Hello and welcome to the January 2025 episode of Economy Watch. Happy New Year everyone. I hope you had a great break and are ready for an exciting 2025. We're going to launch into this year's OF programs by taking a look at the US consumer. the US consumer was responsible for really keeping the US economy afloat over the course of last year, So we're going to explore how they're feeling and what the outlook is on the consumption side for this year. So specifically, we'll talk about the findings from our most recent U.S. Consumer Confidence survey. And then we actually asked some special questions this time around, asking consumers about what their hopes and concerns are for 2025. And then following that, we'll go ahead and and talk a little bit about our most recent forecasts for the US and the global economy for 25 and 26. And then of course, we'll keep in mind what all this means for business. We love your questions, so make sure to to make sure to put those into the question box in on your screen. And also you have the ability to react to some of our slides. This is sort of a newer feature, so give us reactions over the course of the next hour. We use that to try to refine the the content that we show you all on each of these episodes. So it's just myself and Stephanie Guishar, our senior economist for Global Indicators. Today Stephanie's in New York and we'll be walking you through some of the findings of the surveys that she's that she leads. And then finally, we do offer attendant credits for attending these web casts. There's a few hoops you'll have to jump through over the course of the hour, a few pop ups, but please make sure to take advantage of that if that's something that you're interested in. So without further ado, we're going to transition straight into the content and Stephanie's going to spend a little bit of time walking us through some of the surveys that we just outlined. Stephanie, why don't I hand it over to you? Thank you, Eric. So let's as Eric mentioned, we're going to do this in two-part. The first part, I'm going to take you through the results of the latest survey which was in the field in December like a bit more than the first two weeks of December about 2000 respondents. And then I'm going to take you through the responses to our question on hopes and concern in the second part. So let me move forward. And so this is how general index looks like. And what we've seen is that for the past two years, it's kind of stuck in this narrow range slightly above the long term average. And you know, one month it goes up, one month it goes down and we it doesn't been able to move out of this band, not on the downside, not on the upside. There was some strong excitement in October and November because we saw like a strong increase in consumer confidence both both in October and November. And we thought that maybe this was going to get out of the range and move above the range, but December was a bit not as good. So it's kind of move back towards the middle of the range. That said, what it means for the US economy is that as Eric mentioned, consumers have been driving the US economy in 2024 and most likely they're going to continue to do so in 2025. S one question is, So what happened in, in December and, and in the months before? So we, we need to look at the two components of the survey because it's very important to be able to differentiate what consumers are thinking about the economy right now and what they're expecting for the future. So the the situation for I guess since 2022 has been a situation where consumers are extremely positive about the present. However, they have more doubts about the future. And so the kind of dark blue line is showing the the assessment of the present situation. We saw some decline through 2024, but then towards the end of last year, I started to bounce back and in December it was relatively stable. The blue line is showing you the expectation components and it has been overing around this 18 mark which typically signals our recession. So when the index, when the blue line, the light blue line is build the yellow line, it signals potential recession risks. And as we can see it has been going up and down around that line and in December it moved a bit closer. So let's let's dig a bit more into this and what I'm showing here is the two components of the present situation. So one is reflecting consumers assessment of current business conditions. And I mean honestly it doesn't move so much over the past two years. It's slightly positive, which means that there are a few more consumers thinking that business conditions are good than consumers thinking that business conditions are bad. But the gap is not huge and it has been quite stable. This big story is on consumers assessment of current labour market conditions. So we ask consumers whether jobs are plentiful or whether jobs are out to get. And what you can see here is that there are much more consumers saying that jobs are plentiful than consumers saying that jobs are up to get over. Last year we saw some slight decline, I mean some kind of trend decline of the index until September, October and it started to increase again and we saw consumers optimism about current labour condition increasing again and these kinds of matching what we see on the labour market. I mean, we, we got like the recent data for December, which is the same month that is reflected at the, at the end of this chart, unemployment, the unemployment rate went down, the jobs opening went up. And this is what consumer are saying and that you know, they recognize that the labour market is still strong. So we are fully aware that it's not the case for everyone that people that are struggling to find jobs. We know that the share of people looking for a job for more than six months as increased recently. But that said, overall labour market conditions are relatively