1 00:00:00,240 --> 00:00:07,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,360 --> 00:00:12,639 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:12,640 --> 00:00:14,840 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:14,840 --> 00:00:17,400 Speaker 2: anchors all around the world, and straight ahead on the program, 5 00:00:17,760 --> 00:00:20,200 Speaker 2: look ahead to the April jobs report here in the 6 00:00:20,280 --> 00:00:23,639 Speaker 2: US how that may impact FED policy moving forward. I'm 7 00:00:23,680 --> 00:00:24,959 Speaker 2: Tom Busby in New York. 8 00:00:25,200 --> 00:00:27,639 Speaker 3: I'm Carolin Hetger here in London, where we're keeping you 9 00:00:27,760 --> 00:00:30,560 Speaker 3: up to date as the UK heads to the polls. 10 00:00:30,800 --> 00:00:34,400 Speaker 4: I'm deg Krissner looking ahead to China's PMI data, the 11 00:00:34,440 --> 00:00:38,000 Speaker 4: first reading since those higher US tariffs took effect. 12 00:00:38,400 --> 00:00:42,440 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:42,479 --> 00:00:46,160 Speaker 1: eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:46,680 --> 00:00:50,920 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 15 00:00:51,360 --> 00:00:54,560 Speaker 1: Sirius XM one twenty one, and around the world on 16 00:00:54,600 --> 00:00:57,760 Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business App. 17 00:01:02,440 --> 00:01:04,360 Speaker 2: Good day to you. I'm Tom Busby, and we begin 18 00:01:04,400 --> 00:01:07,080 Speaker 2: today's program with a look ahead to the April jobs report, 19 00:01:07,160 --> 00:01:10,959 Speaker 2: with non farm payroll numbers out this Friday eight thirty am. 20 00:01:11,160 --> 00:01:13,680 Speaker 2: Wall Street Time Now for more on the strength of 21 00:01:13,720 --> 00:01:17,959 Speaker 2: the US labor market how Friday's numbers may impact FED policy, 22 00:01:18,000 --> 00:01:23,199 Speaker 2: were joined by Michael McKee, Bloomberg International Economics and Policy correspondent. Well, Michael, 23 00:01:23,280 --> 00:01:25,760 Speaker 2: what do you expect to see this Friday in the 24 00:01:25,800 --> 00:01:26,840 Speaker 2: April jobs report? 25 00:01:28,360 --> 00:01:32,039 Speaker 5: Well, we expect to see a slowing in hiring, but 26 00:01:32,080 --> 00:01:34,640 Speaker 5: we don't really have a good idea good handle on 27 00:01:35,200 --> 00:01:37,880 Speaker 5: what the overall number is going to be, because we're 28 00:01:37,880 --> 00:01:41,399 Speaker 5: not really sure at this point how companies are reacting 29 00:01:41,440 --> 00:01:43,520 Speaker 5: to all of the news that we have seen about 30 00:01:43,520 --> 00:01:46,759 Speaker 5: tariffs and the economy. The Base Book, which was out 31 00:01:46,840 --> 00:01:52,280 Speaker 5: last Wednesday, used the word uncertainty eighty times and mentioned 32 00:01:52,320 --> 00:01:55,200 Speaker 5: that companies didn't seem to be laying off people, but 33 00:01:55,360 --> 00:01:58,160 Speaker 5: seem to be making plans to do so if the 34 00:01:58,200 --> 00:02:01,559 Speaker 5: tariffs go into effect and start to hurt their business prospects. 35 00:02:01,600 --> 00:02:05,880 Speaker 5: So we may see a ratcheting down, but the expectation 36 00:02:06,240 --> 00:02:09,359 Speaker 5: is we won't fall off the cliff, and we're not 37 00:02:09,600 --> 00:02:13,000 Speaker 5: expecting at this point. According to economists, a big change 38 00:02:13,000 --> 00:02:15,760 Speaker 5: in the unemployment rate is still supposed to stay at 39 00:02:15,800 --> 00:02:18,200 Speaker 5: four point two percent, So. 40 00:02:18,240 --> 00:02:21,480 Speaker 2: By all appearances, until now, the labor market has remained 41 00:02:21,480 --> 00:02:25,919 Speaker 2: pretty resilient, but that uncertainty caused by the Trump tariffs. 42 00:02:26,040 --> 00:02:28,560 Speaker 2: I guess the question really is how long can that last? 43 00:02:28,880 --> 00:02:32,160 Speaker 2: I mean, the Independence day from President Trump was this 44 00:02:32,280 --> 00:02:36,880 Speaker 2: month in April, So we probably won't see any damage 45 00:02:36,960 --> 00:02:39,120 Speaker 2: or much damage reflected in this report. 46 00:02:39,200 --> 00:02:46,000 Speaker 5: Correct, that's correct. We may see some increased unemployment or 47 00:02:46,320 --> 00:02:51,520 Speaker 5: increased job losses in some of the defense contractor consultants 48 00:02:51,800 --> 00:02:55,720 Speaker 5: that will lose jobs because of the DOSEE firings. It 49 00:02:55,760 --> 00:02:58,959 Speaker 5: isn't clear how many actual government workers we'll see fall 50 00:02:58,960 --> 00:03:01,320 Speaker 5: off the pay rolls because it isn't clear how many 51 00:03:01,720 --> 00:03:05,440 Speaker 5: have been let go. So it's all kind of up 52 00:03:05,440 --> 00:03:09,680 Speaker 5: in the air, and we won't know necessarily what the 53 00:03:09,720 --> 00:03:13,280 Speaker 5: full impact of the tariffs are until del first, because 54 00:03:13,320 --> 00:03:16,640 Speaker 5: Trump put a ninety day hold on that. And I 55 00:03:16,639 --> 00:03:18,880 Speaker 5: think you go back to the basebook, and it suggests 56 00:03:18,960 --> 00:03:22,640 Speaker 5: that companies are waiting to see the impacts because of 57 00:03:22,639 --> 00:03:25,160 Speaker 5: course it was hard for them to hire workers coming 58 00:03:25,160 --> 00:03:27,839 Speaker 5: out of the pandemic, so they're reluctant to let them go. 59 00:03:28,480 --> 00:03:31,760 Speaker 5: They will if they need to to retain their margins, 60 00:03:31,840 --> 00:03:34,400 Speaker 5: but they just don't know yet. So I don't think 61 00:03:34,440 --> 00:03:35,400 Speaker 5: we see much change. 62 00:03:35,600 --> 00:03:38,320 Speaker 2: Yeah, even though all the ingredients are there. We've seen 63 00:03:38,360 --> 00:03:42,800 Speaker 2: consumer sentiment decline, consumers and businesses pulling back spending. But 64 00:03:43,920 --> 00:03:45,680 Speaker 2: it's almost like a hurry up and wait, We've got 65 00:03:45,680 --> 00:03:48,040 Speaker 2: to see what happens with these tariffs and the impact 66 00:03:48,040 --> 00:03:48,680 Speaker 2: on companies. 67 00:03:49,720 --> 00:03:52,040 Speaker 5: It's a little bit like you know, when you'd be 68 00:03:52,320 --> 00:03:55,280 Speaker 5: out playing on the sidewalk and mom would say, don't 69 00:03:55,280 --> 00:03:57,520 Speaker 5: step into the street. I mean, you're right on the 70 00:03:57,560 --> 00:04:01,560 Speaker 5: curb there and we could could fallen into the street. 71 00:04:02,200 --> 00:04:05,160 Speaker 5: And that's what worries everybody. That's what worries the folks 72 00:04:05,160 --> 00:04:07,960 Speaker 5: at the FED. I spoke with Chris Waller, FED governor 73 00:04:08,320 --> 00:04:13,160 Speaker 5: on Thursday, and he said they can only model scenarios 74 00:04:14,000 --> 00:04:16,200 Speaker 5: a possibility of a lot of tariffs, the possibility of 75 00:04:16,279 --> 00:04:20,520 Speaker 5: lower tariff, but if unemployment starts to rise, they will 76 00:04:20,560 --> 00:04:21,320 Speaker 5: have to react. 