Eco Data, Black Friday, Venture Capital

at Bloomberg dot com. Today we got a slew of better than expected economic data out of the United States, including demand for US business equipment unexpectedly increasing in October by the most since the start of the year. So is it the time pop the champagne? Get ready for a tick up across the board next year? At Dan North joining US now chief economist at North America at youler her mays, Dan, can you give us a sense first of all on how positive today's economic data was? Well?

I think, first of all, good morning and happy almost Turkey day to you. Um. Looking at the month to month data on a number of things this morning, I mean you sighted durable goods, Yeah, it's up for the month, but I tended to take a longer term view, and if you look at core orders were still negative. Year over year negative point eight A year ago that was

four point one percent, So the downtrend there. And if you look at shipments UM, which go into g d P, you know it's point four percent year over year, so that bodes well poorly for fourth quarter g d P. And you know a year ago was four point seven percent UM. And you saw a few other things this morning that looked kind of positive on the surface, but the biggest one to me is the indicator of the consumer. You know, the consumer has been sort of holding up

the economy at least that's the narrative. Well this morning you see, uh, for the most recent data in October, real consumption was only up point one percent to two point three percent the last month of the year over year last month that was two point six percent, was three point two percent last year UM, and real income was down point three So I think that's the most important data of the morning, And certainly if you look at a longer term trend, to me, it's it's distinctly negative.

So Dan focusing on the consumer again. The consumers you mentioned has been kind of the bulwark of this economy over the last several quarters. Are you concerned that the consumer may not be able to do its part again for the economy. I really am. And and here's again as a perfect example, real uh disposable personal income down this month. What I see is, let's holiday sales are coming up, right. I mean, in a few days we're going to get the anecdote reports of how good holiday

sales are. And I think they're probably going to be pretty good. You know, By the way, I love this sort of cynical resignation that everyone who I've spoken to this morning has about Black Friday. Way to go with the spirit, carry on. You're like, yeah, they're I said, they're going to be pretty good. Do we think we've

got the exuberance of consumer confidence of the stock markets high? So, you know, over the past few years it's something like four percent holiday sales growth overall, more so on black variety, of course. But let's say, you know, the consumer spends as much as usual for holiday sales, maybe more because of the exuberance. I think that sets us up for a little bit of a fall in the first quarter, especially since income is trending down, and that's what really

gives us a concern about a future slowdown. We think growth in the first quarter could be flat even Dan, you think there could be a US recession in or maybe we think there's definitely going to be a sharp slowdown. We're looking at something like one point six percent GDP for all of you know this past year is two point so for sure a significant slowdown, and if this trade war picks up, you know, that could really knock half or one percentage point off a GDP, And in

our world, that's a lot, Dan, sound go ahead. I was just gonna say, we still do think that there's a possibility of recession, but certainly a slow down, no question about that. Dan. I'm trying to square what you're saying with the consensus right now among at least Wall Street analysts which believe that who believe that the US equity market is going to do very well, particularly in the first quarter or first half of the year, with some accelerating growth. Why are they getting it so wrong?

I wouldn't start they're getting it wrong about the stock market. Number one. Two things, you know, we are really involved in trade credit and we have to have a more realistic approach to what's actually happening to business on the front lines, and we're seeing an absolutely distinct deterioration there. But the important point is um, the stock market isn't necessarily connected to the economy a lot of the time.

For instance, if you go back and look at the past ten recessions, the stock market only gave you some kind of warning three times, So it's not at all uncommon for them to disconnect. So I can't argue with the banks and brokerages who want to sell investments who were saying, yes, stock Mark is going to be great. Well, it could well be, you know, with low interest rates, but it's not a connection to the economy necessarily. Dan North, thanks so much for joining us, Dan Northeast, chief economist

for North America. For Euler Ermez joining us on the phone from charm City, Baltimore, Maryland. Appreciate his comments. Time to check in with Bloomberg Opinion. We're joined by opinion calumnists retail columnists. Our house actually covers all things retail for Bloomberg Opinion. She joins us from the Washington d C Bureau. Sarah, thanks so much for joining us. Black Friday coming up, Cyber Monday coming up. What is the expectation for holiday sales this year? Yeah? So I think

the expectations are largely upbeat for the season. Overall holiday sales are expected to be up about four percent, and that's because consumers are feeling pretty good. And you know, we saw quite a mixed bag of retail earnings results in the last couple of weeks, with some strong performers and some weak performers. But I think that just suggests that, uh, for for the ones that are executing well and do have a good strategy, there are plenty of dollars out

