Global Data Pod Weekender: On the strait and harrow

Welcome to the JP Morgan Weekender. I'm Bruce Kasman and with me this week is Joe Lupton. Hey Joe. Hey, Papa Bear. Okay, so trying to think how to frame the conversation today. I guess The way I'll frame it is in some ways to think about the buckets that we're really focused on here. One one bucket is the kind of the magnitude and the extent of the damage being done to the global energy markets. Um another one is trying to understand how it's having an effect on um

behavior and and performance and there's a an issue there both about where we're coming from and also what the highest frequency news is telling us about where we're going. And then there's policy. So I guess I'm gonna just sum up by saying that uh having uh moved towards a ceasefire, having moved towards some negotiations, I think We reduce but by no means um

move to any kind of low level the the tail risk stuff that we've talked about with the supply being uh constrained here and possible spikes in prices and actual shortages. That's there. But there is, I think, some Some shift in distribution there. Um and then I think on the The big issue of how we're reading the the resilience of the global economy, the size of the shock, how much vulnerabilities there are. Um I think, you know, you gotta be a little bit more concerned here. Uh I think the

momentum loss on the consumer side, um, by itself is not such a big deal, uh, that we're seeing in the global economy. But it's coming, I think, um Um in a sandwich of consumers having already had to um uh effectively cushion a blow in the second half of last year and now a a pretty significant hit to uh purchasing power that's coming in March and April with uh

um a clear sense that sentiment is also going to get hit and you can see it in some of the surveys already. Uh I think the business sector side is doing its job in terms of spending, but um the hiring side is still gradual, modest at best in terms of normalizing and there is this risk that businesses get pulled into this sense of caution at this point, even without the the more um

uh, you know, kind of extreme scenarios on on the geopolitics playing out. And then finally on the central bank side, I guess I'm feeling I'm feeling okay with the call that there's a lot to be talking about where you might be six or twelve months from now on central banks, but at least for the next two, three months these

These guys are gonna be doing their job doing nothing effectively. Um and there's obviously a debate we've been having with our European team who still have a hike in in all four of the Western European central banks before mid year. Um but that notwithstanding, I think the Fed is clearly the the bigger player here in how other central banks and how financial conditions play off of that. I think that part of the story's holding in. So That's kind of my summary of the week, Joe. You wanna

Yeah, I mean I guess what one one thing I would maybe just start with is um you know, I get the You know, risk markets are gonna do what risk markets, you know, wanna do and I guess maybe I shouldn't second guess that around the the the ceasefire. I mean the idea of calling this a ceasefire I think is I mean Nothing you're still firing. Uh nothing's moving through the straight. So the only thing I've seen kind of said is a bunch of words without anything really changing. Um I

The firing I thought they did basically stop. Uh but maybe I'm was the US the US has, that's fair. But I mean you still see you know, attacks. Obviously the uh the kind of kerfuffle around Lebanon. um adding to the pressure and and as a result Iran is still you know, there were bombs still flying and uh, you know, so forth over the course of of this week. Maybe the intensity has has pulled back. So I guess there's

There's something to that. I think that by far the most important thing is that nothing is flowing through the Strait of Hormuz. So Nothing but Well look, I yeah, I don't wanna get hung up on the uh you know, the I think it's whatever. three or four percent or five percent of the the flows, but uh nearly nothing is is flowing through the Strait of Hormuz. Um I think, you know, our our our kind of call is that we get

you know, we get the straight opening up by the end of this month, right? And you could say it's still early and ultimately things are tracking. I do worry a little bit and and y you and I kind of dug into the bowels of what dated Brent and the North Sea forties, you know, wet barrel pricing, which is the pricing that people are actually paying.

at the port versus the paper contracts. Um that these prices are sitting around 140. That's what people are actually paying right now. So we don't know enough about how commodity market works, but that does seem like you know, if those are what people are paying one hundred forty, then you know, that that's the pressure point.

Um if those are the types of numbers we're gonna be seeing, um and those are the that's what's being transacted right now. If 140 is what we're gonna see, then that's well above what our forecast. Well you wouldn't say that we saw anything in the March CPI energies that are different than what we would have expected given what Brent is. So I'm not sure. I'm not I don't wanna get into uh I don't wanna get into a long conversation.

