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TRANSCRIPT
Monday
April 4, 2016
www.bloombergbriefs.com
Boston, Minn. Fed Presidents; Factory Orders; LMCIBEN BARIS AND JAMES BATTY, BLOOMBERG BRIEF EDITORS
WHAT TO WATCH: Boston Fed President will speak on “A View on Eric RosengrenCybersecurity and Financial Stability from the CEO” at a cybersecurity conference in Boston at 9:30 a.m. Minneapolis Fed President holds a town hall Neel Kashkarimeeting on “Too Big to Fail" at 5:15 p.m. in Minneapolis.
ECONOMICS: The will release its business outlook survey compiled Bank of Canadafrom interviews with managers from about 100 Canadian firms, 9:15 a.m. Factory
are forecast to have fallen 1.7 percent in February, while the final print for orders for the month is expected to show a 2.8 percent decline, 10 a.m. durable goods orders
The Federal Reserve's March is released concurrently.Labor Market Conditions Index
GOVERNMENT: Republican presidential candidates and Donald Trump Ted Cruz both claimed victory after state party conventions in North Dakota and Tennessee over the weekend.
MARKETS: declined for a fifth day and Russia’s slid as Commodities ruble oil retreated while European equities erased earlier losses.
(All times local for New York.)
Click to view a live version of this chart on the Bloomberg terminal.here
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COMMENTARY IN THIS ISSUE
The absence of a rebound in the length of the workweek moderated the overall tone of the : payrolls report Bloomberg Intelligence Economists.
The calendar is fairly light in the datacoming week, with most of the focus on the February trade balance, non-manufacturing ISM and release of the March FOMC meeting minutes: Bloomberg Intelligence Economists.
Richard Curtin, Director of the University of Michigan Surveys of Consumers, spoke with about the Carl Riccadonnafinal print of March consumer .sentiment
Electricity in India — or lack thereof — explains the global — or lack recoverythereof — says .Narayana Kocherlakota
Cleveland Fed President Loretta Mester said she supported a decision to hold off from raising interest rates last month, while cautioning against waiting too long to resume tightening if the economic outlook stays on track. Read more on the Bloomberg terminal .here
TWEET OF THE DAY
LABOR MARKET CARL RICCADONNA, YELENA SHULYATYEVA & RICHARD YAMARONE, BLOOMBERG ECONOMISTS
Core Shipments Should Give Clue on GDP Component
February factory orders should fall due to the drop in durable goods orders already reported for the month. Weak external demand and a strong dollar continue to weigh on U.S. manufacturing, as was evident in the large number of layoffs in the manufacturing sector — 47,000 — over the past two months. Analysts will watch for any revisions in the pace of nondefense capital goods excluding aircraft shipments, also referred to as core shipments, because it is a proxy for the business investment in equipment component of GDP. The year started on a weak note as core durable goods shipments fell in both January and February, suggesting business investment will be a drag on economic growth again in the first quarter.
— Carl Riccadonna, Yelena Shulyatyeva and Richard Yamarone, Bloomberg Economists
April 4, 2016 Bloomberg Brief Economics 2
LABOR MARKET CARL RICCADONNA, YELENA SHULYATYEVA & RICHARD YAMARONE, BLOOMBERG ECONOMISTS
No Workweek Rebound Means U.S. Payroll Surprise Is HollowMarch payrolls’ greater-than-expected
gain bucked the trend of below-consensus readings in the month over the past several years. However, the absence of a rebound in the length of the workweek resulted in only a partial recovery in aggregate hours worked, moderating the overall tone of the report.
Hours worked correlate with both economic output and employment income, so the dismal performance this quarter is a reminder that any pickup in GDP growth from the fourth quarter’s tepid pace will be mild at best, and that household income growth will also remain constrained. The slow pace of overall growth is set to continue for the foreseeable future.
The increase in the unemployment rate is good news, as it reflected rising labor-force participation. This report does not change BI Economics’ assessment that the next Fed rate increase will occur at midyear — likely in June. Labor-market resilience will result in firmer employment income growth in the current quarter, which will in turn enable a more forceful pickup in consumer spending.
Non-farm payrolls increased by 215,000 in March, exceeding the consensus estimate of 205,000. This followed an upwardly revised 245,000 job increase in February. The first quarter averagestands at 209,000, below the 282,000 average for the final quarter of 2015. For all of last year, the average monthly increase was 229,000. While this pace has moderated somewhat, it remains impressive for an economy that is more than six-and-a-half years into expansion.
