Moody's Talks - Inside Economics - Surveys, Sentiment and Stamps

Episode Date: July 26, 2024

John Leer, Chief Economist from Morning Consult and frequent Inside Economics guest, joins the team to discuss the past week’s slew of (mostly) very good economic data. John discusses the latest consumer sentiment surveys and why they have diverged so sharply from observed consumer behavior. He also talks about changing expectations for the upcoming Presidential election and Senate races in light of the past week’s political events.  Today's Guest: John Leer, Chief Economist of Morning ConsultFollow John Leer on LinkedInHosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X' @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn   Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Sandy, the chief economist of Moody's Analytics, and I'm joined by my two trusty co-host, Chris DeRides and Marissa Dina Talley. Hi, guys. Hey, Mark. Hi, Mark. I was a vacation, Marissa. You were away? Yeah, it was really nice. Went up to the central coast of California by Big Sur. Very nice. You got some wine. Some red wine. You were talking about red wine. Yep. Jump in the ocean. No, it's freezing up there. It's absolutely freezing. Yeah, yeah. No jumping in the ocean, but stayed on the ocean, which was nice. Sounds nice. I haven't been in that part of the country

in a long time. It's absolutely beautiful. It's like, weird thing about California is it's, it's pretty empty that part of the state, isn't it? There's like, there's, I don't recall many people living there. It just seems pretty wide open. I mean, it's, you're kind of, you know, south of the Bay Area, right? And then north of the Central Valley, Ventura County. So, yeah, it's less populated, but on the coast, it's pretty decent-sized cities going on there. Things are going on. Yeah.

But not nearly as crowded as it is down here. You were, you were toiling away this whole week. Christmas? Oh, yes. Oh, absolutely. Somebody has to. I had to wake him up. Did you see that?

I didn't hear my name. I didn't know who you were talking to. Yes, I actually was in Arlington, Virginia, this week. Oh. Lovely Arlington. Doing what? Was that business? Business, yes. I gave a presentation on the economy. Oh, very good. Good. Do you say anything that I would disagree with? Probably. I'd have, I'd have, no, I think, maybe the emphasis. I think, I think we're just degrees apart. not fundamentally apart. Right, right. Well, thank goodness for that. And we've got a guest, John Lear.

John, good to see you. Good to see you. I'm not that far from Arlington, so I'm a little offended right at the gate that Kristen, you know, say hi. I'm in D.C., so right around the corner. I thought you were Boston. No, no, no, no. Oh.

Oh, next time. Next time you're here, you know. For sure. I'll be honest. John, this is your, you're the chief of, are you, You're the chief economist of Morning Consult. The President's the Morning Consult. Yeah, right.

And is Morning Consult headquartered in D.C.? In Washington, D.C., New York, Chicago, San Francisco, but D.C. is our hub. Right. We were just commenting. We're all in our uniform, I guess, a white shirt. I guess, although John's white shirt looks a lot more somehow better than my white shirt. I don't know. How's that possible?

The same white shirt, but he looks better in it. Maybe he ironed it. I think by Friday, you know, you just go to whatever's easier. A white shirt on Friday is like, okay, I don't have to think. Or at least maybe that's how I approach it. That's how I, no, definitely. Yeah, that's why I said it's my uniform. I don't, so therefore I do not think.

I just put it on. Although I have found, have you seen these new, and I don't mean this to be an advertisement, but it might sound like one. These Peter Millar clothing line, have you seen this? they're pretty, that's pretty cool. Yeah, I'm very comfortable pants. I'm thinking, but no jeans, no jeans, right? No jeans, no jeans, no jeans.

Yeah, you know what I'm talking about, John, or you're not in the... I do. I know it from the golf world. They've been in golf world. They've made golf like polo shirts for a long time. They're pretty comfortable. Yeah, but now they have pants. The pants are really very comfortable.

And to Bruce's comment about ironing. you know, they're crease-proof. Non-iron, yeah. Yeah, that kind of thing. It's maybe slightly too kind of preppy for me. It's just maybe a little too. Oh, really? Yeah, yeah, yeah.

I think, yeah. Yeah. Too much. Yeah, it's a little much. Are you saying I'm preppy? It might be. I think we're learning through revealed preferences here. Exactly.

Which goes to surveys. So how are things going on at morning console? What's going on? How's business? Business is going really well. I think we've seen, you know, 20203 for a lot of companies was a tough year. And I think that is meant on net, sort of good thing for a company like Morning Console that comes in and tries to help folks who are dealing with some of those demand uncertainties and challenges. So it's a

global data intelligence company. So we're able to come in and help folks across the C-suite. But really focused on that sort of demand forecasting. demand outlook perspective. Am I butchering things if I say? It's largely based on the surveys you do. It's entirely survey based. Yep, we collect about 30,000 surveys a day across 43 countries. So it's like high frequency global survey data across a really wide range of issues.

And what I really love about my job right now is going through and trying to figure out, you know, these sort of connections across our economic and brand. and political data. And I find right now, and you guys probably are hearing this too, you know, if you go into the boardroom or something, they're hyper-focused on politics and trying to figure out sort of what this means for their business. Yeah, absolutely. I mean, there's the seeming disconnect between economists like me, perhaps you, kind of happy

talk, you know, GDP, jobs, unemployment. you know, stock market, house prices, everything. But the person out there that you survey, I'm sure, is still pretty depressed about things. Not very comfortable. It doesn't really buy into this happy talk that economists are, you know, spouting. Is that right? Do I have that right? I think on average, although I would say, you know, where we're kind of moving.

I think it's not just the survey space. I think it's the data space in general, was trying to kind of move away from looking at averages. thinking about distributions, you know, we maybe would use box and whisker plots would be sort of the older way of doing it. But, you know, the econ speak would be sort of heterogeneity in consumers and consumer outlook. I think that's widened recently in large part because we have this economy where folks who are invested in the stock market are longtime homeowners, you know, they're really doing quite well financially. And you sort of contrast that with folks who are, You know, renters and the rental, we can talk about the rental market.

You know it well. The rental market is really tough right now. And then there's a lot of folks out there who just do not have access to a 401k or don't have money invest in the stock market. So booming equity prices doesn't really mean anything for them. And I think that's the disconnect that we're seeing in our surveys. Okay. I want to come back to that.

