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Nike, PCE, and Space · Bloomberg Intelligence

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Speaker 2: We can break down this story here on Nike with
1:00
Speaker 2: Putum Goil. She is the retail analyst for Bloomberg Intelligence.
1:04
Speaker 2: She follows this stuff. She's done it for decades. She
1:06
Speaker 2: knows what's happening, so put them. Thanks so much for
1:09
Speaker 2: joining us here. Is this a Nike issue? Is just
1:14
Speaker 2: this reflection of the consumer. What's going on?
1:17
Speaker 3: It's definitely not a Nike issue. It's more a reflection
1:20
Speaker 3: of the consumer and just the macro environment that we operated.
1:23
Speaker 3: You know, when you look at the results that Nike
1:25
Speaker 3: post did and you just look at the different geographies
1:28
Speaker 3: that they operated, the myss was really in two geographies.
1:32
Speaker 3: One was China and two Baza Mia. Now the China
1:35
Speaker 3: miss consensus is looking for a twelve point five percent
1:38
Speaker 3: increase on sales in constant currency. They posted an eight
1:41
Speaker 3: percent increase. That's not so bad. I mean, it's definitely,
1:44
Speaker 3: you know, behind consensus, but eight percent growth is still
1:47
Speaker 3: pretty respectable. Now when you look at Emia the negative
1:50
Speaker 3: three percent that we saw there versus an Estama for
1:53
Speaker 3: a little single digit gain there, I think, you know,
1:56
Speaker 3: whether it was really the culprit not apparel sales which
1:59
Speaker 3: hurt them. And that's something that we wouldn't be too
2:02
Speaker 3: concerned with when we think about Nike for the longer
2:04
Speaker 3: term because those kind of situations have been slow.
2:07
Speaker 2: All right, So here we go, hold on, let's go
2:09
Speaker 2: to the I'm gonna go back to an earlier We
2:12
Speaker 2: were discussing simone tennis shoes versus sneakers, and Eric Mala,
2:16
Speaker 2: our producer, popped something in the chat. Here a map
2:20
Speaker 2: showing the United States and where people call it tennis
2:24
Speaker 2: shoes and where they call it sneakers. So like the northeast,
2:27
Speaker 2: kind of like from Pennsylvania up to the northeast sneakers,
2:31
Speaker 2: Southern Florida sneakers, the rest of the country, including Alaska
2:37
Speaker 2: tennis shoes.
2:38
Speaker 4: I don't buy it.
2:39
Speaker 2: You don't buy that, But pun what do.
2:41
Speaker 4: You call them?
2:42
Speaker 2: I call them sneakers, see expert.
2:46
Speaker 5: Experts.
2:48
Speaker 4: That must be an interesting conversation to have at industry of.
2:52
Speaker 2: Well, in Chicago and Cincinnati. You might lace up your quote.
2:55
Speaker 4: Gym shoes that I've heard.
2:57
Speaker 2: Actually, I'm sneaks, you know, sneakers. Sneaks, that's the.
3:01
Speaker 6: Way you go.
3:03
Speaker 4: I want to get your sense. How much is this
3:06
Speaker 4: a story of sneakers. How much is this a story
3:10
Speaker 4: of apparel? And how much is this, you know, athletic war,
3:14
Speaker 4: and how much is this a story of overall apparel?
3:18
Speaker 3: Sure? So, I think the bigger story here, which has
3:20
Speaker 3: been in the story for some time, is broader apparel weakness.
3:24
Speaker 3: Now we have seen this across the board because inventories
3:27
Speaker 3: were too high and that's what caused apparel to be
3:30
Speaker 3: marked down. Now, the other thing was apparel is versus footwear.
3:33
Speaker 3: It's for Nike. Nike is dominant in footwear, but when
3:36
Speaker 3: it comes to apparel, they don't have that lead that
3:39
Speaker 3: they have in footwear with rivals. So it's anyone's game
3:42
Speaker 3: when it comes to apparel, and Nike has to fight
3:45
Speaker 3: for its share. So it's definitely a tougher marketplace. Though
3:49
Speaker 3: when it comes to the footwear, I think they do
3:51
Speaker 3: have a lead. I think it comes back to innovation,
3:54
Speaker 3: which they're pressing the pedal harder on and that will
3:57
Speaker 3: continue to really help them maintain that lead. So footwear,
4:00
Speaker 3: I do think they're very strong in and you could
4:03
Speaker 3: argue that, you know, there's been competition from companies like
4:07
Speaker 3: Foca and on, especially on the running side, but those
4:11
Speaker 3: brands are very small. When you look at Nike's footwear
4:14
Speaker 3: market and its size there, it's multiple fold of those
4:18
Speaker 3: smaller brands and we don't see them losing that lead,
4:22
Speaker 3: especially with Jordan. Right Jordan's position to be the second
4:25
Speaker 3: largest global footwear brand or at leisure brand in the world,
4:29
Speaker 3: and that says something for the Nike flagship.
4:33
Speaker 4: But we also heard Nike introducing about two billion dollars
4:36
Speaker 4: worth of cost cuts over the next three years. Will
4:40
Speaker 4: that impact innovation?
4:43
Speaker 3: I don't think so, because the cost cuts are now
4:45
Speaker 3: going to be to limit innovation or to really reduce
4:49
Speaker 3: spending on innovation. They're really happening on the operation side
4:53
Speaker 3: where they may have had redundancy and they're kind of
4:55
Speaker 3: backstaff where they're just reorganizing to make matters more efficient,
5:00
Speaker 3: more about driving efficiencies. So you could argue that, you know,
5:04
Speaker 3: maybe they were two layered to start with and now
5:06
Speaker 3: they're just peeling off those layers. I don't think this
5:10
Speaker 3: will impact their roadmap for innovation to drive newness into
5:13
Speaker 3: the business, especially in footware.