good and consumers are feed it. Yeah, that's exactly what I was thinking too. Stephanie, you, you do see the, the, the relationship here between what we're seeing in the job data that came out last Friday, for instance and and what consumers are saying. So there is a definitely a strong relationship there. So then where things are a bit more complicated is on the expectation front. So we have 3 components for the expectation, expected business conditions, expected income and expected labour market conditions. And business conditions, they turn consumer assessment turn positive in the course of 2024. And it's still positive, which means that there are more consumers thinking that business conditions are going to get better in the next 12 months, that consumers thinking that things are going to get worse. The other one is household income. And this has been positive for some time, which means that consumers on average, expect their income to increase. However, they are much more concerned about labor market conditions. And they, I mean, the measure has been most of the time negative. In 2024, there was some uptake in October, November, and then it went back into pessimism territory in December. And it's important to look at these two measures together. And what it tells you is that looking forward, consumers think that overall the labor market situation is going to deteriorate. It's going to be more difficult to find a job. And it's kind of, you know, things are so good now that our consumers are aware that it can't last forever. So and you know, they've seen this before. Things are very good at some point in time and they they deteriorate. So it's kind of a bit, it's too good to last. So they're expecting the labor market to weaken going forward. However, and This is why it's interesting, they are not expecting their income to become having to be to decrease, which means that they are aware that labour market conditions may deteriorate, but they are not worried about losing their jobs. Because if they were worried about losing their jobs, you will see some can you will see more pessimism on households expected income. So it. Almost seems that consumers are expecting someone else to lose their job but but not not that. That's that's one possibility. My interpretation is more like, even if I mean, you may have a job, but you may still want to get something better. So you're going to look for another job. And what this is telling us is although they are not worried about losing their jobs, they, they are thinking that if six months from now I go on the job market and try to find something else just to switch, it's going to be more difficult than it was, especially in the, in the post pandemic. So it's, and I think it makes a lot of sense. They are not, they don't see the risk of being laid off. And we see when we, we also do this CEO survey and CE OS are not planning to lay off people. I mean, from, I mean at least from the results we were, we got in October, they were still going to hire or in the worst case keep their work workforce the way it was, but not lay off people. That's it, you know, so consumers are not worried for their job, they are just thinking it's going to be more difficult to find a new one if I want to switch to especially to something better. So that's that's these are the five components of our index. We also ask consumers about their family financial situation and both measures have been positive both for the current financial situation and for the expected financial situation. We started this measure in 2002. So it's a bit hard to have like the some history on the measure. But what we can see is like October, November on the expected financial situation, we had the highest merger since we started to collect the data. It dipped a bit in December, but it's still much higher than we started than we think it's, it's likely due to maybe inflation where people see that, you know, inflation is slowing. So it could help with their financial situation. Hey, Stephanie, we, we did have a quick question. When we're talking about sort of future conditions or expected financial situation, typically how, how long far in advance are we, are we talking about here it says in the in the slide here six months hence is, is that kind of the standard? Yes, yes, you know. Forward the six months is usually the benchmark in terms of, you know what, these, these. Questions. Yeah, OK, OK. So let me move to the next one. We are also, you know, asking consumers about the spending plans. So are you planning for instance, for that one, are you planning to buy the car in the next six months? And So what the data suggests is that there has been an increase through 2024 of the share of consumers planning to buy a car. It's, you know, I think just after the pandemic, it was linked to that. People started to travel again and cars were available because there was a point where no one can buy a car because the car was not in the dealership. She would go there, there would be no cars. That was the beginning of the pandemic. But then for a few years, you know, the prices were so high that consumers were kind of postponing this purchase. Now we see some increase. And when we look at the price data, there was some decline in the price of used car, but also new cars. So it's kind of now with the price of car declining a little bit, we see more appetite to buy a car. And it's also likely due to the fact that interest rates have declined and most people finance their cars. So both slightly lower prices, slightly cheaper credit to get your car. We see some rise in the in the intentions to buy car for homes. It's a bit more we see a bit of the same thing, but it's really still low, you know, compared to pre pandemic level. And in December, we saw some slight decline in the intentions to buy home. So this is most likely not what is going to drive the