77 00:04:21,480 --> 00:04:24,200 Speaker 2: You know, I heard that interview put another way, he said, 78 00:04:24,279 --> 00:04:27,760 Speaker 2: tariffs are a tax, and you know the fear is 79 00:04:27,880 --> 00:04:29,960 Speaker 2: higher taxes will lead to a slow. 80 00:04:29,760 --> 00:04:32,840 Speaker 5: Down in hiring, lead to a slowdown in hiring, and 81 00:04:33,120 --> 00:04:36,560 Speaker 5: lead to higher prices. And as prices go up, people 82 00:04:36,600 --> 00:04:39,640 Speaker 5: tend to spend less. So you have an impact on 83 00:04:39,720 --> 00:04:42,400 Speaker 5: demand as well as the supply talk that people are 84 00:04:42,440 --> 00:04:47,800 Speaker 5: talking about. So the general consensus is any level of 85 00:04:47,960 --> 00:04:50,599 Speaker 5: tariff are going to be disruptive. It's only a question 86 00:04:50,680 --> 00:04:53,600 Speaker 5: of how disruptive they are. And then there's a kind 87 00:04:53,600 --> 00:04:57,719 Speaker 5: of psychological aspect to it. If people have heard all this, 88 00:04:57,880 --> 00:05:02,760 Speaker 5: we've seen consumer confidence collapse, do they react more quickly 89 00:05:03,120 --> 00:05:05,760 Speaker 5: to the tariff that we do get, whether they're large 90 00:05:05,839 --> 00:05:09,839 Speaker 5: or small, or do they think, well, we can manage 91 00:05:09,839 --> 00:05:12,560 Speaker 5: our way through it, we can muddle through it. Governor 92 00:05:12,600 --> 00:05:15,839 Speaker 5: Waller thinks that small tariffs, maybe we just get the 93 00:05:15,880 --> 00:05:20,480 Speaker 5: ten percent tariffs would enable people, enable companies to find 94 00:05:20,560 --> 00:05:24,559 Speaker 5: ways to survive it and keep going. But anything larger 95 00:05:24,600 --> 00:05:27,480 Speaker 5: than that would probably cause people to pull back fairly 96 00:05:27,560 --> 00:05:31,360 Speaker 5: quickly because they were scarred by the inflation coming out 97 00:05:31,360 --> 00:05:32,040 Speaker 5: of the pandemic. 98 00:05:32,400 --> 00:05:35,239 Speaker 2: Well, the April jobs report out this Friday, eight thirty 99 00:05:35,240 --> 00:05:38,240 Speaker 2: am Wall Street Time our thanks to Michael McKee, Bloomberg 100 00:05:38,279 --> 00:05:41,960 Speaker 2: International Economics and Policy correspondent. With the first quarter earning 101 00:05:42,000 --> 00:05:44,480 Speaker 2: season in full swing, we move now to some key 102 00:05:44,600 --> 00:05:48,039 Speaker 2: earnings this week from some of big tech's magnificent seven 103 00:05:48,080 --> 00:05:52,320 Speaker 2: meta platforms and Microsoft on Wednesday, Apple and Amazon coming 104 00:05:52,320 --> 00:05:55,360 Speaker 2: on Thursday. For more and what to expect, we're joined 105 00:05:55,360 --> 00:06:01,000 Speaker 2: by Mandeep Singh Bloomberg Intelligence senior tech industry analyst Mandy Well, 106 00:06:01,040 --> 00:06:02,840 Speaker 2: it was just a quarter ago. I think the big 107 00:06:02,880 --> 00:06:05,839 Speaker 2: concern for those megacap tech firms was how much they're 108 00:06:05,839 --> 00:06:08,960 Speaker 2: spending on AI when they expect all that investment to 109 00:06:09,000 --> 00:06:11,839 Speaker 2: start paying off. But that was then. Now it looks 110 00:06:11,839 --> 00:06:14,640 Speaker 2: like the Trump tariffs and all the uncertainty they bring 111 00:06:15,120 --> 00:06:17,240 Speaker 2: putting AI kind of on a back burner along with 112 00:06:17,320 --> 00:06:19,880 Speaker 2: regulatory pressures. I mean, is that what it looks like 113 00:06:19,960 --> 00:06:20,360 Speaker 2: right now? 114 00:06:20,920 --> 00:06:26,080 Speaker 6: Yes, Because all the MAC seven companies are global companies. 115 00:06:26,240 --> 00:06:30,039 Speaker 6: More than fifty to fifty five percent of their revenue 116 00:06:30,360 --> 00:06:34,000 Speaker 6: comes from outside the US. So when you think about 117 00:06:34,040 --> 00:06:38,680 Speaker 6: the international revenue exposure they have, I mean, tariffs will 118 00:06:38,760 --> 00:06:43,280 Speaker 6: clearly play into that. There could be some retaliation in 119 00:06:43,360 --> 00:06:48,200 Speaker 6: terms of, you know, other countries kind of imposing some 120 00:06:48,279 --> 00:06:52,039 Speaker 6: sort of attacks or fine on these companies, or or 121 00:06:52,120 --> 00:06:56,479 Speaker 6: just a pushback in terms of using their products. So look, 122 00:06:57,360 --> 00:07:00,720 Speaker 6: is there any catastrophe lurking for these companies? I would 123 00:07:00,720 --> 00:07:05,200 Speaker 6: say no, But on the margin, I feel like the 124 00:07:05,360 --> 00:07:08,760 Speaker 6: estimates for these companies in terms of growth and profitability 125 00:07:09,400 --> 00:07:13,760 Speaker 6: are likely to go down or sideways simply because of 126 00:07:13,840 --> 00:07:16,960 Speaker 6: the tariff uncertainty, and even though AI is a big 127 00:07:17,040 --> 00:07:21,760 Speaker 6: secular tailwind that will remain, I think in the near term, 128 00:07:21,880 --> 00:07:24,800 Speaker 6: AI won't be enough to make up for any lost 129 00:07:24,840 --> 00:07:29,720 Speaker 6: revenue due to tariffs or just you know macro slowdown 130 00:07:29,760 --> 00:07:32,800 Speaker 6: where companies may pull back on ads or just kind 131 00:07:32,840 --> 00:07:36,320 Speaker 6: of shelf their IT spending projects for now. 132 00:07:37,160 --> 00:07:40,960 Speaker 2: Well, back to tariffs, We've seen that Apple has shifted 133 00:07:40,960 --> 00:07:43,640 Speaker 2: some of its production, almost ten percent of it to India, 134 00:07:44,040 --> 00:07:46,440 Speaker 2: and that is really to kind of not rely so 135 00:07:46,520 --> 00:07:49,600 Speaker 2: much on China a benefit now that we're in this 136 00:07:49,680 --> 00:07:52,920 Speaker 2: tariff war. Have any other companies done a similar move. 137 00:07:53,800 --> 00:07:57,520 Speaker 6: Well, everyone is trying to figure out how to best 138 00:07:57,640 --> 00:08:02,280 Speaker 6: kind of relocate their supply chains to deal with the uncertainty. 139 00:08:02,800 --> 00:08:06,880 Speaker 6: The good things for you know, Meta or Alphabet is 140 00:08:07,320 --> 00:08:11,440 Speaker 6: they have very low exposure to the hardware side, you know, 141 00:08:11,480 --> 00:08:14,600 Speaker 6: which gets impacted the most in the case of tariffs. 142 00:08:14,680 --> 00:08:17,800 Speaker 6: I mean, if you're selling digital services or you know, 143 00:08:18,160 --> 00:08:20,840 Speaker 6: if you have an online business, it's not going to 144 00:08:20,920 --> 00:08:24,120 Speaker 6: get affected by tariffs. At the same time, as I said, 145 00:08:24,160 --> 00:08:26,600 Speaker 6: you know, they will see the impact in terms of 146 00:08:27,080 --> 00:08:32,200 Speaker 6: certain advertisers pulling back their ads spending because of uncertainty 147 00:08:32,240 --> 00:08:36,280 Speaker 6: That is out there. So there are large Chinese advertisers 148 00:08:36,360 --> 00:08:39,680 Speaker 6: like Timu and Shane who were spending almost you know, 149 00:08:39,760 --> 00:08:45,720 Speaker 6: ten billion dollars plus on digital ads across Google and Meta. 150 00:08:45,920 --> 00:08:49,439 Speaker 6: So from that perspective, any pullback from them is going 151 00:08:49,480 --> 00:08:52,680 Speaker 6: to impact the growth rates for these companies, and there 152 00:08:52,800 --> 00:08:55,000 Speaker 6: is a lot of indirect impact, but in terms of 153 00:08:55,040 --> 00:08:57,840 Speaker 6: the direct supply chain impact, I think Apple is the 154 00:08:57,880 --> 00:09:01,000 Speaker 6: most exposed. So you're right, they have to do something 155 00:09:01,000 --> 00:09:03,560 Speaker 6: about it. They don't have a choice and they are 156 00:09:03,559 --> 00:09:05,920 Speaker 6: doing whatever they could do. 157 00:09:06,000 --> 00:09:10,160 Speaker 2: You see the tariffs benefiting anybody or is it all negative? 158 00:09:11,080 --> 00:09:13,720 Speaker 6: Well, I think again, I go back to my comment 159 00:09:13,760 --> 00:09:18,480 Speaker 6: about these companies, the large ones being international businesses. So 160 00:09:18,720 --> 00:09:22,520 Speaker 6: even if you know, you may say, if dollar is weakening, 161 00:09:22,640 --> 00:09:27,160 Speaker 6: that's somewhat helpful, but on the margin, you know, they 162 00:09:27,240 --> 00:09:31,360 Speaker 6: benefit a lot more from selling their products outside the US. 163 00:09:31,480 --> 00:09:34,760 Speaker 6: You have to remember, you know, Asia has the biggest population. 