Bloomberg Surveillance: US Retail Sales Dip; Government Shutdown Threat Eases

Michelle Meyer, Mastercard Economics Institute North America Chief Economist, says October's slight drop in US retail sales doesn't take away from overall robust consumer spending . Diane Swonk, KPMG Chief Economist, details how the Fed will look to navigate a potential successful soft landing . Anastasia Amoroso, iCapital Chief Investment Strategist, says corporations could look to cut costs in 2024 if the Fed doesn't cut rates . Henrietta Treyz, Veda Partners Economic Policy Director, discusses an increasingly dysfunctional environment on Capitol Hill despite the passage of a stopgap funding bill . Jennifer Bartashus, Bloomberg Intelligence Senior Analyst, breaks down Target's better-than-expected 3Q earnings . Get the Bloomberg Surveillance newsletter, delivered every weekday. Sign up now: https://www.bloomberg.com/account/newsletters/surveillance Full transcript: This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along with Jonathan Farrow and Lisa Abramowitz. Join us each day for insight from the best and economics, geopolitics, finance and investment. Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and anywhere you get your podcasts, and always on Bloomberg dot Com, the Bloomberg Terminal, and the Bloomberg Business app. This is a joy what happens with young economists as you read their research and you go, oh, they're quite competent. Not long ago and far away, but a few years ago. That was Michelle Meyer absolutely owning the parsing of the American consumer. She worked for a small bank in Manhattan and is now Chief Economists North America from MasterCard Economics. You own the analysis I put you and Allen Zetner together. You own the analysis of the American consumer. Have we stopped spending? We clearly have not stop spending. Far from it, and think about the data this morning. It was an incredible combination of continued strength and retail spend, of rebound in Empire State manufacturing, which shows that there's still a need for more goods production, which is because consumers are still spending, and on top of that, you're getting some relief on the pricing side. So it's a really nice combination. I hate asking this question, and I'm stunned. It's my first time I've asked it. On November fifteenth, what's back to what's a holiday season look like? What's Black Friday? And then Black Monday and this and that? What does this retail madness did January look like? Well, it is a longer holiday season. We've learned that over the last few years, and it's a heavily promotional based holiday season, and part of that is because of the fact that there's so much demand out there to buy online. I mean, think about the numbers we just saw this morning. Our spending post numbers saw just over eight percent year of your growth in e commerce sales. So you know, you're seeing a consumer that is certainly exploring many different channels of spending, including online, and that creates a lot more opportunities for them to get products, and it also creates a lot more need for retailers to compete with these big moments in time where they offer promotions, and I think that's what's going to be indicative. So we'll learn a lot from the Black Friday period, and it's approaching very quickly. How sustainable is this combination of both robust retail sales and disinflation or even outright goods deflation. So I think you have to consider the different categories. I mean, when you looked at CPI yesterday, you certainly saw some categories like these big durable goods like your refrigerators back seeing some price declines. But for many other things, like many services, for example, you are still seeing some price increases. So part of the drop in prices for some of these goods simply reflects the fact that prices increased too much out of a pandemic because of supply chain issues, because of higher costs, and now it's reverting a bit more to something more normal, right, So that means in real terms you will see some support in terms of some of these items moving through. In nominal terms, you could see some move down in terms of overall spend. So it really depends on why inflation is moving, and that is a function of the type of product and how things evolved coming out of the pandemic. When you put it together, does this seem like a recipe for this goldilocks soft landing, or does this seem to paint the picture of a federal reserve that needs to do more and of an economy that has way too much momentum to really achieve the disinflation that a lot of people are baking into market evaluations. I think the data is shaping up in a way that's really favorable at the moment because you continue to have economic growth. Look at the third quarter GDP numbers, that was fairly broad based economic activity, not just consumers but also businesses investing inventories getting much more manageable and in stock So you know, things have been evolving remarkably well in terms of the real economy, taking out some of the excesses, labor market coasting into a litt bit of a slower trajectory for job growth, but still expansionary, while you get this relief on the inflation front. So how much of that is because of monetary policy, how much of that is because of the