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Conference Board's Goldstein on the June LEI Index (Audio) · Bloomberg Intelligence

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  Speaker 1: I'm Charlie Palot. Stocks continue to move lower, worst level
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  Speaker 1: index down eleven to sixty one to drop there of
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  Speaker 1: five tenths of one percent. Nasdaq is down twenty two
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  Speaker 1: one nine percent, down eighty six cents forty four eighty
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  Speaker 1: nine for a barrel of West Texas Intermediate crude. I'm
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  Speaker 1: Charlie Palot, and that's a Bloomberg business fly. This is
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  Speaker 1: taking stock with Pim Fox and Kathleen Hayes on Bloomberg Radio.
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  Speaker 1: A basket of leading economic indicators rose in June, as
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  Speaker 1: jobless claims fell and home builders signaled that they would
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  Speaker 1: break more ground. That's the latest report to show the U.
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  Speaker 1: S economy is starting the second half of the year
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  Speaker 1: on more solid footing. Here to tell us more, Ken Goldstein,
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  Speaker 1: he is the economist at the conference board. Can always
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  Speaker 1: a pleasure. Thanks for coming in. Give us the broad
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  Speaker 1: picture right now on the conference boards June Leading Economic
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  Speaker 1: Index report. I keep telling you we start with the
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  Speaker 1: coincident because that tells us where we are right now
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  Speaker 1: in terms of production, terms of jobs, terms of incomes.
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  Speaker 1: We've actually moved up a little bit in the last
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  Speaker 1: month or so. And in terms of leading indicators, not
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  Speaker 1: just the latest month, but even the six month change
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  Speaker 1: is telling us either we stay on the course that
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  Speaker 1: we're on, or if anything, actually pick up a little
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  Speaker 1: bit of momentum, especially out of the housing market. So
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  Speaker 1: a three tenths of a percent increased last month that
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  Speaker 1: reverses May's two tents of a present decline. That was
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  Speaker 1: better than economists had estimated. Yeah, I mean, if you've
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  Speaker 1: average the two months, basically they haven't done much. But
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  Speaker 1: here's the thing. One of the things that we're seeing
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  Speaker 1: right now, and you saw this in the CBI just
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  Speaker 1: last week, is that the only thing that's moving in
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  Speaker 1: the CPI are rents and home mono costs because vacancy
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  Speaker 1: rates for apartments are so low, and because demand for
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  Speaker 1: homes is being you know, is exceeding the supply. So
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  Speaker 1: these builders are out there trying to build new apartment buildings,
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  Speaker 1: new homes as fast as they can, and that's giving
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  Speaker 1: this economy a little bit of a spark. Well, earlier today,
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  Speaker 1: the Chicago Federal Reserve said that national economic activity rose
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  Speaker 1: in June at the best pace since the beginning of
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  Speaker 1: the year, mainly because of improvement around the domestic manufacturing sector.
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  Speaker 1: What do you make of that, Well, you know, part
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  Speaker 1: of it may very well be catch up. But here's
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  Speaker 1: what I find really interesting. This is not just the
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  Speaker 1: US phenomenon. Brazil, um Uh, South Korea, you know, are
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  Speaker 1: even Mexico are going through the same kind of thing.
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  Speaker 1: So maybe there's a little bit of a momentum not
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  Speaker 1: just to the domestic economy, but to the global economy
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  Speaker 1: that will feed back to the domestic economy. Jovass claims
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  Speaker 1: that came in today. People were not necessarily surprised, but
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  Speaker 1: they were certainly feeling much more optimistic about the economy
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  Speaker 1: after the initial Topics Claims report. You know, so, one
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  Speaker 1: of the things that we saw in the first half
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  Speaker 1: of the year is a drop down from two hundred
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  Speaker 1: jobs a month to about a hundred fifty thousand. But
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  Speaker 1: it's not a steady decline. It's like we moved from
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  Speaker 1: a step to a step as opposed to a decline.
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  Speaker 1: And if the labor market remains so strong and the
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  Speaker 1: housing markets picking up momentum, that's going to feed consumer confidence.
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  Speaker 1: That's going to feed consumers spending, and you're gonna see
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  Speaker 1: some of that in the reports about back to school
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  Speaker 1: sales this very summer. As as we speak, I'm wondering
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  Speaker 1: if you could just tell us a little bit about
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  Speaker 1: the index and how it was composed and what it
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  Speaker 1: tells you, not necessarily about the future, but how it
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  Speaker 1: describes the present for people. In other words, the components
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  Speaker 1: are not all the same. Some of the measure stock prices.
