00:00Yeah, so there was a couple things. We already know the auto sales for the most part. When we
00:04get this retail sales number, we get the unit auto sales early in the month, and those did
00:07show a bit of a decline in July. Of course, average gas prices still were falling in July,
00:13and so nominal sales would be a bit weaker for that reason. But yeah, we were definitely not
00:17expecting that pullback in retail control group sales. That's a pretty weak number,
00:21but it does make some sense with, you know, we did see job growth, you know, pulling back a bit
00:25in July. Income growth is slowing, so it makes some sense that people would pull back on spending.
00:30Is it a blip? Is this something we need to start thinking about? Because I'm probably one of those
00:35people that was saying, ah, it doesn't matter. The consumer just powers through every time.
00:39That has been the narrative for the most part, right, the last couple years, and I think that's
00:44still mostly true. We did see really strong consumption in Q2 GDP. I'll be interested to
00:49see when we get the revisions with the release in a couple weeks. We start to get better data
00:52on services consumption with that release, but we had really soft consumption in Q1.
00:58We do know that, you know, in Q2, consumers did have those tax refunds that were larger, and
01:02you can't spend those forever, right? Those are limited, so maybe there is some underlying softness
01:07showing up now that incomes have slowed a lot. I mean, it's just, you wonder, what could push this
01:14consumer really to kind of roll over a little bit? I mean... Yeah, for that, I think you would need
01:20to see bigger job losses, which we don't see the evidence of that yet, right? Initial jobless
01:24claims, those are still very low. Layoff rates are still very low in the JOLTS data, so I don't
01:30think we're seeing that yet, but we have had an environment now for a while that hiring is just
01:34very low, and the worst that consumers feel about hiring prospects and feel about the labor market,
01:40and we see that in, you know, consumer surveys and whatnot, you will maybe, you know, save a bit
01:45more, you will spend a bit less. Forward here. I asked this question the other day and got an
01:49uninformed answer. Let's try with Veronica Clark of Citigroup. There's a separation of goods and
01:54services in our study of the American economy. Are we beyond now core services as a measurement?
02:02Is there a new regime or study of goods versus services? Yeah, I mean, we look at it across,
02:08you know, the range of measures. Of course, retail sales is going to be good spending, right? And we
02:12don't have the best insight into services consumption yet. Why isn't retail sales my vet
02:16bill? Yeah, I know. It's just a harder thing to measure. You know, we survey stores that,
02:22you know, have brick and mortar, and those are the ones that can give us the... Retail sales is only
02:25goods.
02:26So there are restaurant sales in that. That's the one services component in retail sales,
02:30but for the most part, it's goods. Yeah, and we don't have insight into services yet. I wake up every
02:33day, I learn something every day. I know. It's just unbelievable. It's restaurants and then all goods.
02:38All restaurants and all goods. How do you think the Fed's going to be looking at this data point
02:44here in conjunction with the CPI and PPI data we got this week? Yeah, I mean, I think they're for
02:48now probably inclined to say, okay, it's just one month of softer spending. Let's see if we see the
02:53trend appear. But there have been a lot of data points. It's not just retail sales today, but CPI
02:58earlier this week. Of course, the jobs numbers last week, the inflation data that we had a month ago in
03:03June, that there are reasons that they should be on hold right now, that you want to wait and see
03:08how things evolve. So what's your Fed rate hiking, cutting outlook for Citi? We still think they can
03:15be cutting. You think they can be cutting? I love this Citi call. I think we are slowly chipping away
03:20at the narrative that inflation is too sticky. Of course, core PCE is not where they want it to be.
03:26That is their target. But it does look like core PCE is the outlier among a bunch of other
03:30inflation measures. Core CPI, of course, is much softer. Variations of PCE, all the trimmed mean
03:36and the Cleveland Fed median, those are only 10, 20 basis points away from where they were in 2019.
03:41So I think we're slowly chipping away at that inflation narrative. And then if you see more
03:45jobs reports like we saw in July, I think that's a Fed that would be thinking about cutting again.
03:50With all of this reaction function malarkey and the Jackson Hole speech maybe of passing interest,
03:56we're still slaves to X post. We have to wait for the data, right?
04:02Yeah.
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