nature of the shock that we had initially, We'll see it's probably a bit of both. But it's evolving really quite quite nicely, and obviously exceeding many people's expectations. Out there. We talked about the interest expense and the debt and the deficit earlier with Mia mcguinnis. Let's talk about the average charge card is twenty five twenty six percent interest, migrating up now to twenty eight twenty nine percent interest. I find thirty percent to be almost criminal. But you people look at this daily, is that interest rate goes up, do we spend less? So what we're looking at overall is how monetary policy is transmitting into the economy broadly. So when you think about who's borrowing out there, there's companies that are borrowing in terms of the expansionary needs. There's consumers that are borrowing in terms of whether or not they want to buy a home or a big ticket item that might require some leverage. So higher interest rates are certainly transmitting into the economy. You can see it today with the retail sales number that's Mike just my friends. Around housing related items, furniture, some of these bigger ticket items that require debt. You are seeing some hit to those types suspending. So I think the high level of interest rates goes back to Lisa's point around how the FED is trying to calibrate this economy with some easing of real growth but still allowing inflation to come down. Okay, you're out of the game, but I'm going to ask you the game question here, which is what is your twelve months for to real GDP? Like, what's your twenty twenty You're talking to fancy people at MasterCard, and you know they don't want to charge cards. They want to know what Michelle Meyer thinks about the economy. What's your twenty twenty four real GDP call? So the good news is that we are I'm still in the game, and that we are still running at still absolutely that is who I am as a person, as an economist. When I look ahead, I mean this year we had an economy that ran above its underlying trend. So we're trending right now, given where GDP is for real growth somewhere between two point four percent right now in twenty twenty three. As we look ahead to twenty twenty four, we're probably going to see some moderation closer to the underlying trend growth rate of the economy closer to trend. Didn't answer, Ye's still in the game. I'm still I got to total go away. Michelle Meyer's MasterCard. There somewhere in the blur of the last four or five days through my small little brain, would somebody get Diane SWUNKA You know, I just said she has such a perspective different from three zip codes in New York, And I guess all of this is her academic work at the University of Michigan Longo. She's putting a penalty box there. At one point she was stealing signs from the Federal Reserve. Is I think it's a football joke there, Yeah, dian Swank understands Michigan's I guess in the penalty box, Diane Swank, is it free and clear? Is your own Powell not in the penalty box. I've asked this question four times, but with immense respect to your work and your holistic look at business data. Is it mission accomplished? Finally, for the FED, it's not mission accomplished because if that is still going to hold rates higher for longer. But we're done with right hikes and that's what we've been saying, and that's what we believe. That's the good news out there is that it does look like the soft landing is not only possible but probable. But the journey is not yet over, and the endurance part comes next, and that's what the FED is watching closely. They still expect to see growth below potential in order to have that soft landing occur. That's one of those technical things that consumers don't really like, because growth below potential is a rise in unemployment, which in fact we've already seen. Most of that rise we saw over the summer was because more people were looking for jobs, not because of mass layoffs than in October when we saw unemployment move up to three point nine percent, it was because we also saw the spillover effects of strikes as well. When I look at this economy and all the different narratives that are out there right now, the heart of the matter for me is fully employed America. Butter stop with what Austin Goolsby brilliantly said yesterday. Is a believer in a new productivity, a new regime of productivity that's going to make the job for everybody out there easier. Do you buy it? Well, we are seeing a major increase in productivity, and I think during the frenzy, the hiring frenzy that we saw, we know from ADP data that's locked at this more closely, many firms stopped hiring people. Then add on top of it the loss and hiring an educational attainment due to the pivot online itself. And now we're unwinding that and people are actually learning the jobs they have. Overlay that with innovation and technology and leveraging the technologies we were forced to use as we moved online, and you do get higher productivity growth, and that is helping to bring down inflation as well. The problem for most consumers, of course, is that the level of prices are still very high. And let's face it, you know, consumer sentiment hit its record high for University of Michigan Centiment Index in Chau two thousand. Yeah, I threw that in. Although I did go