But let's talk about the data first because we've got a lot of economic data this week. Generally good, I think. But Marissa, you want to go through some of the data, the highlights and how you feel about things based on the data? Yeah, we got quite a lot. So I think the biggest release was second quarter GDP, which really surprised on the upside. We were expecting growth in the second quarter of about half of what it actually came in at. So GDP annualized came in at 2.8%. We were expecting growth of 1.4%, which was actually a little bit lower than what consensus was expecting, but even consensus expectations were too low this quarter.

And growth in the first quarter, as a reminder, was 1.4%. So double the rate of growth in the second quarter as we got in the first. The second quarter growth was really led by, I would say, two things primarily. one, consumer spending. And we got a lot of other data on the consumer. We got, you know, personal income and spending data. We got the PCE deflator. So we'll get to those things as well. But consumers are still powering the economy. You know, it added about 1.6 percentage points to growth over the quarter. And that's compared to about one percentage point in the first quarter. and we got a big inventory swing in the second quarter as well. So inventories added

almost a percentage point to growth. I think that was our biggest miss, right? I mean, as you said, our expectation, the number was 28. Our expectation was like one four, one five. Right. And the big difference was inventories, which are very difficult to measure just because they're so lagged. The data is lagged. That's right. And they, it's the change in inventories over the quarter that matters. And so this tends to sometimes whipsaw GDP growth, right, in either direction. If you get a big downshift in inventory build or vice versa, and this was a big swing in the other direction here. So it was primarily where our miss came from.

Trade was a drag on growth. So net exports detracted from growth more. more so than it did in the first quarter. Government spending is still pretty solid, not at the rate that we saw, you know, maybe a year ago, but it is still contributing to growth. And we got actually a negative on fixed residential investment. So that was a small drag on growth after three consecutive quarters of it being a positive for growth. So the economy is still growing above potential, right? and we thought that this would be a single- I'm gonna stop you right there.

Yeah. How can it be growing above potential if unemployment's rising? It's just the opposite. No? I mean, the economy is despite the 2.8% in the second quarter, despite year-over-year real GDP growth of close to 3%. Right. Over the past year, the unemployment rate has risen a half a point.

So that means the economy is growing below potential. I mean, potential goes up and down and all around, right? I mean, what you're saying, what's in your mind is potential is 2%. That's kind of cutting through the business cycle. But at this point in time, am I wrong, Chris? I mean, how would you think about that? No, I don't think this is a point. This is something that's confusing me a little bit, right?

Yeah, yeah. Yeah. I would say near potential. I don't think you're advocating that it's sustainable, right? Sustainable or radically or sharply different from potential, right? I don't think you're making that claim. Well, I mean, if you use Oaken's Law, remember Oaken's Law? O'Kins Law would say, you know, for every percentage point difference in the GDP relative

to potential, you get a half a point difference on unemployment. So if the unemployment rate has risen a half a point over the past year, and it has, that would suggest the economy has been growing a full point below its potential. That's what it would suggest. And actually it's intuitive, right? Because we've got all this labor supply. We've got all these surge in foreign immigration. So that could be, you know, typically that's maybe a half a pop, you know,

labor force growth is a half a point. Right now it could be a one and a half percentage point. I'm making it up. And then the other is we know that productivity growth has actually been reasonably strong. that could be another 2%. So potential growth right now could be, and the data would suggest that it is, 3 and a half to 4%.

Now, that feels like I'm overstating the case, but that's what the data suggests. If, you know, historical regularities hold here, the so-called Oaken's law. Remember Oaken, for those folks out there, Oaken, well, he was an econ. He never, did anyone know, he never won the Nobel Prize, I don't think,

but he was a very well-known economics acomedition, found this regularity in the data that really isn't doesn't hold all the time but holds most of the time. John, do you have a position on this? I think Marissa probably was citing the CBO estimate. That would be my guess for potential. You know, they used to estimate potential for a long time using the Nauru, you know, this non-accelerating unemployment rate. And then I think that the math there it became so challenging to defend to folks that they just selected an unemployment rate that they thought in perpetuity was the sort of non-accelerating unemployment,

inflation unemployment rate, which I think they pinned at 3.5% or 3%? The narrow? Yeah, yeah. Four. Yeah. Was it four? Yeah. I only know this because I'm on the board of advisors for the CBO.

So I look at it. Oh, yeah. Well, I think what we would say is right now, you know, this experience would suggest that it is probably lower than that estimate, or at least in this time period, certainly it's lower. Yeah. I would agree with that. I would say it's three and a half to four, but their estimate is like four one, four two, something like that. Yeah. But this, this, the, the, the, what may be going on. How to square the circle may be that, you know, these kind of rules of thumb we have, that potentially. potential growth, real GDP growth is 2%. And by the way, for folks out there, the potential means at that rate of growth, you're generating enough jobs to maintain stable unemployment, right? That's the definition. The 2% is kind of sort of through the business cycle.

It's what's sustainable over time. But that doesn't mean that it can't vary at any point in time. It can vary quite a bit at any point in time. And at this point in time, it feels like the data is saying the economy's potential is actually a lot higher than two. And again, it's intuitive with all the immigration and the stronger productivity gains that we've been getting. There's something to be said too for folks coming in, you know, labor force participation rate has been, while unemployment is higher, we've seen a little, some positive developments in terms of labor force participation. You know, longer term

trends, right? It's labor force and productivity are going to be what drive that potential number. Yeah. Chris, you were going to say some. I was going to say the usual. Let's be a little cautious on the on the data, right? Subject to revision, there are restatements here. So, you know, yeah, yeah. Well, the unemployment rate won't be revised. That won't be revised, right? But the GDP definitely could be revised. Yeah. But it doesn't be like, you know, you know, year over a year through the second quarter of this year, it's 3% on the nose, I think. 3% on the GDP growth is 3. Yeah. So even it gets revised down a little bit,

it's not two. Yeah, yeah, I agree. So yeah. Just see it. So, mercy, that was a digression, but it's been something that's been bothering me. It's been something that's bothering me. Yeah. We've talked about that in the context of the labor market in terms of job growth, too. Like, how is it that we keep getting job growth that is averaging above $250,000 a month and the unemployment rate has risen over the past year, right? We used to think $250,000 a month on job growth was like amazing, right? Now it seems to be like May. Normal.

