Hello, this is Jung In-seol from Washington Now. It's been two weeks since I greeted you last time. I caught a cold that doesn't seem to go away, so my voice sounds a bit strange, and I might cough. I hope you can understand this part. Major countries around the world, with Europe at the center, are all lowering their benchmark interest rates. Earlier this month, the European Central Bank lowered its benchmark interest rate for the first time in five years. Nordic countries like Sweden and Denmark have also joined the rate-cutting trend. Switzerland already lowered its interest rates last week for the second time since March. Following Canada, the UK is also considering lowering interest rates. However, what about the US? The US stands out. They are loudly declaring that it is not yet time to join the rate-cutting trend. They argue that the economy is strong and inflation remains low, like the last mile, the last 0.5 miles, the last mile.

The reason we cannot get out of this section is that NVIDIA is monopolizing AI artificial intelligence through the Envidia nationwide. In contrast to the United States and Europe, there is a stark contrast. Even within the United States, there are differences in consumption and employment. Still, inflation is easing and the economy is slowing down in the U.S. This direction is dominated by the observation that it has been determined. What is the problem? It's about the difference in speed and degree. Inflation indicators for major countries, including the United States, are being announced this week. Let's take a look at this week's key issues and schedules focusing on the speed of the last mile. What are the two pillars supporting the strong U.S. economy? As you all know, it's consumption and employment. However, among them, consumption is slowing down first. Retail sales have fallen below expectations for two consecutive months. It was negative two months ago, virtually unchanged.

The level was high. Nevertheless, the total scale of U.S. consumption is not decreasing, and compared to a year ago, it has increased. However, looking into it, it's not exactly like that. Due to inflation, prices have risen, making it seem like overall consumption has increased. However, looking deeper into it, actual spending is decreasing. In other words, under the so-called inflation illusion, Americans are also tightening their wallets little by little. These signs are being detected everywhere, especially in groceries. According to research firm Nielsen IQ, in the past year, the total number of transactions in U.S. stores decreased by 3 billion compared to a year ago. Compared to the period before the pandemic in 2020, the number decreased by 20 billion. Due to inflation, the total purchase amount has increased, but the number of items purchased and the number of transactions have significantly decreased. In theory, in retail.

Companies are increasing various discounts. Target, a representative retail company in the United States, lowered the prices of about 5,000 items including milk in June to bring customers back to the stores. Walmart also returned the prices of 7,000 products, which increased by 50% compared to a year ago, to previous levels. According to the sales criteria, the top U.S. logo said that due to a significant drop in the sales growth rate of U.S. stores, they are considering more promotions than before. It's not just grocery stores, but restaurants are also struggling. They are significantly reducing dining out. Why are they reducing dining out? It's because of tips and the inability to withstand deflation. According to the U.S. Restaurant Association, the average number of customers entering restaurants has been decreasing for 13 consecutive months. Last month's sales also fell for the first time in 7 months.

It is said that when Americans travel abroad, they do not feel any financial burden at all due to inflation. However, it is because of the strong dollar and the fact that they don't have to tip. In the past, it was said that countries like Iceland, Norway, and Switzerland had much higher prices than the United States, but now Americans don't feel that it is particularly expensive to go there. One of the main reasons is the exchange rate, but it is also because of tipping. If you deduct 20% of the tip, it actually seems cheaper. People are looking for fast food to avoid tipping. However, those who feel the price burden are not completely refraining from consuming. They are going online and flocking to discount stores that offer significant discounts. Yet, American consumers are still finding prices quite burdensome.

It is clear that wallets are being closed little by little. Consumption is like this, but employment is not like that yet. It means that it is solid, not indicating a slump. Vinyl sales have returned to pre-pandemic levels, and although the unemployment rate has slightly increased, the labor market is still strong. Even though it is unknown how long consumption can play a strong supporting role, at least the labor market is not leaning towards a recession. Looking at the truth of the labor market, we can understand it more clearly through a law called the Three Times Rule, named after Dr. Claudia, an economist at the Federal Reserve. It's not the 1st or 2nd rule of universal gravitation, but the rule named after this person. So, because it's a bit confusing, it's called the Rule of Three Times.

The spelling of the person's name is sahm, so it's spelled as sahm. That's why it's called the Rule of Three, which is a bit awkward in tone. Still, what is the Rule of Three? This was proposed in 2019. The moving average of the unemployment rate for the recent three months, for example, the average of the unemployment rate is around 3.9, and the lowest in a year was 3.6. If the unemployment rate increases by 0.5 percentage points higher than that, a sudden recession comes. However, this time it's not a recession because it's around 3.9 to 3.5, so it's naturally not a recession. It should suddenly increase by 0.5%. Since 1970, all recession cases have fit into this Rule of Three. So, Paul Krugman, in his forties with a Ph.D., highly praises it, saying it's a very good rule.