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  Speaker 1: This is this is a great question because the whole
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  Speaker 1: point I mean, imagine you're at a doctor's office and
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  Speaker 1: the doctor wants to check. So he doesn't just put
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  Speaker 1: one probe, he puts them all over. Will we put
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  Speaker 1: one in the housing market, the labor market, the industrial market,
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  Speaker 1: and so we get a sense about what's going on
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  Speaker 1: because not all pieces of the economy moving at the
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  Speaker 1: same pace at the same time. What this is telling
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  Speaker 1: us is that there's enough momentum in enough sector so
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  Speaker 1: that overall there's not a lot, but there's a little
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  Speaker 1: bit of momentum to the U. S economy. And as
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  Speaker 1: they just suggested, in at least some parts of the
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  Speaker 1: global economy, we're seeing the same thing. Today's existing home
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  Speaker 1: sales report. Home sales are at a pace that we
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  Speaker 1: have not seen in nine years. This is pent up
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  Speaker 1: to man. These are all these folks, especially the young
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  Speaker 1: folks who took so long to get you know, a
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  Speaker 1: down payment together because you can't get a surprime mortgage anymore,
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  Speaker 1: as well as the banks allowing you know, approving of
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  Speaker 1: mortgage mortgages. So that's feeding this demand not only for
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  Speaker 1: apartments but also for new homes. And you know, it's
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  Speaker 1: gonna take a while to really scratch that itch. I
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  Speaker 1: was looking at. For example, the rate on thirty year
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  Speaker 1: mortgages right thirty your paper, someone is taking the other
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  Speaker 1: side of that trade. I mean three three and a
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  Speaker 1: quarter percent. You see that people are going to do
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  Speaker 1: a lot of refinancing. I mean, now that the rates
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  Speaker 1: have come down just a little bit, that would put
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  Speaker 1: more money in their pockets on a monthly basis, they'll
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  Speaker 1: do some. But here's you know, the fact that that
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  Speaker 1: will slow that down at least a little bit is
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  Speaker 1: banks don't really make that much money on that, so yes,
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  Speaker 1: there will be some question is how much? But that
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  Speaker 1: only feeds this overall momentum in terms of the housing market,
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  Speaker 1: which along as I'm suggesting, with the labor market, is
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  Speaker 1: feeding the consumer market, which is the thing that's really
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  Speaker 1: been holding up the economy in the first half of
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  Speaker 1: the year. That's the thing we're banking for the second
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  Speaker 1: half of the year. I beg your pardon. Three point
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  Speaker 1: four five percent. That's the average for US thirty year
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  Speaker 1: mortgage rate. And that's actually slightly higher than it was
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  Speaker 1: last month. And the last time we saw the numbers
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  Speaker 1: that low might have been when Truman was president. Well well,
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  Speaker 1: and the fixed year UH fixed year, the fifteen year
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  Speaker 1: fixed rate mortgage two point seven five. It's amazing. Well if,
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  Speaker 1: of course, as that happens, so that the affordability of
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  Speaker 1: a new house, you know, pushing some of these folks
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  Speaker 1: who got pushed into the rental market, it's pushing them
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  Speaker 1: back into the home owner market. As far as those
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  Speaker 1: mortgage rates go, though, do you feel that they are
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  Speaker 1: readily accessible to the people that want to buy homes,
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  Speaker 1: you know, to some who want to buy homes, to
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  Speaker 1: those who have a down payment you know, and have
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  Speaker 1: the kind of income, uh, you know, to be able
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  Speaker 1: to sustain that. So what we will absolutely not do
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  Speaker 1: is go back to a period of time that we
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  Speaker 1: have befood the debacle when you had people who were
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  Speaker 1: paying half of their income to make a teaser rig.
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  Speaker 1: Those days are long gone and they're not coming back.
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  Speaker 1: What about the people who are on the other side
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  Speaker 1: of the trade taking thirty year paper for three three
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  Speaker 1: and a half pers This is a whole other question
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  Speaker 1: about how low interest rates are and that they're not
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  Speaker 1: fully priced in risk, and what's going to be the
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  Speaker 1: penalty for that, and when is that going to start
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  Speaker 1: to hit? Not now, but that's the day that's coming. Well,
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  Speaker 1: we look forward to having you on that as always
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  Speaker 1: Ken Goldstein. He is economist with the Conference Board and
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  Speaker 1: giving us details about the conference boards leading Economic Index
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  Speaker 1: up three tenths of our percent for the month of June.
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  Speaker 1: I'm Pim Fox and this is Bloomberg. Coming up on
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  Speaker 1: taking Stock. We're going to talk about a company who's
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  Speaker 1: closing a twenty two million dollar funding round and how
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  Speaker 1: they're trying to redefine companies such as ge, Microsoft, and
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  Speaker 1: Fiser to find talented workers. That's next