5:16
Speaker 2: So simone, you know, Punham's one of the top retail
5:19
Speaker 2: anamalsts on Wall Street. Her job, a big part of
5:22
Speaker 2: her job is literally going to shopping malls and just
5:25
Speaker 2: watching people. What are they buying, what's hot, where's the
5:29
Speaker 2: traffic going, how are the promotions out there? And we
5:33
Speaker 2: actually pay her to do this stuff. Punum, what are
5:37
Speaker 2: you seeing here on this holiday? Shopping. What's your outlook
5:40
Speaker 2: here for holiday shopping overall?
5:44
Speaker 3: I think we're gonna have a really good homebase even fall,
5:47
Speaker 3: irrespective of what we have heard about the US consumer
5:50
Speaker 3: and how they're shopping, where they're shopping. The stores are crowded,
5:53
Speaker 3: people are buying stuff online. Trucks are being seen all
5:57
Speaker 3: over the US delivering multiple blocks, so the lobbies are full,
6:01
Speaker 3: so it will be a good holiday. The question is
6:04
Speaker 3: what happens after holiday? Do we go into a lull?
6:08
Speaker 3: Do you have you bought everything that you wanted and
6:10
Speaker 3: now you're just going to take a break. And that's
6:13
Speaker 3: really what we'll see into twenty twenty four. But for now,
6:15
Speaker 3: people are spending. They're using more buy now, pay later mediums,
6:19
Speaker 3: alternative stayment mediums to facilitate the spend, which is also
6:23
Speaker 3: something we'll be watching for. But holiday spend online in
6:26
Speaker 3: stores looks robust, especially at the key that have done
6:31
Speaker 3: a good job in just you know, harping their value
6:34
Speaker 3: message and also driving the nique product into their stores.
6:37
Speaker 4: Of online businesses, Are there any sectors of the broader
6:41
Speaker 4: retail space that may benefit going into next year? What's
6:45
Speaker 4: your take on that.
6:46
Speaker 3: I think the online retailers are well positioned going into
6:49
Speaker 3: twenty twenty four because now things have normalized where you know,
6:53
Speaker 3: we've were passed the pandemic and people went to stores
6:55
Speaker 3: that wanted to go to stores. They have that experience there.
6:58
Speaker 3: But now convenience comes back into play. You want to
7:02
Speaker 3: be able to shop from your home, shop from wherever
7:04
Speaker 3: you want, and just have things delivered to you, especially
7:07
Speaker 3: as things are coming faster now with two day shipping,
7:10
Speaker 3: Monday shipping with bio Fine that's being rolled out to
7:14
Speaker 3: companies that don't typically sell on Anthon but to be
7:16
Speaker 3: able to use that service. So we do think that
7:19
Speaker 3: consumers will lean back a little more on digital in
7:22
Speaker 3: twenty twenty four than on stories.
7:25
Speaker 2: All right, put them Goil, Thank you so much. We
7:26
Speaker 2: appreciate that. Put them Goil. She's a senior retail analyst
7:29
Speaker 2: for Bloomberg Intelligence, one of the best on Wall Street,
7:33
Speaker 2: giving again extent so kind of where the trends are
7:35
Speaker 2: for consumers and what retailers are best position to meet those.
7:39
Speaker 2: So check out Bloomberg's put them's research on Bloomberg Intelligence.
7:44
Speaker 2: You go to Big on the terminal and get all
7:47
Speaker 2: of the research from Bloomberg Intelligence. Including put them stuff
7:50
Speaker 2: here so it's good stuff, and calling for a decent holiday.
7:54
Speaker 2: Are you doing you?
7:55
Speaker 4: Which is interesting because you know traffic in store was
7:58
Speaker 4: so lackluster it seemed like one Black Friday. No, I
8:03
Speaker 4: have not done on my holiday.
8:04
Speaker 2: Shn you need to get going there. I need to
8:07
Speaker 2: click click a few buttons myself. I'm actually waiting for
8:10
Speaker 2: a couple of things that have not been delivered, one
8:13
Speaker 2: by Amazon and one by another retailler, So maybe supply
8:16
Speaker 2: chain issues out there.
8:18
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8:33
Speaker 7: We welcome now our Bloomberg television and radio audience. Is
8:36
Speaker 7: the top story of course today. Cooling inflation in the
8:39
Speaker 7: United States call PCEE barely rising in November. You want
8:43
Speaker 7: a cool figure, take a look at the six month
8:45
Speaker 7: annualized number, the core metric. They're up one point nine percent,
8:49
Speaker 7: ie below two percent. Let's get some reaction from Washington.
8:53
Speaker 7: Leil Break, our director of the National Economic Council at
8:55
Speaker 7: the White House, and of course, former Vice Chair of
8:58
Speaker 7: the Federal Reserve joins us now along with our own
9:01
Speaker 7: Kaylee Lines low Brain. Not great to see you. We've
9:04
Speaker 7: all been anticipating this number and looking forward to seeing
9:07
Speaker 7: exactly what it was going to deliver and what the
9:09
Speaker 7: data are going to deliver. It's a really solid number.
9:12
Speaker 7: I'm wondering whether we are now at the points where
9:14
Speaker 7: we can declare victory, whether it is time for a
9:17
Speaker 7: victory lap, whether the inflation dragon has now been slain.