there to to win and be fought for this season. Sarah, let's talk about Black Friday. This is the cliche of people lining up at three am to bust through the doors and these manufactured televised events, And I'm wondering, is that the reality anymore? Or is the vast amount of Black Friday shopping online? So it's definitely not the reality

anymore more, folks are this isn't increasingly digital holiday. There will be seven point five billion dollars spent online alone on holiday and quotes, we're gonna just put that in quotes but carry out. Yes, but we so certainly Black Friday is becoming more and more of a digital occasion. However, stores still really matter a lot, and there will be big crowds in the stores. Uh, both Thanksgiving evening when a lot of the retailers kick off their big deals events,

and and all throughout the weekend. Um. You know, for the holiday season, overall, only about of shopping will happen online. Uh. The vast majority of it will still happen in stores. Sir, What are gen Z folks? How are they shopping? I know they do a lot of e commerce, but did they what is their store bricks and mortar experience? Are actually even going to the malls? So interestingly they are, in fact, they shop a lot more like us, older

than you might imagine. Um. So for purchases like food and beverage, they're still doing, you know, something like ninety one to their shopping in stores for items like apparel, seventy percent of their shopping in stores, and they actually say in surveys they liked the experience of being in a store. When we talk about this weekend specifically, uh, Deloyte did some survey work around this and asked, folks,

will you be out shopping with family and friends? Gen Z was most likely to respond amongst people who were going to go to stores this weekend. Gen Z was most likely to respond that they were doing it in a social way, that they were doing it with family

and friends. And I think if you've never been out on Black Friday before, I've been doing this for seven years now as in my capacity as a reporter UM, and this is consistent with what you see is that there aren't a lot of people out in the stores this weekend who are just trying to check off their gift list and you know, being very task oriented and errand oriented. This is a social event. This is something that people like to do with their family and friends.

Are sort of a sport or ritual. I'm wondering about this data that we got out today. UM. Retailers were choice. This is on the Bloomberg terminal. There's never been a better time to buy heading into a Black Friday, and this was a look at buying conditions in the US advancing to the highest ever levels. Does that foretell something

in your mind? And and sort of where they may be shopping too, you know, I think that in terms of where they're going to be shopping this year, I think the winners are going to be the retailers that have done the best job of kind of integrating their

online and in store experiences. I think Walmart, Target in Best Buy are clear examples of that, where it's easy to ping pong back and forth between their websites and between their stores to place an order online and pick it up in the store, or to browse in the store and go and buy online later. I think those kinds of factors are what's going to be shaping people's purchasing decisions most and of course where the discounts are.

There's no doubt that this is a very deals oriented weekend, UH, and that that is shaping a lot of the decision making about where dollars gets spend. Sir, with all the changes in consumer spending, e commerce and so on, just give us a sense of how important still is this how they shopping period for retailers, the all shopping period is critically important. UM. It's more important for some retailers

than others. So toy stores, jewelry stores, for example, h they do draw a more disproportionate share of their sales

during the holiday season than say a bookstore. UM. So it varies by retailer, but this is a really important time of year, not only for the actual dollars that are pulled in, but just because it's a chance to make an impression with a consumer that you know, in the case of an apparel store, you might only see two or three times a year, right, And so if you're not showing them when they come into your store or pull up your website that you have good merchandise,

that you have good pricing, that you're sort of aspirational and inspirational, that kind of sets a tone that will stick with that consumer for the rest of the year. So it's a very important, uh, several weeks for the retail industry. Sarah how Zac, thank you so much for being with Sarah. How's that covers all things retail for Bloomberg Opinion Up, Well, it is the day before Thanksgiving.

People are gearing up for family and friends and food and also for a lot of us shopping on maybe even tomorrow evening heading into Black Friday and Cyber Monday. To get a preview, we welcome Mark Hamrick, senior economic analyst at bank rate dot Com, joining us on the phone from Washington, d C. Mark, Thanks so much for joining us. I love to get your thoughts on how you think this holiday shopping, Stevens is going to kick off on it's called Friday. Sure, good to be with you,

