BIG PICTURE - Bloomberg.com · April 13, 2016 ... Fed's Beige Book; Canada Rate Decision BEN BARIS AND JAMES BATTY, ... headline CPI and the PCE have advanced by 1 percent.

Wednesday

April 13, 2016

www.bloombergbriefs.com

Retail Sales; Fed's Beige Book; Canada Rate DecisionBEN BARIS AND JAMES BATTY, BLOOMBERG BRIEF EDITORS

WHAT TO WATCH: U.S. are forecast to rise 0.1 percent in March after retails salesdeclining the first two months of the years. Sales ex-autos and gas are expected to advance 0.3 percent, 8:30 a.m. Released concurrently, are forecast to producer pricesrise 0.2 percent in March from a month earlier. are expected to Business inventoriesfall 0.1 percent in February, 10 a.m. The Federal Reserve issues the report Beige Bookon regional economic conditions at 2 p.m.

ECONOMICS: The announces its rate decision at 10:00 a.m. in Bank of CanadaOttawa, with economists predicting no change, as well as its monetary policy report. BOC Governor and Senior Deputy Governor will hold Stephen Poloz Carolyn Wilkinsa press conference at 11:30 a.m.

GOVERNMENT: The releases its Fiscal Monitor report on the latest developments IMFin public finance at 9:30 a.m. IMF Head of Fiscal Affairs holds a briefing.Vitor Gaspar

COMPANIES: releases first-quarter earnings. Follow JPMorgan Chase & Co. for our on the terminal for real-time coverage starting at 6:45 a.m.TOPLive blog

MARKETS: Global stocks climbed for a fourth day as Chinese trade data added to signs of a pickup, supporting a rebound in commodities. Haven assets including the yen and retreated.gold

(All times local for New York.)    

QUOTE OF THE DAY

"Although I cannot give you a definitive path for how policy will evolve, it might prove prudent to wait until the inflation data are stronger before we undertake a second rate hike."  — Philadelphia Fed President Patrick Harker, one

of several Fed presidents to yesterdayspeak

COMMENTARY IN THIS ISSUE

Retail sales data will provide an important signal as to whether consumers are gearing up for a stronger performance this quarter: Carl Riccadonna.

The latest edition of the Federal Reserve’s Beige

should denote a Bookdegree of improvement in the U.S. economy:Richard Yamarone.

Today's Bank of Canadapolicy decision presents a good opportunity for Governor Stephen Poloz to acknowledge good news in the economy: Richard Breslow.

Small business remained sour sentimentin March, holding at the lowest level in more than two years: Yelena

and Shulyatyeva Carl Riccadonna. Fannie Mae's Douglas Duncan discusses

and how excessively high housing pricesrent payments can impact the economy:

and Tom Keene Michael McKee.

NUMBER OF THE DAY

—2.4% The amount the U.S. will grow this year, according to the latest IMF forecast — a 0.2 percentage point cut from lender's the last . The estimateforecast for 2017 dropped 0.1 percentage point to 2.5 percent.

BIG PICTURE  CARL RICCADONNA, BLOOMBERG INTELLIGENCE ECONOMIST

NY Fed Has Rosier GDP Than Atlanta in Battle of Forecasts

New York to Atlanta: Buck up, growth ain’t so bad. The Federal Reserve Bank of New York, capitalizing on the popularity of the Atlanta regional bank’s growth forecasting tool “GDPNow,” introduced its own measure Tuesday that updates gross domestic product projections on a weekly basis. The aim is to consider the impact of a range of economic indicators in a timely fashion. The New York Fed’s model — the “Nowcast” — pegged growth at 1.1 percent for the first quarter, according to its latest update on April 8. Growth in the final three months of 2015 came in at 1.4 percent. That’s a lot rosier than the Atlanta Fed’s read, which has first-quarter growth at 0.1 percent.

— Michelle Jamrisko, Bloomberg News

April 13, 2016 Bloomberg Brief Economics 2

BIG PICTURE  CARL RICCADONNA, BLOOMBERG INTELLIGENCE ECONOMIST

A Stumble for U.S. Retail Sales Could Trip Up the FedRetail sales may not give a

comprehensive picture of the vigor of U.S. consumers, but the data will provide an important signal as to whether they are gearing up for a stronger performance this quarter. Barring such an improvement, both the economy’s underlying momentum and the Fed’s plans for multiple interest-rate increases will be in jeopardy.