economy next year. We also ask consumers whether they are planning to buy durable goods like big ticket items or services. And what this is showing you is when we ask people, are you going to buy like a big ticket items? So it could be like, you know, computers, some appliances, fridge, dishwasher, a bit more than 46% say yes, 1% no and 20% more or less said maybe. When we go to services, we see that consumer are less keen on buying services. I mean we get more or less the same same share saying they're going to buy more services than saying no, they're not going to buy more services. So we interpreted this as thinking that, you know, consumers are more keen now right now to spend more on goods that than on services. If we dig a bit more into the categories. So for goods, you know, once consumers have said that, yes, we're going to be buying some big ticket items, they have a list from which they can choose and they can choose how many of they can just choose one. They can choose several. And what we could see over the most recent period is there was a slow down in intentions to buy goods except for refrigerators. But I think what is like is that like a year ago, people would select a bunch of them. Like they would say, OK, I'm going to buy some appliances. I need a freezer, washing machine, a dishwasher, and a wrench. Now. I think they are much more selective in what they are planning to buy. This is why we see a decline in intentions because instead of selecting 5 items, we're just going to select one or two. So we see this kind of decline in intention, although they say yes, we're going to be buying durable goods, but then maybe fewer. We have the same question on electronics where we also saw some some decline in intention in the recent past. Now going back to services again, we share a list of possible services on which you could spend more and seems that the winner on the restaurants, bars take out and it has been top of the list since we started to ask the question. The second one is streaming and Internet services. And it's kind of part of this trend of consumers, you know, switching to cheaper options. So instead of going to the movie theatre, which is kind of in the middle of the pack, instead of spending more on that, they rather spend more on streaming services because you know, it's much more affordable to stream a movie, especially if you have a family of four than going to the movie theatre. The activities on which we are the least keen on spending are going to museum, library, historical sites, childcare, education, amusement park, outdoor recreation. So these are the categories where they seen all that they they are less keen on spending. They are not also so keen on spending on airfare and train for personal travel. And this is kind of matching what they respond when we ask them are you going to go on vacation in the next six months? And we saw a decline over time. You know, it's interesting that this is showing up in the data because especially recently, you know, we have seen airfares in as a component of CPI and the PCE deflator, you know, have risen quite a bit. It's gotten more expensive recently, not just recently, but in in the most recent data there, there has been sort of stronger upticks in terms of airfare prices and things like that. So. Yeah. You know, seeing a downtick on on this front makes sense in that regard. OK, thank you. So we also asked consumers what their expectations for the economy in general is. So we, we started the question on recession in 2022. So although we still have 60% of consumers expecting a recession in next 12 months, this is the lowest since we started to ask the question. So we are not sure what the level means because we don't have so much history. But what we can tell is that's the lowest since we started to ask the question, which is kind of a good sign about the expectations for the economy. We also asked them what they think about interest rates. And we we have a majority of consumers expecting red cuts in 2025. It's kind of the the the the lowest in close to the lowest since the pandemic. And the share expect expecting rates to be lower. Yeah, it's, it's the lowest since since 2020. And the share expecting increase it's no sorry is the highest. So you have the highest share of consumer expecting lower rates and one of the lower share of consumer expecting higher rate. We also asked them about the stock market and they have been extremely happy about the stock market. So here you can see that there are over 50% of consumers expecting an increase in stock prices. This is the highest since we started to ask the question in 87. You don't have the word story here, but since 87 this is the highest. Consumers are super bullish about the stock market, which may be linked to the expectations for the economy and also what they see in actual stock prices. We we know that they tend to react to the changes in the stock market. When we add the mini financial turmoil in the summer, the expectation went down a little bit and this is one of the the small decline you can see on the chart and then the stock you know in the stock market bounce back and expectation. Hey, Stephanie, We did have a quick question. I might interject here for a second. One of the audience members is asking about, we had a slide that said consumers are more keen on spending on goods, sort of big, yeah, big ticket items more. So than. Services, but then we also had some data that said that, you know, there's slower expectations for purchases for appliances and electronics and prioritizing sort of restaurant spending and things like that. So how do we reconcile that is, is, is, are there are consumers telling us conflicting things or it, you know, is there a way to thread that needle? So I think there is a way and I try to explain it and maybe I mean I'm just going to try to go back on the slide so that it's care