Paul and Lisa. Well, I'm sure it'll start off with a bang. Obviously, through this shopping period, which truly begins before November one, Americans indicated they would start their holiday shopping in that time. Hold on a second, when is it just shopping? I mean, if you're starting before November one, can we just call it shopping or is it this typically for the holidays? So I think it's an intention

to buy holiday gifts. And I think from a consumer standpoint that's quite wise because we know that this industry is promotional almost all the time anymore because it's so competitive. And from a bank RT perspective, I also like the idea of not sort of taking the hit to the either the bank account or the credit cards, um, you know, uh late in the year, if if you have the

ability to spread out those purchases. So to ask your question from a bank reat data perspective, we did ask Americans, by the way, and just published this survey this week whether they intend to spend more or less or about the same, and of Americans said they intend to spend about the same as last year, only said they'd spend more, said they'd spend less. We know the Yeah, So how does this cohere with the idea that this is the best time ever for consumers and that they're more confident

than ever heading into Black Friday? Um, I, you know, I guess the question best time for consumers? I I'd want to play that out a little bit and and have an idea about how that works exactly. But there's plenty of competition out there, and between online and brick and mortar, you certainly can uh pick and choose, and particularly in the apparel world, where it feels like that is sort of yesterday's news in the sense of things

to have. So um, you know, I think also consumers are always consuming, right, and so the question is, you know, I think for a lot of people who are you might call them well qualified consumers, what do they need? And for many the answer is not much? And I think that's one of the reasons why purchase of experiences has become more of a thing, because you can always have more experiences, but we don't necessarily need another sweater. So Mark, give us a sense of from your survey work.

Are people gonna spend money they have. Are they going to rack up some debt here going into the holiday season. Yeah, And of course that's one of our key concerns, right, and I think it should be our concern as a society or as a nation as well. And so I suppose the good news here is that a slight majority fifty said that they're going to spend money that they

already have. And then of those who gave us an answer, in other words, if they had an idea about where they would use their financial resources, said they'd use some combination of credit. In that mix, only about six indicated that they would use either most or all with credits only six percent, or go leaning heavily on the plastic

you know, which raises a question in my mind. We've heard about the strength of the consumer powering the economic recovery in the United States over the past five ten years. I'm trying to understand how much this has been done on credit and how much further it has to go, given the fact that rates are still low, but that we are starting to see delinquencies chack up a bit, at least in credit cards and auto loans. Well, rates

are low from a credit card perspective, right. Uh. You know, we survey this all the time, and the average rate for consumer credit card is cent. Of course, you don't need to take that eighteen percent hit if you're paying the balance off within the month and then store cards are above twenty UM. So you know, I love the use of reward oriented credit cards personally, but I loathe the idea of allowing those balances to go beyond thirty days.

But to your question, I think it has as far to go as the economic expansion has far to go, and as long as we can have actual gains and income or wages that is above the rate of inflation and so um. You know, I think that is sort of the conundrum to use an Allen Green Spanish word, uh that you know, while the FED is sort of fighting to get inflation up to its would be target, uh, you know, a lot of consumers are sort of saying, hey,

wait a minute, what about education? What about healthcare? Those should matter more, shouldn't they because those have the outsize impacts on our on our finances, and they do matter a lot. Right, So what are we hearing and or what are you seeing out there as it relates to gen Z about how they're buying stuff out there. Are

they still buying stuff? Are they just more into experiences? Yeah, this is a great question, and I'm glad you asked it because I think this may be one of the one of the things that is going to be most fascinating in the period to come. And So for those who aren't all into the cohort categories here, we're talking

about those who are age eighteen to twenty two. And of course millennials are perhaps the most talked about UM and to some degree take the most heat in print, etcetera via views of the words latte and avocado toast, and I get a little tired of that. But but the real reality is that the gen Z folks are really looking to be shaking things up with respect to UH for example, looking to buy uh, you know, gently

used clothing for example. And when we ask people who is focused on saving as a reason why they're not spending more gen Z again, those eighteen to twenty two popped up by far at the top of the list. That was so, you know, these are the people who truly have been digital only all their lives. Some of the millennials were a bit of a mix between analog and digital. And I think that there's a back uh lash to that, just the same as in some ways

the rest of society is having a backlash attack. Um. You know, tech is has become the punching bag that the bankers were ten years ago. Uh and and so, and I think that there are some valid reasons for that, right, the fact that people can be bullied in that space, and they also want to have touch points. Sure, and there is now a shift towards some more social affairs in addition to a big tech. Mark Cameric, thank you

so much for being with us. Mark Camerck is a senior economic analyst with Banquet dot Com, joining us from Washington, d C. The years of the unit corn of given way to a year of skepticism with some high profile misses when it comes to we Work and other darlings of the venture capital space. But this doesn't really paint the whole picture. Joining us now, Matt Miller, chief executive

officer of and broker, joining us from San Francisco. Matt, you've been surveying the venture capital space, but not just the mega deals or the mega companies within the sector. Can you give us a sense of what you're looking at. Yeah, sure, thank you. We work with thousands of venture back companies. Our company build an online platform for insurance, and venture

