Bloomberg Audio Studios, Podcasts, radio news.

Bloomberg Audio Studios, Podcasts, radio news.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple card playing Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube again.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple card playing Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube again.

M and A talk just kind of coming across the tape here Boeing and talks to buy supplier Spirit Aerosystem. Spirit air System stock is higher Boeing a little bit lower here. But you know, one could argue this is a transaction that probably needs to happen for Boeing to address some of their concerns. Let's bring on them. George Ferguson. George Ferguson covers the aerospace and airlines of business for Bloomberg Intelligence. George tell us why Boeing would want to do this transaction.

M and A talk just kind of coming across the tape here Boeing and talks to buy supplier Spirit Aerosystem. Spirit air System stock is higher Boeing a little bit lower here. But you know, one could argue this is a transaction that probably needs to happen for Boeing to address some of their concerns. Let's bring on them. George Ferguson. George Ferguson covers the aerospace and airlines of business for Bloomberg Intelligence. George tell us why Boeing would want to do this transaction.

Good morning, Paul. Quality control. It's absolutely quality control. They must be looking inside Spirit. I know they've been looking inside spe for months. My guess is they've looked inside and they just feel like they can't control quality well enough. As an outsider. They used to own Spirit, not as it looks exactly now, but they used to own you know, those facilities. It makes a majority of the seven thirty seven fuselage, it makes the front portion of the seven eight to seven, two extremely important products. I think they've looked inside and they said, we can't control quality well enough from the outside.

Good morning, Paul. Quality control. It's absolutely quality control. They must be looking inside Spirit. I know they've been looking inside spe for months. My guess is they've looked inside and they just feel like they can't control quality well enough. As an outsider. They used to own Spirit, not as it looks exactly now, but they used to own you know, those facilities. It makes a majority of the seven thirty seven fuselage, it makes the front portion of the seven eight to seven, two extremely important products. I think they've looked inside and they said, we can't control quality well enough from the outside.

We've got to buy this thing.

We've got to buy this thing.

Do we trust Boeing to have the kind of quality control that Spirit needs?

Do we trust Boeing to have the kind of quality control that Spirit needs?

Bowe doesn't have a choice.

Bowe doesn't have a choice.

Boone's got to get quality control or they.

Boone's got to get quality control or they.

Got a major problem on their hands. And so I.

Got a major problem on their hands. And so I.

Guess I think as an owner, I think it is the path, probably a good path forward. I do think they will get the quality issues in hand, but it's going to take some time, but they have to.

Guess I think as an owner, I think it is the path, probably a good path forward. I do think they will get the quality issues in hand, but it's going to take some time, but they have to.

They have no choice.

They have no choice.

Yeah, I'm looking at the stock A bug is pretty much unchanged on the news here. I think if I were an investor in Boeing, I would think I may or may it, may or may not make financial sense to own this Spirit thing, but I would say it's probably the best way to move forward here. And when you talk to investors Georgia, did they think that way? You know?

Yeah, I'm looking at the stock A bug is pretty much unchanged on the news here. I think if I were an investor in Boeing, I would think I may or may it, may or may not make financial sense to own this Spirit thing, but I would say it's probably the best way to move forward here. And when you talk to investors Georgia, did they think that way? You know?

I think investors, you know, I don't know that you could say they all monololiithically think that way. I think if there if there could have been a way to keep it outside not have to buy it, you know, I think they that probably would have pleased people more. I mean, there will be an unwinding required in this transaction. Right, So Airbus is a three twenty. Some of the components are made at Spirit. I'm imagining that Airbus is not going to be interested in having you know, Boeing as a subcontractor on their airplane, you know, and their their other defense products, you know, for lockeed things like that. It's going to require some work I think to unwind this thing a little bit in order to you know, in order to pull it inside of Boeing. Probably energy you would prefer not Boeing to spend. But again I think it's their most important products are flowing through Spirit, and Spirit's been a source of the problems in some of those products lately. And if Boeing is going to a much higher production rate, which is where they're going to generate the cash flow they need, the profitability they need, they've got to stabilize production. And I think, you know, they must have looked at it and said we got to own it. And so if you're an investor, I think you're okay, Yeah, it's the way forward. I'd rather not have taken this path, but it's the way forward.

I think investors, you know, I don't know that you could say they all monololiithically think that way. I think if there if there could have been a way to keep it outside not have to buy it, you know, I think they that probably would have pleased people more. I mean, there will be an unwinding required in this transaction. Right, So Airbus is a three twenty. Some of the components are made at Spirit. I'm imagining that Airbus is not going to be interested in having you know, Boeing as a subcontractor on their airplane, you know, and their their other defense products, you know, for lockeed things like that. It's going to require some work I think to unwind this thing a little bit in order to you know, in order to pull it inside of Boeing. Probably energy you would prefer not Boeing to spend. But again I think it's their most important products are flowing through Spirit, and Spirit's been a source of the problems in some of those products lately. And if Boeing is going to a much higher production rate, which is where they're going to generate the cash flow they need, the profitability they need, they've got to stabilize production. And I think, you know, they must have looked at it and said we got to own it. And so if you're an investor, I think you're okay, Yeah, it's the way forward. I'd rather not have taken this path, but it's the way forward.

This is the leading question, and it could be very wrong. But does this tell us anything about how bad things are at Spirit that this is the option?

This is the leading question, and it could be very wrong. But does this tell us anything about how bad things are at Spirit that this is the option?

I think it does.

I think it does.

So how bad are things at Spirit?

So how bad are things at Spirit?

To me, it sounds like it's so bad they got to buy it, And I think that's bad. Right, If you're Boeing, you do want to preserve cash, right, you don't want to go make an acquisition. You got plenty of other things to manage right now. But I think it means that, yes, the turnover at Spirit's been bad. The quality control, I think that's led it to the quality control problems. You want to have your hand in how those line workers are being managed, how the quality control is being handled. Yeah, it means it was really bad at Spirit, all right.

To me, it sounds like it's so bad they got to buy it, And I think that's bad. Right, If you're Boeing, you do want to preserve cash, right, you don't want to go make an acquisition. You got plenty of other things to manage right now. But I think it means that, yes, the turnover at Spirit's been bad. The quality control, I think that's led it to the quality control problems. You want to have your hand in how those line workers are being managed, how the quality control is being handled. Yeah, it means it was really bad at Spirit, all right.

The shares of Spirit Error Systems SPR is a ticker for your Bloomberg terminal, up fourteen percent a year today. Trading has resumed here, so obviously the market signing pretty high probability that something will get done here. So George, just looking at Boeing holistically, you know, as you've told us in the past. You know, this is a scale business. You've got to make as many planes as you can for that over that fixed cost base. You have talk to us about the production goals, but taught to us where they are in production today and where do they want to get to and do you think that's a reasonable glidepath.

The shares of Spirit Error Systems SPR is a ticker for your Bloomberg terminal, up fourteen percent a year today. Trading has resumed here, so obviously the market signing pretty high probability that something will get done here. So George, just looking at Boeing holistically, you know, as you've told us in the past. You know, this is a scale business. You've got to make as many planes as you can for that over that fixed cost base. You have talk to us about the production goals, but taught to us where they are in production today and where do they want to get to and do you think that's a reasonable glidepath.