The Bloomberg consensus forecasts a modest increase of 0.1 percent in

in March, following headline retail salesdeclines in January and February. The headline will be drawn between weak auto sales and rising gas station sales, so the underlying details will provide a more reliable snapshot of consumer activity.

Sales excluding automobiles are projected to rise at a significantly faster rate (0.4 percent versus minus 0.1 percent prior) than the headline, as unit motor vehicle sales were unexpectedly weak in the month (minus 5.6 percent).

While remain gasoline pricesextremely low, a 12 percent increase in March from the previous month will boost sales at gas stations, adding to the headline increase.

Retail sales excluding automobiles and gasoline will provide a less distorted assessment of consumer activity. The consensus forecast is for a 0.3 percent increase, matching February’s gain.

Retail control, which excludes food, auto dealers, building materials and gasoline stations, will yield clues toward consumer spending in the GDP accounts. It is projected to rise 0.4 percent in March versus unchanged previously, which should push the quarterly annualized change to 1.4 percent from 0.8 percent currently.

Mind the revisions: The direction of revisions can significantly alter the interpretation of the report, as was the case in February, when a less negative decline was trumped by a sizable downward revision to January (minus 0.4 percent revised versus 0.2 percent initially reported).

What to Expect

 Read a more comprehensive retail sales preview with a live version of this chart on the terminal . here

The March retail sales report is the most important data to be released before the April 26-27 FOMC meeting. While the chance of policy action then is remote, the tone of retail activity in the first quarter will affect policy makers’ assessment of the economy and the degree to which they try to prepare financial markets for the possibility of a rate hike at the next meeting on June 14-15. If retail sales signal limp consumer spending, it will be a difficult case to make.

Retail sales account for only a small portion of overall consumer spending, which tends to be dominated by consumption of services. In fact, the services share of spending has been steadily increasing over the past several decades, and now accounts for 68 percent of consumption. As such, retail weakness does not automatically signal broader weakness in consumer spending, but it is a troubling signal nonetheless.

Retail control, the portion of retail sales that is used as a direct input into the tabulation of GDP, accounts for only about one-fifth of total personal spending. Because of this small share, some analysts tend to dismiss the impliedsignal for overall consumption. However, this is ill-advised, because retail control is nonetheless highly correlated with total nominal spending — as are headline retail sales. In year-on-year terms, retail control

has demonstrated a 97 percent correlation with overall personal spending over the past decade (all calculations based on quarterly averages).

The correlation between headline retail sales and spending is a still-impressive 90 percent. In terms of the quarterly change, headline retail sales (91 percent) show a slightly higher correlation than retail control (87 percent). As such, while March retail sales will leave significant portions of consumer profile unknown, the implicit guidance bears watching.

If they are in line with consensus estimates, headline retail sales’ quarterly annualized change will slip to minus 0.6 percent. Retail control will slip to 1.4 percent. Both would represent the weakest outcomes since the first quarter of 2015. These results should be consistent with nominal spending growth for the quarter around 1.9-2.2 percent.

This is a troubling prospect for overall GDP growth, since consumer spending accounts for about 70 percent of underlying activity. The last three quarters in which real consumer spending advanced in the vicinity of 2 percent were the fourth quarter of 2015 (2.4 percent), the first quarter of 2015 (1.8 percent) and the first quarter of 2014 (1.3 percent). GDP growth in those periods was 1.4 percent, 0.6 percent and minus 0.9 percent, respectively.

Retail Sales, Retail Control and Personal Consumption

April 13, 2016 Bloomberg Brief Economics 3

FEDERAL RESERVE  RICHARD YAMARONE, BLOOMBERG INTELLIGENCE ECONOMIST

April 13, 2016 Bloomberg Brief Economics 4

FEDERAL RESERVE  RICHARD YAMARONE, BLOOMBERG INTELLIGENCE ECONOMIST

Expect Fed Beige Book to Reflect Modest Economic GainsThe forthcoming edition of the Federal

Reserve’s Beige Book should denote a degree of improvement in the U.S. economy. Most of the commentaries and data found in the regional Fed reports, as well as those in the Bloomberg Orange Book, suggest that growth continued at a moderate pace. To be sure, there are scattered pockets of weakness — largely in the energy-dependent industries and regions of the nation. But the outlook is upbeat for the most part, thanks to solid job creation and low inflation.

