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Ken Goldstein on August LEI Index (Audio) · Bloomberg Intelligence

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  Speaker 1: You're listening to Taking Stock with Kathleen Hayes and Pim
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  Speaker 1: Fox on Bloomberg Radio. Where is the economy heading? Is
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  Speaker 1: it heading for an interest rate increase in December? Or
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  Speaker 1: is it going to have to wait and see. That's
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  Speaker 1: why we're so happy to welcome back Ken Goldstein. He's
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  Speaker 1: economists with the Conference Board to take a look at
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  Speaker 1: the Leading Economic Indicators Index put together by the Conference
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  Speaker 1: Board every month. It's been had a bit of a
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  Speaker 1: rocky road. It was up at zero point five last month,
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  Speaker 1: down zero point two. If you look out and sort
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  Speaker 1: of average where it's going. It continues to uh point
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  Speaker 1: towards growth. The question is how much? And the question
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  Speaker 1: big question there enough for the Fed? So can let's
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  Speaker 1: start with what we're seeing in the latest l EI
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  Speaker 1: for the month of August really, in a sense, no
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  Speaker 1: change from what we've been looking at all through the spring,
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  Speaker 1: all through the summer, and now into the fall. You've
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  Speaker 1: got a weak industrial sector, You've got some strength and
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  Speaker 1: services because of the consumer and housing that really hasn't change.
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  Speaker 1: So while the number fluctuates from one month to the next,
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  Speaker 1: there's no sign here either of acceleration of growth. But
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  Speaker 1: certainly no sign here of deceleration of growth anytime soon?
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  Speaker 1: Can twenty seven? I think you've been doing this for
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  Speaker 1: twenty seven years? Correct? No, no, no, I thought since nine,
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  Speaker 1: since seventy even oh even better, well done, even better? Okay,
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  Speaker 1: all right, So in that context, as an economist, are
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  Speaker 1: there new tools? Are there new ways of looking at
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  Speaker 1: the economy that would be just as relevant because you're
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  Speaker 1: not just an economist, you're also someone that understands and
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  Speaker 1: has his pulse on kind of what's happening in the
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  Speaker 1: in the world. You have to be to stay on
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  Speaker 1: top of things. What kinds of tools because you say,
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  Speaker 1: all right, you know it's flat, a little more of
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  Speaker 1: the same, bad, so on. But how can you add
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  Speaker 1: some nuance to all of that? This is a great
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  Speaker 1: question because again, if you split between the industrial corps
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  Speaker 1: and we have really good metrics of the industrial coo
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  Speaker 1: or and that's where you get the you know, the
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  Speaker 1: boom and busted the economy. Give us some examples of, like,
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  Speaker 1: you know, what kind of great measurements in those kinds
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  Speaker 1: of businesses. You look at industrial production, you look at orders,
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  Speaker 1: which is a leading indicator about where industrial productions going.
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  Speaker 1: As really been soft. Um, you look at at business confidence.
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  Speaker 1: Are they confident enough to say, okay, go ahead, let's
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  Speaker 1: green light that project. You know. So we're looking at
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  Speaker 1: capital investment, we're looking at industrial production, we're looking at orders,
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  Speaker 1: and all of it tells us not that it's falling apart,
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  Speaker 1: even though in the oil patch it's beginning to improve
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  Speaker 1: a little bit, but elsewhere there's really no change, not
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  Speaker 1: since the spring, maybe not since the winter. It's in
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  Speaker 1: the service sector that we keep saying, you know, we
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  Speaker 1: need new measures. We didn't have this back in seventy
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  Speaker 1: one or earlier. But the service sectors don't have that
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  Speaker 1: boom and bust. If you look at it regionally, you
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  Speaker 1: want to pick up what's going on in the Midwest,
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  Speaker 1: what's going on in the South. You don't want to
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  Speaker 1: look here at the Northeast quarter because it's a service
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  Speaker 1: economy and they just said you don't get the boom
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  Speaker 1: and busted it. So you want to look at sectors.
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  Speaker 1: You also want to look at regions, and all of
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  Speaker 1: that is telling us. You know, what we're getting here
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  Speaker 1: is relatively modest or moderate growth, whatever adjective you want
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  Speaker 1: to use. It's not soft, but it certainly isn't strong.
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  Speaker 1: And more important, there's no sign here of an acceleration separate.