So they are at thirty eight today, although they'll tell you even though their suppliers are building at thirty eight and delivering the Boeing at thirty eight, Boeing is not putting thirty eight out.

So they are at thirty eight today, although they'll tell you even though their suppliers are building at thirty eight and delivering the Boeing at thirty eight, Boeing is not putting thirty eight out.

So I don't know. There's somewhere between.

So I don't know. There's somewhere between.

They's somewhere in the high thirties.

They's somewhere in the high thirties.

Let's say it depends what month it is.

Let's say it depends what month it is.

That that's you know, their mother base is just in general.

That that's you know, their mother base is just in general.

Sorry, and that's on the seven thirty seven. Yep, that's the most important product. On the seven eight seven. You know, we're in the in the I think five is six ish area right now on seven thirty seven. You know, they've got goals to be into the fifties. They've and at the end of the last expansion phase before the pandemic, before the max crashes and groundings, you know they were they were in the sixties. They're not going to go in the sixties airbuses, you know, for the seven thirty seven. Airbus is talking about going to seventy five for the eight three twenty. So I think if you and I were inside the Boeing management meetings and they told you where they really wanted to go, they want to be up there near.

Sorry, and that's on the seven thirty seven. Yep, that's the most important product. On the seven eight seven. You know, we're in the in the I think five is six ish area right now on seven thirty seven. You know, they've got goals to be into the fifties. They've and at the end of the last expansion phase before the pandemic, before the max crashes and groundings, you know they were they were in the sixties. They're not going to go in the sixties airbuses, you know, for the seven thirty seven. Airbus is talking about going to seventy five for the eight three twenty. So I think if you and I were inside the Boeing management meetings and they told you where they really wanted to go, they want to be up there near.

Airbus.

Airbus.

They're taking a fifty to fifty complement of this market. Is that the right place to go? Yes, they're talking mid decade. Yes, probably pulling Spirit inside. Timing probably had a lot to do with that too. They thought, look, how can we stabilize this the fastest, because we don't want to keep giving away share to air Bus.

They're taking a fifty to fifty complement of this market. Is that the right place to go? Yes, they're talking mid decade. Yes, probably pulling Spirit inside. Timing probably had a lot to do with that too. They thought, look, how can we stabilize this the fastest, because we don't want to keep giving away share to air Bus.

Going to Spirit back to just for one second. We're also reporting that Spirit is exploring strategic options. So that leads me to believe that if the Boeing thing doesn't happen, they're still in deep trouble and they got to get a buyer or do something else. What would be Plan B.

Going to Spirit back to just for one second. We're also reporting that Spirit is exploring strategic options. So that leads me to believe that if the Boeing thing doesn't happen, they're still in deep trouble and they got to get a buyer or do something else. What would be Plan B.

For Spirit?

For Spirit?

Yeah?

Yeah?

Yeah, I mean when we look at Spirit spirits, you know, you know, Spirit has has a bunch of debt coming do the capital markets haven't loved them as much. I think they've they you know that some of the debt they've placed has been up in the nine percent ish level. I think the capital markets, the debt capital markets especially, have looked at the Boeing relationship and that's given them more comfort probably to give them rates that perhaps were better than what Spirit should have got. I think it, frankly, would be strategic options, you know, away from Boeing are really difficult because again some you know, some fifty to sixty I'm talking off the Kuffey I have to go pull the exact number of their revenues flow through Boeing. What I'm guessing, and that's that strategic comment, is that Spirit is probably looking at how they would spin off portions of the business that are not Boeing focused, so that, you know, so that it could continue, you know, to serve those customers. Like I said, Airbus, Lockheed, other defense companies have products that are being built by Spirit. I think They're probably looking at ways to continue to service them in an entity that would be.

Yeah, I mean when we look at Spirit spirits, you know, you know, Spirit has has a bunch of debt coming do the capital markets haven't loved them as much. I think they've they you know that some of the debt they've placed has been up in the nine percent ish level. I think the capital markets, the debt capital markets especially, have looked at the Boeing relationship and that's given them more comfort probably to give them rates that perhaps were better than what Spirit should have got. I think it, frankly, would be strategic options, you know, away from Boeing are really difficult because again some you know, some fifty to sixty I'm talking off the Kuffey I have to go pull the exact number of their revenues flow through Boeing. What I'm guessing, and that's that strategic comment, is that Spirit is probably looking at how they would spin off portions of the business that are not Boeing focused, so that, you know, so that it could continue, you know, to serve those customers. Like I said, Airbus, Lockheed, other defense companies have products that are being built by Spirit. I think They're probably looking at ways to continue to service them in an entity that would be.

Outside of Boeing.

Outside of Boeing.

You know, the fuselage building business, which is largely what Spirit does, isn't one of the great money makers in the industry. And you know, we've seen it go to some you know, to go offshore. You know, the Koreans want to be in this business, the Japanese are in this business, the Chinese are in this business. There's a lot of competition in that space, and so I think it makes it a really hard part of the business to be in to make very good returns and looks it's a space, the fuselage building space that I think Airbus has kept more inside because again they want to control their quality. So, you know, I guess that's a lot a long way of saying, I don't know that options as a complete entity away from Boeing. I don't know the great ones exist and I don't see that. My guess is they're trying to spend parts of it away, all right.

You know, the fuselage building business, which is largely what Spirit does, isn't one of the great money makers in the industry. And you know, we've seen it go to some you know, to go offshore. You know, the Koreans want to be in this business, the Japanese are in this business, the Chinese are in this business. There's a lot of competition in that space, and so I think it makes it a really hard part of the business to be in to make very good returns and looks it's a space, the fuselage building space that I think Airbus has kept more inside because again they want to control their quality. So, you know, I guess that's a lot a long way of saying, I don't know that options as a complete entity away from Boeing. I don't know the great ones exist and I don't see that. My guess is they're trying to spend parts of it away, all right.

George, thanks so much for joining us on short notice. Really appreciate it. George Ferguson, he covers the airspace business was the airlines is the whole complex over there, including the defense manufacturers. Again, Wall Street Journal first reported, now Bloomberg News matching that Boeing is in talks to acquire Spirit Aerosystems Holdings SPRS.

George, thanks so much for joining us on short notice. Really appreciate it. George Ferguson, he covers the airspace business was the airlines is the whole complex over there, including the defense manufacturers. Again, Wall Street Journal first reported, now Bloomberg News matching that Boeing is in talks to acquire Spirit Aerosystems Holdings SPRS.

The ticker Spirit is.

The ticker Spirit is.

The stock is up fifteen and a half percent today right now, So suggesting to the market believes that there is something there in s George was suggesting, Alex, it's probably something they gotta do.

The stock is up fifteen and a half percent today right now, So suggesting to the market believes that there is something there in s George was suggesting, Alex, it's probably something they gotta do.

George was awesome, Like that was great, that was great perspective, etc. Yeah, And I thought that it was really interesting that it's the fuselage business. So if you can spin off other stuff, maybe that's the profitable money maker. You can still keep the contracts with Airbus and Boeing, but it's the fuselage business. Like, that's the part that Boeing just has to basically absorb and suck up within its within its company. We'll see if that works.

