KPMG's Hunter: Weak Corporate Investment Held Back GDP (Audio)

revised first quarter g D p PM. We've got a come, got a triffic one to punch in this half hour to look at all this stuff, what it means for the economy, for the Fed and the markets. Yes, we'll be speaking with Constance Hunter, chief economist at KPMG. Right now, let's speak with Katherine Cowdery in the Bloomberg newsroom with the Bloomberg Business Flash. Thank you him and Bloomberg. Taking Stock is brought to you by National Realty Returns on cash and rented real estate. Find them at n r I,

a dot net. Well stocks never their earlier advanced. The dollaris send it as gains and treasuries fell after FED Reserve Chair Janet Yellen said an interest rate increase in the coming months may be appropriate. Echoing recently marks by policymakers. Speaking at Harvard University, yell And stopped short of giving an explicit hint that the FED would act next month. Julian emanuel Us Equity and Derivative Strategy to V says

it is time for the Fed to take action. The data is supportive, the economy is getting better on virtually all fronts. The GDP was revised higher this morning. Housing has been very strong, the confidence numbers are good, the retail sales are good, and it's it's time for investors who actually, perversely are are still very cautious right now. Uh, They're going to realize that we check the markets every

fifteen minute throughout the trading day. DAL Industrial Average is up twenty three points an eighth of a percent is trading at seventeen thousand, eight hundred fifty one. Smp F I Funded up five points at quarter percent to two

thousand ninety five. Fanasta ACT is up twenty three points half a percent, trading at four West Texas Intermediate Crude oil down twenty one cents a barrow for tens of a percent at seven s about, gold is down eleven dollars ten cents a ounce at twelve eleven sixty, and the tenure Treasury is down six thirty seconds with the

yield of one point eight five percent. Among today's top business stories, Key corps four point one billion dollar bid to buy First Niagara Financial is apparently facing some questions concerning a federal investigation into First Niagara's minority lending practices. Two people familiar with the matter say the Justice Department began examining more than two years ago whether First Niagara violated a federal lauthor prohibits discrimination in issuing loans. It's

two thirty two on Wall Street. Let's get enough date if some of the other stories were following. On Bloomberg Radio today, Katherine, thank you from the Bloomberg News Room. I'd Mark Crumpton, Egypt' chief investigator says this search for the egypt airplane that crashed last week, killing all sixty six people on board as narrowed to a three mile wide area in the Mediterranean Sea that based on signals from the plans emergency beacon. That information was from the

day of the crash. May nine, no new signals have been received. President Obama made history today in Hiroshima, laying a wreath at the site of the first to S nuclear bomba attack. The President urged moral progress alongside scientific achievements, mindset about war itself, to prevent conflicts through diplomas, and strive to end conflicts after they've begun. Mr Obama is the first sitting US president to visit Hiroshima. He didn't apologize for the U S action, but said the memory

of the atomic bombing must never fade. Speaking at the National Press Club today, CDC director Thomas Frieden said the US now has its first case of a patient infected with bacteria found to be resistant to all known antibiotics. Medicine cabinet is empty for some patients. It is the end of the route for antibiotics unless we act urgently. City Bike says it topped to daily ridership record on Wednesday, when more than fifty three thousand people took out bikes.

It also happened to be the warmest day in the city since last fall. The previous record was fifty two thousand, seven oh six set last September. Global News twenty four hours a day powered by our twenty four hundred journalists in more than one hundred fifty news deuros around the world. From the Bloomberg news Room by Mark Crumpton, Catherine, thank you, and recapping down industrial leverages up twenty three points, trading at seventeen thousand, eight hundred fifty one s andp f

I funded up five point to two thousand. Nassack hired by twenty three trading at four And that's a Bloomberg business flash. You're listening to Taking Stock with Kathleen Hayes and Pimpbox on Bloomberg Radio. Speaking at a panel discussion at the Ratcliffe Institute for Advanced Study at Harvard University, fed A Reserve Chair town At Yelling said that a rate increase would be a p opriate probably in the coming months, if the economy and labor market continue to strengthen.