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  Speaker 1: Separate from that is the difference between some of these
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  Speaker 1: measures and jobs. Jobs are very good, much better than
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  Speaker 1: some of the rest of it. And so there's a
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  Speaker 1: little bit of a puzzle here, which number do you follow,
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  Speaker 1: especially if you're the FED, look at jobs or look
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  Speaker 1: at some of the rest of this. In your view
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  Speaker 1: as somebody again who has watched the economy for many,
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  Speaker 1: many years, uh, is it your sense that whatever the
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  Speaker 1: economy needs to grow faster, whatever businesses need to actually
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  Speaker 1: start investing again, business investment has been so weak the past,
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  Speaker 1: not just in the US, that's a global store. Okay,
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  Speaker 1: So is this something that is receptive to fixable through
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  Speaker 1: can be affected by monetary policy? And so so then
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  Speaker 1: the the point so this is okay, no, why then
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  Speaker 1: tell me why? Because I think there's an assumption, certainly
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  Speaker 1: among central bankers that they can affect this by keeping
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  Speaker 1: stimulus paddle to the metal. You know, Look, what you
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  Speaker 1: need is demand. You need enough demand to push the
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  Speaker 1: product out. You need enough demand to get a price increase,
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  Speaker 1: so you generate the funds to generate that investment. So
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  Speaker 1: even though the Fed and Central banks have been very
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  Speaker 1: accommodative and remain so, and money is as cheap as possible,
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  Speaker 1: but you're not seeing the investment because they don't see
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  Speaker 1: the growth and they don't see the the the price
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  Speaker 1: increase to be able to justify our rate to return
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  Speaker 1: to that new investment. And again it's not new. It's
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  Speaker 1: not a U S story. You see that across the globe.
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  Speaker 1: In fact, in some sense we're in better shape than
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  Speaker 1: a lot of the rest of the world. I want
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  Speaker 1: you to expand on that idea if you can, because,
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  Speaker 1: as you noted, it is a changed economy and a
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  Speaker 1: changed world. And sometimes we are too attuned and can
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  Speaker 1: convince our els that certain things are true. What are
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  Speaker 1: some of the misconceptions out there that you are seeing
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  Speaker 1: and that you hear documented? But he raises a red
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  Speaker 1: flag with gold team in a conference Yeah, one of
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  Speaker 1: the things we have the conference board, have been preaching
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  Speaker 1: for forever and it's more true now than it ever was.
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  Speaker 1: You have to innovate or is the great economist Bob
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  Speaker 1: Dylan once said he was not busy being born as
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  Speaker 1: busy dying. Where's the innovation and where's the investment dollar
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  Speaker 1: backing up that innovation. But again, I mean, you know,
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  Speaker 1: if the demand isn't there, the price isn't there, where's
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  Speaker 1: the money, where's the way to return? That's the missing piece,
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  Speaker 1: and where's the confidence on the part of business to
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  Speaker 1: go ahead and bite the bullet and say, you know,
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  Speaker 1: let's try this, let's see where it goes. Let's economy.
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  Speaker 1: We're in a mature economy, um, And the question is
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  Speaker 1: are you know, are we at the late stage of
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  Speaker 1: maturity or the early stage? Well, the answers both. Can
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  Speaker 1: fiscal spending make the difference? Government of Okay, what kind
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  Speaker 1: of fiscals infrastructure and happy to help somebody innovate a
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  Speaker 1: new tech quality because that's where the infrastructure is. That
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  Speaker 1: that's where the railroads and the highways and the tunnels
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  Speaker 1: and the bridges for tech companies or services. But you
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  Speaker 1: do need a grid that can handle all of that,
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  Speaker 1: and we don't have that. You don't remember something we
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  Speaker 1: had that blackout back in what was it seventy five
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  Speaker 1: or something. They told us it would cost fifty billion
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  Speaker 1: dollars to fix it, so that would never happen again.
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  Speaker 1: We've never invested depending on that, Thank you, very much.
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  Speaker 1: Always a pleasure to have you with us. Ken Goldstein
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  Speaker 1: is economist for the Conference Board. Uh, well, we know
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  Speaker 1: it was down zero point two in the month of August.
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  Speaker 1: You're listening to taking Stock. I'm pim Fox, my co
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  Speaker 1: host Kathleen Hayes, and this is Bloomberg.