George was awesome, Like that was great, that was great perspective, etc. Yeah, And I thought that it was really interesting that it's the fuselage business. So if you can spin off other stuff, maybe that's the profitable money maker. You can still keep the contracts with Airbus and Boeing, but it's the fuselage business. Like, that's the part that Boeing just has to basically absorb and suck up within its within its company. We'll see if that works.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon on Alexa from our flagship New York station Just say Alexa playing Bloomberg eleven.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon on Alexa from our flagship New York station Just say Alexa playing Bloomberg eleven.

Thirty New York Community Bank down twenty percent. All right, you know the story. It has discovered quote material weaknesses in how it tracks loan risks. They wrote down the value of the company that acquired years ago and replace its leadership to help grapple with the turmoil, there was a theory that maybe this kind of risk was idiosyncratic. They are one of the big exposures to rent control departments here in New York City that has been hurt by a revamp of some of those rent control laws. So when there's a banking potential crisis, we go to one guy, Herman cham Lumberg, Intelligence Senior analyst for US Regional banks. Herman, can we still call this idiosyncratic?

Thirty New York Community Bank down twenty percent. All right, you know the story. It has discovered quote material weaknesses in how it tracks loan risks. They wrote down the value of the company that acquired years ago and replace its leadership to help grapple with the turmoil, there was a theory that maybe this kind of risk was idiosyncratic. They are one of the big exposures to rent control departments here in New York City that has been hurt by a revamp of some of those rent control laws. So when there's a banking potential crisis, we go to one guy, Herman cham Lumberg, Intelligence Senior analyst for US Regional banks. Herman, can we still call this idiosyncratic?

It is a good question. I think it's the appropriate question.

It is a good question. I think it's the appropriate question.

What's idiosyncratic is you mentioned the exposures to commercial real estate, specifically apartment lending in office. But what's also idiosyncratic is that it recently cleared the one hundred billion dollar asset mark, which ushers in higher capital liquidity regulatory issues.

What's idiosyncratic is you mentioned the exposures to commercial real estate, specifically apartment lending in office. But what's also idiosyncratic is that it recently cleared the one hundred billion dollar asset mark, which ushers in higher capital liquidity regulatory issues.

For the bank.

For the bank.

And what's happening in our view is that it's easy to reach the big leagues of one hundred billion dollars, it looks like it's harder to stay there, right And what we're seeing is that they're facing growing pains and becoming such a bigger company, and these lack of material weakness and internal controls just reflects.

And what's happening in our view is that it's easy to reach the big leagues of one hundred billion dollars, it looks like it's harder to stay there, right And what we're seeing is that they're facing growing pains and becoming such a bigger company, and these lack of material weakness and internal controls just reflects.

That change in management. Is that usually doesn't look good, right, I guess that's contributing to the stock here today. But tell us about that.

That change in management. Is that usually doesn't look good, right, I guess that's contributing to the stock here today. But tell us about that.

Yeah.

Yeah.

Sure.

Sure.

So a few years back, the bank acquired another institution called Flagstar Bank, and the CEO of Flagstar Bank is now the CEO of NYCB. He was named the executive chairman back earlier in February once these issues became apparent, and it looks like the former CEO it just has been sidelined because of.

So a few years back, the bank acquired another institution called Flagstar Bank, and the CEO of Flagstar Bank is now the CEO of NYCB. He was named the executive chairman back earlier in February once these issues became apparent, and it looks like the former CEO it just has been sidelined because of.

The need for new management.

The need for new management.

Okay, So what's interesting is that if we rewind to when they were able to buy with a signature correct, some signature assets, right, it was like, oh, look, yay, they were the savior, et cetera. Is that gonna are regulator is going to rethink what being a bank savior is in that circumstance.

Okay, So what's interesting is that if we rewind to when they were able to buy with a signature correct, some signature assets, right, it was like, oh, look, yay, they were the savior, et cetera. Is that gonna are regulator is going to rethink what being a bank savior is in that circumstance.

Yeah, that's a great question, and I think it really poses a different question. Was New Your Community the right bank to acquire the signature assets and deposits if we knew, if the regulators should have known, that New Community wasn't really up to snuff up the speed on a number of these internal issues, capital issues, liquidity issues, and reserve issues. So, uh, does do the bank layers need to be more cognizant of what they're doing and anointing of potential savior and a year later, now this bank is in the crossairs.

Yeah, that's a great question, and I think it really poses a different question. Was New Your Community the right bank to acquire the signature assets and deposits if we knew, if the regulators should have known, that New Community wasn't really up to snuff up the speed on a number of these internal issues, capital issues, liquidity issues, and reserve issues. So, uh, does do the bank layers need to be more cognizant of what they're doing and anointing of potential savior and a year later, now this bank is in the crossairs.

What one of the lessons I'd take away from this story is I think a basic fundamental investing lesson, which is kind of concentration risk. Look like, had so much exposure to this type of loan class i e. Loans to rent controlled apartments, that presents a whole level of risk. I either not diversified in their portfolio as much as maybe we would like. But I guess if you were investor in YCV, you knew that going in, right, Yes, you knew that.

What one of the lessons I'd take away from this story is I think a basic fundamental investing lesson, which is kind of concentration risk. Look like, had so much exposure to this type of loan class i e. Loans to rent controlled apartments, that presents a whole level of risk. I either not diversified in their portfolio as much as maybe we would like. But I guess if you were investor in YCV, you knew that going in, right, Yes, you knew that.

Going in that this was the bank that has historically focused on the rent regulated apartment lending sector. There they're the big ahuna in this niche business and they've been doing it for decades.

Going in that this was the bank that has historically focused on the rent regulated apartment lending sector. There they're the big ahuna in this niche business and they've been doing it for decades.

So that's not new.

So that's not new.

And you should have known that a few years back when when New York imposed tougher regulations, that this was going to hurt their their main business.

And you should have known that a few years back when when New York imposed tougher regulations, that this was going to hurt their their main business.

So it's taken a few years for just to really bore itself out.

So it's taken a few years for just to really bore itself out.

Also, maybe an investor should know, but the company also should have known, Like that part couldn't have come as a surprise from that end.

Also, maybe an investor should know, but the company also should have known, Like that part couldn't have come as a surprise from that end.

No, but they're risking controls. That's a real problem exactly.

No, but they're risking controls. That's a real problem exactly.

And now they're trying to do what is this risk, synthetic risk something something. So basically the aesthetics sounds.

And now they're trying to do what is this risk, synthetic risk something something. So basically the aesthetics sounds.

Not great, but synthetic the rid of a transaction to help reduce their their loan exposures and improve their capital. So that's one way to get rid of or improve their capital without actually selling the loans.

Not great, but synthetic the rid of a transaction to help reduce their their loan exposures and improve their capital. So that's one way to get rid of or improve their capital without actually selling the loans.

All right, for our listeners and viewers that are not exposed to New York RAN controlled real estate, talk to us about the regional banks in general. What's kind of the feeling. And you talk to investors today, are they warming up to this? I know it's bounced off that October low, right, but I'm not sure if that's a market bouncer. People are saying, I think I've seen the worst in regional banks.