The joble rate increased to 5.0 percent, following two months at 4.9 percent. The increase occurred as entrants and re-entrants to the labor force (396,000) outnumbered hiring (246,000), so the ranks of the unemployed increased by 151,000 — The hiring numbers differ from the official payroll print because they come from a separate survey.
The Household Survey continues to show impressive hiring gains — 464,000 per month in the first quarter compared with 209,000 per month for non-farm payrolls. Because labor-forceparticipation climbed to 63.0 percent, the hiring did not drive the jobless rate lower.This validates
Read the full jobs report analysis with additional charts on the Bloomberg terminal . here
Yellen’s assessment that labor-market slack remains and that fence-sitters are being drawn back into the workforce. This trend is likely to continue as wage pressures increase later this year.
The broader U-6 unemployment rate moved in-line with the U-3 headline rate, rising to 9.8 percent from 9.7 in the previous month. However, the current reading stands below the level at the end of last year, suggesting continued progress in reducing labor-market slack.
Average hourly earnings increased 0.3 percent last month. Over the last 12 months, average hourly earnings advanced by 2.3 percent. The February pace was upwardly revised to 2.3 percent from an initially reported 2.2 percent increase. That is softer than the recent high of 2.6 percent registered during October and December, and little changed from the 2.1 percent average since July 2009. Wage inflation appears to be returning toward its benign 10-year average of 2.4 percent.
The unusually large decline in the workweek in February did not reverse in March. This was perhaps among the most disappointing elements of the current report. The workweek was unchanged at 34.4 hours — the lowest level since February 2014. As such, the 215,000 payroll increase was only sufficient to partially reverse the prior months’ decline
in total hours worked. Aggregate hours rose 0.2 percent in March following a 0.4 percent decline in February.
As a result, the quarterly annualized increase in aggregate hours was a paltry 1.8 percent, little changed from 1.7 percent in the fourth quarter. This is a troubling signal that any improvement in GDP growth in first quarter will be mild, following a real GDP gain of just 1.4 percent in the final quarter of last year. Two quarters of sub-2 percent growth will signal to policy makers that there is little urgency to further tighten monetary policy.
Household income growth appears to be regaining its footing in March following a stumble in February. The modest rebound in aggregate hours of 0.2 percent combined with a decent increase in average hourly earnings of 0.3 percent to lift aggregate income growth by 0.5 percent. The year-on-year growth rate rebounded to 4.2 percent, but this remains soft relative to the trend in the latter half of last year, when it oscillated in the 4.5-5.0 percent range.
Employment income growth is critical to the outlook for consumer spending, and therefore to the near- to medium-term prognosis for the broader economy. The March results are an encouraging reversal from February, but further gains will be necessary for the economy to return to 2 percent growth.
WEEK AHEAD CARL RICCADONNA, YELENA SHULYATYEVA AND RICHARD YAMARONE, BLOOMBERG ECONOMISTS
Consumer Income Trend Appears to Be Recovering Gradually
April 4, 2016 Bloomberg Brief Economics 3
WEEK AHEAD CARL RICCADONNA, YELENA SHULYATYEVA AND RICHARD YAMARONE, BLOOMBERG ECONOMISTS
Time to Probe Labor Data for Rate-Hike CluesThe data calendar is fairly light in the
coming week, with most of the focus on April 5-6, when the February trade balance, non-manufacturing ISM and minutes of the last FOMC meeting are released. A billing of the four most recent Fed chairs — Paul Volcker, Alan Greenspan, Ben Bernanke and Janet Yellen — on April 7 leads the docket of policy maker public remarks, even though it is unlikely to contain new insights on the trajectory of monetary policy.
The February international trade balance, released Tuesday, is likely to reflect continued weakness in both domestic and external demand. Even so, slightly firmer economic activity at home may nudge the trade gap modestly wider, given that it incrementally boosts imports. Nonetheless, the trend in both exports (minus 7 percent) and imports (minus 5 percent) were both well below year-ago levels in January.
The Bloomberg consensus forecast expects slight widening of the trade gap to minus $46.2 billion from minus $45.7 billion previously, consistent with the trend in the already-reported advance goods trade balance (minus $62.9 billion versus minus $62.4 billion prior). BI Economics is wary of an elevated risk for an outlier result due to Chinese New Year, which often distorts international trade figures in the corresponding month as much of Asia comes to a standstill for several days.