164 00:09:35,280 --> 00:09:39,719 Speaker 6: So because these companies have got large online platforms, more 165 00:09:39,760 --> 00:09:43,080 Speaker 6: than one third of their users who use metal properties 166 00:09:43,200 --> 00:09:47,280 Speaker 6: or you know, Google apps, they're outside the US. That's 167 00:09:47,320 --> 00:09:50,160 Speaker 6: where all of your user growth is. So if there 168 00:09:50,240 --> 00:09:53,760 Speaker 6: is any pushback in terms of using US based products, 169 00:09:54,000 --> 00:09:54,719 Speaker 6: that's gonna hurt. 170 00:09:55,320 --> 00:09:58,040 Speaker 2: Hurt, Yeah, if a third of your market. 171 00:09:58,320 --> 00:09:59,200 Speaker 7: Yeah. 172 00:09:59,520 --> 00:10:01,480 Speaker 2: Now we've seen reports. I want to talk about AI, 173 00:10:01,640 --> 00:10:03,959 Speaker 2: which which the last couple of times you've been here, 174 00:10:03,960 --> 00:10:07,880 Speaker 2: that's all we talked about with these tech earnings. We've 175 00:10:07,920 --> 00:10:10,400 Speaker 2: seen reports of some of these tech giants pulling back 176 00:10:10,400 --> 00:10:16,000 Speaker 2: on leases for AI centers. You know, I mean, is 177 00:10:16,120 --> 00:10:18,080 Speaker 2: are we at an inflection point right now or is 178 00:10:18,080 --> 00:10:19,800 Speaker 2: it just kind of like, let's hold off on this 179 00:10:19,880 --> 00:10:23,400 Speaker 2: capex on AI now and see how this plays out well. 180 00:10:23,520 --> 00:10:28,320 Speaker 6: So two of the four big hyperscalers have reaffirmed their 181 00:10:28,400 --> 00:10:31,800 Speaker 6: capex plans for the full year, and you know, Google 182 00:10:32,400 --> 00:10:36,520 Speaker 6: and Amazon, they said, even with all the uncertainty, and 183 00:10:36,559 --> 00:10:39,360 Speaker 6: this goes like two weeks back, so we had all 184 00:10:39,400 --> 00:10:44,480 Speaker 6: this tariff turmoil going on, but they reaffirmed their capex, 185 00:10:44,520 --> 00:10:48,120 Speaker 6: which goes to show that everyone is still very bullish 186 00:10:48,160 --> 00:10:51,800 Speaker 6: on AI. You're still in the very early innings. They 187 00:10:51,840 --> 00:10:56,040 Speaker 6: see a lot of potential with you know, AI driving 188 00:10:56,160 --> 00:10:58,600 Speaker 6: a lot of their revenue growth down the line, and 189 00:10:58,640 --> 00:11:01,240 Speaker 6: they want to be ahead in terms of investments. So 190 00:11:01,880 --> 00:11:05,080 Speaker 6: I think what will be reassuring this quarter is just 191 00:11:05,440 --> 00:11:08,880 Speaker 6: companies coming out and saying we still will continue to 192 00:11:08,920 --> 00:11:12,240 Speaker 6: invest in AI. Could there be a digestion period in 193 00:11:12,320 --> 00:11:15,880 Speaker 6: terms of, you know, building these large scale data centers. Possibly, 194 00:11:15,960 --> 00:11:20,320 Speaker 6: That's what all these pauses and leases are suggesting, that 195 00:11:20,400 --> 00:11:23,560 Speaker 6: there could be a small pause here and there. But 196 00:11:24,120 --> 00:11:27,280 Speaker 6: the trend is still intact and I think you will 197 00:11:27,320 --> 00:11:31,320 Speaker 6: see a very quick rebound the moment this uncertainty clears out. 198 00:11:31,360 --> 00:11:32,640 Speaker 4: Just a pause, just a pause. 199 00:11:32,880 --> 00:11:34,880 Speaker 2: One last thing, I want to talk about a lot 200 00:11:34,960 --> 00:11:38,880 Speaker 2: of ramped up regulatory pressure on these tech giants, not 201 00:11:38,920 --> 00:11:41,520 Speaker 2: just the US, but the EU especially, and how will 202 00:11:41,559 --> 00:11:42,439 Speaker 2: that impact things. 203 00:11:42,679 --> 00:11:46,760 Speaker 6: Well, right now, it feels like regulatory site may take 204 00:11:46,800 --> 00:11:50,640 Speaker 6: a backseat because of all the tariff's situation and just 205 00:11:50,920 --> 00:11:54,480 Speaker 6: you know, this week, Meta and Google were slapped to 206 00:11:54,559 --> 00:11:57,240 Speaker 6: find by the EU. But that was a drop in 207 00:11:57,280 --> 00:12:01,720 Speaker 6: the bucket. We're talking about seven hundred million euro whereas 208 00:12:01,760 --> 00:12:05,440 Speaker 6: these companies have paid billions in dollars of fines. So 209 00:12:05,760 --> 00:12:10,880 Speaker 6: from that perspective, it feels like you may see regulatory 210 00:12:11,000 --> 00:12:13,760 Speaker 6: stuff take a backseat. But there is that pending case 211 00:12:14,600 --> 00:12:18,679 Speaker 6: for Google in the US, you know, the monopolization case 212 00:12:18,720 --> 00:12:22,679 Speaker 6: where they're asking for Chrome divestiture. I mean, to me, 213 00:12:22,960 --> 00:12:25,559 Speaker 6: that is the big one, and the meta FTC. So 214 00:12:26,280 --> 00:12:30,640 Speaker 6: the regulatory overhang is more within the US than outside 215 00:12:30,640 --> 00:12:34,600 Speaker 6: the US, whereas previously, you know, these companies were kind 216 00:12:34,640 --> 00:12:36,600 Speaker 6: of paying more fines outside the US. 217 00:12:36,679 --> 00:12:38,600 Speaker 2: Wow, well, there's a lot going on and a lot 218 00:12:38,640 --> 00:12:41,520 Speaker 2: to look forward to. Our thanks demand Deep, saying Bloomberg 219 00:12:41,559 --> 00:12:45,600 Speaker 2: Intelligence senior tech industry analysts. Coming up on Bloomberg day 220 00:12:45,600 --> 00:12:48,439 Speaker 2: Break weekend, we'll look ahead to local elections in the UK. 221 00:12:49,040 --> 00:13:02,600 Speaker 2: I'm Tom Busby and this is Bloomberg. This is Bloomberg 222 00:13:02,640 --> 00:13:04,640 Speaker 2: day Break weekend, our global look ahead at the top 223 00:13:04,679 --> 00:13:07,560 Speaker 2: stories for investors in the coming week. I'm Tom Busby 224 00:13:07,559 --> 00:13:10,360 Speaker 2: in New York. Up later in our program, look ahead 225 00:13:10,400 --> 00:13:13,960 Speaker 2: to a key economic reading from Beijing amid the uncertainty 226 00:13:13,960 --> 00:13:17,600 Speaker 2: around US tariffs. But first, just over eight months since 227 00:13:17,640 --> 00:13:20,600 Speaker 2: the Labor Party's emphatic victory in the UK general election, 228 00:13:20,720 --> 00:13:23,840 Speaker 2: voters will have their first real chance to pass judgment 229 00:13:23,960 --> 00:13:26,959 Speaker 2: on the party's progress. Polls around the country will open 230 00:13:27,000 --> 00:13:29,840 Speaker 2: in the coming days as local elections get underway. But 231 00:13:30,200 --> 00:13:33,240 Speaker 2: as Prime Minister Keir Starmer done enough so far to 232 00:13:33,320 --> 00:13:36,080 Speaker 2: convince the British public for more, let's go to London 233 00:13:36,080 --> 00:13:39,720 Speaker 2: and bring in Bloomberg Daybreak Europe anchor Caroline hepgar Tom. 234 00:13:39,880 --> 00:13:43,400 Speaker 3: When kir Starmer was elected the first Labor prime minister 235 00:13:43,480 --> 00:13:47,280 Speaker 3: in fourteen years, last summer, he said that a burden 236 00:13:47,400 --> 00:13:51,679 Speaker 3: had finally been removed from the shoulders of this great nation. 237 00:13:52,320 --> 00:13:56,080 Speaker 3: But in twenty twenty five, almost a year into his tenure, 238 00:13:56,360 --> 00:14:00,280 Speaker 3: his government might be feeling more burdened than ever. Part 239 00:14:00,320 --> 00:14:03,280 Speaker 3: of that weight comes in the form of concerns about 240 00:14:03,400 --> 00:14:08,960 Speaker 3: limited economic growth. Just recently, the International Monetary Fund released 241 00:14:09,040 --> 00:14:14,640 Speaker 3: a quote significant downward revision to its UK growth forecasts 242 00:14:14,679 --> 00:14:18,000 Speaker 3: for the next two years, cutting them more than for 243 00:14:18,160 --> 00:14:23,280 Speaker 3: any other leading European country. And that's amid increasing uncertainty 244 00:14:23,360 --> 00:14:27,760 Speaker 3: about what President Donald Trump's tariffs will mean for the country. 