gna go travel possibly but I see IT as having venture .

al bigger impact I see no up to there is nothing downed you, right? How do is the downside? Because we how can gage what these terrorists gonna? How much is this blaster and how much is actually going to be implemented? But I don't see this.

This is all different shades of grey. I mean IT through life. The obvious is the tax increase through higher Prices. It's gonna ise interest rates. Uh, rich are based on the terrace once the other some of the other policies that likely doing so here in the next sixty twelve months um is the confidence effects. You know I I you know I think because of the uncertainty in the confidence effects, I think they could be quite significant.

And then fact, my original worry about the equity market at the equity market feels really like it's discounting nothing but good news and terrace are out to the downside. This doesn't talk about something that income gross, that this feels increasingly inconclusive. me.

So I don't know. I think these terrorists could turn out to be do more damage than we think could. Certainly, there again, there's no upside here. Nothing but downside. Anyone disagree with that?

no. Sounds like you are thinking markets are assuming ing.

That's gonna deal. yeah. No, no big deal. Assuming no big deal.

And I I don't know that doesn't feel right to me. That doesn't feel right to me. Uh, okay.

Uh, I think we cover a lot of ground. Uh, thanks, god. Appreciate that.

Hope you enjoy the conversation. So I scored very, very much. You great. You very good, very good.

Looking forward to being back.

And thank you. Thank you. We really enjoyed having you on and I I think um I think the listener got should get a lot out of that else guys before we call quits and happy thanksgiving and all that stuff .

I thanksgiving to all yeah have lays out there listen your the .

cast yeah if so if you get stuck in an airport you know you know exactly what to do inside economics yeah there you go or you can come I am on blue sky now guys I you know i'm on twitter ex， and now blue sky uh you can see me mark out Sandy I don't know what the handle is but you know mark is Sandy i'll get there uh I think uh and 因为 um with that we're going to call the podcast uh they are listening。 Thank you for a tune and will talk you next week. Take care.