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KPMG's Hunter: Weak Corporate Investment Held Back GDP (Audio) · Bloomberg Intelligence

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  Speaker 1: be speaking with Constance Hunter, chief economist at KPMG. Right now,
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  Speaker 1: and recapping down industrial leverages up twenty three points, trading
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  Speaker 1: business flash. You're listening to Taking Stock with Kathleen Hayes
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  Speaker 1: and Pimpbox on Bloomberg Radio. Speaking at a panel discussion
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  Speaker 1: at the Ratcliffe Institute for Advanced Study at Harvard University,
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  Speaker 1: fed A Reserve Chair town At Yelling said that a
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  Speaker 1: rate increase would be a p opriate probably in the
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  Speaker 1: coming months, if the economy and labor market continue to strengthen.
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  Speaker 1: Let's find out more and get her thoughts on Chair
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  Speaker 1: Yellen's conversation. Want to introduce Constance Hunter, Chief Economist KPMG.
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  Speaker 1: You can follow Constance Hunter on Twitter at Constance Hunter. Alright,
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  Speaker 1: Constance Hunter, what do you make of Chair Yellen's conversation
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  Speaker 1: and comments about the appropriate increase in interest rates probably
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  Speaker 1: in the coming months. Yeah, Hi, pam Um Kathleen. He's
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  Speaker 1: just just tweeted and asked me if I thought her
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  Speaker 1: comments were hawkish, dovish, wonkish or impish, and uh, I'm
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  Speaker 1: gonna go with dovish, because if she were hawkish, she
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  Speaker 1: would be saying things like it's appropriate for the SAID
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  Speaker 1: to raise now because it takes time for monetary policy
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  Speaker 1: to work through the system. She'd be legitimizing a rate
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  Speaker 1: hike um in in more concrete and um assertive lane
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  Speaker 1: which and she's definitely in a wait and see mode.
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  Speaker 1: But let me prepare you that there's a very good
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  Speaker 1: chance we will raise, right, So she doesn't want to
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  Speaker 1: be the markets to be surprised if the Said does
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  Speaker 1: raise in June or July, and I think they probably will.
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  Speaker 1: The thing that could hold them back is what's going
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  Speaker 1: on in the UK with the vote for England to
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  Speaker 1: remain or leave the European Union. Because should that vote
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  Speaker 1: go for UH route leaving the European Union, and it
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  Speaker 1: happens just the day after the meeting, um, so they,
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  Speaker 1: depending on how the polling is, they may wait to
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  Speaker 1: find out that result because it would cause havoc in
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  Speaker 1: the market to New yor term. So let's take a look.
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  Speaker 1: And I'm happy hear you say that, because we're kind
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  Speaker 1: of joking the top of the show. I would have
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  Speaker 1: lost money if I was a trader this afternoon because
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  Speaker 1: I was listening to her, going gosh, she doesn't sound
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  Speaker 1: talkished to me. She almost sounds stublish. So I'm happy
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  Speaker 1: that you are an expert FED watcher, and that's how
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  Speaker 1: you're taking it on it too. But there are people
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  Speaker 1: who think that she was on the hawker side GDP
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  Speaker 1: though zero. The talk is to the she talk is
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  Speaker 1: compared to expectations, right, there's an expectation was that the
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  Speaker 1: FED was on you know, hold for the whole year.
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  Speaker 1: She's not hawk ish, but she's dove is compared to
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  Speaker 1: four rate hikes as of September. She's dove is compared
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  Speaker 1: to some of the other members of the f O
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  Speaker 1: M c UM. But I don't think that means if
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  Speaker 1: she raises in June July, there's a big good chance
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  Speaker 1: they only have one rate hike this year. So the
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  Speaker 1: GDP number, what do you have to say about that?