to Chicago too. They won the first Heisman Trophy right now with a lack of scandals, which a little better. Did you go to the Goldsby speech? I mean, you're such a hitter out there in Chicago? Did you darken the door for the Golsby speech? I wasn't at this one. I've been at many of them, and I'll be at one on December first with them. What about Hey, Dana speaking as well, what do you feel how do you kind of view the consumer here? We got some retail sales data today that came in a little bit better than expected, yet target, you know, still seeing some some challenges out there with the reported numbers, and of course we'll hear from Walmart tomorrow. What's what's your sense of the consumer out there? This is a consumer that shown remarkable endurance. Remember October is when the first student loans for about twenty three million student borrowers were due. Of course, they started paying those loans already in August while ahead of time, front running the interest accruing on those loans. But we know that student loan, your payments are going to crimp consumer spending. And I think what's also important is we're seeing the biggest trade offs everything within grocery stores. They're spending more at grocery stores than at restaurants during the month, and after adjusting for inflation, they're still spending more at grocery stores because it's really expensive after adjusting for inflation to go out to restaurants. That said, there's a lot of trade offs within that as well. Beef prices hit a record high during the month of October in that's due to the fact that we had all these droughts. That's in the herds, and I think, you know, the effects of those kinds of shocks are what really matter to consumers. And even as the FED is combating inflation the pace at which prices increase, many consumers who finally saw their wages level up only got to spend a moment in the sun before they were burned by inflation, and they're still playing catchup from those earlier increases exactly. So, you know, in terms of the consumer here we have the unemployment rate officially at three point nine percent. What do you think the FED would like to see that rate? Do they feel like it needs to drift a little bit higher before they get a sense that this economy really is cooling? Well, I hate to use the word like, because I think that's a little pejorative in this context. I think they think it needs to go a little above four percent in order to get the full derailing of inflation and to be able to really cut rates as we move into twenty twenty five. I think we're going to see rate cuts by the middle of twenty twenty four, but the descent on rates is going to be much less graduate much slower than the acent on rates, and I think that's very important to remember as well. The Center Reserve is really pretty pleased with the fact that so far until we had that October blip, which was by an external shock the strikes, that we were able to really see more people looking for jobs rather than layoffs contributing to unemployment, more data checks and all this turmoil, the vix goes to constructively bullish. We are higher above fourteen and now at fourteen point eight, a better VIX number off of yesterday. Dow up one hundred, SPX up sixteen points, doing better than call it nine o'clock, futures up four tenths of a percent, NASDAK up half a percent as well. We're with Diane's swank this morning of KPMG. Diane, my great theory is corporations are going to adapt and adjust. How do they adapt and adjust? Is it just going to be one expense reduction? You know, that's going to be a series of I think we're already seeing the adaption occur, and it's evolution more of a revolution than an evolution, and that is that after more than a decade of ulter low rates and some business models that were built entirely on ultra low rates still adapt to a more normal economy that has higher rates to it, and they have to deal with the higher wage levels that they leveled up to, and that means they got to make their workers more productive to be able to continue paying those wages without mass layoffs. And that's where I think we're going. I think we are going to see productivity growth continue to be elevated. That's the good news. I think also it's important to remember the tire meets the road on productivity growth when you combine innovation and technology with our human capital, and how valuable it is. When you really level the boats together two together, that's when you get the big benefits. Sure theory there is how the Cubs stole the Milwaukee Brewer's managers. I mean you get that. She's like consulting the Chicago Cubs. How do we jump started Creid Council bring them down to Chicago? Paul slip in one more? All right, So, Diane, I mean we have our President Biden in San Francisco meeting with President she. How do you figure China into your economic outlook here? What do you what do you what would you like to see. What do you think we're going to see. I think it's important that you know we can't deglobalization is a bit of a myth. We're seeing trading blocks that have moved, and more training within blocks rather than across blocks, which is actually boosting global trade. That's more friction in the global economy and ultimately more risk of supply chocks and more