WEBVTT - UPDATE: British GDP Shrinks &  A UK iPhone Price Cut

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<v Speaker 1>Good morning. It's Wednesday, the thirteenth of September here in London.

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<v Speaker 1>This is the Bloomberg Day Bacurate podcast. I'm Caroline Hepka.

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<v Speaker 2>And I'm Tom McKenzie. Coming up today, the UK economy

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<v Speaker 2>reverses recent gains, shrinking at the quickest pace in seven months.

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<v Speaker 1>Bp CEO Bernard Looney quits over failing to fully disclose

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<v Speaker 1>past relationships with colleagues.

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<v Speaker 2>Plus, Apple unveils its latest iPhone and hikes top end

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<v Speaker 2>prices everywhere except the UK.

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<v Speaker 1>Let's start with a round up of our top stories.

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<v Speaker 2>The UK economy has shrunk at the quickest pace in

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<v Speaker 2>seven months, as dull weather held back spending and strikes

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<v Speaker 2>hit the public sector, unwinding the strength of the previous month.

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<v Speaker 2>GDP fell by zero point five percent half a percent

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<v Speaker 2>in July after a zero point five percent gain the

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<v Speaker 2>month before. Are UK Chris One and Lizzie Burdens says

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<v Speaker 2>the reversal will give the Bank of England pause for

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<v Speaker 2>thought ahead of next week's rate decision.

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<v Speaker 3>This day to suggests that there is a bit more

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<v Speaker 3>weakness in the economy, perhaps than was thought. We're going

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<v Speaker 3>to get more inflation data from the Eve of the decision.

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<v Speaker 3>That's expected to show that the headline rate actually increases

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<v Speaker 3>because of contributions from petrol and diesel prices, So you

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<v Speaker 3>might see another hike yet, but maybe we get to

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<v Speaker 3>that peak sooner than perhaps thought.

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<v Speaker 2>Lizzie Burden also says that the latest estimate may well

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<v Speaker 2>be revised later this month based on recent changes the

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<v Speaker 2>way the data is calculated.

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<v Speaker 1>Now, Apple has launched a range of upgraded iPhones, also

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<v Speaker 1>raise the price of its top end handset by almost

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<v Speaker 1>ten percent in the US. But as Bloomberg's chief correspondent

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<v Speaker 1>Mark German points out, there's one place where prices won't

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<v Speaker 1>be rising.

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<v Speaker 4>The UK is unique today for a very key reason.

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<v Speaker 4>There was actually no price increase in the UK. In fact,

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<v Speaker 4>the new iPhones are cheaper in the UK than they

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<v Speaker 4>were previously, coming down by about one hundred pounds, which

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<v Speaker 4>response to about one hundred and twenty eight dollars US,

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<v Speaker 4>So if you're in the UK, you might be getting

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<v Speaker 4>a better deal than you did last year.

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<v Speaker 1>Mark German says that the new iPhone models, which include

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<v Speaker 1>a USB C connector, represent the first significant iPhone overhaul

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<v Speaker 1>since the five G phones came out three years ago.

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<v Speaker 1>Apple CEO Tim Cook will be hoping that the updates

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<v Speaker 1>will pull the company out of a sales slump and

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<v Speaker 1>fears of a consumer backlash in China.

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<v Speaker 2>That's another major corporate story. BP's CEO, Bernard Looney has

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<v Speaker 2>resigned over failing to fully disclose past relationships with colleagues.

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<v Speaker 2>Ludy's exit leaves the Island gas giant looking for a

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<v Speaker 2>new CEO as the company pushes ahead with a costly

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<v Speaker 2>transition to low carbon energy. Bloomberg's Managing editor for Energy

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<v Speaker 2>and Commodity Simon Casey says the decision is part of

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<v Speaker 2>a wider trend at corporations.

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<v Speaker 5>The CEO big corporate of failing to be honest with

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<v Speaker 5>the board. Fundamentally, That's what this is hardly about. It's

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<v Speaker 5>got a lot tougher in recent years, its boards to

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<v Speaker 5>feel much more empowered to fort fedules of the whole,

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<v Speaker 5>even the CEO to account.