The Fed’s April 13 Beige Book will contain data and anecdotes gathered from Feb. 22 to March 27.

Consumer Spending/Retail: Once again, it appears as if consumer spending will likely be the greatest source of strength in Beige Book, even if it is not as strong as it was in December and January. A softening of consumer attitudes since then is probably a function of higher gasoline prices. Consumer spending rose 0.1 percent in February, matching January’s downwardly revised gain of 0.1 percent (initially reported as a 0.5 percent increase).

Inflation: Most of the premier inflation barometers are running below the Fed’s 2 percent objective. Over the last year, headline CPI and the PCE have advanced by 1 percent. The associated core measures for CPI and PCE are 2.3 percent and 1.7 percent, respectively. There should not be any overly disconcerting comments related to the general price level.

Labor/Wages: The labor market continues to improve, with non-farm payrolls climbing by more than 200k each month and a seemingly never-ending string of declines in initial claims. While it is safe to expect several references to employers’ inability to find workers with specific skillsets, the labor market remains quite strong overall.

Credit Suisse, AIG, U.S. Steel, McKesson, UBS, Avon, Lockheed-Martin, Goldman Sachs, Sysco, Halliburton, Deere, Wal-Mart and Sears are among companies that have announced job cuts since late February. Yet these moves do not add up to anything troubling. Wages continue to appreciate at a moderate pace.

 Click to view a live version of this chart on the Bloomberg terminal . here

Manufacturing: All of the headline regional Fed manufacturing surveys improved in March, suggesting that the Beige Book will include some favorable commentary regarding production and output. Even the broadest measure, the ISM PMI, showed factory-sector activity expanding for the first time since September. Still, some of those Fed barometers carried contractionary readings and industrial production fell 0.5 percent in February — suggesting that manufacturing may not be out of the woods just yet.

Real Estate/Housing/Construction: Home construction and sales activity has been choppy during the winter months, but most commentary points to strength. “We do not see the telltale signs of recession,” said Stuart Miller, CEO of Lennar. “Stronger general economic conditions, including lower unemployment, modest wage growth and general consumer confidence, are still driving consumers to form new households and to rent and to purchase apartments and homes. We expect that demand will continue to build and come to the market over the next years and will drive increased production as the deficit in housing stock ultimately needs to be replenished.”

The U.S. Department of Agriculture: Agriculture reported that dry conditions

intensified throughout March. Drought conditions across the 48 contiguous states eased somewhat in recent weeks, and were exceptional only in California and southeast Nevada. John Deere reduced its U.S. farm cash receipt forecastfor 2016 based on record crop harvests of the last three years, and lower prices.

Financial Financial/Lending: conditions are little changed over the past six weeks. Yields on the benchmark 10-year Treasury note averaged 1.86 percent during the survey period, a tad lower than the 1.95 percent average in the previous period. Lending appears to be solid in many districts, and consumer credit increased an annualized 5.8 percent in February, with associated gains in revolving (3.7 percent) and non-revolving (6.6 percent) credit.

Energy: Despite a 25 percent increase in oil prices to more than $39 a barrel since the last Beige Book, the number of operating oil and gas rigs in the U.S. fell by 50 over the same period. This is hardly an improving situation from an economic perspective. According to one machinery manufacturing respondent in the Dallas Fed survey, “It appears the oil and gas business won’t be back for 12-18 months. We are actively pursuing other industries, with varying degrees of success depending on the industry. We may very well survive.”

Correction: An earlier version of this article misstated inflation figures in the second bullet point.

CENTRAL BANK COMMENTARY

Regional Manufacturing Indexes All Improved in March

April 13, 2016 Bloomberg Brief Economics 5

CENTRAL BANK COMMENTARY

Chance for Canada’s Poloz to Spread Some JoyRICHARD K BRESLOW, FIRST WORD

The Bank of Canada meets today and most forecasters expect them to hold rates steady and retain their “neutral bias.”

On its face, that might sound like Canada is preparing to live up to its outdated reputation for being boring. That’s a dangerous presumption. Good things have been happening there and it’d be a shame for Governor Stephen Poloz not to embrace it.

Growth has been surprising everyone, including the BOC. Just about every indicator compared to their downbeat January forecast has been a beat. GDP, employment and inflation are all stronger.