I don't wanna I I also don't wanna give the impression here that what we're Discerning here in terms of the broader shock suggests we should be thinking about it in the context of a 140, 150 Brent. I don't think that's right. Um I o you know, I think I think we are the price is right in the sense of what we're seeing. There's product prices which are behaving differently. There's natural gas which is doing it

its thing. But I think it's still right to say that at the current time, notwithstanding the tail risks, if the strait doesn't open, this is still a far more modest shock than what we saw in twenty two and what we've seen in Bruce, I I get that. When you say the price is right, I totally agree, but the question is what price? And this is where I don't it is what we're seeing in transacted prices something that is what we're gonna be seeing at prices at the pump uh in in the next few weeks.

Um, and i our Brent price is going to be the, you know, moving up in a world where we're still not seeing a conclusion to this in the next three weeks. I don't know. And you're right, we shouldn't spend a lot of time on this. My point of all of this is to say There was a huge relief rally uh on the kind of ceasefire announcement and That to me seemed like okay, that nothing's really changed. Things are still getting worse.

In terms of ports still closed, this thing we've said gets exponentially worse the longer the port stays closed and the port is still closed, which means it's exponentially worse relative to where we were on Friday. Now Is the the hint of an agreement, you know, is is you know, Vice President Vance gonna be able to kind of pull a rabbit out of a hat uh and figure out a way to get the Iranians to open the um uh the the the strait in the next Four weeks.

May maybe uh that's still in the offing. So I I don't I don't want to obsess over tail risk here, but you're basically I I think there's a modest reduction in the tail risk as a result of the developments last week. You don't think so? Yeah, that's probably Okay, so let's just go on from there. Yeah. Okay. Got else to say? No no I I think that that's not a Well okay. Matt, Mac.

Yeah, the macro side of this, um, in terms of what we're seeing already, uh, you know, I think The up through February things were looking um pretty darn good. Um, I will say As we look back to the fourth quarter You know, they the the US G D P numbers were super strong at first and keep you know, kept getting cut down and got cut down a little bit further. And we know that there was a government shutdown, so we don't wanna overstate that. But um

you know, I I I do think there was a a sense that there was a lot more momentum at the end of the year than we ended up getting. Now on the plus side, the profit numbers that came out of that were were pretty strong and those were news on the week. And we also updated our global profit. This week. And those are quite strong. So those are important cushions. Last week I talked about cushions that I'm seeing to weather, weather the storm. And I think on net,

we were kind of on track for a pretty good start to the year. Um, if anything, uh start to the year that was making us a bit more on the hawkish side when we talked about central bank. The March news that we're getting, I think, is the mixed, but certainly on that concerning. I say mixed because we did get that nice solid.

um uh nice solid um uh labor report. Um I think we saw you know in the US some auto sales that were looking uh a bit better. Um so that's you know, modestly encouraging, but are the PMIs that came out this week, the composite PMI, um, you know.

uh we we don't wanna overstate the surveys, but we also, you know, always say standby or PMIs and um that that's a that's a concerning signal. It did only f only fall back to kind of trend like growth, which isn't bad, but the new orders falling to a 28 month low, the employment index moving to kind of one of the lowest levels we've seen in decades. the future output falling and just the sheer momentum loss in that I think is is reason for

Let me jump in here. I think I think I would kind of look at the world a little bit differently. If if I took everything you said about what the world was doing through February and then think about the PMI in that context, and I'd be far more not far, but I'd be more willing to just say, okay, this is a geopolitical event uh surveys get hit. Um they're not really yet telling you anything much about activity, so don't don't start to put your PMI lining up with GDP as this.

as telling you where you are. You know, you just got hit. You got hit by some shock and people got a bit worried and it it probably won't have m any real impact on what the underlying

trajectory of the world is doing unless that hit gets magnified in a few more months, which is a risk, of course. However, I'm not sure that's the r only thing going on here. I mean, I think when I look at the momentum into the first quarter Uh you know, I see some very good things in terms of the s continued strength in CapEx.

Uh tech obviously leading. Uh I do think the pickup in sentiment through February uh on global businesses is encouraging. I think the pickup in jobs is okay. But I think the consumer has taken a step down.