fragile supply chains. So I think the concept of de risking is something that is a relative concept. I understand there's geopolitical and strategic issues we need to deal with with China, but these are the two largest economies in the world. We're talking about China and the US, and it's better to have better relations than intense relations and intensifying geopol tensions between the two. Dane swanp KPMG. They're chief economists, thank you. The grace of Bloomberg's surveillance is we don't throw up films of people being wrong or people being right. This is a tough, tough business gaming out equities, bonds, currencies, commodities. If we tossed up a video John and Lisa Anastasia Amroso on the market a number of months ago. She held Lisa's hand and said, Lisa, It'll be okay. A chief investor strategist and what and correct bull joins us. Now, is this the second Is this the second bull market off the October lows thirteen months ago? Are we clicking in with a new bullmarket lift? I mean, I think this is giving investors a lot of faith and hope into the year end. You know, Tom, It's amazing how quickly things shift, And just in the last couple of weeks we went from really bad technicals to really a great technical setup. And I think what's likely to happen now is the chase into your end is on and it's going to involve a lot of stakeholders, whether it's this systematic traders, whether hedge funds that were called too short, whether it's all the cash eight trillion of it on the sideline. So I do think that we well, I was initially going to say drift higher into your end based on yesterday. We might rip higher into your end, but I do think we'll finish higher. Let's discuss what worked yesterday. Small caps, discretionary real a state. Is that what you think works going into your end? Well, I think tech is going to continue to work into your end because if you look at unprofitable tech, for example, it also rallied pretty massively yesterday as well. You know the reason I hesitate when it comes to consumer discretionary. You know, I love the target beat this morning, but it does feel like a bit of a one off. And you know, if we look at some of the surveys of consumer spending consumer spending intentions, consumers are likely to be slower and likely to be more discerning and the I want to look for promotions. So you know, maybe this everything rally does take consumer dis questioningly higher with it, but from a quality perspective, and where I have the most convictions on margins, on growth, on secular opportunity, John, I think it's still tech. Okay, So how much is this baking in both the ongoing profits and also yields going lower given that valuations are already pretty high considering how high the alternative is. Yeah, I mean everything is working in the right direction right now. Clearly this is a huge yield story. But when it comes to big tech, for example, you know, yes, yields help from the valuation perspective, But what I also like about big tech for example, is that earnings growth is there over and above the S and P. For example, for the next year or two, the average earnings growth is about sixteen percent. So and by the way, valuations, I know people say big tech or tech generally is expensive, but when you adjust for that earnings growth, it's actually not that expensive. And when you start looking at individual stocks, maybe forty times forward earnings on Nvidia, maybe that seems expensive, but when you expand the chart, it's not actually off the chart, so to speak. So everything is relative. What's the balance of risks? We've been talking about that throughout the morning for next year, as people get enthusiastic into year end, is it a better than an expected economic picture or is it some sort of recession that really feeds into a profit recession as well. Yeah, so we have to decouple the view into your end versus what might happen in twenty twenty four. And I think the reason for this optimist for twenty twenty three has been this is a soft landing year. This has proven to be a soft landing year. Now I think something harder may have to happen in twenty twenty four. And here's really the big question. Which is going to determine the direction of the markets in twenty twenty four is how quickly does the FED cut or do they cut? If they cut, then I think we're off to the races, and this is they go in all on risk moment. But if they don't cut, if they stay persistent, then I think some of the bold may be disappointed. Do we underestimate the ability of corporations to adjust? Twenty four months ago of screaming about that we saw Target. Today they've had a real, real post pandemic challenge. I guess, John, what's it up right now? Forty two? It's twenty five? Okay, who's keeping count? But the answer is I still think it's underestimated in FED centric, rate centric New York City that I'm sorry, each and every corporation out there is going to adapt and adjust. What are they going to do next year? Yes, corporations are adjusting, and the case of Target, it took them a while, but those inventories were eventually paired back. I think what corporations may struggle with next year until and unless the FED pivots is the refinancing bill of some of their corporate debt. And by the way, This goes across the spectrum. It's