Oil prices, the great thorn in the economy’s side have been rising. Should WTI get above $41 per barrel, the

technical picture is going to look constructive and toss January’s gloom on its ear. Don’t for an instant think those planned cutbacks in oilfield capital expenditure won’t be quickly reconsidered should prices hold.

Non-energy exports (see, countries can adapt) have been growing. The weaker currency has helped but so has improving U.S. demand. Yes, the Canadian dollar is strengthening, but really, anything over 1.30 to the U.S. dollar is crisis territory.

The biggest news, however, and one Poloz will have to break silence on, is the federal budget passed in March. It’s a budget that reintroduces the concept of fiscal policy to the global stage. Opinions differ on extent, but it’s unquestionably stimulative, not merely a pick-me-up for asset prices. It calls for continued

spending, including infrastructure. At least they will have something to show for their budget deficits.

No rate hikes are priced into the futures curve for 2016. Indeed a small chance of a cut is there. If BOC forecasts suggest the output gap will be closed quicker than expected, there’s a chance Poloz might sound the hawk.

We’ve gotten used to central bankers sounding upbeat when they don’t really mean it. Here’s an important opportunity for one to acknowledge legitimately good news. That could be a shot in the arm for animal spirits and an endorsement for superior policies.“Trader’s Notes” are authored by Richard Breslow,

a former FX trader and fund manager who writes

for Bloomberg. The observations he makes are

his own and are not intended as investment

advice.

How the Federal Reserve Can Work BetterNARAYANA KOCHERLAKOTA, BLOOMBERG VIEW COLUMNIST  

The U.S. Federal Reserve is an unusual institution: It makes key policy decisions on behalf of the public, yet its constituent parts — the twelve regional Feds — are legally part of the private sector. In a new series of , Professor Andrew proposalsLevin of Dartmouth University argues that making the regional Feds into truly public institutions is crucial to improving the Fed's accountability, transparency and governance.

I’ve known Levin for a long time, and I have a great deal of respect for his integrity and acumen. That said, I think his aims can be achieved without such a radical reform. All it requires is some changes at Fed's Board of Governors in Washington, D.C. — a fully governmental entity that already oversees and has a great deal of control over the regional Feds.

Levin, for example, suggests that the process of appointing presidents at the regional Feds is too opaque. I agree, but the problem is in Washington, not in the regional banks. Currently, the six non-banker directors of the regional Fed nominate a candidate, who must then be approved by the Board of Governors. The

Board is supposed to represent the interests of the public, but it's hard to know how well it's doing its job because it provides no information about its deliberations.

The solution is simple, and requires no change to the Federal Reserve Act. The regional Fed's non-banker directors would

The problem is in Washington, not in the regional banks

offer a slate of up to three finalists. The Board of Governors would then undertake a public panel interview of each finalist, and hold a public vote to approve its preferred candidate (it could also choose nobody and ask for a new slate of candidates). In this way, the public could see how the board reached its decision.

Consider, for example, the three regional Fed presidents that the board of governors approved in 2015 (for positions in Philadelphia, Dallas, and Minneapolis). All had past professional associations

with Goldman Sachs — ties that some members of the public view with deep suspicion. Under my proposed process, the public would know exactly how the board assessed these past connections, and why it decided they weren't a problem.

Many of Levin’s other goals (which I don’t necessarily endorse) can readily be accomplished by the board of governors without any change in the law. Levin proposes a term limit for regional Fed presidents, suggests that the re-appointment process for presidents is insufficiently rigorous and argues that the regional banks should be subject to the Freedom of Information Act. The board already has the authority to make all these changes at any time.

Levin is right that the Fed should become more accountable and transparent. But that's something the Board of Governors can achieve, simply by better aligning its oversight of the regional Feds with the public interest.

Narayana Kocherlakota is the Lionel W.

McKenzie professor of economics at the

University of Rochester. This column does not

necessarily reflect the opinion of the editorial

board or Bloomberg LP and its owners.