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<v Speaker 2>Simon Casey says that while BP hasn't named a long

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<v Speaker 2>term successor, it typically depicts its CEOs from among the

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<v Speaker 2>ranks of its own top executives.

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<v Speaker 1>Storms and flooding in eastern Libya are thought to have

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<v Speaker 1>claimed more than twoy three hundred lives, with thousands more

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<v Speaker 1>people missing. A search for survivors is underway after a

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<v Speaker 1>Mediterranean storm hit the city of Dierna, with dams collapsing,

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<v Speaker 1>triggering flooding. High water levels, but also tumultuous politics are

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<v Speaker 1>hindering rescue efforts. Rami El Shahabi, who is from the

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<v Speaker 1>World Health Organization in Libya, says it's a disaster zone.

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<v Speaker 6>The situation is more disasters than we expected, and the

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<v Speaker 6>numbers that keep builing up, so those who have not

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<v Speaker 6>been reported as found are considered very likely to be

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<v Speaker 6>dead or under the rubbles of those Bill think that

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<v Speaker 6>collapsed after the flood.

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<v Speaker 1>Meanwhile, rescue teams have recovered over two thousand bodies in

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<v Speaker 1>eastern Libya. Today, officials fear that the death told they

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<v Speaker 1>could exceed five thousand.

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<v Speaker 2>Okay, Double Line Capital CEO Jeffrey Gunlack well he's fine

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<v Speaker 2>back at retired bond king Bill Gross, saying he hopes

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<v Speaker 2>he feels better about himself. The ongoing feud in the

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<v Speaker 2>world of finance returned after Gross criticized Gunlac saying he

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<v Speaker 2>wasn't anywhere near being crowned a bond king.

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<v Speaker 7>To be a bond king or a Quinn. You need

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<v Speaker 7>a kingdom, You need a kingdom. Okay. BNKO had two

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<v Speaker 7>trillion dollars. Okay, double line's got like fifty five billion.

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<v Speaker 7>That's no kingdom. That's like Latvia for her Estonia. Then

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<v Speaker 7>look at his record for the last five six seven years,

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<v Speaker 7>had a sixtieth percentile smack of a bond king. That doesn't.

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<v Speaker 2>Poor old Latvia gross there. In a live recording Applom

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<v Speaker 2>Hot Lots Podcasts, in response, gone Like says quote, it

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<v Speaker 2>is sad for somebody that's been out of the business

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<v Speaker 2>for so long ten years and is still trying to

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<v Speaker 2>exercise the demons. But I hope he's doing fine.

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<v Speaker 1>This caught my attention though the policies around families have

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<v Speaker 1>come to the four in the UK, but also specifically

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<v Speaker 1>around birds. This issue is one that is significant for

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<v Speaker 1>the UK. You know, worries around demographics, not just in

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<v Speaker 1>the UK, Germany, Italy, Japan also but David Miles, who's

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<v Speaker 1>the Chief forecaster at the UK's Office for Budget Responsibilities,

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<v Speaker 1>are well known economists in the UK. He actually says

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<v Speaker 1>that lower birth rates are set to help household living standards,

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<v Speaker 1>that long term they might not be quite so bad

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<v Speaker 1>as we think he's done some new analysis.

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<v Speaker 2>Well, he points as well to the fact that if

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<v Speaker 2>you have an increase in population, you have to match

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<v Speaker 2>that with the build out of infrastructure, and the UK

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<v Speaker 2>has clearly failed to do that. Many other countries have

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<v Speaker 2>as well. But then he points as a slightly different

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<v Speaker 2>case or or case of example of shrinking ooperlation in

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<v Speaker 2>Japan that has actually managed to continue to increase per

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<v Speaker 2>capita GDP even as that population has of course famously shrunk,

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<v Speaker 2>and they've struggled with that declining population. So it's a

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<v Speaker 2>kind of counterintuitive. Look. I remember we spoke to Grace

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<v Speaker 2>Peter's JP Morgan just a week ago or so, and

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<v Speaker 2>she said one of the key reasons she was negative

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<v Speaker 2>on the UK was because of the population constraints, particularly

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<v Speaker 2>post Brexit.