for everyone. So here we are asking consumers, are you planning to buy a big ticket at them or several yes or no? 46% say yes, but then we have a list. And OK, so this this question here, this is a kind of a new question to make sure like we are really comparing what they think about goods versus services. But then they have a list and in that list they can pick how many goods as they want and all these goods are included in the list. So although there are planning to buy and I think they are planning to buy, but they would answer yes to the same extent that they were a year ago. They have become more selective. So instead of choosing 10 items, we're just going to choose one or two. And this explains the drop they need to they are kind of choosing between these different items. Yeah, I'm sorry, I'm not very good at moving this slide. So that kind of picking one or two when they used to pick much more and we see it for this is what is largely driving the decline for the goods, for the services, the same, the same thing we have this overall question, are you planning? So I'm going to go back here. Are you planning to buy more of more services in the next six months, yes or no? And out of the ones who are saying yes and the ones who are saying maybe it was OK, which ones and then they in terms of which ones, what is leading the race are the services and the take out. So I hope it's key. I don't think there is any contradiction in there. I think there are. It's all you can kind of make a make the story from based on the answers. And in any case, what I wanted to say is even if at some time this year they're expressed doubt about buying things and they're buying plans, at the end of the day, they kept on spending. So I think that's the very important thing. Like, you know, we had several surveys where consumers were saying, Oh, yeah, maybe we need to spend a bit less in the survey. And, you know, as economies who are saying yes, where interest rates are increasing, prices are high, it makes sense to cut spending as a consumer. This is kind of rational behavior. And then the next month we will see now consumers are spending more than they were last month, and they are just taking more debt. And because they all have jobs and they are still not worried about choosing their job. So even though they think they should be saving a bit more money, they don't. Yeah. Now we had a question about that in terms of the relationship between consumer confidence and and actual spending. And I think especially over the course of 2024, you know, there, there were were some hesitation, you know, in terms of those confidence levels, that band that you showed at the onset of your, your, your section, you know, hasn't really broken outside of that. And yet, you know, there was a strong spending over that period of time. So a bit of a conflict in terms of, you know, what people are saying, what they're actually doing, especially over 24. Yeah. And I think what they are doing here is really based on how they assess the current labor market situation. I have a job, I have an income, I can keep on spending. I think that this has been the behaviour in 2024. And I don't know you, you will tell us whether you think is going to change for 2025. But from the consumer survey we don't see any indication that this is going to change. So I just want to come back to our how consumers view the economies are very optimistic about stock prices in terms of inflation expectations. They have really come down a long way since the peak in 2022 and they have kind of stabilized especially for the for the median, but also to some extent for, for the average and close to prepandemic levels still a bit high, but it's really close to prepandemic level. And now even though consumers, you know, they are expecting slower inflation that they used to a few years ago, what's top of their mind every month is prices and inflation. We have this question where we ask consumers like after they kick everywhere, we tell them what has affected the most your view of the economy this month. And they typically say prices, inflation, the big change in November and December, as expected, was that they started to talk more about the elections in, you know, it started like in October, they showed a bit more interest. And then really November and December, they started to talk much more about the impact of the the new administration. You know, it's it, it. That isn't surprising, of course, given, you know, events over the course of late 2024. We did have a couple questions about politics and the influence that it has on, on consumer confidence. Have we seen 'cause we don't, we don't ask for party affiliation or anything like that. And I don't believe in, in, in these surveys. But I mean, to what extent, you know, does an election, you know, have have an impact in terms of consumers perceptions about, you know, spending and, and their confidence levels? Is there is there much of an impact? So we, we used to have this kind of question about affiliation. We we didn't, we don't, we haven't added for, for some time now, but the Michigan University is still asking this question. And you know, the results are not very surprising if the parties you are, the party you affiliated with wins the election, you must you are very optimistic. If the party you affiliated with lost election, you are very pessimistic. And I mean this has been happening over time. It's kind of regular, but and if you are more like an independent, you are closer to the middle. So, but we, I mean the, we saw some, the, the increase in consumer confidence that we saw in November. It's unlikely that it was the result of the election because it started the month before. So we started to see some increase in optimism in October. It was confirmed in November and then it went down a little bit in December. So we don't think it's really the result