In recent months, the non-manufacturing ISM appears to have succumbed to weakness in the factory sector, and this service-sector gauge may have room to fall further in the near term given the slack economic conditions at the start of the year. As the following figure illustrates, the manufacturing and non-manufacturing ISMs are meaningfully correlated, which serves as evidence that the fates of the factory and service sectors are closely intertwined.
Despite the recent improvement in the manufacturing ISM, the services index is likely to decelerate further as it closes the gap between the two series and finds a level more consistent with an economy that is struggling to reach 2 percent growth. The Bloomberg consensus forecast anticipates a mild improvement (54.1 projected versus 53.4 prior). BI
View a more comprehensive preview, with Fedspeak analysis, on the Bloomberg terminal . with Fed here
Economics is wary that even if March shows some improvement, the near-term bottom for this survey may not yet have been reached.
The Job Openings and Labor Turnover Survey provides the underlying details of the net employment change published in the monthly employment report. While this report comes with one-month lag and can be often overlooked, it helps analysts better understand what is driving progress in the labor market. A pickup in the hiring rate in February in line with improving jobs availability would confirm the labor market is on the right track, and a rebound in the quit rate would help to convince policy makers that full employment is approaching.
While policy makers took no policy action at their March 15-16 meeting, they sent a dovish signal in lowering the expected trajectory of the fed funds rate through year-end. While the pace of anticipated rate increases in 2017-18 was unchanged, less tightening in 2016 carries through to a more accommodative profile over the next few years. Updated economic projections revealed that policy makers had resigned themselves to a slower pace of growth over the medium term.
Many market participants perceived Yellen’s recent public comments to reflect
a renewed dovishness and a pushback against hawkish comments from various regional presidents, including suggestions that a rate hike at the April Fed meeting was possible. BI Economics interpreted Yellen’s remarks instead as a reflection of continued caution — and therefore consistent with previous comments — and not suggestive of a reassessment of her view of the appropriate policy path.
While several Fed officials have weighed in on the policy debate following the meeting, the minutes, released Wednesday, will provide greater clarity regarding the cohesion among both Yellen’s dovish base, as well as the hawkish contingent which logged its first dissent of the year in March.
Initial jobless claims rose leading up to Easter after hitting post-recession lows just a couple of weeks prior. A sizable increase is common around this period, as businesses and schools pause for a spring break. Based on the historical pattern around this holiday, claims, released Thursday, are likely to fall back toward their four-week moving average over the next few weeks, although elevated readings occasionally persist into the week immediately after Easter as well. Analysts should refrain from reading too much into the claims data in the near term due to these technical distortions.
DATA & EVENTS
Non-manufacturing ISM May Have Room to Fall in Near Term
April 4, 2016 Bloomberg Brief Economics 4
DATA & EVENTS
TIME COUNTRY EVENT SURVEY PRIOR
7:25 Brazil Central Bank Weekly Economists Survey (Table) — —
7:30 Chile Central Bank Meeting Minutes — —
9:00 Mexico Leading Indicators (MoM) -- -0.16
9:45 U.S. ISM New York 54.1 53.6
10:00 Canada Bloomberg Nanos Confidence — 54.5
10:00 U.S. Labor Market Conditions Index Change — -2.4
10:00 U.S. Factory Orders -1.80% 1.60%
10:00 U.S. Factory Orders Ex Trans -0.50% -0.20%
10:00 U.S. Durable Goods Orders -2.80% -2.80%
10:00 U.S. Durables Ex Transportation -1.00% -1.00%
10:00 U.S. Cap Goods Orders Nondef Ex Air — -1.80%
10:00 U.S. Cap Goods Ship Nondef Ex Air — -1.10%Source: Bloomberg. Surveys updated at 5:05 a.m. New York.
CALENDAR
Click on the to see the full range of economists' forecasts on the terminal. highlighted releases
OVERNIGHT
Euro-area unemployment retreated in February to the lowest since 2011, continuing its slow decline as the economy grows at a modest pace. The rate fell to 10.3 percent from 10.4 percent in January, the ’s European Unionstatistics office in Luxembourg Eurostatsaid today. That matched the median forecast of economists in a Bloombergsurvey, though the January number was revised from an initially reported 10.3 percent.
IMF Managing Director Christine was drawn into a spat with Lagarde
Greek Prime Minister Alexis Tsiprasover the weekend, with the Greek leader questioning the “good faith” of fund officials engaged in the negotiations after
on April 2 published the WikiLeaks purported transcript of an internal IMF call. Lagarde in response released a letter hinting that the Greek government had spied on her team and leaked the document. The transcript shows three fund officials discussing ways to pressure German Chancellor into Angela Merkelconceding to their push for Greek debt relief.