And I think that's a good thing. Uh that's really where the G D P forecast revision matters. I don't really care if we're revising down first quarter US GDP because imports are stronger, because I think that's got a double double edge to it. I do care that we are lowering consumer spending and not only the US consumers looking softer

Uh the Japanese consumer was rise down this week. The European consumer data, which is cracked to begin with, is looking a little softer. Um and that does raise the question. It comes back Right. You're right. That's all that's all but that's all through the February news, right? So I I I came off saying, hey. But I'm saying that's the reason why I put a little more weight on the March BMIs, not because

of the size of that move because if I had interpreted everything is going fine through February, then I would just say March is just a p a political shock. I think you have to integrate it with the idea, well, there might have been a softer underlying tone to what the data uh, to what the to what the global economy was doing before that that's starting to get picked up in March together with this and you have more

reason to be uh concerned about it. And I think that's that's the way I would look at it. I it's I'm a little kind of uh jarred here'cause I feel like you're taking the more negative side than even me.

Um, but I think you're you I should have mentioned, you're right, all of the consumer spending numbers are looking and I had been kinda saying, Oh, you're seeing a little hint of a of a pickup there and I was willing to put some weight on that, but I think now that we've gotten kind of more data, you know, the consumer goods spending globally, it's just it it really is coming off and the three month run rate has come to a Well, yeah.

I'm not sure I'd put too much weight on this in the sense of just the three month run rate coming off, because it does come in the backdrop of some stronger numbers. And you would have expected it. But I I do think you put that together with the PMIs and you put that together with the idea

that consumers did have to stretch at the end of last year and are now getting hit by a pretty big sentiment shock, pretty pretty purchasing power drag. I mean, to me those are the You know, these are these are kings which kinda make me feel I gotta be cautious. And it's not just a headline, right? I mean, you have uh like in the US, you have kind of a supercore running close to five percent uh three months. Uh three months through March.

Um, so I I mean there's a purchasing power drag coming through. Uh that is that is not just headline. That is something that we've been worrying about that the that the trade war drag and you can very clearly see these kind of The the tariff effect playing a role. So many people have said, Oh, you economists have been worried about tariffs and you just don't see them at all. And we're kind of like, No, actually, when you look, you see the tariff effect.

Passing through, and it's going to continue to pass through at the start of the year, and it's going to be a headwind. And you can see it. And you can see the consumer starting to pull back on, as you said, that purchasing power squeeze. And now you're layering in this big headline shock. Now the question is, is this kind of Pullback going to be enough to um uh you know kind of build on itself, or there are enough cushions.

Um and so our things like healthy balance sheets, kind of wage inflation kind of holding up and and I kinda took a little issue when you said the labor market is is looking pretty good. I I I think when you smooth things out the labor market is still quite weak. Um, but you know, it's it's not as weak as we had feared. So I think that's That's certainly worth making. So overall labor income kind of doing okay, but not great, balance sheets doing well.

Are those the types of cushions you got the refunds coming? Are those the types of cushions that are going to kind of keep the consumer alive as we weather this kind of really big purchasing power squeeze coming from energy, right? I don't know, that's the question. And yeah, the the March surveys are concerning. And we didn't mention the consumer sentiment survey just absolutely hit an all time low back, you know, since before nineteen seventy six or whenever that survey starts. So

That's pretty Michigan survey. Who cares about Michigan? Oh wave oh we forgot to mention who won the national championship this week. Thank you for working that up, Bruce. We were gonna get that in there at some point. Go blue. Ha ha Yeah. I mean I think I think consumer sentiment in this environment is a somewhat somewhat of a misleading indicator. I think even March spending uh surveys more generally have to be taken with a a grain of salt. But I do think

There's a really you know, in some basic sense the point is that there are vulnerabilities here, there are imbalances here. Um, you know, if we had been um comfortable that the the foundations of the labour market, the foundations of

consumer income, the foundations of uh of um business behavior across the broader sweep of things was in solid footing. We could feel more comfortable. Now let me just say I do think that if you do follow our baseline forecast, and we are sitting here at the end of this month opening the straight, if we are sitting with oil prices peaking close to current levels and then moving down. I think the moral most likely outcome here is going to be uh that we get through this uh and we get through this.

without materially uh turning the contours of the forecast that we have right now, which is that growth is running um, somewhere close to trend for the rest of this year, both US and globally. Uh and that inflation uh doesn't have much pass through from

the energy price s shock that's lasting, but it probably does have a bit and it's already in most places in the world, not all running on an elevated um uh level. Uh so I'm I'm okay with that. I don't feel like If we can if we can um get past the tail risk scenario, even though I'm a little bit more concerned about what I'm seeing in the data, I'm still feeling okay that we're gonna get through this.