back companies are one of our main customer segments. So we get data from thousands of back companies, both small ones and large ones, and a few days ago we publish a report with our findings on all of the data from twenty nineteen that we see across the entire venture industry. So what are some of the key takeaways from your report, Because, again, as Lisa suggested, the VC community, uh, Silicon Valley broadly defined, has taken some lump here in

the public market. Look, I mean, I think when you look at the numbers, there's a lot of talk about funding slowdown or were expecting one, but you don't really see it yet. I think what we see as funding activity is still quite strong, particularly in early in middle stage investments, and so I think that we also see companies that are still able actually to raise pretty sizeable amounts of money despite having relatively small or even being

pre revenue. So I think from a deal activity standpoint, at least right now, you still see investors trying to lean in and get deals done. How about the actual companies, how are they doing. I think, you know, obviously it varies across the span. I mean, there are companies that are doing quite well, companies that are potentially slowing down

and starting to hordcasts. I think one interesting tech trend we see when we look at the data is that companies in California certainly are hiring fewer people relativity the amount of funding that they're raised than companies and other parts of the country. I think obviously a part of that is just due to the cost of hiring here, but I think a part of it could also be companies that are trying to preserved capital. What are the sectors right now that vcs are allocating maybe more money

than maybe we've seen in the past. Yeah, I think certainly one of the things that we see is fintech continuing to be particularly strong um both in terms of average size of deals and overall deal flow UM. So I think that's an area where both just judging from the investor sentiment that we connect with but also looking at the numbers, that I think we should expect to see uh pretty wide and continued pattern of growth for

fintech companies. But also I think we start to see UM still still some decent traction and consumer goods and consumer hardware and so companies that have had a couple of big accepts in the space, and I think there's investors that are still leaning in. Can you give us a sense of the investments made by the venture capital community and sort of the trend line of them. Are

they increasing, are they decreasing? Are they tending to shift more towards the higher bigger companies, are the smaller ones? What are you seeing? Yeah? Um, I think we see in general it depends a little bit on the sector, but overall continent UH pattern of growth. If you look at the deal volume of total funding, I think you know you do see a lot of still large growth deals coming into relatively small number of startups that are

those that have the most traction momentum. But when you broaden the aperture and look across the entire spectrum, I think you continue to see UH a reasonably strong amount of activity, and not just in the usual places of California and New York, but I think small venture deals are getting done increasingly across the entire country. I think one thing we definitely see is that as companies start

to branch out. Even though San Francisco is still the bulk of where we see most funding activity, there are places like Utah and Texas where we're starting to see a growth of startups and a growth of some early stage deals as investors get more comfortable with technology companies being built outside of just the Bay Area. Man, I know there's UM seed rounds, Series A, Series B. Are all those kinds of rounds as conscious of those? Do they share similar similarities in terms of strength or lack

of strength? It's a good question. Actually probably not. It really depends. I think you can look at companies UM that you call around a seed round or call around a Series A that have wildly different sizes of revenue and a number of employees, And so to some degree, I think the naming nomenclature really just varies depending on how companies are trying to UH position themselves. But I think you do see certain trends like to raise a

series A round. I think you most companies want to have UH an established business model, real revenue in the door. Maybe not quite a proven traction, but UM certainly enough points where you know you can justify a larger size of investment, and companies that move on to a series B of call it, you know, ten to fifteen million dollars or more, tend to have a repeatable business model where you know you're doing something that works. People are generally can see the pattern and see how you can

go into a much larger business. So, even though I think there are differences specifically between companies at the at each round, right, you do see some transmit that tend to continue. Matt Miller, thanks so much for joining us. Appreciate your thoughts on the venture capital world. Matt Miller's the CEO of M Broker. They've just put out a report kind of detailing their views kind of what they're

seeing in the venture capital community. And I think it's a Tommy discussion because, as you mentioned, Lisa, twenty nineteen, we came into the year thinking, boy, we're gonna really spread the wealth of the venture capital and private equity community to the public markets and public investors with you know, the Ubers and lifts of the world and we works of course, uh and some of those big high profile deals obviously been very disappointing for public equity investors. So um,

I think the story we hear from the VC communities. Yes, there were some big disappointments, but there's a lot of smaller, midsized deals that continue to work well. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney and Lisa abram Boy It's I'm on Twitter at

Lisa A. Bramwoit's one before the podcast. You can always catch us worldwide on Bloomberg Radio.