Japanese companies cut their forecasts for inflation for the next five years from now, indicating that even after adopting a negative-rate policy, the Bank
is struggling to persuade of Japanbusinesses that sustained price gains will take hold. Companies project 1.2 percent of inflation at this time in five years, down from 1.4 percent estimated in December, according to a report for BOJ Tankan March released today. In three years, they expect 1.3 percent price growth, and 0.8 percent in one years.
Europe
Asia
GLOBAL EVENTS BY JAMES AMOTT, PHYLLIS HALLIDAY AND KEAT KIAN KOH BLOOMBERG NEWS
U.S. Factory Recession Averted, Manufacturing ISM Shows
The U.S. manufacturing sector has found its footing, improving from a slump in the second half of 2015 that weighed heavily on aggregate demand. The headline PMI reading of 51.8 showed manufacturing activity expanded more than expected in March. The details of the report, particularly the production components, were equally encouraging. The sustainability of this improvement will depend greatly on the value of the dollar and foreign appetite for U.S. goods. Domestic activity appears to be keeping factories humming, and a notable increase in orders for export suggests that production may pick up due to increasing overseas demand. Read the full analysis on the Bloomberg terminal .here
— Carl Riccadonna, Richard Yamarone and Yelena Shulyatyeva, Bloomberg Economists
April 4, 2016 Bloomberg Brief Economics 5
GLOBAL EVENTS BY JAMES AMOTT, PHYLLIS HALLIDAY AND KEAT KIAN KOH BLOOMBERG NEWS
The Federal Open Market Committee’s March 15-
16 meeting minutes will be released, giving
investors fresh insights into policy makers’
thinking. Fed Chair Janet Yellen takes part in a
panel discussion in New York, and ECB
President Mario Draghi makes a presentation in
Lisbon. Democratic and Republican presidential-
primary voters go to the polls in Wisconsin. U.S.
service producers probably expanded at a
stronger pace in March, the first increase in five
months, based on economists’ estimates.
Talks resume between the Greek and creditors to complete a government
review of the country’s latest bailout.
The Bloomberg New Energy Finance takes place in Annual Energy Summit
New York City. Speakers include the energy ministers of Argentina, Canada, Chile and Brazil, and U.S. Secretary of State John Kerry. Through April 5.
CENTRAL BANKS: Chile meeting minutes.
ECONOMY: U.S. labor market conditions index (March), U.S. factory orders(Feb.), Japan monetary base (March), Turkey inflation (March), U.K. construction PMI (March).
U.S. service industries probably grew in March at a faster pace, marking the first improvement in five months and showing the economy is moving forward at a modest rate. 10:00 EDT.
The was probably U.S. trade deficitlittle changed in February after widening more than forecast a month earlier. 08:30 EDT.
Bloomberg hosts the Argentina , with scheduled speakers Summit
including Finance Minister Alfonso Prat-Gay and Central Bank President Federico Sturzenegger. Begins at 07:00 EDT in Buenos Aires.
holds its U.S. presidential Wisconsin primaries for Republican and Democrat candidates.
The Bank of England’s Financial publishes the record Policy Committee
of its March 23 meeting. 05:30 EDT in London.
MONDAY, April 4
TUESDAY, April 5
IMF Managing Director Christine will present her agenda for the Lagarde
IMF’s spring meeting in a speech at Goethe University Frankfurt at 03:30 EDT.
Chicago Fed President Charles Evans speaks on the economy and monetary policy at the Credit Suisse Asian Investment Conference. 00:30 EDT in Hong Kong.
German Finance Minister Wolfgang gives a speech on the future Schaeuble
of the EU. 12:15 EDT at Basel University in Switzerland.
CENTRAL BANKS: Rate decisions in Australia, India.
U.S. Markit services PMI ECONOMY:(March final), U.S. job openings (Feb.), Colombia inflation (March), Japan wages (February), South Korean foreign reserves (March), South Africa whole economy PMI (March), Russia PMI(March), Romania retail sales (Feb.), Egypt PMI (March), euro-area services PMI (March), U.K. services PMI (March), German factory orders (Feb.).
The U.S. Federal Reserve Bankreleases the minutes from its March 15-16 Federal Open Market Committee meeting. 14:00 EDT.