245 00:14:28,480 --> 00:14:31,960 Speaker 3: Despite the gloomy outlook, Bank of England rate setter Meghan 246 00:14:32,080 --> 00:14:36,000 Speaker 3: Green has told Bloomberg that there could be some bright spots, 247 00:14:36,320 --> 00:14:39,720 Speaker 3: whilst maintaining that uncertainty prevails. 248 00:14:40,120 --> 00:14:42,520 Speaker 7: Look market pricing has moved around a whole lot over 249 00:14:42,560 --> 00:14:45,120 Speaker 7: the past couple of weeks, and it's also worth pointing 250 00:14:45,120 --> 00:14:47,160 Speaker 7: out that not all of that is focused on what's 251 00:14:47,200 --> 00:14:51,120 Speaker 7: going on in the UK, so traditionally about a third 252 00:14:51,120 --> 00:14:52,960 Speaker 7: of the moves in the gilt curve have been driven 253 00:14:53,000 --> 00:14:57,520 Speaker 7: by things happening outside the UK. These days it's about 254 00:14:57,560 --> 00:15:00,080 Speaker 7: half that's been driven by things happening outside the UK. 255 00:15:00,280 --> 00:15:03,200 Speaker 7: So part of those moves I think reflect what's going 256 00:15:03,240 --> 00:15:06,160 Speaker 7: on globally, and you know, we're just about to go 257 00:15:06,240 --> 00:15:09,280 Speaker 7: into an interest right round, so we'll have to see. 258 00:15:09,320 --> 00:15:11,520 Speaker 7: But I would highlight that those market moves don't all 259 00:15:11,520 --> 00:15:13,800 Speaker 7: reflect to U fundamentals in the UK. 260 00:15:13,960 --> 00:15:16,400 Speaker 8: Because what of the uncertainties If you look at you know, 261 00:15:16,440 --> 00:15:19,320 Speaker 8: there seems to be a lot of disinflationary kind of 262 00:15:19,360 --> 00:15:23,200 Speaker 8: impact from folly energy prices, we could dollar tightening, financial conditions, 263 00:15:23,560 --> 00:15:26,640 Speaker 8: global demand. Does that point to a cont you know, 264 00:15:27,080 --> 00:15:27,760 Speaker 8: in may. 265 00:15:28,200 --> 00:15:32,520 Speaker 7: So that there are factors that are both inflationary and disinflationary. 266 00:15:32,600 --> 00:15:36,360 Speaker 7: You know, I'm particularly concerned. We've had weakness and output 267 00:15:36,520 --> 00:15:39,520 Speaker 7: for about nine months now and we're trying to figure 268 00:15:39,520 --> 00:15:41,440 Speaker 7: out what the big driver of that is, whether it's 269 00:15:41,480 --> 00:15:44,240 Speaker 7: demand or supply driven. I think there are reasons to 270 00:15:44,240 --> 00:15:47,000 Speaker 7: think it's both actually, but I'm more concerned about the 271 00:15:47,000 --> 00:15:50,480 Speaker 7: supply side and that actually on balance, would be inflationary. 272 00:15:51,120 --> 00:15:53,400 Speaker 7: So that's part of it. When it comes to tariffs 273 00:15:53,440 --> 00:15:56,640 Speaker 7: and the developments over the past couple of weeks. There 274 00:15:56,760 --> 00:16:00,480 Speaker 7: again are both the inflationary and disinflationary impulses. So when 275 00:16:00,520 --> 00:16:03,880 Speaker 7: it comes to tariffs, in particular for the UK, we're 276 00:16:03,880 --> 00:16:08,040 Speaker 7: a small, open economy, right. The US is our biggest 277 00:16:08,120 --> 00:16:10,640 Speaker 7: single country trade partner, but the EU of course is 278 00:16:10,840 --> 00:16:14,840 Speaker 7: our biggest trade partner overall. So if you have export substitution, 279 00:16:15,560 --> 00:16:17,920 Speaker 7: then that would tend to push down on growth and inflation. 280 00:16:18,200 --> 00:16:20,480 Speaker 7: If you have trade diversion from other countries that are 281 00:16:20,480 --> 00:16:22,520 Speaker 7: trying to find a new home for their markets, that 282 00:16:22,600 --> 00:16:25,760 Speaker 7: also pushes down on inflation. But we saw during the 283 00:16:25,760 --> 00:16:28,640 Speaker 7: pandemic that if you have a repatterning of supply chains, 284 00:16:28,680 --> 00:16:31,440 Speaker 7: that can push up on inflation. And also if we 285 00:16:31,440 --> 00:16:34,960 Speaker 7: have trade fragmentation writ large, then that tends to reduce 286 00:16:35,040 --> 00:16:39,000 Speaker 7: knowledge spillovers, that reduces potential growth, That tends to be inflationary. 287 00:16:39,360 --> 00:16:43,280 Speaker 7: So something you've mentioned was exchange rates, and those have 288 00:16:43,360 --> 00:16:46,640 Speaker 7: not gone as the economic theory would suggest. Normally, if 289 00:16:46,680 --> 00:16:50,400 Speaker 7: the US announces or imposes unilateral tarifs some other countries, 290 00:16:50,760 --> 00:16:54,040 Speaker 7: the theory suggests the dollars should appreciate the opposite has 291 00:16:54,080 --> 00:16:57,960 Speaker 7: actually happened, and so that in and of itself could 292 00:16:58,160 --> 00:17:00,960 Speaker 7: be disinflationary for the UK, but courses I mentioned the 293 00:17:00,960 --> 00:17:03,200 Speaker 7: EU is the UK's biggest trade partner in the Euro 294 00:17:03,280 --> 00:17:06,439 Speaker 7: has appreciated, so net net, if you look at the 295 00:17:06,840 --> 00:17:09,480 Speaker 7: kind of Sterling exchange rate index, the pounds up a 296 00:17:09,480 --> 00:17:12,199 Speaker 7: little bit. There's a ton of uncertainty around this, but 297 00:17:12,240 --> 00:17:14,640 Speaker 7: they are both inflationary and disinflationary forces. 298 00:17:14,680 --> 00:17:17,439 Speaker 8: But are are you concerned about the the slight recent 299 00:17:17,480 --> 00:17:20,000 Speaker 8: strength and pound does does that change? Actually, you know, 300 00:17:20,119 --> 00:17:23,120 Speaker 8: tightening financial conditions, so it does. 301 00:17:23,280 --> 00:17:26,000 Speaker 7: I mean the currencies have been moving a lot recently 302 00:17:26,040 --> 00:17:29,520 Speaker 7: as well. We've also seen off the back of previous 303 00:17:29,680 --> 00:17:32,800 Speaker 7: kind of structural shift af after the global financial crisis, 304 00:17:33,280 --> 00:17:36,920 Speaker 7: after COVID, the d the dollar didn't always behave immediately 305 00:17:37,000 --> 00:17:41,000 Speaker 7: as the theory would suggest. It weakened and then subsequently rebounded. 306 00:17:41,040 --> 00:17:42,600 Speaker 7: So I think it's a bit too early to say 307 00:17:43,040 --> 00:17:45,480 Speaker 7: kind of where the dust is gonna settle on currencies. 308 00:17:45,560 --> 00:17:49,199 Speaker 7: But I will say if the dollar continues to depreciate uh, 309 00:17:49,240 --> 00:17:52,080 Speaker 7: on balance, that would be uh disinflationary for the UK, 310 00:17:52,720 --> 00:17:54,800 Speaker 7: and and if the opposite happens uh less. 311 00:17:54,840 --> 00:17:56,600 Speaker 8: So So are y are you worried that? And you 312 00:17:56,640 --> 00:17:58,840 Speaker 8: said in the past, actually that there's a danger that 313 00:17:58,880 --> 00:18:01,919 Speaker 8: it could you know, muddy the water on inflation. The 314 00:18:02,000 --> 00:18:04,160 Speaker 8: moves and pounds, so are you're worried that there could 315 00:18:04,160 --> 00:18:05,760 Speaker 8: be a reverse and then it becomes an our broad 316 00:18:05,800 --> 00:18:08,360 Speaker 8: pressure on inflation quite quickly, it could. 