Uh one of the reasons I think we'll get through this is I think central bankers are not gonna make the mistake of hiking into this. Um, and that that's gonna be supportive of financial conditions. It's gonna help a little bit in terms of bolstering sentiment. Um and um, you know, that kind of does does provide an important bridge. in the since all this started, I've been on the side of central banks should look through this and not certainly not fighting.

I y I I I don't think you took a strong position on it, but I thought you were more open minded. I took a very clear position that their initial reaction should be caution. April. You said by June they should be high. I I said they should be at least waiting to June and then at that point they should be assessing what they think is going on in terms of core inflation. And if they're

If they're starting to see pressure on core inflation and they're starting to think that inflation in the second half of the year is moving up to two and a half, then they will be hiking. Whether they should be hiking is another issue. That's what I was saying. Yeah. So but we're talking about the forecast and you're feeling comfortable. You said you're feeling comfortable because they're not going to do I'm feeling comfortable because the Fed's not going to do that.

Oh yeah, this is just a Fed comment. Well, the Fed keys like seventy percent of the central banks in the world offer them. Okay. So okay, so now we're saying seventy percent of the banks aren't gonna hide. That's enough.

Oh no no I I mean I I didn't I did Look, I'm not I'm not taking a strong view on what the E C B's doing, but I would say that if we come into the middle of the year and they feel like core inflation is going to be moving up towards something closer to two and a half percent, then they'll hike.

Yeah, no, no, let's leave the E T BSI. This is this is kind of important because right now you've got probably 60% of the world's central banks priced for hikes, and you're saying you think that's not gonna happen. Not by the middle of this year. Where we're gonna be at the end of this year is a whole other story, but no, not by the middle of this year.

Okay. I would have thought if we're talking about weathering the storm, we're talking about the next six to eight months here, right? That's the storm. Like, are we going to be able to get through? Well I think the next stor the storm is the next three months if we're not following if we're not following the tail of the scenario. Of course

you can argue that we will be still sitting here in July and August worrying about the Strait of Hormuz. That's a different issue. But if we if we get past the tail tail of the distribution of the the st strait staying closed and um the conflict continuing. Then I think the storm is really the next three months. The next three months we get can we get past the

Tail risk, the I there's the tail risk. Let's set that aside. If that's the storm, then I agree. That needs to use three months is too long. In fact, who was it? Hassan. I love Kevin Hassett. Hassett said, Oh, the straight's gonna open within two months. Don't worry about it. And everyone's like, What? Right. So two months is like you've got to have it done by then. I'm saying our baseline.

Is the storm, right? Our baseline is oil prices staying upwards of ninety dollars, let's say, over the coming three quarters. Right. And in that world I would have thought what you're saying, which is sensible, as I said, I kind of lean in that direction, or more than lean, I'd push in that

The central bank shouldn't be hiking into that. And over sixty percent of the central banks are priced to hike. So I I I'm a little So I I again I wanna distinguish between I think in the next right now I think there is heightened um concern about growth, which is what we talked about the first part of this call. And there is some concern that this event could end up becoming a catalyst for what has already elevated inflation in most places to be even higher.

I think in the next few months the anchor of the Fed showing patience is gonna allow most central banks to stay on hold. I'm actually kind of believing somewhat more likely than our team in Europe is that the European central banks will stay on hold through that. And if we're sitting here in the next three months and oil is

peaking and the reason why oil is staying up is because we're starting to rebuild buffer stocks and repair energy infrastructure. But we can see that going forward. Then I think if we haven't done undue damage uh to the labor market. If we haven't done undue damage. Those are the ifs, Bruce. I I think the question is

But that's the storm. That's the storm. I'm saying I there's a there's a there's a basically there's a basically a few month period here where we're gonna be absorbing the intensity of this shock. And we're gonna be sitting here three months or so from now, whenever it is, if the shock has already been defined and not intensifying.

then either we will have done a bunch of damage in that period and be talking about a a trajectory of weakness or not and then we'll be talking about trajectory of reasonably decent global growth. We'll have, I think, defined the terms of how much damage gets done looking forward over the next six or twelve months. um on growth. And then I think there's a different conversation that happens around what what is the trajectory of inflation doing? How much, if at all, has that been changed?