9:22
Speaker 8: Well, look, it is really good to see that we're
9:26
Speaker 8: closing out the year with inflation on a six month
9:29
Speaker 8: basis at two percent. That's the pre pandemic benchmark, and
9:33
Speaker 8: it's a very significant milestone. And if you look back
9:37
Speaker 8: over the course of the year, it is really stunning
9:40
Speaker 8: how much progress the economy has made. Inflations come down
9:45
Speaker 8: faster than even the more optimistic forecasts, and growth has
9:49
Speaker 8: remained very resilient, along with a strong employment. If you
9:53
Speaker 8: recall a year ago, the consensus projection was that getting
9:56
Speaker 8: inflation down will require a spike in unemployment recession, but
10:01
Speaker 8: in fact, the unemployment rate has remained below four percent
10:04
Speaker 8: for twenty two months in a row, and of course,
10:06
Speaker 8: we're still seeing more data suggesting growth is resilient. But no,
10:12
Speaker 8: it is not time to rest. It is time to
10:15
Speaker 8: continue working. And that's what the President is determined to do,
10:20
Speaker 8: keep working to keep bringing down prices and improving the
10:26
Speaker 8: economy from the middle out and the bottom up.
10:30
Speaker 9: Well, and Director brainerd it's Kaylee in Washington. Obviously, he
10:33
Speaker 9: has tried to do that domestically, but geopolitics are a
10:36
Speaker 9: factor here as well. If it's not time yet to
10:38
Speaker 9: declare victory on inflation, if there may still be upside
10:42
Speaker 9: risks to inflation out there, How worried are you about
10:45
Speaker 9: what's happening in the Red Sea and what it could
10:47
Speaker 9: mean for energy prices and supply chains.
10:51
Speaker 8: Well, the Red Sea situation is one that we are
10:55
Speaker 8: monitoring very closely. Our National security team is in constant
11:00
Speaker 8: contact with partners in the region, with shippers, and we
11:06
Speaker 8: are doing everything we can to make sure that those
11:10
Speaker 8: shipping routes disruptions do not lead to broader disruption supply
11:15
Speaker 8: chain disruptions in the US economy. And of course we're
11:18
Speaker 8: much better equipped today than we were just two or
11:22
Speaker 8: three years ago, because we have under the presence leadership,
11:26
Speaker 8: done so much to work in partnership with the private
11:28
Speaker 8: sector on supply chain resilience.
11:33
Speaker 7: Doctor Brenand, are you confident that the current outlook when
11:37
Speaker 7: it comes to wages, it's consistent with let's call it
11:40
Speaker 7: two percent, so the target that we're all shooting for here.
11:43
Speaker 7: Are you confident that some of the deals that have
11:45
Speaker 7: be done this year that are going to take effect
11:47
Speaker 7: next year are going to really take us in that direction.
11:52
Speaker 8: Well, as you said yourself, that core number, which is
11:56
Speaker 8: the really important number on inflation, is actually slightly below
12:02
Speaker 8: two percent on a six month basis, and that should
12:06
Speaker 8: give everyone a lot of confidence that inflation is sustainably
12:12
Speaker 8: down and we can continue to see good growth in
12:18
Speaker 8: real disposable incomes, in real wages, and in fact, if
12:24
Speaker 8: you look at the real disposable income growth over the
12:29
Speaker 8: past year that we saw today three point seven percent,
12:32
Speaker 8: very strong, and it is coming in the context of
12:37
Speaker 8: rising productivity. You can see that in the last year,
12:41
Speaker 8: productivity has been nearly two and a half percent. So
12:44
Speaker 8: that gives room for American workers to continue to enjoy
12:49
Speaker 8: that take home pay that allows them to purchase thirty
12:53
Speaker 8: five hundred dollars more today than they could pre pandemic.
12:59
Speaker 9: Okay, so let's talk about American workers, or perhaps more specifically,
13:02
Speaker 9: Director Brainerd American voter. So you've mentioned a few times
13:05
Speaker 9: here the work the president has done on addressing supply chains,
13:08
Speaker 9: on trying to bring inflation down, and clearly the economic
13:12
Speaker 9: data supports this idea that the economy is held in
13:14
Speaker 9: there even as price pressures have eased. Whatever it is
13:17
Speaker 9: not reflected, though, is in the President's approval in consistent
13:21
Speaker 9: pulling we are seeing. It's not really a question of
13:23
Speaker 9: whether there is a disconnect, because clearly there is one.
13:25
Speaker 9: But how do you advise the president as an economic advisor,
13:29
Speaker 9: how to address it? What does he need to do?
13:32
Speaker 8: Yeah, so when I talked to the President, he has
13:35
Speaker 8: focused on one thing. He always wants to know what
13:38
Speaker 8: does the strong data, the strong economy mean for American workers,
13:43
Speaker 8: What does it mean for their wages, their wallets. We've
13:45
Speaker 8: already noted that American consumers are now seeing declines in
13:50
Speaker 8: prices over the year on things that really matter to
13:54
Speaker 8: them a gallon of gas, a gallon of milk, toys
13:57
Speaker 8: for the holiday season, appliances and you know for the holidays,
14:01
Speaker 8: car rentals and airfaress are all down over the year.
14:04
Speaker 8: Wealth is up thirty seven percent since before the pandemic.
14:08
Speaker 8: Home ownership is up, Housing wealth is up, retirement accounts,
14:13
Speaker 8: as you know, is up. And today we saw a
14:16
Speaker 8: consumer sentiment jumping and that's the biggest jump we have
14:22
Speaker 8: seen in years, which suggests that Americans may finally beginning
14:27
Speaker 8: to feel a little bit more confident, a little bit
14:29
Speaker 8: more secure. But the President is going to continue to
14:33
Speaker 8: push us to work to lower costs for American families
14:38
Speaker 8: and to keep these gains over the course of the
14:42
Speaker 8: next year and years.