of the election. And also if you think about it, you have more or less the same, the same share of consumers affiliated with the Republican Party than affiliated with Democratic Party. So they kind of switch so. That's not. Exactly. Must have become more optimistic, but the Democrats were more pessimistic. So it's kind of balanced out. You just flip from one side to the other, and I think it's time for yeah. So as an introduction, so we asked consumers in November what were their hopes and concerns for 2025. But before we show you the results, we want to get your views on at least your hopes for 2025. Yeah. So we, we have a before we get into yeah, the, the details of of what the respondents said to our, our, our questions in the most recent survey, we're going to poll you. So we, we can't incorporate your your feedback into the actual survey results. It's too late for that. But if you get a phone call from somebody next month, maybe you can you can weigh in. So the question that we are that we asked in our consumer confidence survey that we're going to ask you is what are your hopes for 2025? You know what it, what, what are some of the things that you're looking forward to that you're hopeful about? And these are the, the, the, the possible answers. Lower prices for goods and services, ability to save more money, lower taxes, paying off debt, more time with family, lower interest rates. And then we also had an other category, but we don't have the ability to ask you during the program what the other is. So we also gave the respondents in, in our survey the opportunity to select three of these. But again, we can't do that online right now. So you just have to pick one. So again, you know, looking at 2025, you know, what are your what are your expectations and what are you hopeful about happening? Yeah. This year, so not not really expectations, it's more like wishes. Wishes. OK, that's that's a good that's an important point. OK, thanks Stephanie. So what are your wishes for 2025? I try to get to 50% of the audience weighing in we're at about 1/3. So I'm going to give you another minute or two to to reflect on your wish list for this year. Getting close 45%, almost there. OK, 50%, excellent. So let's see what the audience has to say here. Interesting. Lower prices, looks like it was number one at about 20%. Ability to save more money, lower taxes at about 14%, paying off debt 15, more time with family 19%. So that's what it looks like. It's #2 interest rates at about 10, stock prices at about 5, and finding a better job at about 3. So what do you think, Stephanie? Is this? Is this similar or dissimilar? No, I think it's very interesting. So I'm going to take you through the results in a second. But so I think so sample here is kind of sharing the, the, the view of consumers that, you know, the best wish for 2025 was lower prices where the results are big differences than the the second item, which is spending more time with family. I mean, it didn't run very high in our results and we were a bit surprised and because, I mean, I, I'm just going to show you the, there is also that that you can see with your eyes. So same question. So first, lower prices. Second, I mean save money, lower taxes, paying of debt. So a strong focus on, you know, taking better control of finances in 2025. We, I'm going to show you in a minute more details about that and how it's different and by AIDS group and and by income. But we also had a pending question on what are your concerns for 2025. And there again, you know, the most selected concern was higher prices, Like all the 2/3 of consumers were worried that prices would be higher in in 2025. And that was that was a major concern. They're also worried about higher taxes and wars and military conflict and social unrest. So now I'm going to show you how this was different by age group. And so for all age group, lower prices was the best, like the most important wish. But it's much higher for all the consumers, which makes sense because many of them are retirees. They are more affected by increases in inflation. So it makes sense that this is ranking higher for them. And the other thing we see here is for, you know, the younger generation, like under 35, they were wishing more to be able to save money than just lower prices. So we, you the sample was ranking second, spending more time with my family. It was ranked third by the people under 35. But then, you know, it seems that the older you get, the less it's a priority or maybe it's just because you are already spending time with your family. So we're not sure. But what what is the explanation there? But it seems that for the people over 55 is not really something they are wishing for for. This year I find this somewhat funny. Yeah, the older you are, the I've spent enough time with my family. Maybe, OK, that was my first cynical interpretation. And then I thought, OK, maybe they're already spending enough time with lots of time with their family. So it's not the, it's not something like, you know, that is top of their wish list. I guess you're The Alchemist. And I'm the, I'm the pessimist in terms of. The the other thing that was interesting in terms of the wishes was that 30% of consumers under 35 were hoping to find a better job next year. So we all talked about, you know, there was the great resignation, people switching job. We thought that most likely this is over. Well, maybe it's not completely over for the younger generation they still have in mind. I mean, it's it's ranking high on their list like finding a better job. So maybe we still see some kind of job switching, especially for for the for the younger consumers in terms of the top concerns or they're overwhelmingly it was that prices will increase, especially again for, you know, those of the 35 that are most more affected by by inflation. What you know, thinking about we asked the