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<v Speaker 1>Yeah, and that seemed to me more of a migration

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<v Speaker 1>argument than one of birds.

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<v Speaker 7>Yeah.

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<v Speaker 1>The other thing that I pull out of what David

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<v Speaker 1>Marles was saying is that the reason that sort of

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<v Speaker 1>on a household, on a more individual basis, that it

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<v Speaker 1>might be helpful for people's finances is simply the cost

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<v Speaker 1>of having children, you know, the cost of raising kids,

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<v Speaker 1>of childcare, is so astronomic in the UK that actually

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<v Speaker 1>households might kind of reconsider it on that basis effectively. Look,

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<v Speaker 1>I think it's a really interesting bit of analysis, you know,

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<v Speaker 1>demographics being destiny, that older economics catchphrase.

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<v Speaker 2>Really interesting and really important to us when you think

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<v Speaker 2>about the productivity challenges of many countries as well. And

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<v Speaker 2>we're going to focus on the.

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<v Speaker 1>UK now absolutely well. Speaking of the UK economic picture,

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<v Speaker 1>So we had the latest monthly GDP figures out this

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<v Speaker 1>morning disappointing the UK economy shrank at the fastest pace

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<v Speaker 1>in seven months in July and zero point five percent.

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<v Speaker 1>It comes though after the ONS reviewed UK growth post

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<v Speaker 1>pandemic and actually upgraded economic output significantly for Britain. Johnny

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<v Speaker 1>is now to discuss this and much more. I'm delighted

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<v Speaker 1>to say, is the UK's Checkers Secretary to the Treasury,

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<v Speaker 1>Gareth Davies. Good morning, lovely to have you back on

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<v Speaker 1>Bloomberg Radio. That it's a pleasure, great reaction to the

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<v Speaker 1>UK GDP figures. Then the monthly data was much worse

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<v Speaker 1>than expected, rapid Bank of England rate rises of biting

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<v Speaker 1>plus the bad weather and strikes your view.

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<v Speaker 8>So I think you know, the data out today has

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<v Speaker 8>been explained by the owns, has been as a result

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<v Speaker 8>of two one off factors. One is the wet weather

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<v Speaker 8>in that particular month that's hurt retail sales by about

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<v Speaker 8>one point two percent, which is down, and also construction,

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<v Speaker 8>So that is one factor, and as you allude to,

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<v Speaker 8>the other factor is industrial action, particularly in the healthcare sector,

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<v Speaker 8>and we've seen a drag on growth as a result

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<v Speaker 8>of health sector output. So I think it's important to

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<v Speaker 8>one identify what has caused today's figures, but two put

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<v Speaker 8>it in the context of the overall picture, which is

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<v Speaker 8>that the end of Q two growth was up unexpectedly

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<v Speaker 8>by some estimates. But also the IMF as you alluded to,

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<v Speaker 8>as well as upgraded significantly their growth forecast for the UK.

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<v Speaker 8>The Bank of England have said that we're going to

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<v Speaker 8>avoid a recession, and the Ons revise their previous analysis

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<v Speaker 8>to say that we were one of the fastest growing

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<v Speaker 8>economies out of the pandemic. So it is important to

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<v Speaker 8>put this data out today in the context of the

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<v Speaker 8>overall picture.

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<v Speaker 2>Yeah, context is obviously important and the forecasts are accurate,

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<v Speaker 2>but Gareth, what is your level what is your level

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<v Speaker 2>of confidence? That we are not in the foothills of

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<v Speaker 2>a recession right now here in the UK.

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<v Speaker 8>Well, I remember not so long ago a lot of

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<v Speaker 8>the forecasters were saying that we'd be in a recession

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<v Speaker 8>by now, and that hasn't happened. As I say, I

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<v Speaker 8>think the IMF, the Banking and the OBR have all

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<v Speaker 8>upgraded their forecasts for growth. For the Treasury, for the government,

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<v Speaker 8>what we are doing is, you know, seeking to ensure

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<v Speaker 8>that we stimulate growth through our active policies. So whether

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<v Speaker 8>it's workforce participation, as you saw at the budget with

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<v Speaker 8>the chartcare reforms.