the US government which has to refinance about thirty five percent of the debt between now and the end of next year, is the commercial real estate operators that have to refile a lot of the debt, and then it's corporate. So you know, the reason, Tom, why I think we haven't seen more of an adverse impact is because the percentage of floating rate has been low and companies have not had a lot of fixed rate maturities that needed to be refinanced. That does start to change next year. So if the FED doesn't cut, I think it does become harder for corporates and how do they adjust well, if margins get squeezed, I think cost cutting is the next measure. Does that make life difficult for certain parts of the equity market given the nature of high yield issuers, Yeah, it does. The parts of the market that I worry about, or leverage loans for example, which have already had a full year of rates around five percent. And if you look at the net interst coverage ratios, there were about three and a half times going into the year for a lot of those issues. There are one times today, maybe one point three, So how does that picture change next year, especially if you have some slow down in the top line for high yield. I'm a little bit less worried because you do have generally higher quality and better fundamentals, and there's a small portion of high yield that needs to be rolled over next year. But from a broader economic perspective, and especially when I think about the banking sector, if you start to have more charge offs, incrementally more delinquencies, some default and by the way, venture capital bankruptcies have been on the rise, so all of that does start to impact some sector of the economy, which I think is the bank. Can we finish on the banks kind of left for dead at times this year and for good reason earlier in spring. What's your view on them into twenty four? A very mixed view on them into twenty twenty four, because in earlier on the show, I did say that, you know, I was kind of warming up to the bank sector because we were expecting the capital market activity to pick up. That really didn't pan out so far in the fall of this year, and I'm not sure that it does in twenty twenty four. So if you have lackluster capital market activity, in twenty twenty four, and then on top of that you do have those higher delinquencies, defaults, and charge offs. That comes back to roots for the banking sector. So I appreciate the rally that they're participating in, but that would not be my top pic today. You sound actually less optimistic than you did a bunch of months ago, quite a bit less optimistic. Can you frame that out just how much you think some of the gains have already been paked in. Yeah, I definitely sound less optimistic your end rally nowithstanding. And the reason for that is because a lot of investors coming into the year expected this to be maybe even a recession a year, or at least very lackluster economic growth, and instead we got close to five percent GDP in the third quarter. So a lot of people are now in the soft landing camp and are not even talking about recession. But if you think about this, you know, the longer rates stayed at the current levels, and by the way, if inflation falls and real rates start to pick up the relationship we also talked about previously, then we are going to get in restrictive territory relative to the neutral rate, and that's when you start to worry about the FED stays therefore too long, then that's what caused historically a recession. Well, I do worry about that, and I don't think it's in people's consensus numbers right now. Is my takeaway here that Amoroso is on the edge of bramo ye and it gets maybe less constructive gone into twenty five to be a long year of twenty four. So we can't just you know, prepare for the whole thing. That's the joy that I hurt six months ago. Oh, the joy is here. The joy is into your end and you know, you know, I do think that. Look, the FED for now seems to be behind us until mid December. You know, I think some of the worst Fed Treasury auctions are behind us. Okay, So that's the joy. The conversation. The joy was on the screen over the last twenty four and made away and I say, you're constructive so many times right to be and stay camo. So if I capital it the Henrietta Trace joins US now economic policy research director at Vada Partners. Henrietta, with all your years of experience in Washington, and how polarized is the polarity right now? I mean, they are just at each other's throats, almost literally. Certainly, the stories out of DC yesterday were just shocking. Frankly, they have to go on recess. I am so thankful that they have agreed to this kick the can approach. As you mentioned before, I think we're just going to be doing this again, and I'm not optimistic that it's going to stop in January or in February when the two current deadlines exist. We're going to be doing this every couple of months for the rest of twenty twenty four. So we should get used to this kind of acrimony government shutdown risks. Those headlines should just be permanently emblazoned every couple of months in the newsreel. We've got those headlines ready to go hendriady through the whole at twenty twenty four. Can you just frame how big this fight over spending might be