DATA & EVENTS

April 13, 2016 Bloomberg Brief Economics 6

DATA & EVENTS

TIME COUNTRY EVENT SURVEY PRIOR

7:00 U.S. MBA Mortgage Applications — 2.70%

8:30 U.S. Retail Sales Advance MoM 0.10% -0.10%

8:30 U.S. Retail Sales Ex Auto MoM 0.40% -0.10%

8:30 U.S. Retail Sales Ex Auto and Gas 0.30% 0.30%

8:30 U.S. Retail Sales Control Group 0.40% 0.00%

8:30 U.S. PPI Final Demand MoM 0.20% -0.20%

8:30 U.S. PPI Ex Food and Energy MoM 0.10% 0.00%

8:30 U.S. PPI Ex Food, Energy, Trade MoM 0.10% 0.10%

8:30 U.S. PPI Final Demand YoY 0.30% 0.00%

8:30 U.S. PPI Ex Food and Energy YoY 1.30% 1.20%

10:00 Canada Bank of Canada Rate Decision 0.50% 0.50%

10:00 Canada BOC Releases Monetary Policy Report; Poloz, Wilkins Speak — —

10:00 U.S. Business Inventories -0.10% 0.10%

14:00 U.S. U.S. Federal Reserve Releases Beige Book — —Source: Bloomberg. Surveys updated at 5:20 a.m. New York.

Click to view a live version of this chart on the Bloomberg terminal.here

CALENDAR

Click on the to see the full range of economists' forecasts on the terminal.   highlighted releases

OVERNIGHT

Euro-area industrial production fell the most in 18 months in February, giving up some of the surge seen at the start of the year. Data from showed Eurostat output declined 0.8 percent, more than the 0.7 percent economists had forecast in a Bloomberg survey. The decline followed a revised 1.9 percent jump in January, which was the biggest since 2010.

Swedish Finance Minister Magdalena raised the economic growth Andersson

forecast for 2016 and predicted narrowing deficits in the coming years as an economic boom helps the nation cope with a record influx of asylum seekers. Gross domestic product will expand 3.8 percent in 2016 and 2.2 percent in 2017, compared with December forecasts of 3.1 percent and 2.6 percent respectively, the Stockholm-based Finance Ministry said in a statement. It now predicts budget deficits of 0.4 percent of GDP in 2016 and 0.7 percent in 2017, compared with earlier forecasts of 0.9 percent and 0.8 percent.

China’s exports jumped the most in a year and declines in imports narrowed, adding to evidence of stabilization in the world’s second-biggest economy. Stocks rallied. rose 11.5 Overseas shipmentspercent in dollar terms in March from a year earlier, compared with a 25 percent slump in February, when factories and offices were closed for a week-long holiday. Imports extended declines to 17 months with a 7.6 percent drop, data published today show. The trade surplus decreased to $29.9 billion, the least in a year.

Japan needs a fresh, double-dose of stimulus to counter mounting signs of economic weakness, according to one of the key members of Prime Minister

’s brains-trust of pro-reflation Shinzo Abeadvisers . Kozo Yamamoto The government should assemble a 10 trillion yen ($92 billion) fiscal package, and the central bank should add the same amount to its already unprecedented easing program.

Europe

Asia

SENTIMENT   YELENA SHULYATYEVA AND CARL RICCADONNA, BLOOMBERG INTELLIGENCE ECONOMISTS

Commodity Price Jump in March May Add Pressure to PPI

Falling oil prices and a strengthening dollar weighed on PPI last year. A 24 percent jump in crude oil prices and a 4.6 percent increase in the Bloomberg Commodity Price Index in March, boosted by a retreat in the dollar, could add upward pressure to some of the components of the commodity-heavy PPI and alleviate some of the downward pressure on core consumer prices. Nonetheless, with core PPI growth at 1.2 percent in February, wholesale price pressures remain muted.

— Carl Riccadonna and Yelena Shulyatyeva, Bloomberg Intelligence Economists

April 13, 2016 Bloomberg Brief Economics 7

SENTIMENT   YELENA SHULYATYEVA AND CARL RICCADONNA, BLOOMBERG INTELLIGENCE ECONOMISTS

Pessimism Prevails Among U.S. Small Businesses in MarchSmall business sentiment remained

sour in March, holding at the lowest level in more than two years. It appears the growth stall that began in the fourth quarter is still weighing on business attitudes, as expectations for the economy to improve remain subdued despite turning slightly less negative. Nonetheless, small businesses continue to indicate plans to hire and raising worker compensation, as more small business owners find it difficult to find qualified workers. Government requirements and the political climate remain major factors weighing on businesses’ plans for expansion.

The NFIB Small Business Optimism Index fell slightly to 92.6 in March from 92.9 a month earlier, which was much softer than consensus expectation for a modest rebound (93.5). This pulls the index headline to the lowest level since February 2014. The headline is now below its levels ahead of the last four recessions, which is mildly troubling, although it appears that heightened uncertainty about the economy’s resilience is taking a toll on attitudes.