Cleveland Fed President Loretta discusses the U.S. economic Mester
outlook and monetary policy at a local business event. 12:20 EDT.
Bank of Japan Governor Haruhiko speaks at the quarterly meeting Kuroda
of the central bank’s branch managers. 20:30 EDT in Tokyo.
Poland rate CENTRAL BANKS:decision.
U.S. MBA mortgage ECONOMY:applications (weekly), Russian CPI (weekly),Caixin China services PMI (March), Czech trade (Feb.), Hungary industrial production (Feb.), Russia weekly CPI (weekly), German industrial production (Feb.).
Fed Chair joins a Janet Yellendiscussion with former Fed chiefs Ben
, and Bernanke Alan Greenspan Paul in New York, the first time the Volcker
four Fed chairs have appeared together
WEDNESDAY, April 6
THURSDAY, April 7
onstage in conversation. 17:30 EDT.
ECB President attends a Mario Draghimeeting of Portuguese President
’s Council of Marcelo Rebelo de SousaState. Draghi will make a presentation on Europe’s economic and financial situation.
The publishes an account of its ECB March 10 monetary policy meeting. 07:30 EDT in Frankfurt.
The releases the analytical IMF chapters of its World Economic Outlook at 09:30 EDT. The full report on the global economy will be released before the IMF and spring World Bankmeetings in Washington from April 15-17.
Kansas City Fed President Esther speaks about the U.S. economy George
in York, Nebraska, at 21:15 EDT.
Zhou Xiaochuan, governor of the People’s Bank of China, is among attendees at the annual meeting of the Inter-American Development Bank in Nassau, Bahamas. Through April 10.
Russia’s central bank Governor Elvira speaks at an Association of Nabiullina
Russian banks news conference. Starts at 03:00 EDT in Moscow.
CENTRAL BANKS: Serbia rate decision.
ECONOMY: U.S. jobless claims (weekly), U.S. Bloomberg consumer comfort (weekly), U.S. consumer credit (Feb.), Mexico inflation (March), China foreign exchange reserves (March), Taiwan inflation (March), South Africa gross and net reserves (March), South Africa manufacturing (Feb.), Czech industrial output (Feb.), Czech retail sales (Feb.), U.K. Halifax house prices (March), Swiss foreign-currency reserves (March), Hungary trade balance (March).
Canadian Minister of Finance Bill speaks on the 2016 budget Morneau
and the government’s plan to support the middle class. 07:00 EDT in Toronto..
ECONOMY: U.S. wholesale inventories (Feb.), Japan current account (Feb.), Japan economy watchers survey (March), Japan consumer confidence (March), Chile inflation (March), Brazil IPCA inflation (March), Hungary CPI (March), Turkey industrial production (Feb.), U.K. industrial production (Feb.), U.K. trade balance (Feb.).
FRIDAY, April 8
COMMENTARY NARAYANA KOCHERLAKOTA, BLOOMBERG VIEW COLUMNIST
April 4, 2016 Bloomberg Brief Economics 6
COMMENTARY NARAYANA KOCHERLAKOTA, BLOOMBERG VIEW COLUMNIST
Blackouts and the Burden of UncertaintyIn the U.S., people largely take the
constant flow of electricity for granted. Uncertainty about availability doesn’t affect decisions. Businesses and households don't have to think about, or plan around, fluctuations in electrical power.
When I visited India many years ago, the situation was quite different. The availability of electricity fluctuated throughout the day, often in apparently random ways. It was a focus of planning, thinking, and conversation in a way that, while entirely natural, was quite unusual to me as an American. (Unfortunately, it appears that there has not been much improvement my visit.)since
I see an analogy with the global economy.
From the mid-1980s through 2008, central banks had the tools, the will, and the knowledge to protect the economy from sharp swings in the demand for goods and services. They raised interest rates to head off surges, and lowered rates to prevent severe slumps. As a
result, households and businesses could count on an economy in which aggregate demand grew relatively steadily. Nobody had to think about, or plan around, the possibility of persistent shortfalls in prices and employment.
That has changed. Since 2008, central banks haven’t been able or willing to defend against a sharp and highly persistent fall in aggregate demand. They have used much of their toolkit, and seem reluctant to employ the tools that remain. As a result, the flow of demand has become uncertain. Market participants and others are focused on what could go wrong, and how central banks might — or might not — respond.