Exactly. Going back to my point about labor supply. Exactly. There's just so much more labor supply out there that maybe we need to readjust our thinking on all of this upward. Right. Exactly. You know, the shifts coming out of the pandemic in terms of how we think about the labor

market. I think there's a lot that we don't know there in terms of unlocking potential as a result from working from home. I think that, you know, the gig economy is something that, I know BLS is trying to get their arms around, but it's transforming in many ways, so the way that people who previously were sort of on the margins of the labor market are thinking about working. And so my guess is on net the pandemic is probably going to be good for labor force participation because it has reduced some of the barriers that folks face in terms,

especially you think about then folks with disabilities and other sort of physical challenges. Totally. Also, on the business formation side, I wonder, because we've seen all these businesses form post-pandemic, I haven't seen any good research. Have you on what's going on there? But I suspect remote work has got to be playing a partial, at least partly a role here, right, in terms of the new business formation. Because there's more flexibility as a result of remote. But the formations are kind of broad based across the industry. They are. Not just in, right? Right. So. Yeah. I'm sure that's part of it, but I think there's opportunity throughout. Right. Right. Okay.

So you mentioned the inflation number, the PCE, the consumer expenditure, later. So you want to talk a little bit about that? Sure. So PCE inflation month over month rose 0.1% in June. That was up from no change in May. But the year-over-year PCE, total PCE, is 2.4%. and a half percent right now. So we're right above that 2 percent target, right, closing in on it.

That is down from 2.6 in May. So we are coming down on PCE. Core PCE was 2.6 for the second straight month year over year. We got, let's see, goods prices. And we've already gotten CPI, right? So we already had insight into what this would look like. And it is in line, with what we saw in the CPI report for June. So goods prices continue to fall, particularly for durable goods and particularly motor vehicles. Non-durable goods prices are falling according to the PCE as well. Some of that is the price of gas coming in over the past few months. Services inflation has moderated from where it was at the beginning of the year.

So growing 0.2% on total services. and we see both housing services and shelter prices moderating as well. There's some difference there between the PCE and the CPI. As we know, things are weighted differently. We've talked about this before. The basket of goods that the BEA uses for the PCE and the basket that the BLS uses for CPI are a little bit different. We saw a big decline in, we saw a larger decline in shelter prices in the CPI,

and part of that is because hotel prices came in in the CPI and hotel prices are weighted more heavily in the CPI than they are in the PCE, but nevertheless housing services in both reports slowed, which is the big thing we're looking at, right? Because we know that much of the stickiness on inflation is coming from the measured shelter and measured rents. Yeah, in fact, we haven't done the calculation for this month, but I'm pretty sure that when we do, The so-called harmonized PCE, harmonized consumer expenditure inflator. So this is the deflator excluding the implicit cost of home ownership, the so-called

owner's equivalent rent, which there's actually now growing, have you seen the research that's coming out now in the Fed system saying they should exclude O.R. And when trying to assess inflation to determine monetary policy, if you do, then we're at 2%. below 2% on a year-over-year basis. Been below 2 for, I think, almost a year, maybe more, maybe more than... So we're there. We're there. I haven't seen that.

I haven't seen the recent... I think it's a Minnesota Fed. They just put out a really... I thought it was a good piece because it agrees with my view. So is there... What's their argument for excluding it? The same thing that it's just difficult to measure and... And also it's more about the supply side and the Fed doesn't really have any impact on

the supply, you know, what the Fed's doing here in terms of monetary policy is more on the demand side, trying to weigh on demand. And, you know, that's more related to what's going on the supply side. So it doesn't add anything to their understanding of the, how monetary policy will affect, you know, the economy and inflation at the end of the day. It could even be counterproductive, right? It could even be counterproductive, yeah, which I made that point in that Washington Post, like it is right now, like it is right now, like it is right now. That's the view of Erdogan as well, you know, that rising interest rates actually lift inflation. There you go.

Thank you for that. Yeah. Of course, is the Turkish, he's the prime minister or the president? I can't remember. President, I believe. President, yeah. Yeah, thank you for that, John. Thank you.

So the inflation, oh, by the way, the number, the, I believe the core PCE was up 0.18, you know, on the month. See, we've been reduced to going to the second and third significant digit here. Yeah. That's like right on target, isn't it? If I analyze that, that's pretty darn close to 2%. I'm just saying, okay. John, so let me ask you this. So these numbers are good.

I mean, objectively good. Growth is strong. Lots of jobs, low unemployment, you know, inflation is back in within spitting distance of target if not at target. Yeah. But then I look at the surveys. I look at your survey. and then I keep bringing up the University of Michigan survey

just because it's been around a long time. And I know the question, one of the surveys that you conduct that I pay real close attention to, you ask the same questions that the University of Michigan asks in their survey. And it makes sense, you mean, for continuity's sake. Obviously, your survey is based on a lot more survey respondents and much more timely. But the University of Michigan survey,

and we've got a data point today from them for the month of, of June, I believe, very, very weak, you know, compared to historical dorms. You know, the value was, just to give context, 66.4 in the month of June, the average, since the beginning of time is like 85. It's more than a standard deviation below its average. You know, why? What's going on there? Do you have a sense of that?

Why are people so down? Yeah, I think there are a couple phenomena. So we see, first of all, we see something similar in our data, which is still about 20 points below where folks were prior to the start of the pandemic. I think the pandemic was a one-two punch, obviously. We had the initial shutdown and then the associated inflation. While you were talking about the Minneapolis Fed paper, I've been thinking a lot about Larry Summers and his co-authors talking about excluding the cost of credit from our measures of