All right, for our listeners and viewers that are not exposed to New York RAN controlled real estate, talk to us about the regional banks in general. What's kind of the feeling. And you talk to investors today, are they warming up to this? I know it's bounced off that October low, right, but I'm not sure if that's a market bouncer. People are saying, I think I've seen the worst in regional banks.

It's it's an interesting question. You're right that they've bounced. But now a number of folks in the market are saying potentially no rate cuts this year, which would be viewed as negative for the regional banks, just because the positive costs have risen.

It's it's an interesting question. You're right that they've bounced. But now a number of folks in the market are saying potentially no rate cuts this year, which would be viewed as negative for the regional banks, just because the positive costs have risen.

Yeah, cuts because the economy is good and accelerating, So wouldn't.

Yeah, cuts because the economy is good and accelerating, So wouldn't.

That be good?

That be good?

There's two things that that weigh on that.

There's two things that that weigh on that.

Number One, there's not a lot of loan growth and rate cuts would improve loan demand. And number two, elevated interest rates is bad for credit quality and being able to refinance the existing loans.

Number One, there's not a lot of loan growth and rate cuts would improve loan demand. And number two, elevated interest rates is bad for credit quality and being able to refinance the existing loans.

And the decline and value.

And the decline and value.

In areas like office commercial real estate could hamper banks credit quality.

In areas like office commercial real estate could hamper banks credit quality.

So where are we all on that commercial real estate risk? I kind of feel like it's a time bombs still out there, and at any time over the next two or three or four years, maybe multiple times over that timeframe, we're gonna have bank a or group of banks are going to call out CIRI is a reason why they really missed or they have to really up their reserves or.

So where are we all on that commercial real estate risk? I kind of feel like it's a time bombs still out there, and at any time over the next two or three or four years, maybe multiple times over that timeframe, we're gonna have bank a or group of banks are going to call out CIRI is a reason why they really missed or they have to really up their reserves or.

Something like that. Where are we on that?

Something like that. Where are we on that?

Yeah, that continues to play out. We saw that with your community in the fourth quarter. We'd expect more of that going ahead in the coming quarters. That being said, the risk in our view is really relegated to the smaller banking institutions.

Yeah, that continues to play out. We saw that with your community in the fourth quarter. We'd expect more of that going ahead in the coming quarters. That being said, the risk in our view is really relegated to the smaller banking institutions.

We just looked at some data which I think was pretty interesting. Since the.

We just looked at some data which I think was pretty interesting. Since the.

COVID era starting in twenty nineteen, the top twenty five US banks have grown their commercial real estate loans by only two percent, and then the large the smallest banks have grown their commercial real estate by forty three percent. So that shows me that really the risk is comprised largely in the smaller bank cohort.

COVID era starting in twenty nineteen, the top twenty five US banks have grown their commercial real estate loans by only two percent, and then the large the smallest banks have grown their commercial real estate by forty three percent. So that shows me that really the risk is comprised largely in the smaller bank cohort.

That's interesting. So let me ask a question. Went back to the FED cut, So if we don't get a cut for this year, let's just pretend game out.

That's interesting. So let me ask a question. Went back to the FED cut, So if we don't get a cut for this year, let's just pretend game out.

Did that just Torton wor other people know it's just Torston? I think.

Did that just Torton wor other people know it's just Torston? I think.

I think a couple of weeks ago people were talking about the worry that we may have to have another hike because inflation was reaccelerating. But this is maybe the first I've heard of no cuts at all. So if that happens and there's no cuts, who's going to be under pressure? I mean, you mentioned the fact that a cut would help loan demand, So who's already seeing sketchy loan demand?

I think a couple of weeks ago people were talking about the worry that we may have to have another hike because inflation was reaccelerating. But this is maybe the first I've heard of no cuts at all. So if that happens and there's no cuts, who's going to be under pressure? I mean, you mentioned the fact that a cut would help loan demand, So who's already seeing sketchy loan demand?

Right?

Right?

So that's an industry phenomenon where where we're not seeing loan growth across the group. The FED puts out weekly data and it shows that loans are down quarter to day in commercial loans, so that's a big driver of the regional bank the large region on bank balance.

So that's an industry phenomenon where where we're not seeing loan growth across the group. The FED puts out weekly data and it shows that loans are down quarter to day in commercial loans, so that's a big driver of the regional bank the large region on bank balance.

Sheets, so that's hampered. It's going to affect.

Sheets, so that's hampered. It's going to affect.

Banks like probably New York community the most because any potential rate cuts review as a savior for them because then their borrowers could refinance at rates.

Banks like probably New York community the most because any potential rate cuts review as a savior for them because then their borrowers could refinance at rates.

All right, Herman, thanks so much for joining us. Hermy Chands, senior analysts for the banks, joining us here in our Bloomberg Interactive Broker Studio.

All right, Herman, thanks so much for joining us. Hermy Chands, senior analysts for the banks, joining us here in our Bloomberg Interactive Broker Studio.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Affocarplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Affocarplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.

This is the.

This is the.

Bloomberg Intelligence Radio Show. We bring you great analysis with all our Bloomberg Intelligence folks. Two thousand companies, one hundred and thirty industries. You want to know about it, they cover it. We also like to give you a perspective of how to invest on a broader level, particularly on a day where the data My point to, maybe we're going to get some fed cuts, but then Tauris and Slackowapaula said, you're not going to get any cuts this year because the economy is just actually accelerating. Things are too strong. So Anna Rappern joins us now she is CIO at CBIZ Investment Advisory Service. Says Anna, do you agree with Torsten Slock maybe or what's the case for no cuts at all this year?

Bloomberg Intelligence Radio Show. We bring you great analysis with all our Bloomberg Intelligence folks. Two thousand companies, one hundred and thirty industries. You want to know about it, they cover it. We also like to give you a perspective of how to invest on a broader level, particularly on a day where the data My point to, maybe we're going to get some fed cuts, but then Tauris and Slackowapaula said, you're not going to get any cuts this year because the economy is just actually accelerating. Things are too strong. So Anna Rappern joins us now she is CIO at CBIZ Investment Advisory Service. Says Anna, do you agree with Torsten Slock maybe or what's the case for no cuts at all this year?

I don't know about no cuts, but I think it's certainly difficult for the FED to raise rates at this time or at least looking out into twenty twenty four. And it's not just the inflation, it's their target of two percent. It has been really sticky. Sticky doesn't mean it's not falling sticky me that's falling very slowly and that it's very very bumpy. So either the FED is going to have to accept a higher than two percent inflation rate and call it maybe the momentum is heading down and start to normalize rates, or they may have to be higher for longer. That may be one cut, maybe two cuts, maybe no cuts. But I think no cuts is that's a pretty hockey shew.

I don't know about no cuts, but I think it's certainly difficult for the FED to raise rates at this time or at least looking out into twenty twenty four. And it's not just the inflation, it's their target of two percent. It has been really sticky. Sticky doesn't mean it's not falling sticky me that's falling very slowly and that it's very very bumpy. So either the FED is going to have to accept a higher than two percent inflation rate and call it maybe the momentum is heading down and start to normalize rates, or they may have to be higher for longer. That may be one cut, maybe two cuts, maybe no cuts. But I think no cuts is that's a pretty hockey shew.