The details were mixed: Six underlying components declined, while four increased. While hiring plans fell and a smaller share of firms thought it was a good time to expand, expectations for the economy turned moderately less negative and plans to make capital outlays also modestly improved. These are all consistent with a lingering hangover from a slow-moving economy, and confirm growth likely will be modest in the current quarter.

Government requirements and taxes remain the most important problems for small business owners. The share of owners citing weak sales has fallen significantly as the top concern since the recession, while the percent of owners citing the difficulty of finding qualified workers as their most important business problem has picked up in the last couple of years.

Click to view a live version of this chart on the Bloomberg terminal . here

Click to view a live version of this chart on the Bloomberg terminal . here

Following March’s results, small business sentiment joins a growing number of economic series that turned negative in the first quarter. Given the usually tight correlation between small business and household attitudes, this

Friday’s preliminary report on April consumer sentiment may get intense scrutiny. It should serve as evidence to policy makers that market and economic uncertainty are having real psychological effects on business decision-making.

MARKET INDICATORS

Expectations for Economy Turned Moderately Less Negative

Small Businesses Most Concerned by Taxes, Government

April 13, 2016 Bloomberg Brief Economics 8

MARKET INDICATORS

Source: Bloomberg. Updated 5:30 a.m. New York time.

April 13, 2016 Bloomberg Brief Economics 9

Bloomberg Brief: Economics

SURVEILLANCE WITH KEENE & MCKEE

Fannie Mae Chief Economist Douglas Duncan

spoke with Bloomberg's Tom Keene and Michael

McKee about housing prices and how excessive

rent payments can potentially impact the rest of

the economy.

Q: How do you characterize inflation?A: It moved up a little bit, and the owners' equivalent rent was a contrarian to that. And part of that is a function of there is no supply at the low price point either in owned properties or rented properties. So I would expect to see some continued pressure on that component of the inflation index. In addition all these jobs are pushing the demand curve and it's moving faster than supply.

Q: What's the trend with house prices?A: They're still moving up strongly. We anticipate a little more than five percent nominal this year. That will be the fourth consecutive year in which they've risen around that much. And that's a lot faster than real household incomes are increasing. And what we're seeing this year is housing affordability constraints as the expansion matures — this is now the fourth-largest expansion since WorldWar II. You look at our survey of consumers, they don't feel that this year and I'm thinking that the economy is going along track, it's actually increasing. But both rents, particularly in lower quality

apartments, D-grade apartments, and prices of lower priced homes are appreciating faster than are higher prices or higher rents.

Q: What's the appropriate amount every month that we should put into rent or housing?A: I think a long-term rule of thumb is around 30 percent, in that ballpark. And you're certainly seeing well above that in some markets now. I was just out in San Jose and there are essentially no affordable single-family detached homes, available for sale in anything close to the core business near in rents there. They are certainly pushing above that number.

Q: What is the social cost of that, if any? Is it a good thing?A: It has two or three impacts. One is certainly it reduces the ability of households to save. And one of things that was a huge contributor to the crisis was the excess leverage at both the household and business level. So to the extent that your housing cost is a contributor to excess leverage in the household, that's a negative.The second thing is that for the business community at some point you won't be able to afford to pay a wage rate that will allow the worker to live in close enough proximity to make it make sense to work for their company. So you'll start to see some business migration at some point. It

probably will take some time for the costs certainly to get to that point before you see that move, and that's not good for overall growth.

Q: Is it rent or buy? What is the research that you show?A: We financed about $42 billion in multifamily last year, so we're actually in both own and rent. And population suggests today that the homeownership rate is about right. It's at 63 percent. And then we'll see it pickup when the millennials come back to the 64 percent, maybe 64.5 percent a few years down the road. So we're close to the balance. The problem is there is just not supply on the low end, so it gets to that cost problem, the accelerated share of income.

Q: Some people think they can never own. How do we, as a society, fix 20 percent down on a huge number in too many of our cities and towns?A: The real issue is supply. There are a lot of development restrictions in neighborhoods that are controlling sort of lower density. That means land is the most expensive component in building a house because there are restrictions on the size of lot developments. You have to change all the local building codes to import new technologies, and that takes time. It's a market by market activity because building codes typically are local.

This interview has been edited and condensed.

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