just next year. You know, it's just loud. It's not a big fight. It's just a loud fight. They are not getting any reductions in federal spending. This is a clean cr There will be a minimum of about one hundred billion dollars an additional aid that goes out across domestic and international priorities. We are not fighting about spending cuts. We are fighting about the process. The Freedom Caucus came up with the idea of doing this laddered approach. It was rejected, resuscitated, and then finally included in part in this deal. But it contains no spending cuts, and there's no scenario where the second tranche, which includes defense and foreign operations spending, is going to expire after they reach a deal on the first couple of appropriations bills. So this is a lot of sound, This is a lot of bark very little bite. Given the fact that there was not Israel or Ukraine funding in this current bill, how likely do you think that will get done by January? By February? Does it even matter considering the spending that's coming out of different pockets. That's a really important question. And I think a lot of this is tied up with Minoriti leader maccaddeal and how much cloud he continues to have with the party. I think we can't underestimate the impact of the loss in Kentucky for the governor's race that materially acted his standing with his own conference in the Senate Republican Caucus. And I think that's a big problem for Ukraine AID. I was surprised in my last round of meetings in DC how little support there is for Ukraine versus what there has been from the United States for the last year and eight months. It is really a iffy question on whether Ukraine aid gets provided at all. I do think that keeping Israel aid off of the cr that they're passing now creates at least a pathway. But when you tie Ukraine to the border and recognize that we haven't had border security legislation pass in a decade or more, you really have a problem. So I think that it is good news that we don't have a bill yet. It keeps soap alive. But I would dim my expectations for robust aid to Ukraine and Israel. Obviously is another problem that is splitting the Democratic Party just in half, just ripping it apart. So those packages are going to be really hard to come by, and I wouldn't be surprised that they didn't get it till January. You know, it's getting harder and harder to parse through the signal from the noise in Washington, d C. We have all these real, tangible, important issues and yet we are focusing on scuffles both in the Senate that Bernie Sanders had to and with a wooden gavel, and then this the accusation that Kevin McCarthy elbowed fellow Republican Congress member Tim Burchett during some of the contentious negotiations. Are any of these important to you on a policy or just functional level? There is no policy, So I think Tom, you actually just made a statement about how if you don't have your fiscal house in order, you can enact policy. That's exactly what's happening. There is no policy, so we're only talking about fiscal austerity. There's no discussion about passing a year in tax build that's of any kind of merit. They're running around punching each other in the back because they have gripes and qualms with who's a liar, who has trustworthiness. There is no policy, there's no uniting policy that drives the House of publican conference, which is in control, and that means that the Senate can't get their act together or get their work done. And it's really been a darth of leadership that I think is exacerbated by Mitch McConnell being on the way out, and a speaker that is untested with no real leadership mandate to work with on the Republican side. So I think there is no policy. I don't think we will be voting on any meaningful legislation next year. They cannot move forward on impeachment. They can't move forward on you know, impeaching even the Homeland Security secretary. They don't have a plan for the border that is comprehensive or can pass with the Republican conference. When you have these type majorities and a lack of leadership, this is where you land. So we just have these short term fights about federal spending. Thankfully we don't have to deal with the debt ceiling next year. That would have been a real problem. Well, Henry Ti, given everything you've just said, doesn't that make it all the more amazing that we managed to find an agreement in the House yesterday. I mean, you know, yes, and I don't want to be just contrarian, but they're up. The scenario where we shut down is even worse because there's no path to reopen. So if you shut down the government, we will be shut down for quite some time. People talk about, oh, we couldn't possibly go past two weeks because you'd missed a pay cycle. The last time we did this, for no good reason, with no end in sight, we shut down for thirty five days, right over the Christmas holidays. I think the one thing that's kept my optimism alive contrary to a lot of popular opinion, with you know, twenty percent or less odds that we'd shut down all year, is basically that the alternative is worse. Shutting down means we stay shut down for quite some time. Everybody looks incompetent, and you can't have these fights about fiscal austerity and spending. If you're shut down, it starts to have a