And what's the central bank reaction function to that? That's why when I get past the next few months, um I think you have a different set of considerations for what central banks are doing. If you are of the mind, and you you probably aren't, that there's gonna be any uh additional pressures on core inflation.

uh as a result of the shock of keeping oil at ninety, uh, but not going into the tail, then I think there's a decent chance that um you can see central banks tilt in the direction of tightening. And for what it's worth, we do have the Fed Tightening in in in the first half of twenty seven. That's a long that's a longer ways out, but nonetheless that's this that's part of the story.

No, I I agree, but uh but I'm just saying that this whole dynamic can start to shift if you get through the growth um uh concern period, if we get through the shock concern period, and we find ourselves sitting here with some additional pass through to core inflation in places where it's still uh elevated, particularly the US. And if once that starts to turn in terms of the uh dynamic and the pricing, it's gonna have reverberations much more broadly than in just in the US.

So but I think if we're gonna if we're gonna have a an event here that's gonna do meaningful damage to global growth, it's gonna have to start to kick in here in the next few months. Have to is a strong word, Bruce. Well, uh it's always other things that can happen and we're always gonna be surprised. I agree with that. Yeah. But but but I think the purchasing power squeeze is quick. The the risks on the tail uh Think the and you think the spending response to that is quick.

I think the spending response to that will be uh if we're in the in the baseline scenario it will be smooth, but if we're follow following a path of getting far more damage. Then it's not going to follow my baseline and it's gonna be you're gonna get hit harder, for sure. That's the that's the risk in the non tail scenario that we're more vulnerable and we end up with a much weaker consumer, for sure.

But the baseline is that you do smooth it. The baseline is that businesses are sitting with strong profits, as your latest piece shows. Um, that they're Definitely gonna be a little more cautious here, but not by enough to really turn back the tide uh in terms of hiring and and business spending. And then we get through this in the next few months and then things begin to roll in a somewhat more positive direction.

Do we uh well, I don't know if this is shifting gears too much, but you know, one some of the other kind of concerns around financial conditions we're getting a lot from clients. uh I'm sure you're hearing it too, are um on the financial conditions side related uh uh partly to some of the the on the EM side and the capital flow. uh moving out um quite strongly. Uh and then also on the private credit side is another area that um keeps coming up as a you know as kind of an amplifying force.

uh on some of the headwinds. I I just wanna I I actually haven't asked you about this since I've been back on the road, but'cause I've been hearing it a lot. I I have my answer. I'm I'm just wondering how it is your um uh your you're thinking about that. Well I think there's two There's two answers to this question. If I look at financial conditions broadly and I look at what our internal bankers are saying in our

external indicators. I don't think anything is happening here which is having a material impact on access to credit, uh the price of credit. um or liquidity in a way that tells me that financial conditions are now creating uh stress. Yes, the equity market has come off, but not enough to really be a a a a large macro influence at this stage. Um and um right now I th I I think financial conditions against the backdrop.

of our concerns around downside risk are actually a uh a a supportive part of the conversation. The second answer is I think a lot of things are happening on the margin. that if the macro outlook did turn out to be worse um could actually start to reinforce that. So I'm not ignoring the potential for I think uh um financial conditions which are probably not as strongly um you know kind of uh positioned as they were a year or two ago to be become a um

uh accelerant if things went bad more fundamentally. But I don't think financial conditions at this stage are anything close to being a catalyst for uh weakness. Yeah, I mean and I would add to that you have some pretty big So I agree with everything that you said there and I I would add the

the the positives that are floating out there that I think not enough people are talking about and that is what uh could be coming on the um uh the easing of of bank capital um regulatory holdings. So you know, if if the articles I'm reading, say on Bloomberg, are saying this could free up as much as two hundred billion in bank capital.