I did it, but according to the current social law, there seems to be no sign of a recession. Even during the pandemic, there wasn't a recession like that. The unemployment rate spiked for a very short period, but now it's almost stable at less than 4%. It recently hit 4%, but it's maintaining full employment levels. So, the possibility of a recession is low, as seen in the company's regulations. Dr. Three also believes in the soft landing of the U.S. economy, meaning that inflation can be controlled without a recession. He disagrees with the idea that a recession is needed to lower inflation. He forecasted that they can overcome inflation without a recession. Dr. Three also predicted until the end of last year that in the first half of this year, the Fed will start lowering interest rates and will decrease them by 1% point over a year.

It was wrong in a good way. Of course, the Fed made many mistakes, and many people are making mistakes. This law is correct, but people's expectations are wrong. Consumption and employment are flying apart. What will happen to inflation in the future? Since this part is all wrong, many people's forecasts are wrong. Overall, the market is looking very slowly bearish. On the 28th, the US PC will be released, which will confirm this part once again. In the market, the May PC price is expected to increase by 0.01% compared to the previous month, rounding up at the second decimal place, so it is expected to stay virtually unchanged at the break-even level. Compared to the previous year, it is expected to increase by 2.6%. It was 2.7% for two consecutive months, but it is expected to slightly ease to 2.6, breaking that barrier. How about the underlying PC? It is expected to increase by 0.1% compared to the previous month and by 2.6% compared to the same period last year.

I'm doing well. In April, a month ago, it increased by 0.3% to 2.8%, which was more relaxed than expected. For three consecutive months, in March, April, and May, it remained at 2.8%. However, this time, in May, it eased to 2.6%. The 2.8% barrier is broken. So, the market is saying that the inflationary pressure is weakening economically. However, there is still a long way to go. Even if the forecast is correct, the target of 2% is still not being met. Who is the last mile terminator? It is housing and service prices. They are still at a high level. So, inflation is not yet under control. Moreover, looking at the CPI, the situation in the U.S. seems even more serious. What is the current U.S. CPI? It is 3.3%, in the early to mid-3% range. Other countries, including the U.S. and Korea, are in the early to mid-2% range. The U.S. is much higher like this.

What is the main reason for the high CPI in the United States? It's because of the specificity of the CPI. In other words, the housing costs of homeowners are significantly reflected. The overall CPI calculation method across the world is the same, which is comparing the past and current prices of the same items. However, there are significant differences in the composition and weights. There is no country that reflects housing costs as high as the United States. What percentage does housing costs account for in the US CPI? It's over 36%. Among them, the proportion of housing costs for homeowners is 7.8% of that 36%, which corresponds to 2.6% of the total. European countries with lower proportions of housing costs naturally have lower CPI results. That's why the US has higher CPI results. In the case of South Korea, housing costs account for about 10% of the CPI, and the housing costs of homeowners are not included at all. Only rental costs are partially reflected.

Currently, in our country, the homeownership rate is close to about 60%. However, their housing costs, loan interest, and things like that are not included in the CPI. In the United States, though, it is reflected in the form of a survey, like how much would you rent for. But because that part is included, the U.S. CPI comes out slightly higher than other countries, around the early 3%. Considering this, it is necessary to compare the CPI of the United States with other countries like France, Spain, and Italy. On Friday, the 28th of this month, the inflation meetings of these countries will be disclosed. Last week was Wednesday, which was a super Wednesday, but this week will be a super Friday. Already, on the 25th, after lowering the interest rates once, Canada will also announce the CPI of last month. Most countries are expecting inflation to slightly ease compared to before. Inflation is easing and is at a high level, but.

The person in the White House is in a hurry. The U.S. presidential debate is starting earlier than scheduled. Inflation is not easing quickly, but the presidential debate starts early. Why is that? This election is different from previous ones. The presidential candidates have already been decided. Normally, each party's national convention is in July or August, and the election starts after it ends in September. However, this time, even though there is a national convention, it's more of a formality. Both the Democratic Party with Biden and the Republican Party with Trump have been decided. That's why the presidential debate is happening first. It will start at 9 p.m. local time on the 27th in Atlanta, USA, and at 10 a.m. on the 28th in Korea, at the CNN studio. Four years ago, when these two debated, it was chaotic. They kept talking over each other without turning off their microphones. To prevent that this time, when one person is speaking, the other person's microphone will be muted.

The candidate decided to turn off their microphone and, without the help of aides, only holding a pen and a notepad, take a 90-minute break and then continue the debate. Most markets predict that Trump will win or not have a significant advantage. If President Biden overturns this expectation and, like the unexpected speech last time, takes medicine or faces controversy in any form, performs well, attacks aggressively, shows a healthy appearance, and speaks passionately without a break for 90 minutes, President Biden may actually see an increase in approval ratings after the TV debate. In terms of topics, the economy, including inflation, is likely to be the most discussed, and the Middle East issue could be President Biden's Achilles' heel. How to defend against it is of interest. Other topics such as illegal immigration, the Ukraine war, the aging controversy, and Trump's judicial risks are also important.