question soon after the Hurricanes in in on the East Coast and natural disasters were not at the top of the risk are the main concern for 2025. We may ask the question again next year to see is this has changed given what we've seen more recently in California and if people are getting worried over all about natural disasters. And again, I would just want to show you the, the, the one of the last item in terms of the concern is getting laid off. Like, you know, it was the list selected on the list of people are already not worried about losing their jobs, although you know, they are not. They are thinking that overall the the labor market is going to weaken going forward. Let's look at the same thing by income and you know, by income. So all income groups best wish lower prices, all income group highest concern, higher prices. I mean, this is it's really the overwhelming theme in this world. You know, this kind of this question about hopes and concerns for next year. People are talking about prices. This is the this is the top focus of consumers going into next year. What it means for businesses is like people are going to continue to look for promotion. They are going to continue to look. To make sure that they get the most value for their dollars and whenever they can, they're going to be switching from more expensive item to cheaper item. And I think that that's something that that is worth keeping in mind. I think, Eric, I would need to, I want to give you a bit of time to go to the outlook. So I guess I should stop there. Instead, there are some specific questions on on these findings. Oh, thanks Stephanie. That was really helpful. We did have questions, but I think for the most part we were able to to get through them over the course of of your presentation. So I'll spend a little bit of time now just talking about some of the updates to our our forecast for the US economy and then dig into the changes for the the global economy. Let's see here. Hold on, We did have actually one question that just pop up. So maybe I'll, I'll dig into this first. We expect wildfires to have a significant effect on human and capital flight from California. Oh boy. Maybe the question is sort of is, is there a, a potential impact on the, on the economy from the, from the events in California recently potentially I, I think is the answer to that. A lot of rebuilding is going to have to be done in, in, in Los Angeles as a function of this. We've been tracking it quite closely. Stephanie's from San Diego and I used to live in Southern California and in LA myself. So this sort of hit close to home, I think for both of us. But there are, there's, there's a lot of, of, of rebuilding that and, and infrastructure rebuilding that's going to have to be done in, in the LA area in the future. So you know that, that is something that does generate economic activity. But we'll have, we'll, you know, we'll have to wait and see how things shape up. There's still a lot happening in that part of the country right now anyway. So let's let's go ahead and and jump into the the forecast for the US quickly. So for this month in January, we did upgrade our forecast for the US economy for 2025 to 2.3%. We had previously been at about 2%. So there was a 3/10 of a percent increase in terms of our expectations for this year. For 2024, we think the overall economy is going to expand by about 2.8%. So we do think there'll be a little bit of a deceleration in terms of overall GDP growth over the course of this year relative to last. You can see for the fourth quarter, we don't have those data yet. For Q 4/20/24, we have penciled in about 2.5% growth for, for, for that quarter and then slowing as you can see down to, you know, around 1.91.8 and then 1.7 annualized growth rates over the course of the next two years or so. What we're basically seeing is, is a convergence, a gradual convergence towards potential growth or sort of trend GDP growth, which in the US is about 1.71 point 8%. So it's our expectation that you know we will see, you know continued above potential growth especially in the first half of of 2025. A lot of that is going to be based on the consumer. So you know our upgrade 425 was associated with consumer strength that we saw especially in the second-half of of 2024. We saw real income gains after tax income gains continue to be a fairly strong and as Stephanie pointed out, you know we haven't seen any, any big deteriorations in terms of consumer confidence. The job market is, is a huge part of of this equation. As I think Stephanie pointed out during her presentation, consumers feel fairly healthy and and strong about the labor market about their income prospects. Certainly in the jobs report that we got out last Friday, which came in well above expectations, there are are certainly a lot of confidence in terms of in terms of jobs income and that should keep the US consumer spending over the course of at least the first half of this year. But then there's also been a lot happening on the inflation front. So we had the CPI report came out this morning at 8:30 and we had PPI, the producer price index came out yesterday. Both were potentially a little bit softer than expectations had been, but certainly with the CPI, the headline number, you know, we did see an uptick there, but a lot of it was associated with energy prices and gasoline prices specifically. So once you strip out the the the gas prices, energy prices and the food prices, you get to something called core inflation. And we did see a little bit of a moderation in terms of the CPI number today on the core inflation front, it's still elevated. It's still not where it needs to be. And it's our expectation. We've actually made some changes to our forecast this month. We, we think it's going to take a while to get down to, to the Feds 2% target. You know, previously we thought it might happen towards the