CPI. And I think that helps explain some of the gap, you know, especially as we think about, you know, how consumers have financed their spending over the last two years, have been drawing down on savings and taking on additional credit. I think the other data point that I side a lot is we have a working paper out with the researchers from the Cleveland Fed, and we look at how consumers don't expect to be made whole from inflation. So they expect, in other words, that their wages are not going to keep pace with inflation, and that that delta helps explain some of the gap. And then the last is, I would say, prices remain pretty high. And for a lot of folks, they're looking at levels rather than growth rates, which is what inflation actually is. In terms of responding to elevated prices,

that's where we've actually seen a real positive response from consumers recently, where relatively few consumers are surprised by the price of goods and services when they go in to make a purchase right now. And so I think, you know, they're slowly, but surely there's sort of a read a normalization that's occurring, that this is the cost of a car or this is the cost of a restaurant meal. And that, you know, maybe that takes a while for folks to sort of internalize that, but we've seen a lot of that play out over the last few months. Yeah, but the data is objectively good. The way consumers are behaving is not like they're at all depressed. I mean, we've got a data point today on real consumer spending. That's overall

whole spending after inflation. That's growing year over year 2.6% in June. That is a strong number. I would just, how are they financing that spending? But it's not by credit. It's not. I mean, the amount of credit card debt outstanding has not increased since the beginning of the year. Pretty significantly, they've drawn down on savings at the very least. We see a group of consumers who have outstanding, you know, credit card delinquencies. That's been sort of the graph floating around on Twitter recently. So I think there's a group of people out there, again, who are seeing real wages not keep pace with inflation, drawing down on savings, relying on some form of credit, either traditional credit cards or buy now, pay later. And I think that that's sort of

weakened financial position helps explain where they are now relative to the start of the pandemic. Okay, let me throw in one more data point. Yeah, yeah. The conference board survey of consumer sentiment, another survey of sentiment, it's fine. It's 100.4, which is above its long-term average of 95, going back to the beginning of time, same time period that I did calculation for the University of Michigan, that number is much more consistent with what we are observing in terms of spending and behavior, right? They measure very different things. So Morning Consult and the University of Michigan are really focused on consumers' personal

finances and broader business conditions. The Commerce Board is very focused on local labor market conditions. There's also a difference in the time horizon. So we tend to focus on sort of 12-month expectations. Commerce Board was very focused on sort of near-term. And so I think what you're seeing from the Commerce Board is really this sort of micro-perspective, what people are seeing around them and how they're sort of expecting things to play out over the next six months. What you're seeing from Morning Consult to the University of Michigan is this sort of longer-term anxiety over the next 12 months,

particularly as it relates to pocketbook issues. But if I want to, if I'm an economist, like, you know, I'm an economist. like, and I'm an economist, and I'm trying to understand consumer spending. Yeah. What's going to happen with the consumers? It feels like to me I should be looking at the conference board and not the University of Michigan. I mean, it just feels that way, right? I mean, at the University of Michigan, spending should be very weak.

If I look at the conference board, it should be where it is. No? Well, we have a lot of work where we, I mean, the Chicago Fed is one example where they take this high frequency data, boarding consoles and put it into a nowcast to sort of come up with a real-time view of retail sales. I think understanding what's going on with consumers' personal finances, particularly on an inflation-adjusted basis, right? So let's go through and adjust consumer spending for inflation.

I think it tells a different picture. Okay. Okay. Let me throw one other data point in the mix. You know, you didn't mention people's political perspective, because if you look at the survey responses. I know this for the university, and I think it's also more in consult. If you identify as a Republican, you're very, very pessimistic. I mean, like, it's like teeth of the pandemic pessimistic, the heart of the financial crisis pessimistic. Independence,

they're feeling a little bit better. They're not feeling great, but they're feeling a little bit better. Democrats, they're feeling okay. They're feeling okay. Not, I wouldn't say they're, you know, rip-roaring optimistic, but they're feeling pretty good. And those things, obviously, those, the Democrat, independent Republican switch places with Biden's election went over Trump. And I assume they would switch right back in the other direction if Trump wins this election. So doesn't that, well, how do you think about that? I mean, doesn't that kind of muddy, the information you get from the survey responses, if people are looking at or thinking about it from political views?

I would say, you know, how should we think about relating something like sentiment to spending? As I see other folks who do this, they often look at some sort of change over time in sentiment and they connect that, maybe it's a log or something, to change over time in spending. And so as soon as you do that, right,

you're abstracting away from the level differences. And so what you've just described is the big level differences with Republicans and Democrats. But when we actually look at the trends, and I'm just pulling this up right now, you know, as of 3 a.m. this morning, the trends of Republicans and Democrats, up until the recent announcement, we're very similar. Actually, right now, Democrats are trending in a negative direction. Republicans are trending in a very positive direction. So this is sort of the exception maybe that proves the rule. But I do think you should be very, very wary of saying something like 60% of Republicans are positive about the economy compared to 80% of Democrats.

And that means that Republicans are spending less than Democrats. No, no, no. I don't think they're spending any different. That's my point. I think there's this complete disconnect between what people say and how they perceive the world. in what they're actually doing. I don't, I don't, I don't see any connection there. I see, in these certain things.

You just, yeah, you just add, you know, there's some sort of month-over-month percentage change and all of a sudden it tracks pretty closely to real PCE. Well, the one thing I have noticed, and I think there was an academic piece that came out recently, it showed that the Republican sentiment swings a lot more than the Democratic sentiment. I saw that. You see that? It's not symmetrical at all. So the Democrat, the change there is, it changed in a positive direction when Biden was elected, but not nearly to the degree the Republican sentiment got crushed in that election, you know, in the wake of that election. That is consistent with what we see in our

data. The thing I would note, though, is that we do see a higher level of, well, two things. So one is, you know, what drives these big level differences. It's not people's views of their personal finances. It's usually, it's their views of broader business conditions and business expectations. The other is when we begin look at, you know, business expectations cut by Democrats and Republicans. And because we have daily data, we can start seeing sort of how people respond to different news events. And we do see that Democrats are more likely to update their views of the, their expectations. for the economy than Republicans, the exception would be this dramatic sort of resetting of expectations following the 2020 election.