It will be a hot topic. Originally, Biden was the man in crisis, but there was a man in even more crisis. Who is it? It's President Macron of France. In the European Parliament elections, the ruling party was dominant. President Macron surprisingly declared an early budget and announced a snap election. The first round of voting will be held on Sunday, the 30th local time. If there is no majority candidate, the final vote will be held on the 7th of next month. This is for the parliament, not the presidential election. Even if the ruling party led by President Macron loses, he will not step down from the presidency. They will become a minority party in the parliament. Also, Iran is in turmoil right now after President Ebrahim Raisi died in a helicopter crash. A by-election will be held on the 28th with five out of six candidates being conservative. Like I mentioned before,

Employment does not quite match. There is a slight temperature difference. Among them, Dr. 3Sam's forecast was also wrong. Just like his wrong forecast, it's really difficult to predict inflation. Between consumption and employment, which one will give us a better economic forecast for the US? This indicator can be seen this week through the inflation indicators of other countries, so we should pay close attention. That's all for the content. Last week, many of you left comments on the video I made. It was two weeks ago. Thank you. Charlie Lim mentioned that the US government is injecting a lot of money. As I have been saying, due to the balance between the Fed's tightening and the Biden administration's deficit spending, the inflation last mile section keeps getting longer.

Certainly, it will be a problem, and in the long run, compared to the post-World War II period, the government debt has increased more relative to GDP in the United States. This is a significant challenge that needs to be overcome. Depending on how this is overcome, it seems that it could determine the sustainability of the U.S. economy and the global economy. Mr. Sun Na, you also expressed your concerns. Thank you so much for your support. Despite the malicious comments, I will continue to persevere. I don't see many malicious comments, but maybe I just can't see them. I am grateful for everyone's support, and I continue to live on that. Last week, I mentioned that I am expanding investment in job creation. Therefore, it is a new job, and the unemployment rate is measured through a kind of person-centered survey, so these two indicators take different forms.

I said that I could appear, but the number of irregular part-time jobs is increasing. Of course, it's because we have to make a living due to inflation, so the need for sleep is increasing. That becomes new jobs, not new employment or new employees increasing. Many of you have given me a lot of good words. Especially, Alice Kim, you told me what I wanted to hear. You pinpointed the important points that I wanted to hear. What I pursue always seems insufficient, so I try to compress time a bit more and make it more fun, but it doesn't go as planned. Thank you to everyone for your kind words. Especially last week, maybe because there were negative comments, it seems like many of you have given even better words. Carolo, three times.

You mentioned repeatedly that you listened carefully, but it made me reconsider if it is really worth it. You mentioned whether the increase in new jobs has more damage than the rise in hourly wages. The increase in new jobs seems quite significant in the job market because jobs need to continue to increase. Also, the rate of increase in hourly wages has a much greater significance when it comes to inflation. Currently, looking at the whole country, the increase in hourly wages may have a greater impact as you mentioned. Haebing, Shushu, Shuper Wednesday, last week, there were a lot of announcements on Wednesday, but this time it's Shuper Friday. We need to watch whether it will turn into a golden Friday or a black Friday. Abba, you said I remind you of a Smurf when you look at me, I take it as a compliment.

I appreciate it, you know. I might come across that way, but I don't think so. It's quite challenging for me because I can't control my tongue well. Oh, and Kim Dong-hyun, Kim Dong-hyun, mentioned that CPI can be manipulated without processing PC. Well, you can think that way because PC has a more extensive data highway. However, I don't see it that way. I just see differences in data ranges and methods. Abraham, oh, mentioned about the statistics of illegal immigrants' employment and legal economic participants, saying that the statistics show such a big difference. I think many are considering that the statistics related to illegal immigrants have not been fully reflected yet. So, if this comes into the U.S. economy in a significant way or to what extent it enters the center of the U.S. economy.

Many parts from that side will likely be reflected in the statistics. So far, only a very small part has been reflected, and I don't have a sense of how much that part is. Last week, like zd, I explained the difference in CPI and PC, and you mentioned that part. Hanari also mentioned that the issue is the U.S. government's money flooding. Ik7 said it's strange that insurance rates were not discussed. In the U.S., since there are no signs of an economic downturn, interest rates are not lowered. European countries are still not fully achieving their inflation easing goals, but they are lowering interest rates to prevent an economic downturn. There have been a lot of discussions like this. For example, Switzerland has achieved its inflation target, so they have lowered interest rates for two consecutive months. However, the U.S. does not need to do that, so they have not lowered interest rates for insurance purposes yet.

It seems like you are not doing it. I'm not sure if you are saying that, but that's what I think. This week, we'll stop here. I will come back again next week. Thank you.

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