14:46
Speaker 7: Do you think these gains and inflation should be taken
14:48
Speaker 7: for granted? Dr Brain not. The financial markets are pricing
14:51
Speaker 7: in six rate cuts for next year. Do you think
14:55
Speaker 7: this is an economy that needs that level of easing.
15:00
Speaker 8: Look, this is a president who respects the independence of
15:02
Speaker 8: the Federal Reserve, so I won't comment on Federal reserve
15:06
Speaker 8: policy making. What I can say is that the conditions
15:11
Speaker 8: are very favorable in the sense that inflation has come
15:15
Speaker 8: down to two percent on a six month basis, much
15:19
Speaker 8: earlier than people predicted at a time where the labor
15:23
Speaker 8: market is in much better balance. And why it's because
15:27
Speaker 8: supply chains have healed, and workers are coming back into
15:31
Speaker 8: the labor force at much larger numbers three point three
15:35
Speaker 8: million over the last year alone. So that work on
15:39
Speaker 8: supply chains that the President has really pushed forward since
15:42
Speaker 8: the first month of his presidency is showing up in
15:44
Speaker 8: those lower inflation prints, and the market does seem to
15:49
Speaker 8: be taking that to a more benign set of interest rates.
15:55
Speaker 8: I mean, you look at mortgage rates one and a
15:58
Speaker 8: half percentage point DCRE and mortgage rates just over the
16:01
Speaker 8: last few months.
16:02
Speaker 3: It's very welcome.
16:04
Speaker 9: So I understand the restraint around what you can say
16:07
Speaker 9: on the monetary policy side, but I wonder what all
16:10
Speaker 9: of this means on the fiscal policy side of the
16:12
Speaker 9: equation as well, Knowing when Congress returns in January, there
16:15
Speaker 9: is going to be a massive spending fight that has
16:18
Speaker 9: to take place in terms of the budget. Are we
16:20
Speaker 9: looking at a US economy right now that is able
16:22
Speaker 9: to withstand greater fiscal restraint.
16:26
Speaker 8: Well, this economy has proven to be remarkably resilient, defying
16:32
Speaker 8: all the predictions, and looks to close out this year
16:35
Speaker 8: certainly on a much stronger level of growth than had
16:39
Speaker 8: been anticipated in terms of the fiscal trajectory. President Biden
16:45
Speaker 8: really wants to see the agreement that he put in
16:50
Speaker 8: place that would cut an additional one trillion in spending,
16:55
Speaker 8: a bipartisan budget deal the Fiscal Responsibility Act to and
17:00
Speaker 8: put into place. Congress needs to move forward and do
17:05
Speaker 8: its job, And of course he's already seen a one
17:08
Speaker 8: trillion reduction in depths, it's just in the time since
17:11
Speaker 8: he's been in office. So we'll continue to work with
17:14
Speaker 8: Congress on a bipartisan basis. The President is really very
17:17
Speaker 8: focused on being fiscally sustainable.
17:23
Speaker 7: Does big physically sustainable mean as well that we need
17:27
Speaker 7: lower interest rates. There's a growing discussion about the interest
17:31
Speaker 7: bill that the American economy now carries. That the federal
17:35
Speaker 7: government now carries. Significantly lower interest rates obviously would make
17:39
Speaker 7: that challenge much much easier to handle. Do you think
17:43
Speaker 7: there is a case of fiscal dominance beginning to emerge
17:47
Speaker 7: in the United States that the economy is not capable
17:50
Speaker 7: of sustaining itself unless it has lower interest rates given
17:54
Speaker 7: the interest bill that has now been built up.
17:58
Speaker 8: Well, I would come at it from the reverse direction
18:01
Speaker 8: and simply say that the benign data that we are
18:05
Speaker 8: seeing that suggests that inflation really is sustainably coming down
18:10
Speaker 8: on the back of these great improvements and supply chains.
18:15
Speaker 8: With the inflation on a six month basis now at
18:19
Speaker 8: the two percent pre pandemic benchmark, that's a benign outlook
18:24
Speaker 8: that will be much better for our fiscal outlook all
18:30
Speaker 8: around in terms of growth, revenues and the longer run
18:36
Speaker 8: physcal sustainability. So this is a benign outlook, and yes,
18:41
Speaker 8: it's very positive I think for the fiscal trajectory, but
18:45
Speaker 8: there's more work to do there.
18:48
Speaker 9: I'd like to switch topics if we can, to something
18:52
Speaker 9: else that you've addressed this week, which is the proposed
18:54
Speaker 9: takeover of a Japanese steel company, Nipon Steel and US Steel.
18:58
Speaker 9: You have written in response to this at the purchase
19:01
Speaker 9: of an iconic American owned company by a foreign entity,
19:03
Speaker 9: even one from a closed ally, deserves serious scrutiny. Why
19:08
Speaker 9: does a US ally as close as Japan deserve the scrutiny.
19:14
Speaker 8: Well, I think it is longstanding position of the US
19:19
Speaker 8: government and longley held, long held view of President Biden
19:25
Speaker 8: that steel is a very vital sector for US national
19:30
Speaker 8: security and for critical supply chain resilience. And we've seen
19:36
Speaker 8: that in past policies that have been undertaken by this president.
19:41
Speaker 8: So it is important to review or to make sure
19:48
Speaker 8: that there is serious scrutiny of these kinds of transactions
19:54
Speaker 8: from the perspective of national security and supply chain resilience.