material negative impact. So I mean they're both bad options, but shutting down is the worst one, with lots of them looking competent when it's open. Henritta, trace their evade partners, Henritta, thank you. I don't talk to Jim Bartak ahead. Let us get briefs here to say the marriage Jennifer Bartash's marriage counselor joins us with Bloomberg Intelligence. Jen thank you so much for joining. I want you to explain what falls to the bottom line. Home depot has a net income margin of nine is tennis cents. Target I was shocked is three or a moldy four cents on the dollar. Is anybody making money in this business? Good morning, Tom. It's a good question, and it's definitely one of the challenges that we always see in this retail sector. But I have to say, Targets results today we're very encouraging, you know, and it does give a little bit of optimism for the fourth quarter. So when they beat across the board with revenue same store sales, you know, we did see a great increase in margin. That's all really because some of the productivity initiatives that they put in place are starting to really help take cost out of the business. Willmont anst on this news as well. It's up in a free market, buying more than one point two percent. Jen, will hear from that company tomorrow. What is the read across from that company to the other. Well, I think that Target having better than expected results really only means good things for Walmart. Walmart does tend to outperform in environments where people are pulling back or being very careful with their spending, and so I think that a better than expected result today may lead to a very good outlook for tomorrow as well. But Jen, how do you parse through just the management side of things versus the macro call on a management side of saying Target seemed to work down fourteen percent of some of its excess inventory, leading to some of this boost. Does that really cross over to some sort of read through in the broader consumer. Well, I think that what we've seen is across a lot of retailers, they've had to figure out their inventory in kind of this post pandemic world. We went through a phase where everybody was stockpiling inventory so that they've had stuff available, then they had too much and they had to clear it out, and now they're trying to find the right equal librium. And being down versus last year where there were still concerns about supply chain constraints just shows that we're really getting back to that equilibrium and we're seeing it across multiple retailers, and so I think what's important is that inventory is down that much, but they are already stock for holiday, So to us, that also means that they should be able to sell through a good portion of their inventory over the holiday season and not end up in the same position they were in where they had to have a lot of Markdown's post holiday jen Yesterday we were talking about drug stores in certain cities that are putting pictures of toilet paper behind the shelves and then having people ask request for it to be delivered to them from the back of this store. Target did talk about theft to our shrink as they call it, and saying it's still weighing on their margins in a material way. What do you make of this? How long are we going to hear about this in earnings and is this just simply an excuse for margin pressure or is this something that is going to become increasingly concerning for both investors as well as the corporate executives. What we usually see in longer term cycles is that theft escalates whenever the consumer is under pressure, and as inflation is coming down, that actually should be a little bit of a release on that pressure. With regards to theft and the losses that retailers are having. You know, people generally want to do the right thing, and Target in particular has been very vocal about theft levels. We've saw some store closures where they said it was just not profitable to operate, but We do think that as inflation comes down, that should easy get a little bit easier going forward. John, you don't you bihold cell, but I want you to note a four percent dividend, an eleven percent five year dividend growth. I got a multiple of fifteen, which is what one third of the high flyers one fifth of Nvidia. In that can Brian Cornell and his team say we're back on plan the pandemics beyond us and we will have the glide pass of the TAJE we knew years ago. I think we might be at a turning point. It might be a little early to say that we're already there, but I think that today's results definitely indicate that a lot of the strategies that they're retrenching, that they're putting back into place, do put target back on that right trajectory. Jennifer, thanks for the update. Let's cat cheup against tomorrow when we get numbers from Wolmont. Jennifer Pontanshestan of Bloomberg Intetogen's Subscribe to the Bloomberg Surveillance podcast on Apple, Spotify and anywhere else you get your podcasts. Listen live every weekday starting at seven am Eastern I'm Bloomberg dot com, the iHeartRadio app tune In, and the Bloomberg Business App. You can watch us live on Bloomberg Television and always I'm the Bloomberg Terminal. Thanks for listening. I'm Tom Keen, and this is Bloomberg See omnystudio.com/listener for privacy information.