317 00:18:08,200 --> 00:18:13,040 Speaker 7: Be that's right. You know, currency forecasters have the hardest jobs, 318 00:18:13,040 --> 00:18:16,360 Speaker 7: second only to energy forecasters. And like I said, it's 319 00:18:16,400 --> 00:18:18,920 Speaker 7: been really violatile. We're not quite sure where they dust 320 00:18:18,960 --> 00:18:19,440 Speaker 7: will set off. 321 00:18:19,560 --> 00:18:22,399 Speaker 3: So that was the Bank of England policy maker Meghan 322 00:18:22,520 --> 00:18:27,040 Speaker 3: Green speaking to Bloomberg's Francine Laqua. Now, an economic resurgence 323 00:18:27,320 --> 00:18:31,160 Speaker 3: was the central promise the Labor Party staked their whole 324 00:18:31,200 --> 00:18:34,600 Speaker 3: election campaign on. But now as the prospect of growth 325 00:18:34,840 --> 00:18:38,760 Speaker 3: moves further off into the horizon and the public face 326 00:18:38,840 --> 00:18:44,159 Speaker 3: growing cost pressures, can the party count on keeping that support. 327 00:18:44,600 --> 00:18:48,159 Speaker 3: It's something I put to Bloomberg opinion columnist Rosa Prints. 328 00:18:48,600 --> 00:18:52,200 Speaker 3: We started by talking about Labour's track records so far. 329 00:18:52,720 --> 00:18:54,920 Speaker 9: It's fair to say that they haven't had a great 330 00:18:54,960 --> 00:18:59,359 Speaker 9: start to their time in office. Almost straight away their 331 00:18:59,400 --> 00:19:02,760 Speaker 9: opinion poll ratings kind of fell off a cliff. You'll 332 00:19:02,760 --> 00:19:05,560 Speaker 9: remember that Labor was elected on a bit of a 333 00:19:05,680 --> 00:19:10,479 Speaker 9: landslide last summer, partly, I think because the Conservative government 334 00:19:10,520 --> 00:19:14,320 Speaker 9: which had been in beforehand was extremely unpopular, so lots 335 00:19:14,359 --> 00:19:17,280 Speaker 9: of people voted Labor to kind of get the Tories out, 336 00:19:17,680 --> 00:19:20,960 Speaker 9: and I think maybe didn't fall massively in love with labor, 337 00:19:20,960 --> 00:19:23,040 Speaker 9: and that was born out when just a month or 338 00:19:23,080 --> 00:19:26,359 Speaker 9: two into their time in government their opinion polls started 339 00:19:26,400 --> 00:19:28,840 Speaker 9: to go south as well. To be fair, they had 340 00:19:28,880 --> 00:19:32,000 Speaker 9: a really tough hand. The economy was in all sorts 341 00:19:32,040 --> 00:19:34,840 Speaker 9: of trouble. They had to deliver a budget that was 342 00:19:34,960 --> 00:19:38,760 Speaker 9: very unpopular. People are feeling the pinch. So although they 343 00:19:38,800 --> 00:19:43,040 Speaker 9: are doing pretty badly, the Conservatives haven't recovered either, so 344 00:19:43,280 --> 00:19:45,080 Speaker 9: kind of everyone's doing badly at the moment. 345 00:19:45,320 --> 00:19:48,280 Speaker 3: What's at stake during these elections then? Why do they matter? 346 00:19:48,760 --> 00:19:49,000 Speaker 10: Well? 347 00:19:49,040 --> 00:19:52,679 Speaker 9: I think they're fascinating elections. There aren't a huge number 348 00:19:52,680 --> 00:19:55,840 Speaker 9: of seats up for grabs. It's one six hundred and 349 00:19:55,840 --> 00:19:59,960 Speaker 9: forty one council seats. That's the local authorities who come 350 00:20:00,119 --> 00:20:03,000 Speaker 9: of run things on the ground. There's also a by 351 00:20:03,119 --> 00:20:07,000 Speaker 9: election to a Westminster seat and some mayoralties, so not 352 00:20:07,119 --> 00:20:09,600 Speaker 9: a massive change of power. But I think it's just 353 00:20:09,640 --> 00:20:12,080 Speaker 9: going to be so interesting to see what the new 354 00:20:12,119 --> 00:20:15,399 Speaker 9: politics of the UK is because, as I said, no 355 00:20:15,560 --> 00:20:19,720 Speaker 9: one party is really breaking through. You've got the Conservatives 356 00:20:20,080 --> 00:20:23,360 Speaker 9: kind of bumping along on about twenty four percent, their 357 00:20:23,840 --> 00:20:26,719 Speaker 9: usual Tory rivals doing a bit worse on about twenty 358 00:20:26,760 --> 00:20:29,320 Speaker 9: one percent. And the real story I think of these 359 00:20:29,359 --> 00:20:33,200 Speaker 9: elections is whether we can see a breakthrough for reform. 360 00:20:33,400 --> 00:20:37,760 Speaker 9: That's the kind of upstart, quite right leaning populist party 361 00:20:37,880 --> 00:20:41,880 Speaker 9: headed by you'll remember Nigel Farage who was the Brexiteer 362 00:20:41,960 --> 00:20:45,320 Speaker 9: in chief during the Brexit wars. And not to forget 363 00:20:45,320 --> 00:20:48,640 Speaker 9: the smaller parties. The Liberal Democrats did better than they 364 00:20:48,840 --> 00:20:51,280 Speaker 9: had ever done before at the last election. They're on 365 00:20:51,560 --> 00:20:55,359 Speaker 9: around fourteen percent, and you've got some Greens doing well 366 00:20:55,440 --> 00:21:00,080 Speaker 9: and some kind of protest and independent candidates, particularly on issues. 367 00:20:59,720 --> 00:21:02,560 Speaker 3: Like the How do you think that the kind of 368 00:21:02,640 --> 00:21:05,760 Speaker 3: bigger picture is going to affect the local elections? How 369 00:21:05,760 --> 00:21:08,080 Speaker 3: do you think that there's going to be that interplay 370 00:21:08,119 --> 00:21:10,000 Speaker 3: between the local and the national. 371 00:21:10,359 --> 00:21:13,040 Speaker 9: That's such a good question. How do we know how 372 00:21:13,119 --> 00:21:17,120 Speaker 9: anyone votes? I think often what happens is that people 373 00:21:17,440 --> 00:21:20,080 Speaker 9: maybe they don't pay attention to politics all that march. 374 00:21:20,119 --> 00:21:22,359 Speaker 9: They've kind of got the party that they believe in, 375 00:21:22,400 --> 00:21:24,919 Speaker 9: and that they always vote for, so they'll tend to 376 00:21:25,000 --> 00:21:27,760 Speaker 9: vote along those traditional lines that they would do, say 377 00:21:27,800 --> 00:21:31,080 Speaker 9: at a general election, unless something has happened in their 378 00:21:31,160 --> 00:21:35,640 Speaker 9: area that they're particularly unhappy about, less commonly that they're 379 00:21:35,640 --> 00:21:38,520 Speaker 9: particularly pleased about, And then it does come down to 380 00:21:39,000 --> 00:21:43,080 Speaker 9: the performance of what they've been used to. So, for example, 381 00:21:43,200 --> 00:21:47,400 Speaker 9: there's a terrible strike going on among refuse workers in 382 00:21:47,440 --> 00:21:50,000 Speaker 9: the second biggest town of Birmingham, I think the people 383 00:21:50,000 --> 00:21:52,760 Speaker 9: of Birmingham may feel differently about their labor council than 384 00:21:52,800 --> 00:21:55,640 Speaker 9: if they hadn't had rubbish pile duff outside their homes 385 00:21:55,920 --> 00:21:58,919 Speaker 9: for weeks. On the other hand, say a party like 386 00:21:58,960 --> 00:22:02,840 Speaker 9: Reform almost quite new, so they don't really have hardly 387 00:22:02,880 --> 00:22:05,679 Speaker 9: any counselors. So people won't be able to vote on 388 00:22:05,760 --> 00:22:08,360 Speaker 9: their record, and it'll be whether they think that they 389 00:22:08,359 --> 00:22:12,040 Speaker 9: can actually trust reform In to run things. You know, 390 00:22:12,320 --> 00:22:16,120 Speaker 9: Reform hasn't got that record of managing things. Will people 391 00:22:16,800 --> 00:22:19,760 Speaker 9: continue to see them as almost a protest vote, or 392 00:22:19,800 --> 00:22:22,679 Speaker 9: will they actually trust them to run local services? 