19:59
Speaker 8: While we continue, of course to welcome investment from abroad
20:05
Speaker 8: and have seen record foreign direct investment in the US economy.
20:11
Speaker 7: Doctor Brandon, have you spoken to has the administration spoken
20:14
Speaker 7: to the United steel Workers on this issue? Have you
20:18
Speaker 7: got any feedback from them? And is that feedback influencing
20:21
Speaker 7: in any way you're thinking.
20:23
Speaker 8: Well, I will say that the steel workers are a
20:28
Speaker 8: vital part of our steel strength here in the US.
20:35
Speaker 8: They are partners with industry, and they are at the
20:41
Speaker 8: center of President Biden's vision for growing the economy from
20:46
Speaker 8: the middle out and the bottom up. So it is
20:50
Speaker 8: important to continue to see strong, good union jobs continuing
20:57
Speaker 8: to sustain our steel industry, which is US manufacturing, vital
21:02
Speaker 8: to our supply chains, vital to our national security.
21:06
Speaker 7: We really appreciate your time today, have a very happy holiday.
21:10
Speaker 7: We end on a good note with that data.
21:12
Speaker 6: LEL.
21:12
Speaker 7: Brighter, Director of the National Economic Council, and of course
21:16
Speaker 7: I thanks to bloombergs Kdie Lines.
21:18
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21:37
Speaker 2: Lots of economic data today, personal income PC, deflator on
21:41
Speaker 2: the inflation front, durable goods, you know you mish coming
21:47
Speaker 2: in a little bit better than expected. They don't just
21:48
Speaker 2: have a good football team, they have good economists over
21:50
Speaker 2: there at the University of Michigan. So some pretty solid
21:53
Speaker 2: data coming across. Let's check in with Stuart Paul, another
21:56
Speaker 2: good economists, another good economist, Bloomberg Economics. Now he usually
21:59
Speaker 2: joins us in studio, but he's joining us via zoom
22:02
Speaker 2: here today. So I'm going to go out on a
22:04
Speaker 2: limb and say he might be at Windham Mountain. Now,
22:08
Speaker 2: he's got this kind of cheesy background on a zoom,
22:10
Speaker 2: which I'm not buying whatsoever, because I think we really
22:13
Speaker 2: had the real background. It would be like the slopes
22:16
Speaker 2: of Windom Mountain, Stuart, I gotta ask you, where are you, dude.
22:20
Speaker 10: I'm in Wyndom. Yeah, he got a light dusting of snow,
22:24
Speaker 10: and as soon as I hang up with you guys,
22:25
Speaker 10: I'm going out for a hike. All the data is out.
22:28
Speaker 5: The data was a gift to Jay Powell.
22:30
Speaker 10: I'm taking it personally as a gift for the holidays,
22:33
Speaker 10: and after this I'm done.
22:34
Speaker 2: And just full disclosure on behalf of Stuart. He is
22:37
Speaker 2: an all mountain ski patroller at Windham Mountain Resort. He's
22:40
Speaker 2: been doing that for many years. So that's good stuff there.
22:43
Speaker 2: So Stuart, what did you take away from again, a
22:45
Speaker 2: lot of this data this morning? It seems, I guess,
22:49
Speaker 2: give a little bit more leeway for the FED to
22:51
Speaker 2: be a little dovershare. Maybe it does.
22:54
Speaker 10: It does, But the real question that we need to
22:56
Speaker 10: be thinking about the background is just why does the
22:59
Speaker 10: data look as good as it does. So we saw
23:01
Speaker 10: headline PC inflation actually deflation during the month of November
23:07
Speaker 10: because energy price is globally declined, so we got ten
23:09
Speaker 10: basis points of deflation for the headline. Core PC inflation
23:14
Speaker 10: slowed to just ten bases points, allowing the six month
23:18
Speaker 10: annualized pace of core inflation to decline to one point
23:22
Speaker 10: nine percent. So if the FED is thinking about what
23:24
Speaker 10: trend core inflation looks like, they're thinking, oh, wow, it's
23:29
Speaker 10: actually at our target. But in the background, we have
23:34
Speaker 10: a lot of core goods deflation during the month. And
23:39
Speaker 10: if you think, as we do, that destocking of inventories
23:44
Speaker 10: will allow firms, particularly goods producers and retailers, to avoid
23:49
Speaker 10: price cuts in the future, then that drag that we're
23:52
Speaker 10: getting from core goods would be set to reverse, at
23:55
Speaker 10: which point we would have about three percent annualized core inflation.
24:00
Speaker 10: So if that inventory d stocking takes place, it's not
24:04
Speaker 10: really the case that the FED can declare mission accomplished
24:08
Speaker 10: on inflation quite yet.
24:10
Speaker 4: So then if they if we see that, does that
24:15
Speaker 4: threaten the three cuts next year that we outlook that
24:19
Speaker 4: we heard from the Fed? Or does it simply threaten
24:22
Speaker 4: the potential timeline?
24:25
Speaker 10: As far as I'm concerned, it does not threaten the
24:27
Speaker 10: Fed's forecast of three of three cuts. What it does
24:32
Speaker 10: threaten is the market pricing that's showing, you know, nearly
24:35
Speaker 10: double that. So that's what's going on in the inflation front.
24:41
Speaker 10: If the fundamentals that that we think are going on
24:44
Speaker 10: in the background in addition to inflation. If we think
24:47
Speaker 10: that the labor market, for example, starts loosening more materially,
24:51
Speaker 10: which we expect, but let's face it, others out there don't.