Before 2008, global aggregate demand was like electricity in the U.S. — just something in the background that everyone could count on. After 2008, it became like electricity in India — desperately needed, but subject to random and persistent shortages. Just as the uncertainty of electricity provision hobbles India's economy, the uncertainty
of aggregate demand impairs the global economy. To reduce uncertainty and promote higher growth, both systems need overhauls.
How should the world overhaul its system for providing aggregate demand? To me, this is the key question facing macroeconomists today. Answering it will require a big change in the discipline. Before 2008, most macroeconomists studying the U.S. and Europe largely ignored the possibility of long-lasting shortfalls in demand. This may (at least arguably) have been appropriate for most questions of interest before 2008. Now, however, they need different models and approaches to understand the effects of aggregate-demand uncertainty, and figure out how best to eliminate it.
Narayana Kocherlakota is the Lionel W.
McKenzie professor of economics at the
University of Rochester. He served as president
of the Federal Reserve Bank of Minneapolis from
2009 through 2015. This column does not
necessarily reflect the opinion of the editorial
board or Bloomberg LP and its owners.
MARKET INDICATORS
April 4, 2016 Bloomberg Brief Economics 7
MARKET INDICATORS
UNIVERSITY OF MICHIGAN CONSUMER SENTIMENT
Source: Bloomberg. Updated 5: 05 a.m. New York time.
April 4, 2016 Bloomberg Brief Economics 8
Bloomberg Brief: Economics
UNIVERSITY OF MICHIGAN CONSUMER SENTIMENT
Richard Curtin, Director of the University of
Michigan Surveys of Consumers, spoke with
Bloomberg Intelligence Chief U.S. Economist Carl
Riccadonna following the release of the final print
of March consumer sentiment.
Q: Is the improvement in personal finances is more related to financial conditions or is it more closely linked to labor market developments?A: We ask consumers to explain why they're expecting to be better off or worse off financially. Among the top third of the income distribution, they have emphasized improving their net wealth position, including both rising asset values and debt as a combination. But among the balance of the population, it's almost entirely on income and job prospects. There is still this split between those who expect higher wages and those who expect more hours of work. So the bulk of the population, it's been the labor market. But for higher-income households, it's been a combination of both the labor market and financial markets.
Q: How do you reconcile the weakness in the data in the first two months of the year versus your expectation for pretty decent consumer spending? Is it going to be a second half rebound?
I think there will be a rebound. Mostly A:at mid-year it will occur. But I have lowered my forecast from 2.9 in December for 2016 to 2.7, and the
probability of another lowering is somewhat higher than another increase. The chances that it would go down are now about 60 percent, but it's certainly not high enough for me to revise it down as yet. I still think there will be decent sales of vehicles this year and new construction, and retail sales are changing. What we have uncovered in the survey is that most of this decline has been among higher-income households who were more nervous about future economic conditions, while lower-income households were somewhat more optimistic that they would get increased income and increased hours and were more favorable. But I think this concern among upper-income households will begin to fade shortly.
Q: What is the single biggest stumbling block preventing consumersentiment from moving back into, let's say, the upper 90 range?A: If we look at domestic versus international conditions, consumers are a little more optimistic about the global economy than they were several months ago, although it is still a concern. But we have an election this year among candidates who espouse very different policies that have an impact on the economy, and consumers are saying now they just don't know who is going to be elected, or who actually will be the candidates. That is ahead of us, and I think that's something that could firm up more quickly or cause some more serious
declines. The election came up mostly when we asked consumers about the five-year outlook for the economy; not the year ahead. And that they expressed a sense of uncertainty about how it would develop, rather than expressing favorable or unfavorable viewpoints. This reflected their view that they didn't know how the election would turn out. The domestic uncertainty about economy policy moving ahead is certainly a wonky factor.
Q: Inflation expectations were little changed, but gas prices have been slightly rising. Any sense how this is impacting confidence or inflation expectations or spending plans?A: I think I reported at midmonth that consumers expected gas prices to go up by about a dime over this next year and a dollar over the next five years. Now they expect it to go up by about 15 cents over the next year. In February they expected gas prices to be not changed over the year ahead. This has had a slight impact on inflation expectations, but consumers have not come to the conclusion that they usually have done in past cycles, where these concerns about slowing growth in employment and rising prices caused them to increase their uncertainty about their personal finances and that has a great impact on future spending. Of course, if we saw a falling rate of growth in employment and a more substantial rate of growth in prices, they reverse these opinions. But I don't expect that.
This interview has been edited and condensed.
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