And you hit that with the kind of usual ten to one multiplier. If banks actually wanna lend this out, um, you know, that's as much as two trillion in new lending. Um, I'm not saying that's gonna happen. I'm not saying banks are gonna let that out, but even if they did uh a third of that. Um, you know, that's pretty meaningful and um could put us right back in a world where

The Fed does need to think more seriously about hiking rates if what's happening on the backside is you're you're essentially l easing through macroprudential measures. So uh I just throw that into the mix as well as something that people should be thinking about. Yeah, I mean it's hard to see Exactly how that regulatory, you know, arrow

translates into a macroeconomic impulse. I would kind of hit the other point which I've hit before, but why not? I'll hit it again, which is that if we can see our ways past the next few months, And we are um tracking our baseline view and we're beginning to see a US where core inflation stays sticky close to three and the unemployment rate is uh moving lower and we start to turn towards pricing in Fed.

pikes in twenty seven, that that environment has been consistent in the past with some of these weaker link issues starting to pop up and become more uh significant on a macro level. I mean, just about every meaningful financial stress point that showed up in the last fifty years, sixty years, if it hasn't been associated with a slide into recession, has come because of a repricing of interest rates.

So I mean as you know, as you know, that was kind of my uh big worry at the start of the year, right? I said like if you can reprice the fifty basis points, it it you know, certainly our forecast and you know, I was saying it could come even earlier than what our forecast was. Um, if that repricing is done kind of gradually and the market's digested, then I guess you don't have to worry about it and it's coming against a backdrop of solid growth.

you know, I'm maybe a little less worried about it, notwithstanding the, I guess, you know, you know, Jamie's kind of cockroaches comment. Um uh but if it's done in a disruptive way, then I think you worry more about it. This has been, I would say, a disruptive repricing of over fifty basis points from the Fed and yet.

Yeah, no, I don't I don't kinda see a lot of things. It's early. Maybe maybe the there're gonna be a lot more of these cockroaches coming out. Uh but um you know, I I think uh so far Despite what has been a disorderly repricing, we haven't seen the things that Why do you call it a disorderly repricing, Joe? What's disorderly about it? Well I've disorderly. The funding markets are you seeing Mapping in spreads anywhere. It's not this it's very

Rapid repricing, right? So this has been a rapid repricing. Um and yet you haven't seen you know, the type of uh you know it's it's it's early. I don't know. Maybe something's gonna happen. But I I you know, some of the things I was worried about from a rapid repricing have not happened yet. Now maybe you're gonna say going from hikes to hold is not as damaging as going from hold to hike, or excuse me, from cuts to hold is not as bad as going from hold to hike.

And that repricing could do more damage. That may be what you're getting. Well, I d I just don't think the magnitude has been large enough yet. I think you you know, you probably need more. And I don't and again, I think it is an issue of how um how sharp it's been. It you know, you have to remember that um basically from September of last year through February of this year yields were going down. So we're kind of still lower than where we were September of last year and two years.

Not only that, I mean I know we're going and certainly I am going back and forth on this, but th that that's telling of how I'm trying to add the pluses and minuses as I'm putting all this together. Um so just just to kind of recap, I I do think there's a big there's a lot of negatives. We talked a lot about that, but there is a positive, I think, from this regulatory easing that that's that's starting to take place. I don't quite know how to put a number

the potential lending power is big. Another positive that's kind of maybe getting a little bit at what you're saying is that I think people also forget that the long and variable lags of monetary policy is about you know, about f you know, four to six quarters, right? And we are now About twelve to eighteen months into the global easing cycle. And so there probably should be some things starting to gain more traditional monetary policy transmission beneath the surface.

That's another, I think, important uh tailwind to help us absorb another cushion, as I said. Where what are my lists of cushions to absorb this shock? That's another one.