end of this year, but at at this point, you know, the stickiness that we've been seeing on the inflation front, we think is going to last a little bit longer. And, and we won't see a, a real 2% number potentially until sometime in, in 2026. And so as a function of that, we've, we've also made some modifications to our Fed funds forecast. So we had previously expected, I think it was about 5 cuts over the course of of this year. That's no longer the case. We think it's, it's more likely that the Fed will continue to cut, but only three times in 2025 and that we won't see the next cut until probably June. So given the strength in the labor market data, given the strength in some of the GDP data, given the fact that inflation continues to to be sticky and above where the Fed would like it to be, we're probably going to see a bit of a pause in terms of Fed funds and interest rate policies coming coming from the Fed over the next couple of meetings. But we think that, that, you know, progress will be made slowly on the inflation front especially and that towards the end of this year, they'll, they'll continue to, to make some cuts to try to loosen some of the, the tightness and monetary policy that, that we're currently seeing. And then for 2026, as you can see, the, the, the, the growth rate down to 1.8%. Again, that's that's more in line with the potential GDP growth rates. A couple more Fed cuts in, in in 2026, bringing the rate down to about 3.1%, which is closer sort of to what we presume to be kind of a neutral rate environment in the post pandemic world. So it's a higher neutral rate than what we had before the pandemic, of course, for a couple of different reasons, including things like tightness in the labor market, global value chain disruption and renewable energy transition, all kind of raising the steady state inflation rates, which in turn require sort of a higher steady state Fed policy to kind of try to neutralize that. So that's kind of a quick overview of the US economy. We're, we're, this isn't about to be, we haven't posted it to the website yet. It'll probably be up this afternoon along with some more details that that I wasn't able to get into. So in terms of the global economy, we've, we've made a number of, of changes to our forecast since December. You can see sort of a list here of the ones that saw upgrades and downgrades on the upgrade side. the US you know, number did did come in stronger for, for January, which I just outlined, but also a number of other countries in Africa and Egypt, Argentina, Vietnam, Australia and Japan. So we, we upgraded our forecast there and then some downgrades to a, to a number of countries as well and Europe. So Germany and the UK downgraded Ukraine, Kuwait, Brazil, Singapore and a few others. The ones with asterisks is actually I'm gonna dig into a little bit more just to give a little more color in terms of why we made the changes. So for instance, for Egypt, I mentioned an upgrade. We saw a pretty strong GDP number out of Egypt in the third quarter of this year, really the strongest growth that that we've seen out of that economy since 2021. So a really unexpectedly large number on that GDP front. So that sort of drove the momentum stronger kind of moving towards the end of 24 and into 25 and resulted in an upgrade. And a lot of that was associated with domestic demand in Egypt itself. So a good sign there. Inflation however, you know, continues to be an obstacle for Egypt. Progress has been made. You can see that in the chart in the right hand side that the blue line. So the inflation rates remain higher than they should be. But the Bank of Egypt has said that it is their expectation that we'll see a a substantial decline in inflation over the course of 2025 and that it'll start to cut interest rates accordingly. So you can see again with the red line that the Bank of Egypt has has been reluctant to, to do any cuts at this point, but it's expected to do so over the course of this year. On Argentina, which is a really interesting story. I'm sure some of you are familiar with it, given some of the hyperinflation that that Argentina has gone through over the last one to two years. For the first time in in several quarters, there was actually an expansion in GDP growth in Argentina in in the third quarter after a lot of austerity had been implemented in deregulation. Argentina elected a very sort of libertarian style president not long ago, but a year ago promised to really tackle the inflation debacle that that country has been struggling with. And by and large it looks like there there are, you know, it is yielding results. Inflation has come down. It's still exceptionally high on a year over year basis, but on sort of 1/4 on quarter basis, which is the red line. You can see that that the quarter on quarter inflation rates have improved quite a bit in Argentina and that the growth has started to take back up again. So that resulted in a slight improvement in terms of our our forecast for Latin America. And then finally just quickly on on Kuwait, which is another economy that we forecast, Kuwait did have a bit of a stumble in Q2 and Q3 on the GDP growth front. The economy of Kuwait is is, you know, very dependent on oil production. They've been trying to diversify the economy away from that and they've had something success in it in recent years. But as you can see in the the chart on the right hand side, most of the the difficulties in in, in the growth in Kuwait more recently have had to do with the non oil sector of the economy. And so as a function of this, we we, we're, you know, we, we did make a a slight downgrade to our forecast for Kuwait. Let's see here. So overall this is our forecast for the global economy. You can see on the far right we're expecting growth of about 3.1% worldwide for 2025, which is online with with what we saw in 2024 and then a little bit of