Let's find out more and get her thoughts on Chair Yellen's conversation. Want to introduce Constance Hunter, Chief Economist KPMG. You can follow Constance Hunter on Twitter at Constance Hunter. Alright, Constance Hunter, what do you make of Chair Yellen's conversation and comments about the appropriate increase in interest rates probably

in the coming months. Yeah, Hi, pam Um Kathleen. He's just just tweeted and asked me if I thought her comments were hawkish, dovish, wonkish or impish, and uh, I'm gonna go with dovish, because if she were hawkish, she would be saying things like it's appropriate for the SAID to raise now because it takes time for monetary policy to work through the system. She'd be legitimizing a rate hike um in in more concrete and um assertive lane which and she's definitely in a wait and see mode.

But let me prepare you that there's a very good chance we will raise, right, So she doesn't want to be the markets to be surprised if the Said does raise in June or July, and I think they probably will. The thing that could hold them back is what's going on in the UK with the vote for England to

remain or leave the European Union. Because should that vote go for UH route leaving the European Union, and it happens just the day after the meeting, um, so they, depending on how the polling is, they may wait to find out that result because it would cause havoc in the market to New yor term. So let's take a look. And I'm happy hear you say that, because we're kind

of joking the top of the show. I would have lost money if I was a trader this afternoon because I was listening to her, going gosh, she doesn't sound talkished to me. She almost sounds stublish. So I'm happy that you are an expert FED watcher, and that's how you're taking it on it too. But there are people who think that she was on the hawker side GDP

though zero. The talk is to the she talk is compared to expectations, right, there's an expectation was that the FED was on you know, hold for the whole year. She's not hawk ish, but she's dove is compared to four rate hikes as of September. She's dove is compared to some of the other members of the f O M c UM. But I don't think that means if she raises in June July, there's a big good chance they only have one rate hike this year. So the GDP number, what do you have to say about that?

We know she's concerned about low productivity. She mentioned how output has been unusually low in this recovery. But what do you see constance as you pull apart all these signals in that report and others. How how much are you going to pick up in the second and third quarters in the FED chair watching that? Yeah? Absolutely, so, so let me go through. There's there's the there's this sort of not such great components of GDP which is exactly what you mentioned, and and that stems from corporate

investment which has been really weak. And if we looked through, you know, there's a bunch of different components of corporate investment, so UM, there's investment in structures equipment UM, and and that is where we see real weakness from the fall in the in the oil price and the fall and investment in the oil and gas sector. But there's another section so that could be viewed as temporary, and it certainly had a big drag on GDP UM in almost

seventy four bases points. So we had that not fallen as much we were to see much younger growth last year. But there's another component that is intellectual property products, so software research and development UM, entertainment, literary and artistic UH investment and those first two software research and development have not been as strong as we would like to see, and those are the things that help determine future productivity growth.

So she has reason to be concerned there. How some wage increases, if there are any tell us about that and how that figures into your thinking. So well, when we think about um reaches and the relationship between inflation and the relationship between growth, which is what the FED is looking at, we need to look not just at wrage wrage growth, but we need to add waste growth to jobs growth to get total income games because that is where the pressure comes through the economy and impacts inflation.

So when we look at those two things together, we get about a four and a half percent increase year over year, and that's what we were getting last year. We're looking to continue to get that this year, and that is enough, UH in my view, to support some pressure on prices. Now, the most reclent PC gator released this morning doesn't necessarily support that, and that's because goods costs have gone way down in the last quarter UM.

But when you look at at the consumptument is happening, we're seeing households in the last two quarters really shift a lot of their consumption to services and that pressure on services prices. We are services economy is I think what's going to push the FED over the edge to raving to raving rates sooner and that is the summer juno July for the hike. Is that the only one this year or will it be more September. I think

it's pretty likely that's the only one this year. One of the things that Yellen has said consistently is if we go sooner, we can go slower. If we wait too long, we're going to have to go faster. And I think, all things being equal, for preferences to go sooner and slower, slower and sooner. Well, thanks very much, Constance Hunter, Chief Economist, KPMG. Again, pm I feel a little bit vindicated that I was not the only person listen to Janet yelling. You thought, gee, she didn't Sunhawk.

I think maybe she sounded bevish. Well, but we are. We're gonna put this another very Another person who watches all of this very closely will probably ask us about every guest on this show today what they made a Janet Yellen? And if you want to tweet to at pim Fox, at caltheen underscore Hayes Feel Free. This is Limberg Radio. This Hampton's Commuter Minute is brought to by Landrover.

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