What was I going to say? Oh, so one of the reasons you gave for why sentiment is such a, so in the dumpers, is it's not the inflation that matters as much as the price. price level, meaning that people are still paying a lot more, even though inflation's come in, the rate of growth in the price of goods and services has slowed and back close to the Fed's target, obviously people are paying a lot more today than they were a few years ago because inflation took off back in late 21 and going into 22, the pandemic, the Russian war, that kind of thing. So if you look at the cost of groceries, that's up 20, 25 percent from where it was

three years ago. I'm making that up, but roughly speaking, rents are up 20, 25 percent. gas is up 2025. Those are staples. And so people still have that kind of in, in, kind of, uh, gnawing at them. This really bugs them. And I get it. I get it. I, you know, because their real wage has got nailed. And as you pointed out, to supplement their income, to maintain their spending, they had to borrow more. And it's one thing when rates are low, but when rates are high, your interest expense now, especially if you borrowed against your card or buy now, pay later, uh, you're going to be paying a lot more an interest expense. So that all, you know, adds up to me. Is that, is that, would you put that

kind of at the top of the list of the reasons why people are feeling, ugh, about the, I think it's a very significant reason. I would add maybe sort of a, the nuanced point. We have a paper out where we call it the expectations of others, where we, you know, I think one thing that has shifted over the last few years is just how people form their expectations of the economy in inflation. And so we see that this is maybe going to be a little too wonky here, but I'm going to go deep into it. We see that people's inflation expectations are heavily influenced by their social media connections and that people who live in, you know, you could think about shocks to inflation across the country. We're talking about average inflation, but there are pockets of

inflation, pockets of the country that are experiencing elevated inflation, those people, those cities tend to have sort of an outsized impact on how people perceive inflation, basically the negative news from regions with high inflation, travel more across social media and have a bigger impact on people's inflation expectations. And so it's a really challenging time now to be, you know, thinking about the role, this sort of relationship, between expectations and reality because you think about sort of Robert Schiller's world, right, of these narrative economics, well, that's all been sort of supercharged right now with social media. And so negative news travels more, is more persistent in terms of impacting people's

future expectations. That is one of the reasons I think that we continue to see this sort of depressed level of consumer sentiment, despite a relatively strong, broader sort of macro perspective. Oh, that's fascinating. So you're saying, people who suffer an economic, a negative economic shock are more likely to respond and scream more loudly than folks that are benefiting. Yeah, I mean, the old model that we would have, and Michael Babe at the University of Chicago still does a lot of good work here, you know, thinking about people go to the grocery store, and those prices are very salient for folks,

and they remember they paid the last time for eggs, and so they're updating their expectations based on what they see in the grocery store. And what we're saying is that that's part of the story, but there's also sort of what people experience via social media, in particular what we look at is people's Facebook connections. and I think we're moving into a world where it becomes more and more difficult to to sort of pin down observed economic experiences and use that to explain people's expectations without taking to account sort of the full range of information that they're using to form

their economic expectations. Fascinating, very interesting. Chris, do you have a view? Any comments on this conversation so far? It's fascinating. I think I think John is right. There are a lot of shifts going on here. We're not clear exactly how people are making their expectations. And I guess the other point to make then is, does it matter? How much weight should we be putting on these measures? If at the end of the day, you know, regardless of how those expectations are getting some, people are acting in a very different manner, right? So how much of a signal is there really in this in this data that we collect? So that'd be the question I would ask. Right, right. So, John, you do these surveys all over

the world and specifically focusing on inflation because I do think that that's the thing that is gnawing at people the most, the fact that they're paying a lot more today than they were a few years ago, particularly for things they need to buy necessities. Are you observing any differences across the world in terms of how people think about inflation and how it affects their general mood? Yeah, we see really significant differences across major regions. So if we look at the Americas, for example, we're seeing Argentina, they are experiencing a pretty extreme volatility in terms of.

economic reality, political reality, and then their expectations as well, where their inflation expectations shot up and then they're pretty dramatically falling back. You think about China is actually experiencing essentially deflationary inflation expectations, really concerned about subdued growth there as opposed to sort of, you know, other places. Japan also, you know, chronically, of course, struggles with deflation. And we see pretty low inflation expectations there. And then you could think about just in terms of consumer sentiment, Australia is a company that is a, sorry, is a country that jumps out.

They had to reverse course, right? Inflation has been persistently hot there. The central bank had to come out and say, actually, we're going to stay higher for longer. That was a surprise to a lot of folks in Australia and that we see that playing out in terms of pretty negative shock to sentiment in Australia. I forgot because I'm sitting here in the Western world focused on inflation, but the Chinese, their problem is outright deflation. They're struggling. And consumers are not spending, I guess, in part because they'll, the thinking is that people will delay purchases because they think they'll get a better price if they delay. Yeah, it's real problem. They're in a very tough spot because the traditional approach, right, would be some sort of government stimulus.

They used a lot of government stimulus earlier. And then they've got kind of what happened in the U.S., right, with the mortgage crisis. They have this broad debt overhang that just weighing down on lending and economic activity. And it's hard to figure out sort of what that solution is to work through outstanding debt there. Yeah. Well, I want to play the game, the stats game. And then I want to come back and talk about, you know, what you're learning about people's thinking around the election and, you know, how that that's playing out.

Before they do, one kind of open-ended question, what are you seeing in your surveys that recently that surprises you the most? You go, oh, I didn't expect that. That's a great question. Well, I would say one thing that I feel obligated to tell everyone about, I've been tracking it for a while now, is very robust consumer sentiment in Russia. And so we look at, you know, we look at the shock from the pandemic, the shock from the initial invasion, and then shortly thereafter, really a persistent rebound. And then you go tie that back to, you know, the IMF just consistently trying to upgrade their forecast for the Russian economy. It's something, it's a conversation I've had with a lot of policymakers right now to try to understand the extent to which these sanctions are actually affecting the Russian economy. I mean, when so many countries like China and India have found really clever ways of continuing to import Russian energy.

Do you think, though, that, I mean, if I were sitting in Russia, if someone surveyed me, I'd be pretty reticent to say, oh, I'm not so happy with this situation. I don't know. Just saying. Well, we did see a drop when there was the initial invasion. You did. Okay. He saw a drop when there was the mandatory conscription. I see.

And so it does seem to be sort of sensitive to these things. Again, the levels, I think you have to abstract from the levels, but just looking at the trends or the growth rate is where it feels like there's a pretty strong signal. We also do inflation expectation surveys there that spiked following the invasion and then came down dramatically, I think, when it became clear that this wasn't going to be sort of as big of a deal for the domestic economy as folks. maybe initially thought it would be. Interesting. So the Russians are feeling pretty good about things. Russians are feeling pretty good. Economies seems to be humming along. Chinese not so much. They're Chinese not so much.

Very low and falling inflation expectations. I can go in here and look at, let me pull up the China data from this morning and see exactly what's going on there. You know, they've had so many different phases to this recovery. Right. And so actually it looks to me right now like, you know, sentiment seems to be increasing. People have a pretty more optimistic view of growth in the country as a whole, even as their expectations for inflation remain very muted. Interesting.