He's certainly got some airtime if nothing else today, Anna, what do you think about this kind of soft landing scenario that seems to be out there? People kind of feel like I think the Fed's doing a pretty good job here negotiating a soft landing. You buy into that, well, I think.

He's certainly got some airtime if nothing else today, Anna, what do you think about this kind of soft landing scenario that seems to be out there? People kind of feel like I think the Fed's doing a pretty good job here negotiating a soft landing. You buy into that, well, I think.

You have to look at the underlying risks that are in the markets. I mean, there's the labor market. You know, weakness in the fringes that we've seen, and this is sort of like, you know, what would a recession look like if we didn't have external shocks? If you think about the last three recessions that we had, they all came from crazy external shocks. How often do you have a pandemic? How do you often do you have a global financial crisis? Maybe there's a tech bubble. I don't know, depends on who you asked, but that was in the late nineties. These are sort of triggered by outside factors. If you have a normal economic cycle where you really have like a natural boom and bust, you're going to see weakness around the fringes. And I think we're starting to see that and in the consumers labor market as well as delinquency rates, et cetera. And you're starting to see some cracks in the markets, especially with New York Community Bank, right, I mean, was news that came out. We started to see some cracks about a year ago, it's almost a one year anniversary, and here we are in twenty twenty four talking about banks again.

You have to look at the underlying risks that are in the markets. I mean, there's the labor market. You know, weakness in the fringes that we've seen, and this is sort of like, you know, what would a recession look like if we didn't have external shocks? If you think about the last three recessions that we had, they all came from crazy external shocks. How often do you have a pandemic? How do you often do you have a global financial crisis? Maybe there's a tech bubble. I don't know, depends on who you asked, but that was in the late nineties. These are sort of triggered by outside factors. If you have a normal economic cycle where you really have like a natural boom and bust, you're going to see weakness around the fringes. And I think we're starting to see that and in the consumers labor market as well as delinquency rates, et cetera. And you're starting to see some cracks in the markets, especially with New York Community Bank, right, I mean, was news that came out. We started to see some cracks about a year ago, it's almost a one year anniversary, and here we are in twenty twenty four talking about banks again.

So does that would that be a call then to sell the rally in small caps because what you're describing is really great for large cap companies and really bad for the small guys.

So does that would that be a call then to sell the rally in small caps because what you're describing is really great for large cap companies and really bad for the small guys.

Well, I mean, I think the small caps have been telling us that it's been pretty uncertain because.

Well, I mean, I think the small caps have been telling us that it's been pretty uncertain because.

They've outperformed Anna and the short term they have outperformed.

They've outperformed Anna and the short term they have outperformed.

Yes, yes, so short term they've outperformed because the yields came down, right. So if we're talking about a higher for longer scenario, I mean, look at the ten year today, it's falling pretty dramatically and yesterday as well. I mean, small caps tend to like these things. But if we're talking about a higher for longer, we're talking about a pretty volatile rate environment where it can definitely go back up, and when it goes back up, it sort of supports that higher for longer narrative, and that's not as friendly for small stocks.

Yes, yes, so short term they've outperformed because the yields came down, right. So if we're talking about a higher for longer scenario, I mean, look at the ten year today, it's falling pretty dramatically and yesterday as well. I mean, small caps tend to like these things. But if we're talking about a higher for longer, we're talking about a pretty volatile rate environment where it can definitely go back up, and when it goes back up, it sort of supports that higher for longer narrative, and that's not as friendly for small stocks.

How About on the fixed income side here, I'm looking at you know, just the to your treasure for example, what's pulling back today off a seven basis points but you know, you're still getting north of four and a half percent for a two years. How do you kind of advise your clients I think about the fixed income.

How About on the fixed income side here, I'm looking at you know, just the to your treasure for example, what's pulling back today off a seven basis points but you know, you're still getting north of four and a half percent for a two years. How do you kind of advise your clients I think about the fixed income.

Space, Well, so depending on why you're investing in fixed income, I think that that reason is very important. Look, I mean, yield is very, very attractive, and so even if you have some sell off on and some headwind on the price, there's enough yield there to cushion some of that below so that we're not talking about the same environment as before the FED started to raise rates, right, So we're less sensitive to price changes, so we do invest for yield, especially on the shorter end. We are keeping durraser a little bit on the shorter side because of some of the volatility that we were expecting on the longer end of the curve.

Space, Well, so depending on why you're investing in fixed income, I think that that reason is very important. Look, I mean, yield is very, very attractive, and so even if you have some sell off on and some headwind on the price, there's enough yield there to cushion some of that below so that we're not talking about the same environment as before the FED started to raise rates, right, So we're less sensitive to price changes, so we do invest for yield, especially on the shorter end. We are keeping durraser a little bit on the shorter side because of some of the volatility that we were expecting on the longer end of the curve.

So is that a steep Nerd trade then.

So is that a steep Nerd trade then.

Yes, I mean we're not like that.

Yes, I mean we're not like that.

He doesn't like to talk about steepeners. But because a steep nerd trade has been real.

He doesn't like to talk about steepeners. But because a steep nerd trade has been real.

Rough, Oh yes it has.

Rough, Oh yes it has.

And I think that's because every time the FED comes out and says, well, you know, we we're thinking about cutting rates, we're thinking about doing this, that I think the markets interpret that to be Okay, the FED is going to be dubbish and the financial conditions loosen and then it tightens again. I think it's that volatility that's very hard to stummch for some of our investors. So keeping duration a little bit on the shorter side to minimize some of that price impact is sort of our goal.

And I think that's because every time the FED comes out and says, well, you know, we we're thinking about cutting rates, we're thinking about doing this, that I think the markets interpret that to be Okay, the FED is going to be dubbish and the financial conditions loosen and then it tightens again. I think it's that volatility that's very hard to stummch for some of our investors. So keeping duration a little bit on the shorter side to minimize some of that price impact is sort of our goal.

How about on in the credit space here, should I be willing to go out there and maybe take some credit risk in in an effort to maybe goose up my yield here, So we're.

How about on in the credit space here, should I be willing to go out there and maybe take some credit risk in in an effort to maybe goose up my yield here, So we're.

Talking about credit spreads or every talking about treasure yields, because the treasury yields are very very attractive, and of course you put the credit spreads on top of that, it's even more attractive. But we are a little bit more careful on credit, especially on high yield. I believe our high yield is at the lowest that we're in tern a percentage that willing to go it is still a very attractive yield. Again, there's some cushion for some of the price volatility. But when high yield spread widens, that widens pretty quickly. There's a big price action there on the negative side that we don't necessarily want to participate in. So we're staying on the investment grade credit. As we all know, that market has been very very healthy in terms of new issuance, in terms of demand, and so we are there at the moment. I can't tell you that we'll be there next month, but we're certainly for now. We've been clipping very nice coupon on that on that front.