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<v Speaker 2>Still two point six million people who have healthcare issues

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<v Speaker 2>who have not returned two point six million people, Gareth,

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<v Speaker 2>and that's linked to the NHS and the failures in NHS.

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<v Speaker 2>You have to fix the NHS to get some of

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<v Speaker 2>those people back at two point six million people.

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<v Speaker 8>So what I was going to say is we are

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<v Speaker 8>taking decisive action to incre grease workforce participation but also

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<v Speaker 8>trying to unblock some of the issues for those who

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<v Speaker 8>want to work to be able to work. So we're

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<v Speaker 8>piloting various schemes, for example, to help the disabled, them

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<v Speaker 8>those with long term health issues by providing extra support

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<v Speaker 8>to them to get them into the workforce because we

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<v Speaker 8>recognize that we want to you know, there's more work

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<v Speaker 8>to do to get people back into the workforce. We

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<v Speaker 8>clearly have post pandemic pandemic situation in the NHS where

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<v Speaker 8>we need to clear the backlog of appointments. The industrial

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<v Speaker 8>action is not helping that, and we've been very clear.

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<v Speaker 8>You know, the industrial action has caused I think nearly

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<v Speaker 8>nine hundred thousand appointments to be canceled and so we

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<v Speaker 8>are very clear about that. That is not something that

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<v Speaker 8>we agree with and is clearly having an impact. But overall, overall,

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<v Speaker 8>I think the employment record is strong. Unemployment is still

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<v Speaker 8>lower than most of our international competitors, and payroll employment

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<v Speaker 8>is still at record high. So again, contacts is important.

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<v Speaker 1>Yeah, I mean, but that's part of the problem for

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<v Speaker 1>the UK, isn't it. It's that that is fueling inflation.

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<v Speaker 1>The Bank of England, though, expects Britain to stagnate basically

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<v Speaker 1>for much of the next two years. So maybe you know,

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<v Speaker 1>we aren't in recession, but we're certainly bumping along the

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<v Speaker 1>bottom and that is the fundamental issue for Britain. It's

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<v Speaker 1>actually raising long term economic growth. It's not much to

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<v Speaker 1>celebrate if the next two years are going to be

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<v Speaker 1>stagnant and living standards are under continued enormous pressure.

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<v Speaker 8>Well, the thing that we've got to do is, as

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<v Speaker 8>I've said many times before, the top priority. The thing

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<v Speaker 8>we've got to do is cut inflation. We got to

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<v Speaker 8>get inflation down because that acts as a drag on growth,

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<v Speaker 8>and Prime Minister the Chancellor I have been very clear

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<v Speaker 8>that is our number one priority. We've got to make

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<v Speaker 8>sure that what we do in the treasury fiscal policy

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<v Speaker 8>is aligned with monetary policy, that we support the Independent

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<v Speaker 8>Bank of England to tame inflation and get it down.

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<v Speaker 1>Do you have to start cutting though? Is the triple

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<v Speaker 1>lock on UK pensions going? I mean it looks like

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<v Speaker 1>William Hague has basically taken the heat from the Prime

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<v Speaker 1>Minister by calling for the pensions guarantee to be ditched

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<v Speaker 1>the ifs that we were speaking to and yesterday saying

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<v Speaker 1>that it's going to cost an extra two billion pounds

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<v Speaker 1>more than budgeted two billion. That's not insignificant given how

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<v Speaker 1>little headroom the Treasury has. Is the pension's triple lock

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<v Speaker 1>just toast?

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<v Speaker 8>Well, we're committed to the Triple Lock. Since we introduced it,

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<v Speaker 8>I think two hundred thousand pensioners have been brought out

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<v Speaker 8>of absolute poverty. About twelve and a half million people

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<v Speaker 8>in this United Kingdom rely on it and use it

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<v Speaker 8>as a foundation for their retirement. What we want to

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<v Speaker 8>do is ensure that we provide security and dignity in

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<v Speaker 8>retirement while also ensuring that the system that we put

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<v Speaker 8>in place is fair and sustainable. And we're very clear

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<v Speaker 8>that we're committed to the Triple Lock.