24:55
Speaker 10: If that starts taking place, then we expect the Fed's
24:58
Speaker 10: going to revise its inflation forecast show actually more cuts
25:01
Speaker 10: than it currently is showing, even if it means that
25:04
Speaker 10: inflation has yet to fully reach the target. It's just
25:07
Speaker 10: the case that the last mile of disinflation is difficult.
25:11
Speaker 2: So my personal Paul Swiney daily inflation gauge is gasoline
25:17
Speaker 2: three dollars and twelve cents a gallon. That's down just
25:19
Speaker 2: big time, just over the past a few months here,
25:22
Speaker 2: So talk to us about it. You mentioned before the
25:24
Speaker 2: impact on energy, and you got to adjust for that,
25:27
Speaker 2: don't you, And I guess when you do, maybe you're
25:30
Speaker 2: a little bit less sanguine about the inflation abating.
25:35
Speaker 10: Yeah, So declining energy prices does allow for declining headline inflation.
25:41
Speaker 10: More importantly, probably for the FED, is that declining energy
25:44
Speaker 10: prices matters a lot for consumers and their inflation expectations,
25:48
Speaker 10: and inflation expectations matter a lot for consumer behavior. So,
25:53
Speaker 10: for example, if folks think that prices are going to
25:55
Speaker 10: be much higher in the future, they go out and
25:57
Speaker 10: rush and buy goods and services today, and that act
26:00
Speaker 10: begets inflation in the future. Seeing declining gasoline prices helps
26:04
Speaker 10: consumers to slow their role a little bit, and it
26:09
Speaker 10: does allow for softening consumer inflation expectations, which we saw
26:13
Speaker 10: in umish today, particularly in year ahead inflation expectations, and
26:18
Speaker 10: it does allow them to sort of slow the pace
26:20
Speaker 10: of their spending, which we've seen there has been a
26:22
Speaker 10: little bit of a shift from consumer spending on goods
26:26
Speaker 10: for which they have any elastic demand to nerd out
26:29
Speaker 10: a little bit. But it allowed them to get a
26:32
Speaker 10: little bit of savings on gasoline that was directed actually
26:37
Speaker 10: a little bit more to holiday shopping we saw in
26:39
Speaker 10: the PCE report, But we don't think that that really
26:43
Speaker 10: has legs. If you look at credit card data through
26:46
Speaker 10: December rather than just the November piece report is sales
26:50
Speaker 10: are a little bit more tepid. Consumers are taking that
26:52
Speaker 10: gasoline savings and just kind of sitting on it a
26:55
Speaker 10: little bit in December, So we're not fully out of
26:58
Speaker 10: the woods in terms of an economic slowdown quite yet.
27:01
Speaker 4: This has been a political I guess issue that's come up.
27:05
Speaker 4: You know, Biden very unhappy according to reports that people
27:10
Speaker 4: aren't feeling the impact of his economic policies, people seemingly
27:15
Speaker 4: trusting the Republicans more on the economy than the current
27:20
Speaker 4: Democratic administration. Now, I'm not going to ask you to
27:22
Speaker 4: weigh on politics, but what kind of indicators do you
27:25
Speaker 4: need to see to think, Hey, well, consumers actually think
27:29
Speaker 4: that the economy is good. Now, how far are we
27:32
Speaker 4: from that point?
27:35
Speaker 10: So, at least in terms of election outcomes. And I'm
27:38
Speaker 10: not speaking as a political analyst, but strictly as a statistician,
27:42
Speaker 10: as an economist, it really matters where the economy is
27:45
Speaker 10: three to six months before the election. There's still a
27:48
Speaker 10: lot of the game to be played before then. There's
27:50
Speaker 10: still a lot of data that we're going to see
27:52
Speaker 10: before then. And if we start getting rate cuts in
27:56
Speaker 10: Q one, that could help to avoid the worst case
28:02
Speaker 10: economic scenarios, and that could be helpful for the administration
28:06
Speaker 10: in the twenty twenty four election cycle. But again, it
28:10
Speaker 10: depends why we're getting those rate cuts. Potentially in Q one,
28:13
Speaker 10: if we're getting those rate cuts, because we see the
28:16
Speaker 10: unemployment rate inching up, not just inching up, but gapping up,
28:21
Speaker 10: which tends to be the case once Salm's rule is triggered.
28:25
Speaker 10: If we see the unemployment rate gapping up, and that's
28:27
Speaker 10: why we get those rate cuts, it probably would not
28:30
Speaker 10: be enough to offset any sort of alleviation of of
28:37
Speaker 10: interest rate pressures in financing costs that consumers might find helpful.
28:42
Speaker 10: That softening the labor market would be more influential in
28:45
Speaker 10: determining election outcomes than say, the change in interest rates.
28:49
Speaker 2: So Stewart bottom line, Bloomberg Economics, what is your GDP
28:53
Speaker 2: call for twenty twenty four?
28:56
Speaker 10: Well, so for Q four specifically, we have an estimated
29:00
Speaker 10: one point one percent qver q annualized. Again, you know,
29:05
Speaker 10: that's better than we would have been anticipating. As we
29:07
Speaker 10: do more of the bottoms up work and as we
29:09
Speaker 10: get more of the data, things are looking a bit
29:13
Speaker 10: better than we would have expected, especially a year ago.
29:17
Speaker 10: But we're not quite out of the woods yet. We
29:19
Speaker 10: are still expecting a bit of a slowdown, and you know,
29:25
Speaker 10: we think that that's the reason why the Fed is
29:27
Speaker 10: going to have to start cutting rates in twenty twenty four.
