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So Alexis mentioned the math, I want to go over it, and Lindsay's going to tell me what to do with Lindsay pigs.
This was Stefel nominal GDP last.
Time around, ending September thirty was a China like eight point three percent, Paul. If you add in the one percent government shutdown, we go from five point one percent published nominal to six point one Ish.
I'm going to say, there is Well.
Joining us, the Queen of Ish in economics, Lindsay pigs joining us. What do you do with these numbers, Lindsay, how do you format the view forward? Given the plethora of data in the last ten minutes, Well, I think.
When we dig through some of the details, we're going to see that it's pretty messy, particularly given that the economy was shut down for almost half of that three month period. Now the President says it shaved off about two points, the BA says it shaved off about one percent, So we know that there was a significant damping down effect, regardless of whether it's one or two percentage points. So parsing through some of the details, I think the more
important figure to focus on right now. To really gauge the underlying momentum of the economy is let's strip out inventories, let's strip out trade. Let's look at real final sales to domestic purchasers, which rose at two point four percent, more in line with what we saw in the third quarter at two point nine percent.
Well, that's like, that's brilliant and I really really buy this angle from years ago at Fidelity with Betina Dalton.
And the bottom line, Paul is that's a pretty good number.
I think it's a pretty good number. And how about the inflation outlook there, lindsay, if you give it that the economy is growing at a solid rate, what's the inflation story on top of that.
Well, as you know, I have been long concerned about inflation and the Fed's lack of focus on inflation. So we see this pick up to two point nine percent, and that is in the direction we don't see this ongoing improvement of disinflation that the FED remains very optimistic that we're going to achieve getting back to two percent
as the forecast by twenty twenty eight. Now, any improvement, of course, is welcome, but I do expect inflation to remain elevated nearer that three percent pace for some time, which will keep pressure on the Fed to remain on the sideline.
She so under sells it.
I mean she was my Economist of the year one year or two years, three years ago, I can't remember.
Lindsay with Jim Bianco, was out front with Muhammad Larian. You know what, folks, Inflation is going to be resilient. She nailed it.
So, Lindsay, talk to us about kind of how you think the Fed is digesting the numbers we had today, some of the labor data we had last week, the CPI data we had last week. How are they putting it all together?
Do you think?
Well?
I think right now the Fed is looking at this moderate trend line in activity as a justification for their earlier decision to cut rates. Remember, over the past two years, we're now one hundred and seventy five basis points closer or arguably at now that neutral level. But the reacceleration in payrolls in the latest report, the pickup as we saw this morning in inflation is going to really solidify now their position on the sidelines.
As we saw in the minutes yesterday.
There were some members that we're considering that we're willing to consider a rate hike scenario. I don't think we're there quite yet. This is a FED that has been willing to tolerate above target inflation for years.
So simply maintaining this.
Three ish percent isn't going to move the needle. But they are sending the signal to the marketplace that they're focused on inflation and that should help rein in market.
Excuse me, inflation expectations.
We have a PhD in economics. You can say ish, yep, with quality, lindsay, I mean, I mean. The bottom line here is it's a K shaped economy. We're going to get all sorts of mail. You guys are nuts. You have no idea the struggle out here after fourteen minutes of analysis. How case shape is our K shaped America?
Well, I would argue it's not necessarily a K shaped, but more of an E shaped recovery.
It's going to be uneven.
Certainly, there is this dichotomy across classes, particularly as we see household net worth significantly increase for those at the upper end of the income spectrum as a result of a run up in asset prices via the housing market the equity market, a benefit which the middle class and the lower end of the income spectrum has not benefited from. But we do see other stimulants coming out into the economy, the One Big Beautiful Bill Act averting a reset to
a higher tax rate. This won't necessarily provide a windfall to spending, but it will help to maintain the current levels of expenditures across those different rungs in the E shaped recovery so on, even yes, but not necessarily a K shaped where some are particularly perpetually i should say, doing better and others are losing momentum.
How much of an impact are you expecting, Lindsey from some of the President's legislation, the One Big Beautiful Bill, I mean, are you factoring that into your GDP forecast, your consumer spending forecast? How is that impacting it things?
Well, we're looking at the overall impact on the economy for twenty twenty six to be upwards of several tenths of a percentage point. Now, that doesn't seem like a lot, but again, as we're looking at an economy at a growth rate at two point two percent last year, any additional boost to consumers or businesses it is a welcome
step in the right direction. But right now, I think the biggest factor is going to be how much of a dampening effect does that overheating of elephanty prices take out of consumer's ability to spend out in the marketplace.
So help us here with what Alexis said, and she took her queue from the President of the United States. He's out with the tweets saying it costs two points a shutdown, lindsay, pigs are just back of the Steifel Nicholas envelope.
How much do you.
Add on to real GDP to get where we are now?
I think the President may be looking at this overly. It may be accounting a bit more for the shutdown then I would assign. I would say, maybe in line with the ba's forecast of about one percent. But remember whatever we lost at the end of the year, we typically regain when the government reopens, and so if there was a one percent loss, we're likely going to see an even stronger one percent boost across the first quarter.
Now this time it is a little more complicated because we did see that second round shutdown, although it was much shorter and much less disruptive.
But I would expect that to be reclaimed.
Anything that was lost at the end of the year to be reclaimed at least within the first half of twenty twenty six.
Doctor Peterson thinks so much