I mean I I think we're gonna have to wait and see and I think there is a little bit of a little bit of a little capacity for uh weak links to show up here, but I'd be more inclined to to to think that If the world isn't falling under the dynamic of a energy price shock that's hitting confidence and turning consumers more cautious.

then the the real stress from a financial markets point of view kinda will lie out there further when we start to if we do start to price in actual rate hikes, we turn the tide in terms of the uh directionality of the Fed, um which I don't think happens in the next three to six months, but I certainly can see happening on a twelve to eighteen month horizon, which is

in some ways a six seven view of the world. Uh twenty six, twenty seven is In some ways similar to ninety six, ninety seven and eighty six, eighty seven. Connecting with the U. That's a deeper well that's my deeper analysis. Using all my AI. Yeah, yeah. You're gonna bury yourself.

True. Uh that's what there is. Um, so let's kind of just talk a little bit about Next week. Um, we got our important retail sales report and you've got uh now uh launched a card uh uh you know, data project which is far more expansive. Why don't you kind of give us a a preview as to what this new enhanced uh product tells us about what US consumers are doing in March and specifically the retail sales report.

Well, we've had for a while the the retail the the card data, but we f uh really only focused it on the retail um uh sales report. Um and then we said, well we this card data is pretty expansive. Let's broaden that out. So e even the what we were doing was is the way we mapped it was not as good. So we first mapped much more cleanly into the Nakes codes of the retail sales. So it's a much cleaner model for retail sales. But then we also started to look at

services and we mapped everything also into the the the BEA PCE taxonomy as well. So it's just a very clean and this is a ton of work. I if people want to get into the bowels, they can look at the methodology report. Uh but it's it's really, really complicated stuff when you're dealing with thirty five million um, you know, data points here. Uh so

Uh that's what we have now. We have a a a very nice uh daily tracker of retail sales and and PCE. That's a a monthly now caster done at a daily frequency. Um that's on our website, please. Uh well I said card data, but Chase card. Um so that's there. We also do break things down by generation because we can look at demographics and we actually have an income proxy too that that we've built and we can look at um you know high income, middle income, low income spending pattern.

We've created things like discretionary versus non discretionary spending and there's there's a ton of neat things that we can do with this and we're we're probably gonna be doing some interesting things in the coming weeks, particularly around looking at the response to uh energy uh price shocks here. So uh you can keep an eye out for that type of uh work. Let's talk about the neat things we can do in terms of projecting retail sales next week.

Uh okay. So uh so on that we are looking the the card data are telling us um uh that well. the car data plus the data we have in hand, this now caster actually incorporates more information than just the car data. So it's a it's it's kind of a a holistic approach to trying to get a a better forecast.

We're forecasting the model is forecasting one eight um for headline and that's all partly reflecting some pickup in the car data, but also the fact that motor vehicles And our economists are disagreeing by putting in one seven. Just That's their fault. Just Okay. Uh and the can for control um we're forecasting point six. That's not forecast too for the the number.

One thing everyone should note is that these data are all nominal. So that's what the card data are nominal. So um it's gonna obviously have a pricing component in here. However, one of the things we're doing is You know, we're we're working to actually take our inflation forecast to discount this and um get a real forecast as well. Um So for what it's worth, if we get that number, it will be consistent. Um with something like a four tenths rise in real goods spending. Um, but even with that, um

You know, our team is forecasting that US consumer spending is on track to slow to about a one percent pace this quarter. So even with a decent end of the quarter. Um it's a di it's a clear slowdown. Uh again, the question here, and maybe we'll end on this note, is to what degree is that momentum swing part of a

pretty consistent noisiness and lumpy uhness and spending the consumers had and that the March number signals the beginning of a bit firmer uh number. It's hard to see that of course with the purchasing power squeeze coming. Well here's where the here's where the usefulness of the daily tracker comes in'cause we are now ten days into April and I can say that the now cast for April it's still early and these things swing around less.

a lot. Obviously there's still twenty days left. Uh, but the model's looking for just uh one tenth gain uh in April. And if you take into account there's probably still a lot of pricing going on there, that's probably a soft number. That's one ten headline or one ten headline. So includes the gasoline uh version.

Yeah, but again gasoline is probably still a positive in April. I don't think it's gonna be Uh But if you're thinking one tenth with whatever price increases is at the pump at gas spinks, that's a very big negative in real term. Exactly. That's that's what that's my point. Yeah. Yeah, yeah, that's the same one. Okay. All right, so um I think we'll end it there. And um next week is IMF meetings. Uh hopefully we'll see some of you down there.

I will hopefully see you next week here on the weekender. Take