29:30
Speaker 4: What's the black swan for you? Looking ahead? To next year.
29:36
Speaker 10: Look, I think that there's still a lot of risk
29:40
Speaker 10: around commercial real estate. I don't know if that's totally
29:43
Speaker 10: a black swan, because you know, it is what a
29:46
Speaker 10: lot of folks are keeping their eye on. But in
29:49
Speaker 10: terms of what could be a major shock to the system,
29:51
Speaker 10: I think that that's probably it. The ability of banks
29:54
Speaker 10: to work with their bar works so that they don't
29:57
Speaker 10: have to take back keys, The ability for banks to
29:59
Speaker 10: work with their regulators perhaps to allow those banks to
30:03
Speaker 10: lend to borrowers at below market rates, that those borrowers
30:07
Speaker 10: could then cash flow any sort of dead obligations that
30:10
Speaker 10: they have, which regulators frankly don't love. They don't love
30:16
Speaker 10: when banks are lending it below market rates. Those are
30:18
Speaker 10: the sort of those are the sort of financial conditions
30:22
Speaker 10: issues that are a bit orthogonal to most of the
30:27
Speaker 10: economic data that we think about day to day, and
30:30
Speaker 10: so it could catch some folks by surprise, just because
30:33
Speaker 10: it's sort of retreated to the back of everybody's minds.
30:37
Speaker 2: All right, Stuart, thanks so much for joining us. Really
30:39
Speaker 2: appreciate it.
30:39
Speaker 3: Now.
30:39
Speaker 2: It's been a busy morning for you with all the
30:41
Speaker 2: economic data hitting the tape. Here Stuart Paul. He's a
30:43
Speaker 2: US economist for Bloomberg Economics. Go hit the mountain and
30:47
Speaker 2: enjoy the day.
30:48
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30:52
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31:05
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31:08
Speaker 2: Everything seems to be going to the cloud, all types
31:10
Speaker 2: of applications. Why not space. Our next guest is he's
31:15
Speaker 2: there already. Peter Platzer, CEO and founder Spire Global, which
31:20
Speaker 2: is a New York Stock Exchange list of company spir
31:23
Speaker 2: Go based in Boulder, Colorado. As a parent of a
31:28
Speaker 2: you see graduate, I spent a lot of time in Boulder.
31:30
Speaker 2: Great town there, Peter, Thanks so much for joining us.
31:33
Speaker 2: Tell us what Spire Global does. What's your biz?
31:38
Speaker 11: One of bull excited to be here. Spire collects hearts
31:41
Speaker 11: to acquire data from space through satellites that helps humanity
31:45
Speaker 11: tackle some of our greatest challenges, often related to climate
31:49
Speaker 11: change and global security. And we do this with the
31:51
Speaker 11: world's largest multipurpose satellite fleete over one hundred space draft
31:56
Speaker 11: that covered the Earth every fifteen minutes, every spot on Earth.
32:00
Speaker 4: What is driving various different companies to want to have
32:04
Speaker 4: a satellite, like, what are the key trends behind this
32:07
Speaker 4: market at the moment, and who are you trying to
32:10
Speaker 4: sell your space as a service as it were modeled to.
32:15
Speaker 5: One hundred percent.
32:16
Speaker 11: So companies that want to help humanity, for example, tackle
32:20
Speaker 11: wildfires or measure greenhouse gases, those are companies that leverage
32:25
Speaker 11: our space as a service model, which you can think
32:28
Speaker 11: of is like Amazon Ews.
32:30
Speaker 5: But for space.
32:32
Speaker 11: So if you got a cool application, but you don't
32:34
Speaker 11: want to learn about quaternions and licensees and rockets and
32:38
Speaker 11: everything else that makes space complicated and very very hard
32:42
Speaker 11: to tackle, then you come to us and in a
32:46
Speaker 11: few weeks, a few months, maybe a year, you have
32:49
Speaker 11: your application running. So those are then companies that really
32:53
Speaker 11: have their own application or payload netfor example, can detect
32:57
Speaker 11: a tiny wildfire, or can see where greenhouse gases are omitted,
33:01
Speaker 11: or if you are someone who has long pipelines and
33:04
Speaker 11: you have like little senses that measure where something might
33:07
Speaker 11: go wrong, you know they do that you know, that's
33:09
Speaker 11: an Internet of Thing application.
33:11
Speaker 5: So all of those come to.
33:13
Speaker 11: Us because it's fast, it's easy, it's cost effective, and
33:16
Speaker 11: they're listening to, you know, maybe the report that McKinsey
33:19
Speaker 11: send out recently saying that if you don't have a
33:23
Speaker 11: space strategy today, you better get one.
33:26
Speaker 2: Interesting. So, Peter, does your company do you own the
33:29
Speaker 2: satellites or do you lease capacity on other satellites.
33:34
Speaker 5: No, they are all our.
33:35
Speaker 11: Own spacecraft, our own technology. So everything we do is
33:38
Speaker 11: invented by Spire. This is why it works so well
33:41
Speaker 11: and so reliably, and we can make those offers at
33:44
Speaker 11: a very very competitive economic price point for our customers
33:48
Speaker 11: and we get to scale very very efficiently because it
33:52
Speaker 11: is in house. So those are our own spacecraft, our
33:56
Speaker 11: own technology. It's also our own ground station network. It
34:00
Speaker 11: is our own operations system that manages this very very
34:03
Speaker 11: complex infrastructure.
34:05
Speaker 4: And it's not like a single satellite for a single company.