393 00:22:22,880 --> 00:22:26,399 Speaker 3: I mean thinking about Birmingham reports of gigantic rats as 394 00:22:26,440 --> 00:22:30,080 Speaker 3: a result of that strike and the rubbish in the 395 00:22:30,200 --> 00:22:33,520 Speaker 3: streets that we've seen for weeks now in terms of 396 00:22:33,560 --> 00:22:37,479 Speaker 3: the campaigns, what have they looked like for the major 397 00:22:37,520 --> 00:22:39,680 Speaker 3: parties and how much effort do they put in. 398 00:22:40,119 --> 00:22:42,040 Speaker 9: Just to give you a bit of context, So the 399 00:22:42,119 --> 00:22:45,080 Speaker 9: last time these elections were held they held every four years, 400 00:22:45,600 --> 00:22:48,560 Speaker 9: Boris Johnson was the Prime Minister and he was doing 401 00:22:48,720 --> 00:22:52,320 Speaker 9: very very well. It was Boris Johnson was seen as 402 00:22:52,359 --> 00:22:57,119 Speaker 9: being responsible for rushing through the COVID vaccine and the 403 00:22:57,200 --> 00:23:00,520 Speaker 9: Conservatives did well. They sort of swept the ball to 404 00:23:00,600 --> 00:23:03,680 Speaker 9: the extent that they are now defending most of the seats. Now, 405 00:23:03,920 --> 00:23:05,800 Speaker 9: the problem with that is that they've got a long 406 00:23:05,840 --> 00:23:08,520 Speaker 9: way to fall and given that, as I said, the 407 00:23:08,600 --> 00:23:12,000 Speaker 9: last government was very unpopular. The party doesn't seem to 408 00:23:12,000 --> 00:23:15,520 Speaker 9: have picked up any popularity since the election. If anything, 409 00:23:15,560 --> 00:23:17,520 Speaker 9: it's gone the other way and is losing ground to 410 00:23:17,600 --> 00:23:20,040 Speaker 9: the Tories. It looks like it will be a bad 411 00:23:20,119 --> 00:23:22,560 Speaker 9: night for them now. That has meant a rather odd 412 00:23:22,680 --> 00:23:26,080 Speaker 9: campaign because you've seen Kenmy Baidenock, the new leader of 413 00:23:26,119 --> 00:23:29,600 Speaker 9: the Conservatives, kind of going around saying yes, it's going 414 00:23:29,640 --> 00:23:31,520 Speaker 9: to be bad, We're going to lose lots of seats, 415 00:23:31,560 --> 00:23:33,600 Speaker 9: which to the extent that you wonder if it will 416 00:23:33,640 --> 00:23:37,840 Speaker 9: become a self fulfilling prophecy. Nigel Farage, on the other hand, 417 00:23:38,119 --> 00:23:41,000 Speaker 9: he sees an opportunity here, so he's really going for 418 00:23:41,080 --> 00:23:44,399 Speaker 9: those parts of the country where the Conservatives are unpopular. 419 00:23:44,440 --> 00:23:49,359 Speaker 9: For example, he is around now campaigning in Kent in 420 00:23:49,400 --> 00:23:52,879 Speaker 9: the town of Dover, where the Reform think that they 421 00:23:52,880 --> 00:23:56,479 Speaker 9: can pick up votes. The Liberal Democrats are often strong 422 00:23:56,560 --> 00:24:00,600 Speaker 9: in local government, often stronger than they are nationally. They've 423 00:24:00,680 --> 00:24:03,760 Speaker 9: been having their leader, Davey, going out and doing his 424 00:24:03,920 --> 00:24:06,080 Speaker 9: usual He likes to do lots of stunts for the 425 00:24:06,119 --> 00:24:10,120 Speaker 9: television cameras and labor. They're kind of keeping a low profile, 426 00:24:10,200 --> 00:24:13,400 Speaker 9: hoping that their current woes aren't translated and they don't 427 00:24:13,480 --> 00:24:16,000 Speaker 9: lose too many seats. The expectation at the moment is 428 00:24:16,119 --> 00:24:18,560 Speaker 9: that they did badly last time these seats were fought. 429 00:24:18,600 --> 00:24:21,680 Speaker 9: They'll probably do about the same, but it's so hard 430 00:24:21,680 --> 00:24:23,840 Speaker 9: to know because of that reform factor. 431 00:24:23,720 --> 00:24:27,159 Speaker 3: And how much you think that the wider economy is 432 00:24:27,200 --> 00:24:31,120 Speaker 3: going to affect the elections effectively. We know that, I mean, 433 00:24:31,119 --> 00:24:35,439 Speaker 3: employment is still very strong in the UK, wages a 434 00:24:35,440 --> 00:24:38,399 Speaker 3: bit more difficult for people, cost of living crisis for 435 00:24:38,480 --> 00:24:40,679 Speaker 3: some people. Still continuing, how much do you think the 436 00:24:40,720 --> 00:24:43,920 Speaker 3: economy and the economic backdrop will affect people's vote. 437 00:24:44,080 --> 00:24:46,920 Speaker 9: I think the economy always affects people's votes. I think 438 00:24:47,320 --> 00:24:50,040 Speaker 9: people are feeling the pinch and it's going to come 439 00:24:50,080 --> 00:24:53,240 Speaker 9: down to who they blame for that. Now, the reason 440 00:24:53,280 --> 00:24:56,720 Speaker 9: that the Conservatives became so suddenly unpopular and did so 441 00:24:56,880 --> 00:24:59,439 Speaker 9: badly at the last election, I think can be traced 442 00:24:59,480 --> 00:25:02,480 Speaker 9: back to the disaster that was Liz Trust and her 443 00:25:02,560 --> 00:25:06,399 Speaker 9: brief premiership, and the Conservative never really recovered from that. 444 00:25:06,520 --> 00:25:09,840 Speaker 9: Now Labor has spent their eight months in power kind 445 00:25:09,840 --> 00:25:12,320 Speaker 9: of pointing to her and pointing to the last government 446 00:25:12,359 --> 00:25:14,960 Speaker 9: and saying it's not our ful. We inherited a mess 447 00:25:15,200 --> 00:25:17,719 Speaker 9: and we're doing our best. And I think what it 448 00:25:17,720 --> 00:25:20,719 Speaker 9: comes down to is whether people on the ground believe 449 00:25:20,760 --> 00:25:24,240 Speaker 9: that or whether they're fed up enough to shift over 450 00:25:24,320 --> 00:25:27,320 Speaker 9: to reform. I don't see much time that people are 451 00:25:27,680 --> 00:25:29,480 Speaker 9: ready to trust the Conservatives again. 452 00:25:30,000 --> 00:25:33,439 Speaker 3: My thanks to Bloomberg Opinion columis Rosa Prince. Now we 453 00:25:33,480 --> 00:25:36,800 Speaker 3: will have full coverage and analysis of the local election 454 00:25:36,960 --> 00:25:40,479 Speaker 3: and its outcomes right here on Bloomberg and on our 455 00:25:40,480 --> 00:25:44,760 Speaker 3: Bloomberg UK Politics podcast in the days ahead. I'm Caline 456 00:25:44,800 --> 00:25:47,399 Speaker 3: Hepke in London. You can catch us every weekday morning 457 00:25:47,600 --> 00:25:49,880 Speaker 3: for Bloomberg Daybreak. You at the beginning at six am 458 00:25:49,920 --> 00:25:52,040 Speaker 3: in London. That's one am on Wall Street. 459 00:25:52,400 --> 00:25:55,840 Speaker 2: Tom, Thanks Caroline, And coming up on Bloomberg day Break weekend, 460 00:25:55,880 --> 00:25:58,880 Speaker 2: we'll look ahead to a key economic reading from Beijing. 461 00:25:59,359 --> 00:26:13,399 Speaker 2: I'm Tom, and this is Bloomberg. This is Bloomberg day 462 00:26:13,400 --> 00:26:15,719 Speaker 2: Break Weekend, our global look ahead at the top stories 463 00:26:15,720 --> 00:26:18,200 Speaker 2: for investors in the coming week. I'm Tom Busby in 464 00:26:18,280 --> 00:26:21,720 Speaker 2: New York. A key economic data point from Beijing this week, 465 00:26:21,800 --> 00:26:25,680 Speaker 2: as uncertainty lingers over the US tariffs. Now for more, 466 00:26:26,000 --> 00:26:28,200 Speaker 2: let's get to the host of the Daybreak Asia podcast, 467 00:26:28,320 --> 00:26:29,040 Speaker 2: Doug Krisner. 468 00:26:29,400 --> 00:26:33,560 Speaker 4: Tom. In the last week, the International Monetary Fund revised 469 00:26:33,560 --> 00:26:37,640 Speaker 4: its annual growth forecast for China to just four percent 470 00:26:37,760 --> 00:26:40,920 Speaker 4: this year, and it came with a warning the outlook 471 00:26:40,960 --> 00:26:44,119 Speaker 4: could deteriorate further due to those US tariffs. Now in 472 00:26:44,160 --> 00:26:47,880 Speaker 4: the week ahead, we'll get China's official PMI data. These 473 00:26:47,960 --> 00:26:52,400 Speaker 4: readings will provide a measure of sentiment among businesses and 474 00:26:52,720 --> 00:26:56,920 Speaker 4: how they view overall economic activity. The PMIS can provide 475 00:26:56,960 --> 00:27:01,720 Speaker 4: an early indication of growth. Closer look. Now, I'm joined 476 00:27:01,720 --> 00:27:05,600 Speaker 4: by Bloomberg's Chang Chu She is the chief Asia economist 477 00:27:06,119 --> 00:27:09,639 Speaker 4: for Bloomberg Economics. Chang joins us from our studios in 478 00:27:09,720 --> 00:27:12,320 Speaker 4: Hong Kong. Thank you for making time to chat with me. 479 00:27:12,359 --> 00:27:14,639 Speaker 4: There's a lot to cover. I want to begin with 480 00:27:14,680 --> 00:27:16,840 Speaker 4: the PMI data, Chang. What do you think we're going 481 00:27:16,880 --> 00:27:18,760 Speaker 4: to learn from these numbers in the week ahead? 