a downtick for for 2026. But you know, it's really a mixed bag for the US as I mentioned, you know, we did upgrade our our outlook for 2025, but it's still coming in softer than what we experienced over the course of last year. Europe, we're hoping to see a little bit more of an improvement. There were a lot of challenges in Europe over the course of 2024. Europe, sorry, Germany fell into technical recession. So we we are hoping for and expecting to see a little bit of a modest sort of recovery among some of the major European economies. China, we're expecting somewhat softer growth over the course of of 2025 and 26 relative to last year as that economy also struggles with things like the property sector unwinding and a very weak consumer confidence. India should continue to grow, although perhaps a little bit less, not quite as as rapidly as it had been and then Middle East a little bit stronger, etcetera. So I don't want to take up too much time going through every single one of these, but I do see that we had a couple of questions. Let's see here. Sorry, I haven't been able to read these as I've been talking. What's your take on the middle and lower income perception that the core inflation rate is meaningless? I somewhat agree given that all consumer consumers consume gas and food, it's a large part of the bottom 50% monthly expenses. I think one of the one of the reasons that that there is a core CPI in that there is a core PCE reading isn't because you know, the food and gas prices are meaningless. That's and especially for, you know, lower income quintiles in the US. Certainly, yes, I think it's true that that those categories do take up quite a bit of, of of their income in terms of spending. But for food and energy, those prices tend to be very volatile and that's why it's stripped out in terms of sort of these, these quote UN quote core readings for both of those inflation metrics. I don't think it's, it's this sort of denigrate, you know, those, those, those categories of spending because that's you pointed out they are important, but it's trying to get sort of a cleaner, less, less volatile look at underlying inflation in the economy. And that's why, you know, those numbers are produced and, and the Fed looks at sort of core PCE quite closely. It's because it is, it is it's less likely to move around and provides a little bit more of a stable target for them to, to try to to try to achieve in terms of how they're implementing monetary policy. I don't know Stephanie, you know, did you have any thoughts on on that at all or is that? No, I, I, I completely agree. I mean, it's is, I think it's not the reason why the core was built was not to reflect better, you know, the categories that are that that are important for consumers. It was to use it for, you know, economic analysis because these are the core is not only less volatile, but to some extent reflecting more the underlying pressures, especially on wages. I mean, you know, gas prices, food prices are also very affected by weather event geopolitical events. So This is why they are stripped out. And I think there was no intention there to disregard how much that important for the the low income categories. OK. We did have a couple more questions, but we are kind of coming to the top of the hour and I have a couple of sort of administrative slides to go through. So my apologies. 1 was about the 10 year treasury forecast. We actually don't make a forecast on the 10 year Treasury. So I wouldn't be able to answer that one directly either. So apologies about that, but just quickly. So on Monday we've released a major report called the C-Suite outlook, which we would do every year at the beginning of of the year. It's essentially we we survey C-Suite executives and CE OS around the world to really get a perspective on, you know, what their concerns are economically in terms of all kinds of different issues that that that could affect their businesses. So that is now out on our website. You can read about it as a member. You can download it. And on January 22nd, the window on webcast that's run by Dave Peterson, our Chief economist is going to be exploring some of the takeaways from there along with some of the implications and and takeaways of, of Trump's, you know, first days in office, President Trump. So make sure to spend some time with us on the 22nd of January to talk about two of these really important issues. And then for February Economy Watch, I don't have a topic quite yet for that month, but we'll get that up on the website soon. So you can all check out what we have in store for the 12th. Also, this is the report I just mentioned, C-Suite Outlook 2025 on our website now. So as a member, please stop by and have a look. If you're not a member, I don't think we are offering the report, but the Financial Times actually just wrote up the key takeaways. So you, if you have an FT subscription, you can read some of those takeaways on their website as well. And then finally, we have a conference right around the corner, a year in preview, which will take place at the Plaza Hotel in New York City on February 4th and 5th. So if you're in New York or you're really interested in in joining us to talk about peer-to-peer sort of conversations about the biggest issues for this year and how businesses can respond, make sure to register for that and we'll see you at the Plaza. So that is all the time we have. Stephanie, thank you so, so much for coming on and and sharing all these great data points from the consumer survey. And thank you to the audience for spending a full hour with us. We're really looking forward to the programming this year. It should be a very interesting year and we are looking forward to interacting with you and sharing our assessments of how the economy, the consumer evolve over the next 12 months. So take care and we'll see you next month. _1737176096759