Talking about credit spreads or every talking about treasure yields, because the treasury yields are very very attractive, and of course you put the credit spreads on top of that, it's even more attractive. But we are a little bit more careful on credit, especially on high yield. I believe our high yield is at the lowest that we're in tern a percentage that willing to go it is still a very attractive yield. Again, there's some cushion for some of the price volatility. But when high yield spread widens, that widens pretty quickly. There's a big price action there on the negative side that we don't necessarily want to participate in. So we're staying on the investment grade credit. As we all know, that market has been very very healthy in terms of new issuance, in terms of demand, and so we are there at the moment. I can't tell you that we'll be there next month, but we're certainly for now. We've been clipping very nice coupon on that on that front.

Okay, So that's a good point because so you're you're in the investment grade market, but that's for the coupon. In the tragy market, are you there for price appreciation or are you there for the coupon.

Okay, So that's a good point because so you're you're in the investment grade market, but that's for the coupon. In the tragy market, are you there for price appreciation or are you there for the coupon.

We're there for the coupon because again, rates are so volatile that we sort of have to ignore it as noise for the time being, and we're there to clip the coupon. So we were there for a while now, especially after let's say in twenty twenty three, about halfway into twenty twenty three, we increase duration, we increase our fixed income exposure to participate on that yield, and a lot of our clients are actually looking for that yield, so that made sense for us.

We're there for the coupon because again, rates are so volatile that we sort of have to ignore it as noise for the time being, and we're there to clip the coupon. So we were there for a while now, especially after let's say in twenty twenty three, about halfway into twenty twenty three, we increase duration, we increase our fixed income exposure to participate on that yield, and a lot of our clients are actually looking for that yield, so that made sense for us.

So Anna, the issue here is for a lot of folks is what is our federal reserve going to do. And you know, again there's lots of competing calls out there, but overall, where do you think the risk profile for this market is? Do you think people are willing to take risk when when you talk to your clients, are they a little bit more risk adverse?

So Anna, the issue here is for a lot of folks is what is our federal reserve going to do. And you know, again there's lots of competing calls out there, but overall, where do you think the risk profile for this market is? Do you think people are willing to take risk when when you talk to your clients, are they a little bit more risk adverse?

It's mixed, So there's definitely fomo, but there are people who, especially small business owners, they see some of the you know, some of them see strength, some of them definitely see weaknesses, and a lot of them tell us that this market doesn't make sense to them. So what is priced into the markets right now is a lot of optimism, including the area where FED starts to cut, and if that doesn't materialize, I think that the markets may be in for a surprise, and a lot of our clients are definitely thinking in that way. The valuations, you know, the numbers don't sit very well with them. So certainly there's some fear, but you know, there's always a pusson pool between fomo and fear.

It's mixed, So there's definitely fomo, but there are people who, especially small business owners, they see some of the you know, some of them see strength, some of them definitely see weaknesses, and a lot of them tell us that this market doesn't make sense to them. So what is priced into the markets right now is a lot of optimism, including the area where FED starts to cut, and if that doesn't materialize, I think that the markets may be in for a surprise, and a lot of our clients are definitely thinking in that way. The valuations, you know, the numbers don't sit very well with them. So certainly there's some fear, but you know, there's always a pusson pool between fomo and fear.

Right, Yeah, I definitely have some fomo, but I'm also like soup cans under my bag kind of gal so Anna thanks a lot, really appreciate it. In a Rathburn cio at Sibiz Investment Advisory Services.

Right, Yeah, I definitely have some fomo, but I'm also like soup cans under my bag kind of gal so Anna thanks a lot, really appreciate it. In a Rathburn cio at Sibiz Investment Advisory Services.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

We did see paul A Spike once we got the ism and the you mish in the S and P like I get, we're only up one tenth of one percent and definitely buying coming into the front end. It's like buy everything. It's okay, the Fed's gonna cut not at all what torrest and slock was saying, No, no.

We did see paul A Spike once we got the ism and the you mish in the S and P like I get, we're only up one tenth of one percent and definitely buying coming into the front end. It's like buy everything. It's okay, the Fed's gonna cut not at all what torrest and slock was saying, No, no.

Tors and side. We justaid Torson slock On saying economy is better than expected. Well, these numbers don't show that.

Tors and side. We justaid Torson slock On saying economy is better than expected. Well, these numbers don't show that.

They don't, so let's kind of understand what's going on. Tim Fiori is chair of the Institute for Supply Management, so he's the ISM GUYE. So he does all the stuff, He does all the surveys, he knows the things, and just to recap ism manufacturing coming in light of forty seven point eight the new orders, though slipping below fifty, All right, Tim, what happened.

They don't, so let's kind of understand what's going on. Tim Fiori is chair of the Institute for Supply Management, so he's the ISM GUYE. So he does all the stuff, He does all the surveys, he knows the things, and just to recap ism manufacturing coming in light of forty seven point eight the new orders, though slipping below fifty, All right, Tim, what happened.

Was going on? So Alex, it was actually a pretty good month.

Was going on? So Alex, it was actually a pretty good month.

So what's actually happening on the number side is seasonal adjustment factors. So we got a huge benefit in January from seasonal factors, and we got a huge deducted in February from seasonal factors. If you look at the raw numbers, we're actually positive in February compared to January, which you would normally expect to see anyway. So overall, you know, go, I go through the ten sub inducs, I categorize them as positive, negative, or mixed for the month, and I determined all the sub inducks were positive for the month. So let me let me support this whole thing on the demand side, because the new order number is the one that's going to really.

So what's actually happening on the number side is seasonal adjustment factors. So we got a huge benefit in January from seasonal factors, and we got a huge deducted in February from seasonal factors. If you look at the raw numbers, we're actually positive in February compared to January, which you would normally expect to see anyway. So overall, you know, go, I go through the ten sub inducs, I categorize them as positive, negative, or mixed for the month, and I determined all the sub inducks were positive for the month. So let me let me support this whole thing on the demand side, because the new order number is the one that's going to really.

Flash out of people.

Flash out of people.

By far, the majority of our comments around softening demand is decreased in half, so many fewer panelists are commenting about softer orders, which is a positive thing. Our sentiment around future demand is still running at about two to one. You know, we peaked at ten or twelve to one, you know, many many months ago, but two to one still says we have a predominant amount of people saying that things in the future are going to get better. You know, I've been tracking the percent of respondents that are below fifty industry sectors and the ones that are below forty five, which is a real warning sign.

By far, the majority of our comments around softening demand is decreased in half, so many fewer panelists are commenting about softer orders, which is a positive thing. Our sentiment around future demand is still running at about two to one. You know, we peaked at ten or twelve to one, you know, many many months ago, but two to one still says we have a predominant amount of people saying that things in the future are going to get better. You know, I've been tracking the percent of respondents that are below fifty industry sectors and the ones that are below forty five, which is a real warning sign.

So I think last month under forty five we were twenty seven.

So I think last month under forty five we were twenty seven.

Back in January, twenty seven percent of manufacturing was contracting in forty five or less.

Back in January, twenty seven percent of manufacturing was contracting in forty five or less.

This month is one percent.

This month is one percent.

Wow.

Wow.