482 00:27:20,440 --> 00:27:23,480 Speaker 10: Thank you Doug for having me on the program. Yes, 483 00:27:23,600 --> 00:27:27,240 Speaker 10: it's the PMI reading for April is going to be 484 00:27:27,560 --> 00:27:32,679 Speaker 10: very important. That's going to be the first reading since 485 00:27:32,800 --> 00:27:38,680 Speaker 10: the elevated tariffs came into place. We suspect we're going 486 00:27:38,760 --> 00:27:44,040 Speaker 10: to see dichotomy between the manufacturing and non manufacturing readings. 487 00:27:44,240 --> 00:27:50,199 Speaker 10: On the manufacturing reading PMI, we could see damage, quite 488 00:27:51,160 --> 00:27:56,480 Speaker 10: noticeable damage from the tariffs. At this point, we don't 489 00:27:56,520 --> 00:28:02,360 Speaker 10: have very conclusive data from various sources. We could be 490 00:28:02,880 --> 00:28:09,680 Speaker 10: uh looking at shipping data, for example, for prices and 491 00:28:10,880 --> 00:28:15,600 Speaker 10: volumes in terms of shipping between the US and China. 492 00:28:16,200 --> 00:28:22,560 Speaker 10: They are only showing something with a significant lag, and 493 00:28:22,840 --> 00:28:28,359 Speaker 10: perhaps they are some indications, but not quite conclusive. We 494 00:28:28,520 --> 00:28:34,080 Speaker 10: do hear a lot of stories of Chinese factories not 495 00:28:34,440 --> 00:28:39,960 Speaker 10: taking any further orders from US customers, and some may 496 00:28:40,000 --> 00:28:46,360 Speaker 10: even have stopped production. So uh, those data we don't 497 00:28:46,400 --> 00:28:50,080 Speaker 10: have yet. So the PMI reading is quite important, and 498 00:28:50,880 --> 00:28:57,520 Speaker 10: we do see potentially manufacturing PMI see a quite significant 499 00:28:57,600 --> 00:29:04,000 Speaker 10: job in the activity. At this point, we're projecting the 500 00:29:04,080 --> 00:29:10,440 Speaker 10: manufacturing PMI to drop into contractional territory from expansion of 501 00:29:10,960 --> 00:29:17,640 Speaker 10: fifty point five in March to perhaps you know, around 502 00:29:18,880 --> 00:29:22,080 Speaker 10: forty nine point eight sort of reading. So that's on 503 00:29:22,160 --> 00:29:26,200 Speaker 10: the manufacturing side. But if we want to go into 504 00:29:26,240 --> 00:29:31,240 Speaker 10: the non manufacturing side, we do see expansion to continue. 505 00:29:31,520 --> 00:29:34,080 Speaker 4: Are we going to get any clues as to whether 506 00:29:34,240 --> 00:29:38,680 Speaker 4: supply chains are being reconfigured in a way that China 507 00:29:38,720 --> 00:29:42,880 Speaker 4: would be able to divert some shipments elsewhere into jurisdictions 508 00:29:42,920 --> 00:29:46,320 Speaker 4: that don't have terrorf rates as high as China does 509 00:29:46,360 --> 00:29:47,680 Speaker 4: coming into the US market. 510 00:29:48,000 --> 00:29:52,400 Speaker 10: It's a good question, but a very tough one to answer. 511 00:29:52,920 --> 00:29:58,800 Speaker 10: We here again on the ground, lots of stories firms 512 00:29:58,840 --> 00:30:03,800 Speaker 10: on the ground that try neing to diversify the supply chains, 513 00:30:04,080 --> 00:30:10,600 Speaker 10: maybe accelerating the move out of China, the move of 514 00:30:10,640 --> 00:30:15,480 Speaker 10: the production facilities out of China. I think it's very hard, 515 00:30:15,920 --> 00:30:20,040 Speaker 10: even over the longer term to look at the shift 516 00:30:20,280 --> 00:30:25,080 Speaker 10: of supply chain. But it's going to be even tougher 517 00:30:25,120 --> 00:30:30,080 Speaker 10: to pick up those trends from PMI data. So it's 518 00:30:30,120 --> 00:30:35,720 Speaker 10: something that will keep looking out for. But unfortunately we 519 00:30:35,760 --> 00:30:40,640 Speaker 10: don't have sufficient data to give any clarity on this issue. 520 00:30:40,720 --> 00:30:43,320 Speaker 4: So when I think of the Chinese domestic economy, what 521 00:30:43,400 --> 00:30:46,360 Speaker 4: I really think of is just a lack of demand. 522 00:30:46,920 --> 00:30:49,920 Speaker 4: Is it too much to think that Beijing could try 523 00:30:50,000 --> 00:30:54,240 Speaker 4: to stimulate demand in a way that would compensate for 524 00:30:54,560 --> 00:30:58,720 Speaker 4: the reduction that the export economy is faced with right now? 525 00:30:58,800 --> 00:31:01,480 Speaker 4: Or is that just in entirely out of the question. 526 00:31:01,680 --> 00:31:02,960 Speaker 4: Is that an impossibility. 527 00:31:03,480 --> 00:31:06,320 Speaker 10: It's very tough. It's very tough for the government to 528 00:31:06,800 --> 00:31:12,440 Speaker 10: purely by stimulating the domestic econometer off sets the shock 529 00:31:12,720 --> 00:31:17,200 Speaker 10: from the external demands. It certainly in the short term 530 00:31:17,320 --> 00:31:23,120 Speaker 10: that's even tougher. Right, You have to think of different ways. 531 00:31:23,320 --> 00:31:27,200 Speaker 10: The firms are trying different ways. Certainly they are diverting 532 00:31:27,360 --> 00:31:32,600 Speaker 10: some of the were intended to be exports to divert 533 00:31:32,720 --> 00:31:36,960 Speaker 10: some of that products domestically, and as you alluded to, 534 00:31:37,160 --> 00:31:43,120 Speaker 10: they may think of rerouting the exports, but they offsets 535 00:31:43,840 --> 00:31:47,880 Speaker 10: will not come that quickly. I think the government has 536 00:31:48,520 --> 00:31:53,600 Speaker 10: certainly realized the importance of domestic demands and it has 537 00:31:53,720 --> 00:31:57,160 Speaker 10: been doing something over the past a few months, and 538 00:31:57,280 --> 00:31:58,080 Speaker 10: that's showing. 539 00:31:58,800 --> 00:31:59,040 Speaker 6: Uh. 540 00:31:59,360 --> 00:32:04,600 Speaker 10: Some improvement we do see in the first quarter in 541 00:32:04,680 --> 00:32:09,200 Speaker 10: China's GDP growth was stronger than expected, and if we're 542 00:32:09,280 --> 00:32:13,040 Speaker 10: looking to the March data, this improvement certainly on the 543 00:32:13,080 --> 00:32:18,360 Speaker 10: production sites, but also on the demand side, as we 544 00:32:18,480 --> 00:32:25,560 Speaker 10: saw quite noticeable improvement in consumption in retail cells. So 545 00:32:25,720 --> 00:32:29,800 Speaker 10: we can see some positivity there. But I think it's 546 00:32:29,920 --> 00:32:35,400 Speaker 10: too big a ask for domestic amount to immediately offset 547 00:32:35,840 --> 00:32:36,960 Speaker 10: the external shock. 548 00:32:37,200 --> 00:32:40,680 Speaker 4: So I mentioned that the IMF revised down its annual 549 00:32:40,760 --> 00:32:45,440 Speaker 4: forecast for Chinese growth this year to around four percent annualized, 550 00:32:45,600 --> 00:32:49,640 Speaker 4: And in the last week, your colleagues at Bloomberg Economics 551 00:32:49,680 --> 00:32:53,720 Speaker 4: found that, based on a review of previous IMF forecast, 552 00:32:54,320 --> 00:32:58,160 Speaker 4: the Fund tends to underestimate the depth of these economic downturns. 553 00:32:58,600 --> 00:33:01,920 Speaker 4: So are you beginning to model a growth rate that 554 00:33:02,040 --> 00:33:05,320 Speaker 4: is below four percent for twenty twenty five? I mean, 555 00:33:05,360 --> 00:33:08,760 Speaker 4: clearly that's below what the government is shooting for. Is 556 00:33:08,840 --> 00:33:11,800 Speaker 4: China really at risk of seeing something that is sub 557 00:33:11,880 --> 00:33:12,960 Speaker 4: four percent growth? 558 00:33:13,200 --> 00:33:19,400 Speaker 10: We have already downgraded our China forecast from four point 559 00:33:19,440 --> 00:33:22,800 Speaker 10: five percent we projected at the beginning of the year 560 00:33:23,360 --> 00:33:29,040 Speaker 10: from zero point two percent. The reason for the relatively 561 00:33:29,320 --> 00:33:34,840 Speaker 10: modest downgrades of the forecast reflects a couple of considerations. 562 00:33:35,080 --> 00:33:39,720 Speaker 10: First of all, as I already mentioned, in the first quarter, 563 00:33:40,560 --> 00:33:45,640 Speaker 10: the growth was decent, was above a slighter above our projection, 564 00:33:45,960 --> 00:33:50,160 Speaker 10: so that provides a bit of a cushion for the 565 00:33:50,280 --> 00:33:54,040 Speaker 10: year as a whole. And secondly, we do see the 566 00:33:54,080 --> 00:33:59,360 Speaker 10: government to strengthen its supports for the economy and that 567 00:33:59,400 --> 00:34:04,480 Speaker 10: should help. But as we again discuss earlier, we don't 568 00:34:04,680 --> 00:34:10,080 Speaker 10: think the supports come fully off set the dunting in 569 00:34:10,840 --> 00:34:16,719 Speaker 10: excellental demands. So taking account in all those consituations, we 570 00:34:17,680 --> 00:34:23,399 Speaker 10: have a modest downngrad of the projection. But we can 571 00:34:23,480 --> 00:34:27,399 Speaker 10: come to the discussion clearly what the government is going 572 00:34:27,480 --> 00:34:31,719 Speaker 10: to do, how they are going to support the economy, 573 00:34:32,440 --> 00:34:37,239 Speaker 10: and how effective those policies stimulus will be will be 574 00:34:37,520 --> 00:34:42,160 Speaker 10: very critical for China's growth trajectory going forward. 575 00:34:42,600 --> 00:34:45,239 Speaker 4: It seems as though China is in a very vulnerable 576 00:34:45,280 --> 00:34:48,080 Speaker 4: position right now, given the fact that these tariffs are 577 00:34:48,120 --> 00:34:52,440 Speaker 4: so biting. Is there anything that could come out of 578 00:34:52,480 --> 00:34:56,240 Speaker 4: this upcoming pollut Bureau meeting that would give the markets 579 00:34:56,280 --> 00:35:01,479 Speaker 4: a sign that Beijing is willing to indu a long 580 00:35:01,560 --> 00:35:05,000 Speaker 4: period of negotiation or is this something that is out 581 00:35:05,000 --> 00:35:09,040 Speaker 4: of the question, and it's more likely that China over 582 00:35:09,120 --> 00:35:12,600 Speaker 4: a short period of time will capitulate and kind of 583 00:35:12,680 --> 00:35:15,080 Speaker 4: give in a little bit to what the US is 584 00:35:15,080 --> 00:35:15,880 Speaker 4: demanding of it. 585 00:35:16,800 --> 00:35:22,440 Speaker 10: Yeah, it's a very tough question. I think the Chinese 586 00:35:22,480 --> 00:35:25,920 Speaker 10: side certainly is willing to talk, and it has and 587 00:35:26,200 --> 00:35:32,120 Speaker 10: various signals, but it also laid down the conditions for 588 00:35:32,320 --> 00:35:39,080 Speaker 10: discussions respect and I think the government it's something we 589 00:35:39,640 --> 00:35:45,160 Speaker 10: have written in reports. There are various considerations why it's 590 00:35:45,239 --> 00:35:49,680 Speaker 10: taking on these very tough stance, and it can be 591 00:35:49,760 --> 00:35:53,359 Speaker 10: a simple sort of face issue you come back down 592 00:35:53,760 --> 00:35:57,279 Speaker 10: and one thing you could be that China doesn't know 593 00:35:57,360 --> 00:36:02,640 Speaker 10: at this point what's the US ones. So those are 594 00:36:02,680 --> 00:36:08,200 Speaker 10: the domestic issues considerations. In the meantime, there's also the 595 00:36:08,320 --> 00:36:13,960 Speaker 10: international dimension to it in this particular case, unlike in 596 00:36:14,000 --> 00:36:17,839 Speaker 10: the First Street War, in China was the only one 597 00:36:18,400 --> 00:36:22,319 Speaker 10: more or less the only one affected by tariff, but 598 00:36:22,480 --> 00:36:26,920 Speaker 10: this time it's a wide range of countries, or indeed 599 00:36:27,120 --> 00:36:30,719 Speaker 10: all the countries are facing tariffs, and all the countries 600 00:36:30,920 --> 00:36:35,279 Speaker 10: except China are trying to talk to trying to talk 601 00:36:35,320 --> 00:36:40,840 Speaker 10: to the US. So from again theory perspective, there's a 602 00:36:41,000 --> 00:36:46,520 Speaker 10: risk when everybody tries, every country tries to talk to 603 00:36:46,560 --> 00:36:51,640 Speaker 10: the US, China will end up having a worse deal, 604 00:36:52,000 --> 00:36:55,760 Speaker 10: which is why China kind of takes this particular stance 605 00:36:56,320 --> 00:37:00,520 Speaker 10: to push back strongly. So for various reasons, China is 606 00:37:00,640 --> 00:37:06,520 Speaker 10: holding holding strong stands at this point, but I think 607 00:37:06,560 --> 00:37:10,360 Speaker 10: it's still hoping to to at some point to be 608 00:37:10,400 --> 00:37:12,920 Speaker 10: able to see them to talk to the US and 609 00:37:13,600 --> 00:37:19,320 Speaker 10: get a trade deal to cut down the tariffs. But 610 00:37:19,600 --> 00:37:26,080 Speaker 10: in the meantime, the Chinese economy certainly will suffer. There's costs, 611 00:37:26,200 --> 00:37:30,040 Speaker 10: certainly from the U s side, but on the China side, 612 00:37:30,120 --> 00:37:34,520 Speaker 10: the hit can be quite immediate on the export sector, 613 00:37:34,960 --> 00:37:39,400 Speaker 10: which could spread to the rest of the economy. I 614 00:37:39,440 --> 00:37:44,560 Speaker 10: think the government certainly is prepared for that, and in 615 00:37:44,680 --> 00:37:49,520 Speaker 10: terms of the prelicted Bureau meeting, we think you will 616 00:37:49,640 --> 00:37:53,160 Speaker 10: have to send quite strong signal that it's going to 617 00:37:53,640 --> 00:37:58,840 Speaker 10: support the economy. And I think possibly, like you alluded 618 00:37:58,920 --> 00:38:03,520 Speaker 10: to suggest, this is going to be a long enduring 619 00:38:04,680 --> 00:38:09,000 Speaker 10: standoff with the US, and the government is prepared to 620 00:38:09,040 --> 00:38:10,320 Speaker 10: support the economy. 621 00:38:11,000 --> 00:38:13,440 Speaker 4: Chog thank you so much for joining us and helping 622 00:38:13,520 --> 00:38:16,200 Speaker 4: us understand more of what's going on in the Chinese 623 00:38:16,239 --> 00:38:20,040 Speaker 4: economy these days. Chang Chu is Chief Asia Economist at 624 00:38:20,040 --> 00:38:23,000 Speaker 4: Bloomberg Economics. She was joining us from our studios in 625 00:38:23,120 --> 00:38:26,360 Speaker 4: Hong Kong. I'm Deug Prisner. You can catch us weekdays 626 00:38:26,400 --> 00:38:29,919 Speaker 4: for the Daybreak Asia podcast. It's available wherever you get 627 00:38:29,960 --> 00:38:32,560 Speaker 4: your podcast. Tom, thank you, Doug. 628 00:38:32,719 --> 00:38:34,879 Speaker 2: And that does it for this edition of Bloomberg day 629 00:38:34,880 --> 00:38:37,319 Speaker 2: Break Weekend. Join us again Monday morning at five am 630 00:38:37,360 --> 00:38:39,719 Speaker 2: Wall Street Time for the latest on markets overseas and 631 00:38:39,760 --> 00:38:43,080 Speaker 2: the news you need to start your day. I'm Tom Buzby. 632 00:38:43,239 --> 00:38:46,040 Speaker 2: Stay with us. Top stories and global business headlines are 633 00:38:46,080 --> 00:38:48,120 Speaker 2: coming up right now.