34:09
Speaker 4: Necessarily you've got a lot of satellites. You can run
34:12
Speaker 4: a lot of different operations and use that network to
34:17
Speaker 4: back companies. Am I right in thinking that.
34:21
Speaker 11: You are one hundred percent spot on? Quite the opposite,
34:23
Speaker 11: So our space off on multi purpose so they serve
34:28
Speaker 11: not just a particular customer, but they serve many, many
34:32
Speaker 11: customers across many many industries because one of the power
34:35
Speaker 11: of that infrastructure is is that you collect the data
34:38
Speaker 11: sitt once and then you sell it an almost unlimited
34:41
Speaker 11: amount of time, serving a large number of use cases.
34:45
Speaker 11: We had a very very well known partner assess how
34:49
Speaker 11: many major use cases they could find, and after one
34:52
Speaker 11: hundred and seventy five they said, Peter, we're going to
34:54
Speaker 11: stop counting here.
34:55
Speaker 5: There is a massive amount of use cases. But for
34:58
Speaker 5: us to serve. In addition, on the.
35:00
Speaker 11: Use case, it's not a new spacecraft, it's not a
35:03
Speaker 11: new satellite. It's not more spacecraft, more satellites. It is
35:06
Speaker 11: the same data that is already collected, just packaged in
35:09
Speaker 11: a different way to serve another use case for a
35:12
Speaker 11: different type of customer.
35:14
Speaker 2: So, Peter, who's the typical customer of spire, Like getting
35:19
Speaker 2: a sense of kind of the use cases here?
35:22
Speaker 11: Yeah, So about fifty percent of our business is commercial
35:26
Speaker 11: and about fifty percent of our businesses government.
35:28
Speaker 5: So if you are a company that.
35:31
Speaker 11: For example, is in charge of logistics, well, one of
35:34
Speaker 11: the big things you need to know is, like where
35:36
Speaker 11: is all this stuff, which means you needn't know where
35:38
Speaker 11: are all the ships and where are all the planes? Well,
35:40
Speaker 11: you know, Aspires a company that can help you with that.
35:43
Speaker 11: If you are in the energy business, you know it's
35:46
Speaker 11: a particularly renewable energy, but also you know electricity, you
35:49
Speaker 11: need to understand what is the weather going to be
35:52
Speaker 11: On one hand, to understand demand for electricity, but on
35:56
Speaker 11: the other hand, you also want to understand, okay, what's
35:58
Speaker 11: kind of like the risk of something going wrong because
36:01
Speaker 11: of high winds or because a fire breaking out from lightning.
36:05
Speaker 5: Well, then you come to Spire.
36:07
Speaker 11: If you are a maritime insurance company that wants to know, well,
36:11
Speaker 11: where are all the assets that you ensure.
36:13
Speaker 5: Well, you come to Inspire.
36:15
Speaker 11: If you're a commodity trader that really tries to get
36:17
Speaker 11: a handle of supply and demand for many commodities, in
36:21
Speaker 11: particular oil and gas, but also others, then you come
36:24
Speaker 11: to Spire.
36:25
Speaker 5: If you're an.
36:26
Speaker 11: Airline that needs to run better and smoother operations, or
36:28
Speaker 11: an airport that wants to improve his throughput and have
36:31
Speaker 11: a really really smooth and efficient ground operation, then you
36:35
Speaker 11: come to Spire.
36:36
Speaker 5: I could keep on.
36:37
Speaker 11: Going probably for a couple of hours some use cases,
36:40
Speaker 11: but maybe you get a sense now.
36:42
Speaker 4: I do, Peter, I think anything any business that sends
36:48
Speaker 4: ships or rockets or airplanes into the air is extremely
36:52
Speaker 4: capital intensive. I know you guys have been on a
36:55
Speaker 4: mission to get cash flow positive by year end. That's
36:59
Speaker 4: according to a final last month. A is that still
37:03
Speaker 4: in the cards? And B I guess how do you
37:07
Speaker 4: how do you deal with the extraordinary capital intensity of
37:12
Speaker 4: running a business like this?
37:14
Speaker 11: So the first thing is that you stop making a
37:17
Speaker 11: capital expensive and you make a capital efficient. So for Aspire,
37:22
Speaker 11: as we have published to build all of our infrastructure
37:25
Speaker 11: and maintain it and run it in the space and
37:28
Speaker 11: underground is just a fixed amound there somewhere between seven
37:31
Speaker 11: and nine million dollars a year. So it's a very
37:34
Speaker 11: manageable small amount that supports it CAUs an unlimited amount
37:38
Speaker 11: of revenue because we keep on collecting this data and
37:40
Speaker 11: then sell it aquosity unlimited amount of time. And the
37:43
Speaker 11: reason why Spire is able to do this because we
37:47
Speaker 11: are a fully vertically integrated company.
37:50
Speaker 5: It is our ip our technology.
37:52
Speaker 11: We build it ourselves in our facilities and that has
37:57
Speaker 11: allowed us to take the capital intense out of an
38:01
Speaker 11: operation like space and make it very very capital lines,
38:04
Speaker 11: very very capital efficient, just the same way as you
38:07
Speaker 11: would look at how the subscription businesses that collect a
38:10
Speaker 11: very very valuable data source and then monetize it. For us,
38:14
Speaker 11: it's a small amount of money on an annual basis
38:17
Speaker 11: that is fixed, supporting.
38:19
Speaker 5: A very large revenue.
38:20
Speaker 2: Peter, thanks so much for joining us. Peter Platzer, CEO
38:22
Speaker 2: and founder of Spire Global. Spir is the ticker.
38:27
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38:31
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38:34
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38:42
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38:44
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