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  Speaker 1: We know she's concerned about low productivity. She mentioned how
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  Speaker 1: output has been unusually low in this recovery. But what
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  Speaker 1: do you see constance as you pull apart all these
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  Speaker 1: signals in that report and others. How how much are
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  Speaker 1: you going to pick up in the second and third
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  Speaker 1: quarters in the FED chair watching that? Yeah? Absolutely, so,
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  Speaker 1: so let me go through. There's there's the there's this
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  Speaker 1: sort of not such great components of GDP which is
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  Speaker 1: exactly what you mentioned, and and that stems from corporate
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  Speaker 1: investment which has been really weak. And if we looked through,
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  Speaker 1: you know, there's a bunch of different components of corporate investment,
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  Speaker 1: so UM, there's investment in structures equipment UM, and and
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  Speaker 1: that is where we see real weakness from the fall
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  Speaker 1: in the in the oil price and the fall and
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  Speaker 1: investment in the oil and gas sector. But there's another
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  Speaker 1: section so that could be viewed as temporary, and it
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  Speaker 1: certainly had a big drag on GDP UM in almost
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  Speaker 1: seventy four bases points. So we had that not fallen
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  Speaker 1: as much we were to see much younger growth last year.
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  Speaker 1: But there's another component that is intellectual property products, so
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  Speaker 1: software research and development UM, entertainment, literary and artistic UH
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  Speaker 1: investment and those first two software research and development have
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  Speaker 1: not been as strong as we would like to see,
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  Speaker 1: and those are the things that help determine future productivity growth.
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  Speaker 1: So she has reason to be concerned there. How some
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  Speaker 1: wage increases, if there are any tell us about that
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  Speaker 1: and how that figures into your thinking. So well, when
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  Speaker 1: we think about um reaches and the relationship between inflation
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  Speaker 1: and the relationship between growth, which is what the FED
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  Speaker 1: is looking at, we need to look not just at
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  Speaker 1: wrage wrage growth, but we need to add waste growth
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  Speaker 1: to jobs growth to get total income games because that
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  Speaker 1: is where the pressure comes through the economy and impacts inflation.
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  Speaker 1: So when we look at those two things together, we
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  Speaker 1: get about a four and a half percent increase year
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  Speaker 1: over year, and that's what we were getting last year.
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  Speaker 1: We're looking to continue to get that this year, and
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  Speaker 1: that is enough, UH in my view, to support some
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  Speaker 1: pressure on prices. Now, the most reclent PC gator released
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  Speaker 1: this morning doesn't necessarily support that, and that's because goods
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  Speaker 1: costs have gone way down in the last quarter UM.
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  Speaker 1: But when you look at at the consumptument is happening,
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  Speaker 1: we're seeing households in the last two quarters really shift
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  Speaker 1: a lot of their consumption to services and that pressure
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  Speaker 1: on services prices. We are services economy is I think
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  Speaker 1: what's going to push the FED over the edge to
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  Speaker 1: raving to raving rates sooner and that is the summer
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  Speaker 1: juno July for the hike. Is that the only one
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  Speaker 1: this year or will it be more September. I think
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  Speaker 1: it's pretty likely that's the only one this year. One
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  Speaker 1: of the things that Yellen has said consistently is if
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  Speaker 1: we go sooner, we can go slower. If we wait
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  Speaker 1: too long, we're going to have to go faster. And
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  Speaker 1: I think, all things being equal, for preferences to go
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  Speaker 1: sooner and slower, slower and sooner. Well, thanks very much,
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  Speaker 1: Constance Hunter, Chief Economist, KPMG. Again, pm I feel a
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  Speaker 1: little bit vindicated that I was not the only person
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  Speaker 1: listen to Janet yelling. You thought, gee, she didn't Sunhawk.
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  Speaker 1: I think maybe she sounded bevish. Well, but we are.
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  Speaker 1: We're gonna put this another very Another person who watches
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  Speaker 1: all of this very closely will probably ask us about
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  Speaker 1: every guest on this show today what they made a
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  Speaker 1: Janet Yellen? And if you want to tweet to at
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