And then on the overall contraction under fifty last month was in the range of sixty five. This month we're in the range of forty. So overall we're moving in the right direction. This is going to be a slow recovery. I think the month of February indicated that, yes, January was a pivot month. We're starting to grow again. The headline number is and showing that with the detail underneath supports for sure. So I think the man is coming back, for sure, especially with the raw number being up.

And then on the overall contraction under fifty last month was in the range of sixty five. This month we're in the range of forty. So overall we're moving in the right direction. This is going to be a slow recovery. I think the month of February indicated that, yes, January was a pivot month. We're starting to grow again. The headline number is and showing that with the detail underneath supports for sure. So I think the man is coming back, for sure, especially with the raw number being up.

Okay, So how about so tim four us folks that just kind of look at the headline number, What am I going to see a I in manufacturing number north of fifty? When do you think we're going to see that and see a little bit of growth in manufacturing ecounomy.

Okay, So how about so tim four us folks that just kind of look at the headline number, What am I going to see a I in manufacturing number north of fifty? When do you think we're going to see that and see a little bit of growth in manufacturing ecounomy.

I think it's very possible in March. I've been saying that for the last three four months. It's very possible that we could see it over fifty in March. You know, you know, the seasonal factors are an interesting thing. I'm a big believer in seasonal factors. We had three years of no seasonality, and those three years are now factoring into our seasonal adjustment factors. You know, we had, for instance, on the new order side, we actually up the January new order number up four point two points in January and we're now deducting four point three. So there's some real voluti going in here because of what happened in the pandemic is your carryover effects. But so you look at both elements, look at the seasonal factor, look at the non seasonal factor.

I think it's very possible in March. I've been saying that for the last three four months. It's very possible that we could see it over fifty in March. You know, you know, the seasonal factors are an interesting thing. I'm a big believer in seasonal factors. We had three years of no seasonality, and those three years are now factoring into our seasonal adjustment factors. You know, we had, for instance, on the new order side, we actually up the January new order number up four point two points in January and we're now deducting four point three. So there's some real voluti going in here because of what happened in the pandemic is your carryover effects. But so you look at both elements, look at the seasonal factor, look at the non seasonal factor.

We're definitely heading in the right direction.

We're definitely heading in the right direction.

And I think the other thing here is on the production side, we again were generally stable to the prior month, so revenue continues to be stable, which is good. We continue to take headcount out to match the future projections. At least within the next six months. We're running at about a one to one hired to force managed ratio, with half of the force managed activity being layoffs, so people are a little bit more urgent and eliminating the head count compared compared to where they were in September October.

And I think the other thing here is on the production side, we again were generally stable to the prior month, so revenue continues to be stable, which is good. We continue to take headcount out to match the future projections. At least within the next six months. We're running at about a one to one hired to force managed ratio, with half of the force managed activity being layoffs, so people are a little bit more urgent and eliminating the head count compared compared to where they were in September October.

I think that's all positive.

I think that's all positive.

And then for the first time in many, many months, I think sixteen, the supply base is now stiffening up. For the first time in many months, we've now gone to an environment where the suppliers are struggling to deliver. So that's all positive. It means demand is aggregating at the lowest level and we're now starting to feel the impacts of it.

And then for the first time in many, many months, I think sixteen, the supply base is now stiffening up. For the first time in many months, we've now gone to an environment where the suppliers are struggling to deliver. So that's all positive. It means demand is aggregating at the lowest level and we're now starting to feel the impacts of it.

So this is why we love having Tim on because you look at the headline number and we're all like, oh, oh, this isn't good here, and we get the idea and we get the real data behind those numbers. So maybe when Torston's Slock says the economy is better than expected, maybe that's true. Tim. I know you're not an economist or a FED official or Torsten's Slock, but is the economy better than we think?

So this is why we love having Tim on because you look at the headline number and we're all like, oh, oh, this isn't good here, and we get the idea and we get the real data behind those numbers. So maybe when Torston's Slock says the economy is better than expected, maybe that's true. Tim. I know you're not an economist or a FED official or Torsten's Slock, but is the economy better than we think?

Well?

Well?

I think Alix, you and I have talked about this for many months now, back in the August timeframe. I think in September, I came out with the declaration I think we're in the trough, and I think we've been in the trough since August. The thing I didn't have any insight into is when did we get to climb out of it. Then we did our forecast back in December before Chairman Powell releases predictions on twenty twenty four, the most important one being I'm pretty much going to cap out increases and then by the time we get to twenty twenty six, sometime I might get get to the two percent. So at that point we already had a very positive forecast of twenty twenty four and that just provided really good tailwinds to help us through. And then you know, last month I said, I think we've now started to climb out of the trough. And I think this month supports that it's unfortunate that the seasonal factors are so fluid here, but that will all stabilize. March and April are really strong manufacturing months. We probably will have significant seasonal factors to overcome. I think, like I said, we're not on a huge ramp up here in terms of the expansion. It's going to be slow and gradual, but we're going to be expanding nonetheless, so I think we'll probably break the fifty mark in March April for sure.

I think Alix, you and I have talked about this for many months now, back in the August timeframe. I think in September, I came out with the declaration I think we're in the trough, and I think we've been in the trough since August. The thing I didn't have any insight into is when did we get to climb out of it. Then we did our forecast back in December before Chairman Powell releases predictions on twenty twenty four, the most important one being I'm pretty much going to cap out increases and then by the time we get to twenty twenty six, sometime I might get get to the two percent. So at that point we already had a very positive forecast of twenty twenty four and that just provided really good tailwinds to help us through. And then you know, last month I said, I think we've now started to climb out of the trough. And I think this month supports that it's unfortunate that the seasonal factors are so fluid here, but that will all stabilize. March and April are really strong manufacturing months. We probably will have significant seasonal factors to overcome. I think, like I said, we're not on a huge ramp up here in terms of the expansion. It's going to be slow and gradual, but we're going to be expanding nonetheless, so I think we'll probably break the fifty mark in March April for sure.

Hey, Tim, any particular industry out there leading the way or is there any industry kind of holding back this US manufacturing?

Hey, Tim, any particular industry out there leading the way or is there any industry kind of holding back this US manufacturing?

Yeah, thanks Paul.

Yeah, thanks Paul.

So, I mean the one I've been watching for three years now is chemical products coming back to an expansion mode because they support the other seventeen industry sectors.

So, I mean the one I've been watching for three years now is chemical products coming back to an expansion mode because they support the other seventeen industry sectors.

Chemical products is positive.

Chemical products is positive.

It's expanding at about a fifty one to fifty two in the month of February for the first time in many, many months. But we've had five or six months of improving in chemical products, so that just continues to support the story. And then also in the month of February, fabricated metal products, which is another feeding industry sector. They generally don't sell anything direct to the consumers themselves. They sell it to other companies that then convert it and sell it. That's our strong that's one of our strongest industry sectors for the month of February. Two in the positive territory, I think the number was fifty one fifty two, So two of the big big feeder industry sectors that support growth overall are in the positive territory.