And where does the U.S. line up in that spectrum, Russia to China? Are we kind of closer to China or closer to Russia? Great question. Well, people in China are basically always very optimistic. So if you just play the game, like what share of people have a high view, people in China are always going to say things are great. In coincidentally, we do not ask people about, you know, in Russia, their views of leader approval or in China, right? So we're not going to do anything where we think we maybe jeopardize the safety or security of our respondents. Right, got it.

Okay. Let's play the game. The stats game we each put forward a stat. The rest of the group tries to figure that out. through clues and questions to Dr. Reasoning. The best stat is one that isn't so easy. We get it immediately. I don't think that's going to be a problem that's go around or one that's so hard we never

get it. And if it's apropos to the topic at hand or something in the recent data even better. And we always, John, we always begin with Marissa. So Marissa, you're up. All right. Statistics that came out this week. It is negative 0.65 percentage points. That's the differential between the PC and the CPI.

Oh, my God. Wow. Wow is right. Because that's going to, that was going to be his staff. Now my, I have no chance of stumping you guys. That's like outrageous. You did this last week until you weren't here, Marissa. Got lucky.

He did the same thing with one of the stats. Yeah, that is correct. Yeah. Good one. How did you get that that fast? It was going to be one of the ones I thought about. Okay. You want to explain?

That's interesting. I think you have to go look at the rules a little bit. That's not just a statistic. That's a transformation. That's true. That is true. It is a calculation. You can do that.

It's in our release on the Economic View website. Right. We publish this difference when we cover the PCE or the CPI release. We'll go over the rulebook with you. you at some later date, John. There's not much of a rulebook, as you can say. No, no, no. Are you kidding me? We got to keep Marissa, you know, on the straight and narrow. We need a rulebook. Yeah, so anyway, why did you pick that number? Okay, the reason I picked it. So, so this is year over year core PCE minus year over year core CPI. The difference is minus 0.65, meaning

PCE growth is 0.65 percentage points lower than CPI growth. And that's significant because we've seen much, much, much larger differences between the two over the past, you know, at least since the beginning of this year. So this is more in the range of the normal-ish difference between these two measures. That had ballooned out to almost a full percentage point over the past few months, and it started to come in, and it seems like part of the reason it's starting to come in is this moderation that we are now beginning to see in shelter inflation. That's really been the real difference between these two surveys. So in the CPI, shelter is weighted roughly about a third of the basket. And in the PCE basket, it's about half of that. It's like

15, 16% of the PCE basket. So that, given the shelter is what is driving inflation, and mostly now, that difference is really significant in how the two surveys wait shelter. So now we're starting to see them converge a bit more toward their normal difference. And I think that is reflective of the fact that we're starting to see shelter disinflation. Got it. Hey, John, I failed to ask you when we were back at the start of the conversation about monetary policy. I bet you can glean what I think the Fed should do. Everyone knows what you think the Fed should do.

I've been pounding that drum, I know, and I've been right. I'm just saying. I would say I'm not in your camp. Oh, okay. I don't think July should. I don't think it will be, first of all, and I don't think it should be. Okay. You think they should wait to September?

Okay. All right. But yeah. You feel strongly about that? How strongly do you feel about that? I feel very strongly. I think, let's remember. So 2% is not a ceiling, right? It's supposed to, they came out with a new framework that if you think the framework is worth anything, it's essentially sort of average inflation targeting over some period of time yet to be disclosed. So I think you would really need to. to see sort of after below 2% for some, you know, a month, two months for the Fed to feel like they are consistent with the framework that they've outlined. Worth noting, of course, that they're updating their framework this year again. So maybe we'll see a shift. On the policy framework, as you pointed out, it's a 2% inflation target. The way I frame it is through the business cycle, right?

They don't actually say that, but over time, it hours out. Over time. And I tend to go back a little bit in time. And if I go back prior to the pandemic, the problem was inflation above target, was inflation below target. So if I go back, you know, since the financial crisis, inflation is exactly where I think is pretty close to where it should be. I mean, the inflation.

I think you're, it is not clear to me. I don't know. And I think that that was part of the framework that was intentionally sort of less, ambiguous because so much of it, you know, that's where the, the calibration matters there in terms of what your length of time is. But you're actually right. You know, if we had the zero lower bound problem for 20 years. So if you go back far enough, then all of a sudden, I mean, you really could have started cutting rates probably at 9% if you average enough, enough of those sort of very, very low rates. I don't think so. It would be crazy. I mean, that's what I'm saying. Like,

figuring out how you. Yeah. No, no. I understand. That's why I say the business cycle. And, you know, just put. So I would say two things. One is, you know, getting close to 2% is not the same as being there. And you're really good at forecasting. But I think the Fed is a high level of humility. And so they really want to see the data. No, I'm definitely not humble. The Bank of England had to kind of pivot. I don't think they want to do that. that would be maybe the worst case scenario is that they start the sort of cutting cycle, and then all of a sudden you start seeing a shift, and maybe you get a bad reading again,

and there's sort of bad credibility is at stake. Got it, got it. Okay, I digress. Do you want to go next for this, John, the stat? I don't really want to go after. I'll go, I'll go. It's a lucky break. All right, so here, my number is 3.5%.

An economic statistic? An economic statistic. This past week? Past week. Not the savings rate. It is the savings rate. Nice. Very good.

Very good. Not quite as good as Chris, but very good. You didn't have the same level of confidence. Well, because in my mind, I thought it was 3.4. I think it is 3.4. Well, there's the monthly and the quarterly. The quarterly. Okay.

Okay. The 3.5 was the quarterly. Got it. Pre-4 is the monthly. Part of the GDP release. For me, the savings rate, I think, when we talked about it a little bit earlier, but that explains a lot of what's going on with consumers that they've had this robust spending, but it hasn't been cost-free.

It's come at a, you know, falling level of savings. And then we see that play out for some particularly exposed households with elevated levels of delinquency. So I think it just tells some of the story of what's been fueling this pretty remarkable economic cycle. Yeah, I'd describe more of that, though, to the wealth effect, you know, because most of the spending is done by the folks at the high end of the income distribution, right? And they're, you know, look at their stock portfolio. And also, a lot of that still probably some excess saving built up during the pandemic that they haven't spent. I think that's probably behind that.

I think a lot of the excess savings has been drawn down. San Francisco Fed have done a lot of work there. Is that contrary to the house? Oh, yeah. They're bogus. Sorry. We do our own estimate of excess saving, John. By like income decile or quartile or something?

Yes. Yeah. I'll send it to you. I'll send you our work. Yeah. But yeah. I mean, it has been drawn down. But we just got a new estimate, I think, this morning or yesterday.

And it looks like there's still over. half of it left. That's our estimate, though. Right. That's our estimate. That's right. Yeah. So we, every, every month when the saving data come out like this morning, Scott Hoyt, our colleague does recalculates.

And it peaked at two, the excess saving, the extra saving done during the pandemic, 2.4, I want to say 2.4 trillion at the peak, which was in late 2021. And we're about half of that now, like 1.3, 1.3,000. trillion, something like that. So that's still a lot. But it's all at the high end. It's all the top 20% of the income distribution. Yeah. Looks in the rest of the distribution. In fact, I think people in the 60 to 80% of the distribution of income, they've blown through all of it, completely all of it. Lower income households, it's just it's a little more difficult just because you've got folks that, you know, they're not, they're like retirees and, you know, that kind of thing that complicate the interpretation of the numbers.

But anyway, okay, that was a good one. That was a really good one. And Chris, you want to go next? Sure. 73 cents. 73 cents. Yeah. Pack of bubble gum?

Nope, but you're in the right. Well, it is a price. It's a price for some food commodity, food item? Not a food item, no. A commodity? Does it get change, weekly change in gas prices? No. No.

73. Is it something we buy is consumers? It is something that people buy, yes. But not as much as they used to. Why? Okay. But this isn't a release, an economic statistic that came out this week, is it? No, it's not a release.

You're hearkening back to the rulebook. Is that what you're doing? I am, yeah. Disqualify. You're going to just qualify. were so honed in on the rules. It doesn't have to be a release, though. We've had other prices.

No, I know. Commodity prices, right? Okay. It does have a point, so it's not just a random. I'm sure as a- I figured it. A point about inflation. It is from a government, it is from a government agency.

Okay. Is it, is the points around inflation? Nope. No, it's not. It's a consumer, consumers buy this. Every day. Every day. They have to go to a special office to buy it.

A stamp? No. Exactly. Stamps are 73 cents? Yes. Yes. The forever first class. The forevers are now 73 cents?

Now 73 cents. They were just hiked up another five cents. Oh, no. That's the second time they were hiked this year. Oh. And they're up 33% from 2021. Wow. I think this price encapsulates.

this divide between what people perceive and what they're doing, right? I never, I don't know when, when was last time you want to stand? That's the question, I think. I think that probably explains the divide is there's probably the stamp using. Oh, yes, right. John, I think he should run a survey. I'm in, let's go. Yeah.

I mean, that's it. Are you a stamp user or not a stamp user? Or not a stamp? Yeah. But my point is, I never buy a stamp. I can't remember last time I've mailed anything. but I read this headline and I'm mad as hell. What the heck?

Ice at the same year and this big increase. Well, especially the service has declined. Have you noticed the postal service is just awful? Whatever they're doing to revamp the post office, I've been following it closely, but it's a mess. Except for my local, except for my postal carrier, Christy, she's great. What's that? My local postal carrier is Christy. She's great.

No, no, I'm not saying. I'm saying, I'm not blaming on the, no, that's not fair. I'm not blaming it on. That's like what people think about Congress, right? It's terrible. It's nasty. I'm not going to my conference person, yeah. I blame me it on the on the muckety mucks.

They're making decisions around, you know, consolidating, you know, postal machinery and that kind of stuff. It's just a nightmare. We sent out wedding invitations. People are still getting, that was five months ago. They're now, they're starting to get them now. What's that all about? Especially around Atlanta, you know, I've noticed. And that is the change, right?

They try to sort of take an Amazon style kind of approach and they consolidated the processing centers, but maybe not well. Yeah, not so well. Maybe hopefully they get it together and they're charging a lot more. Now you got me riled up. There you go. Now I'm riled up. John, don't call me because I'd give you really negative. You write a letter into your, your congressperson, but then you got to send it to them and then they get you.

Then what do you do? Yeah, exactly. And an email. An email. Okay, I got a tough one. All right. It's 24,872. Dollars?

Not dollars. People. Not people. People. Not people. 24,872. Yeah. It's a statistic that came out this week.

We don't follow it regularly, I mean, at least in our discourse, but I think going forward, we will start to follow it more. Is it bankruptcy filings? What other clue can I give you that doesn't give it away? So it's not. You know, in the grand historical scheme of things, it's still pretty low, but it's moving up. It's steadily moving higher. Do we agree with the units were? The units were not people.

Well, I don't think he wants to tell us. I can't tell you the units. The units give it away, okay. The units give it away. It's, oh, maybe I'll give you this because I feel pity for you guys. The government stat? It's government stat. It's businesses.

It's businesses. 24,872 businesses. But tell me something about that. Not formations. Is it? Is it? formations and what happens to a lot of businesses. Is it the birth, death rate?

It's bankruptcies. Marissa said that. Oh, you said, oh, I'm sorry. Do you see that early on? Yeah. Yeah. I said, is it bankruptcies? Right out of the gate.

No way. Yeah. Right out of the gate? Oh, I missed it. All right. I apologize. I apologize, Marissa. Forgive me.

Please forgive me. You're forgiven. Yeah. But here's an interesting thing. It's moving up, $25,000, but just for context, I'm making this up, but for context, roughly speaking, in the teeth of the financial crisis, I think it got to like $70,000, excuse me, $65,000. And this is over a three-month period annualized, over a three-month period annualized, $65,000. And I think the all-time high was in 1987. I'm not sure why.

Maybe there was some bankruptcy law change. There was about 100,000 bankruptcies. So it's still very low, but it is moving up, which stands to reason given all the business formation. But personal bankruptcy, that remains very, it's off bottom, but it remains very, very low, is still well below what it was pre-pandemic. So, you know, by that measure, you know, households are still doing pretty well. Anyway, do you think that was a good statistic or not? Was that two esoteric?

No, because I knew it because that was one I was going to pick. I was considering picking it. Yeah. I think I would say, you know, by sheer chance, if you sort of rounded it out, we covered a lot of the sort of pillars of macro right there, right, with some business information. Chris, I don't know where, I guess I'll say inflation. We've got personal finances and savings. Yeah.

Well, John, just so you know, that that's the idea. That's kind of the idea. It's kind of like we went inside economics. Yeah, yeah, yeah. I know, inside economics. That's great. It was a data-rich week, though. It was a data-rich week.

It was data-rich. Okay, let's end the conversation with this, you know, what's increasingly top of mind here, the election. And I don't even know where to begin, John. I mean, I'm sure you're all over this at Morning Consult. Can you tell us anything about the state of play at this point, given kind of this whirlwind of events over the past four, five, six weeks? Yeah, the time horizon here matters a lot as well.

I think, you know, in terms of the head-to-head, there's been a narrowing, right, where we've seen greater support for Harris than for Biden. Top issue continues to be the economy with actually a recent uptick in folks citing the economy as being their top issue. Senate government, Senate and governor rankings and races, of course, are really, really close to swing states. And then I think, you know, as we think about sort of on the, the international front or the sort of global international policy, we see actually, you know, pretty strong alignment there. It's a pretty strong support for for tariffs and sort of broader protectionist policies across the electorate of both Democrats and Republicans.

Whoa, whoa, whoa. There's support for tariffs? Correct. Across both Republicans and Democrats? Correct. Interesting. Yeah. I mean, this has been, I think, the big shift over the last 10 years maybe is that we I think Democrats and Republicans used to both kind of agree on being anti-tariff and now they both kind of agree on being pro-tariff certainly on different scales altogether though right different scales but I mean we we've had tariffs on China that weren't removed over the last four years and in fact it looks like they're going to you know kind of be moderately strengthened at least But one candidate saying a 10% tariff on all imported good, 3.4 trillion, 60% on Chinese imports.

Another candidate's, well, she's not even talking about tariffs, but the Biden administration has raised tariffs on $18 billion worth of Chinese product. Yeah, you're right. They didn't eliminate the tariffs that President Trump put on. But that's a complicated process that goes into lots of other, you know, issues. So, but nonetheless, I'm surprised that there's such broad base. The thinking is what? Jobs. It's going to create more jobs?

That's the thinking? Well, I think there's what we see as well. It's just sort of a broadening decrease in approval for, you know, among Americans, what are their views of other countries? And we see sort of souring views of countries like China. And so I think there's just a growing, sentiment. of sort of an America first the hell with the global order style sort of outlook. Wow. Well, that's surprising. You also do, well, let me ask you this, you know, polling in general

seems like it's gotten a lot more difficult to do, you know, over the past few election cycles. Yeah. Response rates. Actually, maybe make this even a broader question. Response rates are down for at least a lot of the government surveys. It's very difficult for folks to get people to participate in the surveys. And designing surveys and doing polling in a way that is accurate, feels like it's gotten more difficult.

Is that fair to say? Yeah, well, we tell our clients that it's never been easier to collect the data. and it's never been harder to collect good data. I see. And so, I mean, we see this, right, with the response rates for a household survey. We see it with the University of Michigan moving to an online survey. I think there's broadly sort of been this sort of aha moment that this sort of random digit dialing of phone numbers is now sort of seems almost as antiquated as going to somebody's front door and trying to see, you know, who's going to open the door. Having said that, I think that there are pretty significant opportunities,

and maybe this is a plug from Morning Consult, but high-frequency global survey data is something that just was not possible 15 years ago. And so, you know, you guys are data folks. You always bring sort of a high level of skepticism to data sets, but any data set has its basic sort of imperial properties, you've got to just dive in and understand what's going on there. What we tend to feel is, especially globally, there's a move towards internet via phones and mobile phones. So that opens up a really expansive use where all of a sudden now you can start looking at sort of making population inferences in places that previously were we had very low internet population penetration. Yeah. You know, we could dive into the methods and that'd be a separate discussion. But I think, like all things, economic measurement is very, very challenging. The devil is in the details. And you just have to be on top of it.

Yeah. I know you guys are really careful at what you do and appreciate the opportunity to talk to you. One last question before you go. Do you do an explicit forecast for the economy? I mean, do you like a GDP employment going to be? unemployment. You do nowcast. I mean, that's kind of our core strength, right? It's high frequency measurement. And then we have a lot of clients who take that and use it for their own forecasting purposes. Right.

And so you don't necessarily need to have some kind of view on how the election is going to play out and what that means for fiscal policy, that kind of thing. That's right. That's right. I mean, we can talk through it. I think about it a lot because our clients care deeply about it. we start thinking about what these different scenarios are, my, my recent push has been really to dive into, you know, to look. I think the Senate is really what, is really where the action

is going to happen, right, because it's going to be the confirmation, Senate confirmations, places like Treasury and a lot of the regulatory agencies that I think are going to make the difference in terms of, you know, trade policy, immigration policy. And in what's your perspective there? Is that going to flip to the Republicans or? Feels like it. Feels like it. Feels like it.

Yeah. You know, the caveat is if the race were held today, and you just see, I mean, part of it is just you have a couple of Democrats who are retiring from swing states. And so that kind of puts them behind the eight ball to start with. Right. And for president, I mean, do you have a sense of that or of you? It's closer now than it was two weeks ago. Right.

I mean, it was close a couple weeks ago in the margin of air, but now it's really, really close, particularly in the swing states. And I think we're starting to see from the question we've had for the last few elections is trying to understand sort of the extent to which some of these groups that haven't historically come out to vote, whether or not they will. we see Harris is really motivating and inspiring those groups, thinking about younger, younger voters, non-white voters. So they essentially is able to drive that turnout there. I think that's going to be really good for her. Well, I have a suggestion for you. Just kind of my simplistic world way of looking at things. I think you need to survey everyone who lives in Pennsylvania.

Well, I mean, we can get pretty darn close there. get down and we do zip-go and surveys. Yeah, just because it feels like everything's going to boil down the PA here, the way things are going. But it was great to have you on, John. I really appreciate it. And hopefully we'll get you back on soon for a number four. My pleasure, yeah.

Thanks so much for having me. I'll probably have a better statistic next time that at least turns it into a real game instead of just sort of wash. Well, these guys are so good. We actually, other than Chris's Forever stamp. Who buys stamps. We all, all of our statistics were guessed right away. Yeah.

Fair enough. Well, very good. And dear listener, I hope you enjoyed the conversation and we'll talk to you next week. Take care now.