It's expanding at about a fifty one to fifty two in the month of February for the first time in many, many months. But we've had five or six months of improving in chemical products, so that just continues to support the story. And then also in the month of February, fabricated metal products, which is another feeding industry sector. They generally don't sell anything direct to the consumers themselves. They sell it to other companies that then convert it and sell it. That's our strong that's one of our strongest industry sectors for the month of February. Two in the positive territory, I think the number was fifty one fifty two, So two of the big big feeder industry sectors that support growth overall are in the positive territory.

I think that's a very good sign.

I think that's a very good sign.

Transportation has gotten a little bit weaker than it has been. We're still expanding at a fifty and some change. Okay, food and beverage is contracting. It's probably of our big six industries that we follow, it's the one that's probably the weakest. But I've come to learn that there's a real seasonal factor in the food and beverage industry, and we're at the bottom end of that seasonal factor.

Transportation has gotten a little bit weaker than it has been. We're still expanding at a fifty and some change. Okay, food and beverage is contracting. It's probably of our big six industries that we follow, it's the one that's probably the weakest. But I've come to learn that there's a real seasonal factor in the food and beverage industry, and we're at the bottom end of that seasonal factor.

Now.

Now.

They did really well in Q four, they've done really weekly in January February they expected to. That's our number three industry sector. So back by the time we heard April that's gonna come out of the it's going to pass fifty and move on, and that supports the whole PMI expansion over fifty in the March April.

They did really well in Q four, they've done really weekly in January February they expected to. That's our number three industry sector. So back by the time we heard April that's gonna come out of the it's going to pass fifty and move on, and that supports the whole PMI expansion over fifty in the March April.

TIMEA Hey, Tim, thanks so much. You know what, I'm gonna give you an unsolicited room rader here, I mean your room raider in the background. It's fine, but the fact is you're in Miami, Tim, you should have we should have the background be like the ocean or your yacht on the inner Coastal Waterway. So if you can work on that that that'd be great.

TIMEA Hey, Tim, thanks so much. You know what, I'm gonna give you an unsolicited room rader here, I mean your room raider in the background. It's fine, but the fact is you're in Miami, Tim, you should have we should have the background be like the ocean or your yacht on the inner Coastal Waterway. So if you can work on that that that'd be great.

It's even better. I'm a Jupiter.

It's even better. I'm a Jupiter.

Ah, there you go. That's what I'm talking about. Golf course. Then Tim Fury, thanks so much for joining us, Chairman of the Manufacturing Business Survey for the Institute for Supply Management. Again, headline numbers not looking so great, but if you go under the surface, Tim suggesting there's some strength out there, so I appreciate it his time.

Ah, there you go. That's what I'm talking about. Golf course. Then Tim Fury, thanks so much for joining us, Chairman of the Manufacturing Business Survey for the Institute for Supply Management. Again, headline numbers not looking so great, but if you go under the surface, Tim suggesting there's some strength out there, so I appreciate it his time.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple card Play and Android Auto with the Bloomberg Business at You can also listen live on Amazon Alexa from our flagship New York station just say Alexa playing Bloomberg eleven.

You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple card Play and Android Auto with the Bloomberg Business at You can also listen live on Amazon Alexa from our flagship New York station just say Alexa playing Bloomberg eleven.

Let's get back some of the ECO data. At the top of the ten University of Michigan sentiment, the final read for February coming in a bit lighter. Current conditions revised lower as well, and expectations revised lower as well. We want to get to the bottom of it. Joan Chu, University of Michigan Surveys of Consumers Director joins us. Now the revision lower. Joeanne, what happened there.

Let's get back some of the ECO data. At the top of the ten University of Michigan sentiment, the final read for February coming in a bit lighter. Current conditions revised lower as well, and expectations revised lower as well. We want to get to the bottom of it. Joan Chu, University of Michigan Surveys of Consumers Director joins us. Now the revision lower. Joeanne, what happened there.

You know, essentially it edged down just a little bit. It was not much of a change at all, and essentially we should interpret this as moving sideways between January and February. Essentially, consumers haven't really noticed any material changes in the state of the economy since the start of the year, and that comes through in our data. At the same time, it's also solidifying the really enormous games that we saw in December and January. We're still almost thirty percent above where we were in November. That hasn't really changed even with this little wiggle this month. So consumers feeling better than last fall, feeling about the same as last month.

You know, essentially it edged down just a little bit. It was not much of a change at all, and essentially we should interpret this as moving sideways between January and February. Essentially, consumers haven't really noticed any material changes in the state of the economy since the start of the year, and that comes through in our data. At the same time, it's also solidifying the really enormous games that we saw in December and January. We're still almost thirty percent above where we were in November. That hasn't really changed even with this little wiggle this month. So consumers feeling better than last fall, feeling about the same as last month.

I guess a lot of folks, uh, Joanne, right now, given some of the inflation data we saw in January, CPI and PPI and so on, maybe concerned and maybe inflation's coming back into this economy. Are you seeing that in any of.

I guess a lot of folks, uh, Joanne, right now, given some of the inflation data we saw in January, CPI and PPI and so on, maybe concerned and maybe inflation's coming back into this economy. Are you seeing that in any of.

Your survey work.

Your survey work.

No, Consumers broadly have felt pretty assured that the slowdown in inflation is going to continue. You know, the data that the that these new inflation numbers came from comes from consumer reflects consumers experiences last month. You know, it comes in at a lag, so consumers already notice those prices around them and any changes in prices. And you know last year we were seeing quite a bit of volatility see sawing and inflation expectations in January and February exactly the same.

No, Consumers broadly have felt pretty assured that the slowdown in inflation is going to continue. You know, the data that the that these new inflation numbers came from comes from consumer reflects consumers experiences last month. You know, it comes in at a lag, so consumers already notice those prices around them and any changes in prices. And you know last year we were seeing quite a bit of volatility see sawing and inflation expectations in January and February exactly the same.

So, Joanne, what are we going to be looking for for the preliminary read then for March, like, what are going to be like the standouts that you're looking at.

So, Joanne, what are we going to be looking for for the preliminary read then for March, like, what are going to be like the standouts that you're looking at.

The main thing we want to look for in the months ahead is whether this thirty percent game that we saw in December and January, whether that's actually going to stick given how dramatic those increases were. You know, so far the February week confirm that. Let's see if that stays put in March and April. And you know, as mentioned, inflation expectations absolutely top of mind for consumers. Right.

The main thing we want to look for in the months ahead is whether this thirty percent game that we saw in December and January, whether that's actually going to stick given how dramatic those increases were. You know, so far the February week confirm that. Let's see if that stays put in March and April. And you know, as mentioned, inflation expectations absolutely top of mind for consumers. Right.

Very good at Joann, thanks so much for joining us. Really appreciate it. You inshoot Surveys of consumers Director hit there at the University of Michigan. We had some data come out there today.

Very good at Joann, thanks so much for joining us. Really appreciate it. You inshoot Surveys of consumers Director hit there at the University of Michigan. We had some data come out there today.

This is the Bloomberg Intelligence podcast, available on Apples, Spotify, and anywhere else you can get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, the Ihart radio app tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal

This is the Bloomberg Intelligence podcast, available on Apples, Spotify, and anywhere else you can get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, the Ihart radio app tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal