1 00:00:02,440 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:09,520 --> 00:00:11,960 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:12,000 --> 00:00:14,040 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:14,040 --> 00:00:16,720 Speaker 2: anchors all around the world. And straight ahead on the program, 5 00:00:16,760 --> 00:00:19,760 Speaker 2: a look ahead to the latest US retail sales and 6 00:00:20,000 --> 00:00:22,720 Speaker 2: housing starts data what they tell us about the health 7 00:00:22,720 --> 00:00:26,400 Speaker 2: of the consumer and the US economy. I'm Tom Busby. 8 00:00:26,079 --> 00:00:26,720 Speaker 3: In New York. 9 00:00:27,040 --> 00:00:29,560 Speaker 1: I'm Caline Hepkit in London, where we're asking how the 10 00:00:29,640 --> 00:00:32,879 Speaker 1: UK's politics could crossover with monetary policy. 11 00:00:33,200 --> 00:00:35,800 Speaker 4: I'm Brian Curtis in Hong Kong. We look ahead to 12 00:00:35,840 --> 00:00:38,440 Speaker 4: a slew of data in China to see if some 13 00:00:38,680 --> 00:00:41,160 Speaker 4: nascent signs of growth can be extended. 14 00:00:42,479 --> 00:00:46,440 Speaker 3: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg, 15 00:00:46,479 --> 00:00:48,960 Speaker 3: E Loove, the three Own, New York, Bloomberg ninety nine 16 00:00:49,000 --> 00:00:52,400 Speaker 3: to one, Washington, DC, Bloomberg one O six one, Boston, 17 00:00:52,479 --> 00:00:57,280 Speaker 3: Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 18 00:00:57,440 --> 00:01:00,280 Speaker 3: XM one nineteen and around the world on Blue Bomberg 19 00:01:00,400 --> 00:01:03,000 Speaker 3: Radio dot com and via the Bloomberg Business App. 20 00:01:07,080 --> 00:01:09,360 Speaker 2: Good day to you. I'm Tom Busby. We begin today's 21 00:01:09,360 --> 00:01:11,880 Speaker 2: program with some key economic data here in the US. 22 00:01:12,280 --> 00:01:15,320 Speaker 2: On Tuesday, we get US retail sales for the month 23 00:01:15,360 --> 00:01:18,520 Speaker 2: of May at eight thirty am Wall Street Time, and 24 00:01:18,600 --> 00:01:20,480 Speaker 2: for more on what this will tell us about the 25 00:01:20,480 --> 00:01:23,680 Speaker 2: health of the consumer, we're joined by estell O US 26 00:01:23,760 --> 00:01:27,959 Speaker 2: economists with Bloomberg Economics. So, Estelle, what do you expect 27 00:01:27,959 --> 00:01:30,679 Speaker 2: to see in the May retail sales number? The question is, 28 00:01:30,720 --> 00:01:32,600 Speaker 2: are consumers still spending? 29 00:01:33,080 --> 00:01:38,360 Speaker 5: Yeah? So, Tom, we're expecting a tippet rebound in consumers 30 00:01:38,360 --> 00:01:42,520 Speaker 5: spending next week, where we're expecting a point two percent 31 00:01:42,680 --> 00:01:46,640 Speaker 5: increasing the headline retail sales figure and also one point 32 00:01:46,720 --> 00:01:49,800 Speaker 5: two percent in the more important control group figure. And 33 00:01:49,840 --> 00:01:53,800 Speaker 5: this is a very modest rebound from last month's almost 34 00:01:53,840 --> 00:01:58,080 Speaker 5: flat headline figures and also a negative zero point three 35 00:01:58,120 --> 00:02:02,360 Speaker 5: percent decline in the control group. Basically, this is just 36 00:02:02,760 --> 00:02:05,680 Speaker 5: last month we saw a good amount of pullback and 37 00:02:05,760 --> 00:02:09,480 Speaker 5: discretionary spending from consumers as they feel more squeezed from 38 00:02:09,880 --> 00:02:13,600 Speaker 5: higher interest rates. This month, we're expecting a little bit 39 00:02:13,600 --> 00:02:16,280 Speaker 5: more of a rebound, but we're still expecting quite weak 40 00:02:16,320 --> 00:02:20,520 Speaker 5: consumption basically because we're no longer seeing consumers dipping into 41 00:02:20,560 --> 00:02:23,840 Speaker 5: their savings for their purchases, and we're also no longer 42 00:02:23,840 --> 00:02:27,320 Speaker 5: seeing them barring as much in order to finance their 43 00:02:27,360 --> 00:02:33,200 Speaker 5: purchases either. So overall we're expecting modest rebound but still 44 00:02:33,240 --> 00:02:34,000 Speaker 5: weak spending. 45 00:02:34,280 --> 00:02:37,760 Speaker 2: But people are still buying, and so my question is 46 00:02:37,840 --> 00:02:39,800 Speaker 2: what are they buying? I mean, they have to eat, 47 00:02:40,120 --> 00:02:43,960 Speaker 2: so the obviously they have to buy groceries, they dine out, 48 00:02:44,240 --> 00:02:48,360 Speaker 2: but maybe are people going to lower price point restaurants. 49 00:02:48,440 --> 00:02:50,800 Speaker 2: Are they going to discount stores instead of you know, 50 00:02:50,840 --> 00:02:54,760 Speaker 2: the big supermarket. How have the high prices changed things 51 00:02:54,760 --> 00:02:55,239 Speaker 2: for people? 52 00:02:55,680 --> 00:02:58,760 Speaker 5: Right? That's definitely something we're seeing. We've been seeing consumers 53 00:02:58,800 --> 00:03:02,120 Speaker 5: pull back from you know, more expensive, big ticket items 54 00:03:02,120 --> 00:03:04,720 Speaker 5: for a while now, but they have been spending on 55 00:03:04,840 --> 00:03:09,680 Speaker 5: food service and drinking places more so than any other category. 56 00:03:10,360 --> 00:03:13,360 Speaker 5: But we do expect that to pull back as well 57 00:03:13,360 --> 00:03:17,560 Speaker 5: because recently we've been seeing some increases in food services 58 00:03:17,600 --> 00:03:22,000 Speaker 5: prices as well. So overall, consumers will continue to spend 59 00:03:22,080 --> 00:03:26,359 Speaker 5: on services and essential goods. They have been moving towards 60 00:03:26,560 --> 00:03:30,280 Speaker 5: or value goods, but overall we expect a general slow 61 00:03:30,360 --> 00:03:32,080 Speaker 5: down in almost all categories. 62 00:03:32,840 --> 00:03:35,680 Speaker 2: So my next question is what are people not buying? 63 00:03:35,840 --> 00:03:38,480 Speaker 2: I mean, is I know, gasoline is down there's been 64 00:03:38,480 --> 00:03:41,600 Speaker 2: lower demand. How about automobiles a big expense for a 65 00:03:41,640 --> 00:03:43,840 Speaker 2: lot of people, both new and used cars. 66 00:03:44,360 --> 00:03:48,240 Speaker 5: Right, So, actually, consumers had been holding off on automobile 67 00:03:48,560 --> 00:03:51,480 Speaker 5: purchases for quite a while because you know, everyone's waiting 68 00:03:51,520 --> 00:03:54,040 Speaker 5: for interest rates to fall a little bit so that 69 00:03:54,320 --> 00:03:57,960 Speaker 5: automobiles can be a little more affordable. But recently we've 70 00:03:58,000 --> 00:04:02,320 Speaker 5: seen trends where auto deals are actually offering more discounts 71 00:04:02,360 --> 00:04:05,360 Speaker 5: as they noticed that consumers aren't really able to afford 72 00:04:05,400 --> 00:04:08,440 Speaker 5: the sky high prices we saw over the past two years. 73 00:04:08,560 --> 00:04:12,280 Speaker 5: So actually, this month, we're expecting sales in the auto 74 00:04:12,320 --> 00:04:15,640 Speaker 5: sector to pick up quite a bit, but that's mostly 75 00:04:15,680 --> 00:04:18,440 Speaker 5: going to be offset by pull back in other categories. 76 00:04:18,760 --> 00:04:22,400 Speaker 5: So you know, if I'm thinking about my own purchasing trends, 77 00:04:22,600 --> 00:04:24,719 Speaker 5: if I have to buy a car this month, I 78 00:04:24,880 --> 00:04:27,839 Speaker 5: tend to just pull back on my other purchases just 79 00:04:27,880 --> 00:04:28,560 Speaker 5: for this month. 80 00:04:28,760 --> 00:04:34,160 Speaker 2: Yeah, non necessities like clothing you mean, or experiential things. Yeah, exactly, 81 00:04:34,480 --> 00:04:38,960 Speaker 2: not Taylor Swift fans, but concerts, ballgames, movies. I guess 82 00:04:39,040 --> 00:04:41,440 Speaker 2: those things are going to people maybe going to dial 83 00:04:41,480 --> 00:04:41,960 Speaker 2: back a bit. 84 00:04:42,839 --> 00:04:43,039 Speaker 4: Now. 85 00:04:43,120 --> 00:04:45,520 Speaker 2: You mentioned in April we got kind of a nasty surprise, 86 00:04:45,600 --> 00:04:49,279 Speaker 2: retail sales flat that month, but core consumer prices in 87 00:04:49,320 --> 00:04:52,520 Speaker 2: April and May did decelerate a little bit. May's year 88 00:04:52,520 --> 00:04:54,839 Speaker 2: over year price index up just three point four percent. 89 00:04:54,920 --> 00:04:58,000 Speaker 2: What kind of boost do you think that if there 90 00:04:58,000 --> 00:05:01,480 Speaker 2: are signs inflation is moderating, what will it booths? Will 91 00:05:01,480 --> 00:05:02,320 Speaker 2: it give consumers? 92 00:05:02,760 --> 00:05:07,600 Speaker 5: Right? So, I think the slower CPI data we saw 93 00:05:07,680 --> 00:05:12,880 Speaker 5: in May is directly a reflection of retailers slashing prices 94 00:05:12,920 --> 00:05:16,160 Speaker 5: in order to entice consumers to spend more, because, like 95 00:05:16,200 --> 00:05:20,320 Speaker 5: I said, they're noticing consumers being squeezed, so in order 96 00:05:20,440 --> 00:05:24,000 Speaker 5: to bring that demand back up there, a lot of 97 00:05:24,440 --> 00:05:27,440 Speaker 5: retailers are slashing prices and that should be supportive for 98 00:05:27,520 --> 00:05:30,880 Speaker 5: consumers and help them get through this rough patch that 99 00:05:30,920 --> 00:05:32,080 Speaker 5: we're anticipating. 100 00:05:32,520 --> 00:05:36,479 Speaker 2: Also, sales are good now if employment remains solid, we 101 00:05:36,520 --> 00:05:39,080 Speaker 2: continue to see inflation moderate like we saw in April 102 00:05:39,080 --> 00:05:41,160 Speaker 2: and May. Do you think that sets the stage for 103 00:05:41,200 --> 00:05:44,080 Speaker 2: the Fed to begin cutting interest rates as early September? 104 00:05:44,160 --> 00:05:47,239 Speaker 2: And with that, how do you expect to see retail 105 00:05:47,279 --> 00:05:49,320 Speaker 2: sales the rest of the summer. I mean, we're just 106 00:05:49,360 --> 00:05:52,320 Speaker 2: getting into it now, it's the middle of June. What 107 00:05:52,360 --> 00:05:53,960 Speaker 2: does it look like for the rest of the summer 108 00:05:53,960 --> 00:05:54,320 Speaker 2: to you. 109 00:05:55,040 --> 00:05:57,440 Speaker 5: Essentially big picture is that the tail winds we've been 110 00:05:57,480 --> 00:06:01,640 Speaker 5: seeing from consumers dipping into their savings should fad as 111 00:06:01,680 --> 00:06:04,719 Speaker 5: we go through the summer. In terms of rate cuts, 112 00:06:04,839 --> 00:06:08,159 Speaker 5: as long as inflation continues to trend lower. We do 113 00:06:08,279 --> 00:06:11,000 Speaker 5: think that the Fed will cut rates in September and 114 00:06:11,080 --> 00:06:16,760 Speaker 5: that will obviously alleviate some of the financing pressures consumers 115 00:06:16,800 --> 00:06:17,479 Speaker 5: have been feeling. 116 00:06:17,839 --> 00:06:20,159 Speaker 2: Well, a lot to look forward to. Then, retail sales 117 00:06:20,240 --> 00:06:22,120 Speaker 2: data for the month of May out on Tuesday in 118 00:06:22,160 --> 00:06:26,920 Speaker 2: our thanks to Estello US economists with Bloomberg Economics. We 119 00:06:27,000 --> 00:06:29,720 Speaker 2: turn now to housing, where home buying has been hampered 120 00:06:29,720 --> 00:06:32,599 Speaker 2: by record high home prices, mortgage rates at are above 121 00:06:32,640 --> 00:06:35,680 Speaker 2: seven percent, and a limited supply of homes on the market. 122 00:06:35,960 --> 00:06:38,000 Speaker 2: With so few existing homes for sale, a lot of 123 00:06:38,000 --> 00:06:41,320 Speaker 2: would be buyers have resorted to buying new homes with 124 00:06:41,440 --> 00:06:44,920 Speaker 2: mixed results. And this Thursday we get existing home sales 125 00:06:44,920 --> 00:06:48,120 Speaker 2: for May and housing starts for that same month. And 126 00:06:48,160 --> 00:06:50,960 Speaker 2: for more on what to expect, we're joined by Drew Redding, 127 00:06:50,960 --> 00:06:54,880 Speaker 2: Bloomberg Intelligence US home building analysts. Well, Drew, let's start 128 00:06:54,920 --> 00:06:58,400 Speaker 2: with housing starts for May. How are the homebuilders firing. 129 00:06:58,760 --> 00:07:01,360 Speaker 2: What's the market right now for the those newly constructed homes. 130 00:07:01,800 --> 00:07:05,120 Speaker 6: Sure, so, as you would expect, housing starts data continues 131 00:07:05,160 --> 00:07:08,280 Speaker 6: to be volatile month to month, which is partly reflective 132 00:07:08,320 --> 00:07:11,040 Speaker 6: of the demand environment. You know, the strategy for many 133 00:07:11,080 --> 00:07:14,480 Speaker 6: builders out there has been to match supply measured by 134 00:07:14,520 --> 00:07:17,000 Speaker 6: starts with demand. So you've kind of seen that EBB 135 00:07:17,040 --> 00:07:19,280 Speaker 6: and flow with interest rates, and I think some of 136 00:07:19,280 --> 00:07:22,760 Speaker 6: the weakness that we've seen more recently is probably due 137 00:07:22,800 --> 00:07:25,520 Speaker 6: to some of the smaller builders who are getting more cautious. 138 00:07:26,080 --> 00:07:28,800 Speaker 6: That being said, the big builders continue to increase production. 139 00:07:29,200 --> 00:07:31,040 Speaker 6: The other thing that you have to consider is, you know, 140 00:07:31,040 --> 00:07:33,640 Speaker 6: when you look at that headline number, it continues to 141 00:07:33,680 --> 00:07:37,320 Speaker 6: be impacted by weakness in the multifamily sector, where starts 142 00:07:37,360 --> 00:07:41,200 Speaker 6: are falling as completions continue to build. So your to 143 00:07:41,280 --> 00:07:44,320 Speaker 6: date starts are still twenty six percent higher. Of course, 144 00:07:44,360 --> 00:07:47,520 Speaker 6: the comps get a little bit more difficult, but broadly speaking, 145 00:07:47,560 --> 00:07:50,760 Speaker 6: we think that the trajectory for single family housing is 146 00:07:50,800 --> 00:07:51,440 Speaker 6: still higher. 147 00:07:51,760 --> 00:07:54,400 Speaker 2: And is the boom still going on in the Sun 148 00:07:54,440 --> 00:07:56,880 Speaker 2: Belt States more than anywhere else or is this a 149 00:07:57,080 --> 00:07:58,800 Speaker 2: nationwide building boom. 150 00:07:58,960 --> 00:08:01,280 Speaker 6: That's a great question. I mean the performance within the 151 00:08:01,320 --> 00:08:04,160 Speaker 6: new home market has been pretty solid across much of 152 00:08:04,200 --> 00:08:06,800 Speaker 6: the US, But as you look around the country of 153 00:08:06,800 --> 00:08:09,120 Speaker 6: the last year year and a half, you have seen 154 00:08:09,200 --> 00:08:12,560 Speaker 6: markets kind of cycle in and out of favor. For example, 155 00:08:12,680 --> 00:08:15,440 Speaker 6: when Race really started to rip higher back in the 156 00:08:15,520 --> 00:08:18,160 Speaker 6: second half of twenty two. Some of the higher cost 157 00:08:18,280 --> 00:08:22,640 Speaker 6: markets in the West, like California, Washington, Arizona, Colorado, we're 158 00:08:22,720 --> 00:08:25,480 Speaker 6: very hard hit, and we're starting to see them rebound 159 00:08:25,520 --> 00:08:28,640 Speaker 6: more solidly. On the other hand, you have some of 160 00:08:28,680 --> 00:08:32,360 Speaker 6: the markets with leaders and you know, Florida comes to mind, 161 00:08:32,760 --> 00:08:35,400 Speaker 6: and we're starting to see, you know, some signs of 162 00:08:36,080 --> 00:08:39,280 Speaker 6: yellow lights flashing, if you will, with rising inventories and 163 00:08:39,320 --> 00:08:42,240 Speaker 6: slowing sales. So we are seeing markets kind of go 164 00:08:42,360 --> 00:08:44,880 Speaker 6: in and out of vogue here. And some of those 165 00:08:44,880 --> 00:08:46,800 Speaker 6: hardest hit markets, as I mentioned, are the ones that 166 00:08:46,840 --> 00:08:48,840 Speaker 6: are doing the best. And then there's there tends to 167 00:08:48,840 --> 00:08:51,320 Speaker 6: be a little bit more stability in those in the 168 00:08:51,360 --> 00:08:55,360 Speaker 6: Midwest and Northeast, which are comparatively smaller from a new 169 00:08:55,640 --> 00:08:56,920 Speaker 6: home construction perspective. 170 00:08:57,200 --> 00:09:00,720 Speaker 2: Now you mentioned some of these smaller builders, the big ones, 171 00:09:00,720 --> 00:09:01,880 Speaker 2: the Lenaar's and the d R. 172 00:09:01,920 --> 00:09:02,360 Speaker 3: Horton's. 173 00:09:02,720 --> 00:09:06,680 Speaker 2: What's the challenge for them. Is it the high land prices, 174 00:09:06,840 --> 00:09:10,760 Speaker 2: the high cost of labor, is it finding enough skilled workers? 175 00:09:10,920 --> 00:09:12,040 Speaker 2: What are the big challenges? 176 00:09:12,320 --> 00:09:18,000 Speaker 6: It's all you nail head, you know, the private home builders, 177 00:09:18,520 --> 00:09:20,920 Speaker 6: and just take a step back. You have to remember 178 00:09:21,000 --> 00:09:24,400 Speaker 6: that home building has historically been a very fragmented market. 179 00:09:24,520 --> 00:09:27,320 Speaker 6: Now you have the large public builders for about fifty 180 00:09:27,360 --> 00:09:29,800 Speaker 6: percent of the market, so there has been a share 181 00:09:29,800 --> 00:09:32,240 Speaker 6: shift that's been going on over the last couple of years. 182 00:09:33,040 --> 00:09:36,040 Speaker 6: One of the main issues, in addition to the things 183 00:09:36,080 --> 00:09:38,640 Speaker 6: you cite it for the private builders is really their 184 00:09:38,679 --> 00:09:42,920 Speaker 6: access to capital. You know, they typically work with local 185 00:09:43,400 --> 00:09:46,559 Speaker 6: or regional banks in order to access growth capital, whether 186 00:09:47,400 --> 00:09:51,360 Speaker 6: that's for purchasing land or developing developing that land or 187 00:09:51,400 --> 00:09:53,640 Speaker 6: construction the home. And you know, when you have a 188 00:09:53,679 --> 00:09:56,800 Speaker 6: more uncertain economy as you would expect, there's been somewhat 189 00:09:56,800 --> 00:09:59,840 Speaker 6: of a pullback in lending which has inhibited their ability 190 00:10:00,280 --> 00:10:02,880 Speaker 6: to grow. So it's kind of a scenario where you 191 00:10:02,880 --> 00:10:06,720 Speaker 6: have the haves with the large, well capitalized, publicly traded 192 00:10:06,800 --> 00:10:12,160 Speaker 6: homebuilders who have access to land, labor, and then you 193 00:10:12,240 --> 00:10:15,480 Speaker 6: have the have nots, which is the smaller private piers 194 00:10:15,559 --> 00:10:18,040 Speaker 6: who are struggling to get that growth capital. You know, 195 00:10:18,080 --> 00:10:20,320 Speaker 6: we think that that this dynamic is going to continue 196 00:10:20,320 --> 00:10:22,560 Speaker 6: to play out, and we think that you'll continue to 197 00:10:22,600 --> 00:10:25,600 Speaker 6: see more M and A activity in the space. As 198 00:10:25,640 --> 00:10:27,480 Speaker 6: a result of that, M and A has been pretty 199 00:10:27,480 --> 00:10:30,319 Speaker 6: strong in twenty twenty four, So we would think that 200 00:10:30,360 --> 00:10:34,280 Speaker 6: some of those smaller private companies will continue to you know, 201 00:10:34,360 --> 00:10:35,920 Speaker 6: look to sell as a way to get out in 202 00:10:36,000 --> 00:10:38,480 Speaker 6: a more challenging market, and we think that the large 203 00:10:38,520 --> 00:10:40,199 Speaker 6: publics will scoop some of those guys up. 204 00:10:40,440 --> 00:10:40,720 Speaker 3: Wow. 205 00:10:40,840 --> 00:10:43,800 Speaker 2: Yeah, the rich get richer, the big get bigger. Let's 206 00:10:43,800 --> 00:10:47,360 Speaker 2: switch now to existing home sales. Elevated prices. Interest rates 207 00:10:47,360 --> 00:10:49,800 Speaker 2: have really hurt the market, but what are you looking 208 00:10:49,880 --> 00:10:51,760 Speaker 2: for in those numbers for may. 209 00:10:51,840 --> 00:10:53,679 Speaker 6: So in the near term, we think that the existing 210 00:10:53,679 --> 00:10:56,000 Speaker 6: home market is going to continue to be challenged by 211 00:10:56,160 --> 00:10:59,640 Speaker 6: higher rates. You know, one of the disadvantages the resale 212 00:10:59,679 --> 00:11:02,520 Speaker 6: market has had not only you know a lack of 213 00:11:02,559 --> 00:11:06,960 Speaker 6: inventory at the national level, but the higher rates have 214 00:11:07,040 --> 00:11:09,040 Speaker 6: impacted them greater than it has the new home mark. 215 00:11:09,080 --> 00:11:11,160 Speaker 6: And that's because the builders have been able to buy 216 00:11:11,240 --> 00:11:14,000 Speaker 6: down rates. So you know, we're when we're looking at 217 00:11:14,480 --> 00:11:17,280 Speaker 6: contract signings, we're going to continue to see you know, 218 00:11:17,320 --> 00:11:20,080 Speaker 6: we had rates climb up over seven and a half percent, 219 00:11:20,200 --> 00:11:22,800 Speaker 6: so we think that existing home sales will continue to 220 00:11:22,840 --> 00:11:25,920 Speaker 6: be muted probably through much of the year. That being said, 221 00:11:25,920 --> 00:11:28,640 Speaker 6: as rates start to pull back, you know, we're actually 222 00:11:28,920 --> 00:11:31,240 Speaker 6: have a six handle once again, so you know, a 223 00:11:31,240 --> 00:11:34,319 Speaker 6: lot of volatility. But if rates kind of stabilize in 224 00:11:34,360 --> 00:11:36,480 Speaker 6: that mid six and a half, you know, mid six 225 00:11:36,520 --> 00:11:38,600 Speaker 6: percent range as we get through the year, we think 226 00:11:38,600 --> 00:11:41,360 Speaker 6: that you could build a little bit of momentum, albeit 227 00:11:41,440 --> 00:11:43,960 Speaker 6: off a low base, heading into twenty twenty five. 228 00:11:44,320 --> 00:11:46,679 Speaker 2: So for realtors it may be a tough summer, but 229 00:11:46,960 --> 00:11:50,360 Speaker 2: there is hope on that the FED in September may 230 00:11:50,440 --> 00:11:52,839 Speaker 2: dial back rates a little bit, and you think that'll 231 00:11:52,840 --> 00:11:54,080 Speaker 2: have a big impact on housing. 232 00:11:54,280 --> 00:11:56,280 Speaker 6: Yeah, I mean rates have really been the story and 233 00:11:56,600 --> 00:12:00,880 Speaker 6: buyer's ability to afford home. So, you know, our kind 234 00:12:00,880 --> 00:12:02,839 Speaker 6: of outlook suggests that we could get to that mid 235 00:12:02,920 --> 00:12:05,800 Speaker 6: six percent range by the end of the year if 236 00:12:05,800 --> 00:12:08,160 Speaker 6: we see some stability, which is what I think a 237 00:12:08,160 --> 00:12:10,680 Speaker 6: lot of buyers need in this market, kind of certainty 238 00:12:10,760 --> 00:12:12,640 Speaker 6: that you know, when they're going to look for a home, 239 00:12:12,679 --> 00:12:14,520 Speaker 6: they know what kind of rate they're looking at. You know. 240 00:12:14,559 --> 00:12:17,600 Speaker 6: The other thing to consider is the fact that we've 241 00:12:17,600 --> 00:12:19,920 Speaker 6: been at this elevated rate level for a couple of 242 00:12:20,000 --> 00:12:22,640 Speaker 6: years now, so I think at some point, you know, 243 00:12:22,720 --> 00:12:26,480 Speaker 6: buyers have just become increasingly accustomed to a higher rate. 244 00:12:26,559 --> 00:12:28,680 Speaker 6: So I think over time that starts to help. And 245 00:12:28,720 --> 00:12:31,400 Speaker 6: what it also does is it starts to gradually loosen 246 00:12:31,840 --> 00:12:34,559 Speaker 6: the grip of the mortgage rate lock and effect, which 247 00:12:34,600 --> 00:12:37,520 Speaker 6: has been widely documented where since you're starting to have 248 00:12:37,600 --> 00:12:40,800 Speaker 6: transactions at these higher rates, that starts to loosen a bit, 249 00:12:40,800 --> 00:12:43,520 Speaker 6: which should free up the market gradually into next year. 250 00:12:43,760 --> 00:12:47,040 Speaker 2: Oh boy, well, existing home sales housing starts for the 251 00:12:47,040 --> 00:12:49,439 Speaker 2: month of May, both out on Thursday, are thanks to 252 00:12:49,559 --> 00:12:54,040 Speaker 2: Drew Redding, Bloomberg Intelligence US home building analyst, coming up 253 00:12:54,080 --> 00:12:56,439 Speaker 2: on Bloomberg day Break weekend to look at how politics 254 00:12:56,480 --> 00:13:00,960 Speaker 2: in the UK could impact that country's monetary pol I'm 255 00:13:00,960 --> 00:13:15,200 Speaker 2: Tom Busby and this is Bloomberg. This is Bloomberg day 256 00:13:15,200 --> 00:13:17,440 Speaker 2: Break Weekend, our global look ahead at the top stories 257 00:13:17,440 --> 00:13:20,160 Speaker 2: for investors in the coming week. I'm Tom Busby in 258 00:13:20,200 --> 00:13:22,760 Speaker 2: New York. Up later in our program a look ahead 259 00:13:22,760 --> 00:13:25,959 Speaker 2: to the slate of Chinese economic data out this week 260 00:13:26,040 --> 00:13:29,240 Speaker 2: and what it means for that nation's economic recovery. But first, 261 00:13:29,520 --> 00:13:32,520 Speaker 2: with Prime Minister Rishi Sunak calling for a snap general 262 00:13:32,520 --> 00:13:36,560 Speaker 2: election on July fourth, could Bank of England policymakers really 263 00:13:36,600 --> 00:13:38,920 Speaker 2: be willing to lower borrowing costs for the first time 264 00:13:38,960 --> 00:13:42,679 Speaker 2: since the pandemic as many expected they would? And if not, 265 00:13:43,280 --> 00:13:45,400 Speaker 2: what would a further delay and a rate cut mean 266 00:13:45,520 --> 00:13:47,960 Speaker 2: for investors? For more, let's go to London and bring 267 00:13:48,000 --> 00:13:51,160 Speaker 2: in Bloomberg Daybreak europe Banker Caroline hepgar. 268 00:13:51,520 --> 00:13:54,560 Speaker 1: Tom government and the Bank of England in the UK 269 00:13:54,679 --> 00:13:57,520 Speaker 1: have been separate since nineteen ninety seven, when the Prime 270 00:13:57,520 --> 00:14:01,840 Speaker 1: Minister Tony Blair granted the central bank operational independence. But 271 00:14:01,960 --> 00:14:07,000 Speaker 1: as the markets now adjust to this political general election campaign, 272 00:14:07,040 --> 00:14:09,800 Speaker 1: there could be some crossover in the campaign, or at 273 00:14:09,880 --> 00:14:13,720 Speaker 1: least just after. I've been discussing monetary policy and political 274 00:14:13,800 --> 00:14:16,240 Speaker 1: risk with Jeremy Stretch, who is head of G ten 275 00:14:16,480 --> 00:14:20,280 Speaker 1: FX Strategy at CIBC. He says that what happens in 276 00:14:20,320 --> 00:14:23,320 Speaker 1: government has a big impact on the sort of action 277 00:14:23,440 --> 00:14:24,800 Speaker 1: that central banks can take. 278 00:14:25,040 --> 00:14:27,440 Speaker 7: There is an enormous degree of political uncertainty which is 279 00:14:27,520 --> 00:14:30,080 Speaker 7: playing out in a sense. We've seen obviously something like 280 00:14:30,080 --> 00:14:32,880 Speaker 7: Euri Sterling, where we've seen a substantial move lower in 281 00:14:32,920 --> 00:14:35,000 Speaker 7: the context of the last few sessions, because of course 282 00:14:35,080 --> 00:14:38,479 Speaker 7: the UK political system on a comparative basis, seems remarkably 283 00:14:38,520 --> 00:14:41,520 Speaker 7: resilient compared to what we're seeing elsewhere. Now, that hasn't 284 00:14:41,520 --> 00:14:43,680 Speaker 7: been always the case over the course of the last 285 00:14:43,720 --> 00:14:47,200 Speaker 7: one to five eight years, so in a sense, that's 286 00:14:47,280 --> 00:14:49,440 Speaker 7: quite interesting in that context. But I think what we 287 00:14:49,520 --> 00:14:51,880 Speaker 7: have seen is that US exceptionalism has been the key 288 00:14:51,960 --> 00:14:54,280 Speaker 7: theme over the course of the last year or two. 289 00:14:54,680 --> 00:14:57,280 Speaker 7: The question whether that exceptionalism is going to persist into 290 00:14:57,320 --> 00:14:59,280 Speaker 7: the back end of this unit into twenty twenty five 291 00:15:00,320 --> 00:15:02,120 Speaker 7: up for debate, and I think actually we're going to 292 00:15:02,120 --> 00:15:05,840 Speaker 7: see significant narrowing of growth differentials, and I think that 293 00:15:05,880 --> 00:15:09,840 Speaker 7: plays more positively into the growth and or cyclically correlated currencies. 294 00:15:09,880 --> 00:15:12,440 Speaker 7: But for now, at least, those political risks I think 295 00:15:12,480 --> 00:15:15,200 Speaker 7: are still real and realistic. So that's the reason why 296 00:15:15,200 --> 00:15:17,400 Speaker 7: if you're training Euro over the course of the next 297 00:15:17,600 --> 00:15:20,280 Speaker 7: one two, three, four weeks, you have to look at 298 00:15:20,280 --> 00:15:22,800 Speaker 7: what's happening in the political dynamics and looking at those 299 00:15:22,840 --> 00:15:25,440 Speaker 7: bond spreads relative to buns, and if they push wider, 300 00:15:25,440 --> 00:15:26,560 Speaker 7: then the euro will go lower. 301 00:15:27,040 --> 00:15:30,440 Speaker 8: Is that then an opportunity is regards Sterling, and I'm 302 00:15:30,440 --> 00:15:33,520 Speaker 8: also thinking about where your expectations are around the BOE Well. 303 00:15:33,520 --> 00:15:35,600 Speaker 7: I think Sterling is interesting because, as I say, we've 304 00:15:35,600 --> 00:15:38,400 Speaker 7: seen Sterling gains, but I think the market is perhaps 305 00:15:38,440 --> 00:15:40,960 Speaker 7: to my mind, of for our perspective to c IBC 306 00:15:41,240 --> 00:15:44,520 Speaker 7: underplaying the risks of policies and from the Bank of England. 307 00:15:44,560 --> 00:15:47,200 Speaker 7: So I think we're still underplaying the not the pricing 308 00:15:47,240 --> 00:15:49,840 Speaker 7: for next week's meeting, I think that is realistic or 309 00:15:50,040 --> 00:15:53,040 Speaker 7: far more realistically priced. But I think come the August 310 00:15:53,080 --> 00:15:55,680 Speaker 7: and PC, I think there can and should be a 311 00:15:55,720 --> 00:15:58,360 Speaker 7: strong case for the bank to be starting to ease 312 00:15:59,080 --> 00:16:01,880 Speaker 7: rates at that time. That's not necessarily priced by the 313 00:16:01,880 --> 00:16:04,400 Speaker 7: market at this particular juncture. So I think that's one 314 00:16:04,440 --> 00:16:07,440 Speaker 7: factor which could imply that the Sterling rally that we're 315 00:16:07,440 --> 00:16:10,720 Speaker 7: seeing has and will provide opportunities to start to fade 316 00:16:10,720 --> 00:16:14,280 Speaker 7: that because yes, the political backdrop looks more benign compared 317 00:16:14,320 --> 00:16:16,640 Speaker 7: to what we've seen historically, but I think the data 318 00:16:16,760 --> 00:16:18,880 Speaker 7: and all the Bank of England narrative I think will 319 00:16:18,880 --> 00:16:21,960 Speaker 7: play into the presumption that Sterling long positions I think 320 00:16:22,000 --> 00:16:24,200 Speaker 7: will start to look vulnerable as we go into the 321 00:16:24,200 --> 00:16:24,840 Speaker 7: second half. 322 00:16:24,680 --> 00:16:28,720 Speaker 1: Of the year, Okay, on sterling. Also, we should think 323 00:16:28,720 --> 00:16:31,160 Speaker 1: about the Bank of Japan. It's expected to unwind its 324 00:16:31,200 --> 00:16:35,240 Speaker 1: balance sheet, so basically effectively tightening policy. I mean, this 325 00:16:35,480 --> 00:16:37,600 Speaker 1: is also a kind of major story in terms of 326 00:16:37,640 --> 00:16:40,960 Speaker 1: the carry trade in the Japanese yen doomed to weaken 327 00:16:41,840 --> 00:16:44,840 Speaker 1: under pressure to weaken. We've obviously seen so much policy 328 00:16:44,840 --> 00:16:46,680 Speaker 1: intervention as well, which we've tracked. 329 00:16:46,960 --> 00:16:49,560 Speaker 7: Ultimately, the en has obviously been a consequent all the 330 00:16:49,560 --> 00:16:51,600 Speaker 7: weakness of the end has been a consequence of treasury 331 00:16:51,680 --> 00:16:54,600 Speaker 7: JGB spreads in particular, So in a sense, if we 332 00:16:54,680 --> 00:16:57,560 Speaker 7: are going to see some continued ratcheting down in the 333 00:16:57,560 --> 00:17:01,200 Speaker 7: bond purchase strategy, now we're debating to how significant that 334 00:17:01,280 --> 00:17:03,400 Speaker 7: is going to be at this juncture, but nevertheless, we 335 00:17:03,440 --> 00:17:06,440 Speaker 7: are over time going to see that QT working through 336 00:17:06,440 --> 00:17:10,040 Speaker 7: in Japan. How quickly and how aggressively will that course 337 00:17:10,119 --> 00:17:13,320 Speaker 7: spreads to narrow because of course, ultimately the main driver 338 00:17:13,440 --> 00:17:16,480 Speaker 7: of treasury JGB spreads has been the dollar leg in 339 00:17:16,600 --> 00:17:19,600 Speaker 7: terms of treasuries. But ultimately, if the Japanese are going 340 00:17:19,640 --> 00:17:22,520 Speaker 7: to get treasury l or go to witness treasury eels 341 00:17:22,520 --> 00:17:25,320 Speaker 7: coming down, if we're seeing an easier fed strategy and 342 00:17:25,440 --> 00:17:27,920 Speaker 7: always see some degree of typing then that eventually will 343 00:17:28,600 --> 00:17:30,879 Speaker 7: help to cap the dollar yen story. 344 00:17:31,119 --> 00:17:31,600 Speaker 4: But I think. 345 00:17:31,560 --> 00:17:35,080 Speaker 7: It's still the case that the yen will remain relatively weak. 346 00:17:35,280 --> 00:17:37,520 Speaker 7: I don't think we're necessarily in a situation or a 347 00:17:37,560 --> 00:17:42,000 Speaker 7: juncture where we should be anticipating a substantial reversal in 348 00:17:42,119 --> 00:17:44,640 Speaker 7: yen performance over the course of the next few days 349 00:17:44,680 --> 00:17:46,159 Speaker 7: or weeks. I think it is still the case that 350 00:17:46,400 --> 00:17:49,119 Speaker 7: those Treasury JGB spreads and all the cost of funding 351 00:17:49,119 --> 00:17:51,879 Speaker 7: positions are still so extreme that it is still going 352 00:17:51,920 --> 00:17:54,040 Speaker 7: to be evident that the carriy trade still has some 353 00:17:54,080 --> 00:17:56,080 Speaker 7: more mileage in it in the context of the end 354 00:17:56,200 --> 00:17:56,919 Speaker 7: just yet. 355 00:17:57,040 --> 00:17:59,320 Speaker 8: Just going back to the dollar, then I wonder, how 356 00:17:59,359 --> 00:18:01,760 Speaker 8: are you thinking of the November election and what's the 357 00:18:01,800 --> 00:18:05,720 Speaker 8: sort of potential moves or risks involved there. 358 00:18:06,400 --> 00:18:08,640 Speaker 7: Well, of course that is the elephant in the room 359 00:18:08,640 --> 00:18:10,320 Speaker 7: in the context of when we've been talking about the 360 00:18:10,320 --> 00:18:13,280 Speaker 7: electoral risks in twenty twenty four. Because as we know, 361 00:18:13,600 --> 00:18:16,600 Speaker 7: or we assume that we have two presumptive nominees who 362 00:18:16,640 --> 00:18:19,719 Speaker 7: have not yet been ratified, but we assume that we 363 00:18:19,760 --> 00:18:22,480 Speaker 7: will be facing off as we did four years ago. 364 00:18:23,400 --> 00:18:26,200 Speaker 7: We can assume that if there were to be ask 365 00:18:26,320 --> 00:18:29,359 Speaker 7: resurgence or a re emergence of Republicans in the White House, I, 366 00:18:29,480 --> 00:18:32,400 Speaker 7: mister Trump, then the tax cuts will be made permanent. 367 00:18:32,400 --> 00:18:35,160 Speaker 7: That will be the substantial fiscal easing at the same 368 00:18:35,160 --> 00:18:38,679 Speaker 7: time as significant tariff in position that obviously will be inflationary. 369 00:18:38,720 --> 00:18:41,440 Speaker 7: Now that would be an obvious challenge for the FED 370 00:18:41,480 --> 00:18:44,800 Speaker 7: in the context of twenty twenty five, so the presumption 371 00:18:44,840 --> 00:18:48,240 Speaker 7: of significant monetary using could be tested. But of course, 372 00:18:48,400 --> 00:18:52,439 Speaker 7: even amidst the political uncertainty being a function of the 373 00:18:52,520 --> 00:18:56,680 Speaker 7: US political dynamic, there is still no significant liquid alternative 374 00:18:56,720 --> 00:18:58,760 Speaker 7: to dollars. So in a sense, when we do have 375 00:18:58,840 --> 00:19:01,760 Speaker 7: periods and episodes of political risks, than the dollar still 376 00:19:01,800 --> 00:19:04,520 Speaker 7: tends to generally perform well, even if the US is 377 00:19:04,520 --> 00:19:07,560 Speaker 7: the source of that risk, which seems completely counterintuitive, but 378 00:19:07,600 --> 00:19:09,600 Speaker 7: I can see from the look on your face, Caroline, 379 00:19:09,640 --> 00:19:11,120 Speaker 7: you will also understand that as well. 380 00:19:11,200 --> 00:19:13,639 Speaker 1: Yeah, so I want you to pin your colors to 381 00:19:13,680 --> 00:19:16,280 Speaker 1: the mask. Do you get a Trump dollar rally on 382 00:19:16,320 --> 00:19:18,080 Speaker 1: the back of the election We're here to win. 383 00:19:18,240 --> 00:19:20,720 Speaker 7: Very briefly, well, if you get the scenario where the 384 00:19:20,720 --> 00:19:24,159 Speaker 7: equity market rallies strongly, then that will provide an underpinning 385 00:19:24,200 --> 00:19:26,200 Speaker 7: for the dollar. We still think that the dollar will 386 00:19:26,280 --> 00:19:27,960 Speaker 7: ultimately be cheaper in twenty twenty five. 387 00:19:28,600 --> 00:19:31,679 Speaker 1: That was jermy stretch from CIBC speaking there to me 388 00:19:31,880 --> 00:19:35,200 Speaker 1: and to Stephen Caroell on Bloomberg Radio. I've also been 389 00:19:35,240 --> 00:19:39,880 Speaker 1: discussing how the UK's political situation might affect the upcoming 390 00:19:39,960 --> 00:19:43,199 Speaker 1: Bank of England policy meeting and what that means for 391 00:19:43,280 --> 00:19:47,360 Speaker 1: markets with Bloomberg's chief UK economist Dan Hanson. I started 392 00:19:47,359 --> 00:19:50,439 Speaker 1: by asking him if a change to borrowing costs is 393 00:19:50,480 --> 00:19:55,320 Speaker 1: completely off the agenda before the general election vote on 394 00:19:55,400 --> 00:19:56,240 Speaker 1: the fourth of July. 395 00:19:57,400 --> 00:20:00,439 Speaker 9: Yeah, because of the election, and also because of April 396 00:20:00,560 --> 00:20:02,960 Speaker 9: CPI data, which came out on the same day that 397 00:20:03,240 --> 00:20:06,880 Speaker 9: Soona called the election. I think we that morning when 398 00:20:06,920 --> 00:20:08,560 Speaker 9: that came out, we looked at that and thought there's 399 00:20:08,600 --> 00:20:11,680 Speaker 9: no way they're going to cut with that. With that data. 400 00:20:11,800 --> 00:20:14,520 Speaker 9: If obviously CPI fell, it's at two point three percent, 401 00:20:14,600 --> 00:20:17,600 Speaker 9: it came down from three point two percent, but it's 402 00:20:17,359 --> 00:20:20,400 Speaker 9: what went on in the components and particularly services inflation, 403 00:20:20,440 --> 00:20:21,919 Speaker 9: which is the thing that the Bank of England's very 404 00:20:21,920 --> 00:20:24,160 Speaker 9: worried about at the moment. So I think the data 405 00:20:24,160 --> 00:20:26,280 Speaker 9: gives them cover to stay on hold, they won't have 406 00:20:26,280 --> 00:20:28,840 Speaker 9: to come up with some phony excuse around the election. 407 00:20:29,520 --> 00:20:31,840 Speaker 9: Of course, there is the May CPI data the day 408 00:20:31,880 --> 00:20:35,760 Speaker 9: before the Bank's decision as well, but we still think 409 00:20:35,800 --> 00:20:38,520 Speaker 9: that will be above their four car So there's probably 410 00:20:38,560 --> 00:20:40,960 Speaker 9: just about enough cover for them for them to stay 411 00:20:40,960 --> 00:20:43,000 Speaker 9: on hold in June and basically stay out of the 412 00:20:43,040 --> 00:20:46,440 Speaker 9: campaign and not being seen to do anything that is political. 413 00:20:46,720 --> 00:20:46,960 Speaker 7: Yeah. 414 00:20:47,440 --> 00:20:51,919 Speaker 1: So then if they do that and perhaps delay a 415 00:20:52,000 --> 00:20:54,320 Speaker 1: rate card or push off a rate cut, what then 416 00:20:54,520 --> 00:20:55,399 Speaker 1: is the timeline? 417 00:20:55,720 --> 00:20:55,920 Speaker 3: Yeah? 418 00:20:55,960 --> 00:20:58,760 Speaker 9: So I think the May CPI data, which I say 419 00:20:58,760 --> 00:21:00,480 Speaker 9: it comes to the day before the decision, and it's 420 00:21:00,520 --> 00:21:04,640 Speaker 9: important for what comes next, and there'll be one more 421 00:21:04,920 --> 00:21:08,200 Speaker 9: CPI print and also laid market print before the August decision. 422 00:21:08,600 --> 00:21:11,320 Speaker 9: Our view is that those prints will probably give them 423 00:21:11,359 --> 00:21:15,320 Speaker 9: the confidence they need to cut in August. I think 424 00:21:15,359 --> 00:21:18,719 Speaker 9: what's interesting about the inflation dynamic in the UK is 425 00:21:19,200 --> 00:21:20,840 Speaker 9: going into the end of the year we're likely to 426 00:21:20,840 --> 00:21:24,560 Speaker 9: see inflation rise back up mainly on It's basically to 427 00:21:24,560 --> 00:21:27,560 Speaker 9: do with energy prices base effects, and that's going to 428 00:21:27,600 --> 00:21:30,119 Speaker 9: make it tricky for the bank particularly well. There are 429 00:21:30,119 --> 00:21:32,600 Speaker 9: two bits of it really. One is obviously carrying on 430 00:21:32,640 --> 00:21:34,439 Speaker 9: the easing cycle, but that might be a little bit 431 00:21:34,480 --> 00:21:36,520 Speaker 9: easier in the con if you've already started, it's probably 432 00:21:36,560 --> 00:21:38,959 Speaker 9: easier to carry on, and because you know this is coming, 433 00:21:39,200 --> 00:21:41,439 Speaker 9: it's much harder, I think, to start the using cycle 434 00:21:41,480 --> 00:21:43,560 Speaker 9: in that context when inflation is on the rise. So 435 00:21:43,600 --> 00:21:46,560 Speaker 9: I think sort of the August September window is a 436 00:21:46,560 --> 00:21:49,560 Speaker 9: good window for the bank to think about its first 437 00:21:49,600 --> 00:21:51,680 Speaker 9: rate cup. We've got August. That's what the majority of 438 00:21:51,720 --> 00:21:54,879 Speaker 9: economists have as well. The market's sort of torn between 439 00:21:54,920 --> 00:21:58,800 Speaker 9: the September and November, so so yeah, I think it's 440 00:21:58,920 --> 00:22:01,440 Speaker 9: it's not gonna bean long after the Gene meeting that 441 00:22:01,480 --> 00:22:02,560 Speaker 9: they start thinking about it. 442 00:22:02,960 --> 00:22:06,360 Speaker 1: Okay, what impact does the Federal Reserve have on all 443 00:22:06,359 --> 00:22:08,359 Speaker 1: of that, given that they held interest rates and the 444 00:22:08,359 --> 00:22:11,960 Speaker 1: dot plot pulled down expectations for the number of rate 445 00:22:12,040 --> 00:22:13,040 Speaker 1: cuts out of the US. 446 00:22:13,400 --> 00:22:17,040 Speaker 9: Yeah, well, it's having a massive impact on market expectations 447 00:22:17,440 --> 00:22:21,440 Speaker 9: UK or market rate expectations. So futures are essentially following 448 00:22:21,680 --> 00:22:24,800 Speaker 9: US futures, and that's predicated on the idea that what's 449 00:22:24,840 --> 00:22:27,399 Speaker 9: going on with US inflation is running a little bit 450 00:22:27,400 --> 00:22:29,520 Speaker 9: ahead of what has been happening in the UK. So 451 00:22:29,560 --> 00:22:31,480 Speaker 9: it's telling you something about what might be coming down 452 00:22:31,520 --> 00:22:34,840 Speaker 9: the line in the UK of you, and it appears 453 00:22:34,880 --> 00:22:36,800 Speaker 9: to be particularly Andrew Bailey's view is there is a 454 00:22:36,800 --> 00:22:38,480 Speaker 9: bit of a difference, And I think there is a 455 00:22:38,480 --> 00:22:41,240 Speaker 9: bit of a difference, to be honest, particularly around energy prices, 456 00:22:41,280 --> 00:22:44,359 Speaker 9: particularly around the way the dynamic that drove inflation higher 457 00:22:44,359 --> 00:22:47,520 Speaker 9: in the UK, where we had high inflation due to 458 00:22:47,680 --> 00:22:51,680 Speaker 9: energy food that eventually pushed up wages because people tried 459 00:22:51,720 --> 00:22:56,199 Speaker 9: to essentially guard against big real income hit. So I 460 00:22:56,240 --> 00:23:00,280 Speaker 9: think it is different to the US. Nonetheless, if the 461 00:23:00,280 --> 00:23:03,040 Speaker 9: FED isn't cutting, you're going to be worried that you're 462 00:23:03,080 --> 00:23:04,399 Speaker 9: not going to make a mistake and you're going to 463 00:23:04,400 --> 00:23:06,360 Speaker 9: be going it alone. I think the one central bank 464 00:23:06,440 --> 00:23:09,000 Speaker 9: I sort of sort of looked at and thought in 465 00:23:09,040 --> 00:23:11,520 Speaker 9: the context of the bankingland was the ECB. Yes, is 466 00:23:11,560 --> 00:23:16,239 Speaker 9: that they cut, but there's no clear view on what 467 00:23:16,240 --> 00:23:18,320 Speaker 9: comes next. And you know, I'm not saying it's one 468 00:23:18,320 --> 00:23:21,560 Speaker 9: and done. We think our team thinks that will that 469 00:23:21,600 --> 00:23:24,840 Speaker 9: the ECB will cut again in September, but the Bank 470 00:23:24,880 --> 00:23:26,520 Speaker 9: of England does cut. I don't think there's going to 471 00:23:26,520 --> 00:23:29,240 Speaker 9: be any guidance about what comes next and how quickly 472 00:23:29,280 --> 00:23:32,040 Speaker 9: the borrowing rates might fall. I think we're just going 473 00:23:32,080 --> 00:23:34,280 Speaker 9: to continue to be in this data dependent world, and 474 00:23:34,119 --> 00:23:37,000 Speaker 9: we might be in one world where inflation behaves and 475 00:23:37,040 --> 00:23:39,840 Speaker 9: things might move a lot quicker than markets expect. The 476 00:23:39,880 --> 00:23:41,920 Speaker 9: other The flip side of it is that you get 477 00:23:42,080 --> 00:23:44,640 Speaker 9: one a quarter or even slower pace than that because 478 00:23:44,640 --> 00:23:45,919 Speaker 9: the data just doesn't give them. 479 00:23:45,760 --> 00:23:49,320 Speaker 1: The room, yeah to do it. That's yeah, that's so interesting, 480 00:23:49,359 --> 00:23:51,280 Speaker 1: isn't it? That guidance is sort of off off the 481 00:23:51,359 --> 00:23:55,040 Speaker 1: table in a way in terms of I do sort 482 00:23:55,040 --> 00:23:58,080 Speaker 1: of want to talk a bit about politics, because Blueberg 483 00:23:58,119 --> 00:24:01,480 Speaker 1: did this survey of market participants and they were saying 484 00:24:01,840 --> 00:24:04,520 Speaker 1: that a labor victory would be the best outcome for sterling, 485 00:24:04,560 --> 00:24:06,760 Speaker 1: and obviously all the FED decision and all of this 486 00:24:06,800 --> 00:24:11,120 Speaker 1: has so much impact on currency markets. Why are they 487 00:24:11,200 --> 00:24:14,240 Speaker 1: saying that? And does that also last? Is that a 488 00:24:14,320 --> 00:24:16,679 Speaker 1: kind of short bump? Is it just that it's the 489 00:24:16,720 --> 00:24:19,720 Speaker 1: best possible news. 490 00:24:19,280 --> 00:24:21,679 Speaker 9: That's a really good question. So I think, I mean 491 00:24:21,720 --> 00:24:24,560 Speaker 9: the reasons, I think there are two of them. One 492 00:24:24,600 --> 00:24:28,560 Speaker 9: is the perception at least that a labor government with 493 00:24:28,600 --> 00:24:32,159 Speaker 9: a big majority, which is what the polls indicate, would 494 00:24:32,440 --> 00:24:34,840 Speaker 9: be a much more certain policy environment in the UK. 495 00:24:35,280 --> 00:24:37,879 Speaker 9: I think, you know, in fairness to the Tories, there 496 00:24:37,920 --> 00:24:41,800 Speaker 9: have been a lot of shocks, pandemic, energy shock, but 497 00:24:41,840 --> 00:24:43,920 Speaker 9: there's also been a lot of infighting and I think 498 00:24:43,920 --> 00:24:45,760 Speaker 9: it's that bit of it that I think investors are 499 00:24:45,800 --> 00:24:47,760 Speaker 9: sort of focusing on that with labor. The hope is 500 00:24:47,760 --> 00:24:48,639 Speaker 9: that that won't happen. 501 00:24:48,880 --> 00:24:50,280 Speaker 1: Yeah, stability, We'll have. 502 00:24:50,200 --> 00:24:52,960 Speaker 9: A bit of stability. We won't have three prime ministers 503 00:24:53,000 --> 00:24:55,520 Speaker 9: over the course of the parliament. It'll just be a 504 00:24:55,560 --> 00:24:57,960 Speaker 9: little bit more stable. The environment will be more stable. 505 00:24:58,440 --> 00:25:01,920 Speaker 9: They've also been making very sort of positive noises towards business, 506 00:25:01,960 --> 00:25:04,000 Speaker 9: trying to shake off the sort of Jeremy Corbyn era 507 00:25:04,040 --> 00:25:07,000 Speaker 9: of labor. You know, Rachel Rees and Kirstarmer have made 508 00:25:07,000 --> 00:25:08,920 Speaker 9: a real effort and what you've just said there about 509 00:25:08,960 --> 00:25:11,320 Speaker 9: the focus on wealth creation, economic growth, that is a 510 00:25:11,440 --> 00:25:15,520 Speaker 9: very sort of centrist, marginally center left, but you know, 511 00:25:15,600 --> 00:25:18,199 Speaker 9: it's it's very similar ground in many ways to the 512 00:25:18,240 --> 00:25:20,440 Speaker 9: Tories in terms of the sort of view about what's 513 00:25:20,520 --> 00:25:23,000 Speaker 9: most important. I think the other thing to think about 514 00:25:23,040 --> 00:25:26,080 Speaker 9: is Brexit and potentially clositized with the EU. Whether that 515 00:25:26,119 --> 00:25:29,760 Speaker 9: comes to fruition is harder to say, but I think 516 00:25:29,840 --> 00:25:31,560 Speaker 9: they're the two things is a little bit more the 517 00:25:31,600 --> 00:25:34,280 Speaker 9: reason why investors think it will be positive, more certainty, 518 00:25:35,119 --> 00:25:36,639 Speaker 9: possibly closeritized with the EU. 519 00:25:37,400 --> 00:25:40,160 Speaker 1: My thanks there to Bloomberg's Chief UK economist Dan Hanson. 520 00:25:40,400 --> 00:25:42,800 Speaker 1: I'm Caroline Hepkea in London. You can catch us every 521 00:25:42,840 --> 00:25:45,920 Speaker 1: weekday morning for Bloomberg Daybreak you at beginning at six 522 00:25:45,920 --> 00:25:48,639 Speaker 1: am in London. That's one am on Wall Street. 523 00:25:48,800 --> 00:25:49,200 Speaker 6: Tom. 524 00:25:49,760 --> 00:25:52,840 Speaker 2: Thank you, Caroline, And coming up on Bloomberg Daybreak weekend 525 00:25:52,840 --> 00:25:55,680 Speaker 2: to look ahead to a slough of Chinese economic data 526 00:25:55,760 --> 00:25:59,720 Speaker 2: out this week. I'm Tom Busby, and this is Bloomberg. 527 00:26:10,400 --> 00:26:12,520 Speaker 2: I'm Tom Busby in New York with your global look 528 00:26:12,520 --> 00:26:14,920 Speaker 2: ahead at the top stories for investors in the coming week. 529 00:26:15,240 --> 00:26:17,880 Speaker 2: This week, investors get a slew of economic data out 530 00:26:17,920 --> 00:26:22,080 Speaker 2: of China about retail sales, home prices, employment levels, and more. 531 00:26:22,520 --> 00:26:25,440 Speaker 2: Let's get to Bloomberg Daybreak Asia co host Brian Curtis 532 00:26:25,440 --> 00:26:28,760 Speaker 2: and find out whether the data would indicate signs of 533 00:26:28,800 --> 00:26:30,000 Speaker 2: economic recovery. 534 00:26:30,320 --> 00:26:32,840 Speaker 4: Tom, we wanted to dig a little deeper here into 535 00:26:33,000 --> 00:26:36,000 Speaker 4: China's recovery. The economy appears to have picked up a 536 00:26:36,000 --> 00:26:38,920 Speaker 4: little in the latter part of May and feeding into 537 00:26:38,960 --> 00:26:42,800 Speaker 4: this month Bloomberg Economic says its high frequency index has 538 00:26:42,800 --> 00:26:46,960 Speaker 4: captured some signs that recent measures on housing have kindled 539 00:26:47,040 --> 00:26:50,120 Speaker 4: new demand. Our economists say it's too early to say 540 00:26:50,200 --> 00:26:53,560 Speaker 4: whether the uptick is sustainable, though, and what the knock 541 00:26:53,600 --> 00:26:56,480 Speaker 4: on effects might be. In the coming week, we'll get 542 00:26:56,480 --> 00:27:01,320 Speaker 4: home prices, retail sales, industrial production, and fire stas set investment. 543 00:27:01,720 --> 00:27:04,520 Speaker 4: Joining us now for a preview is News Desk editor 544 00:27:04,720 --> 00:27:07,639 Speaker 4: Jill Desis. Jill, thanks very much for being with us. 545 00:27:07,680 --> 00:27:11,840 Speaker 4: So any sign of a domestic rebound would be encouraging, 546 00:27:11,880 --> 00:27:14,359 Speaker 4: but we have had a lot of false dawns in 547 00:27:14,400 --> 00:27:17,800 Speaker 4: the past. How sustainable might this pickup be? 548 00:27:18,600 --> 00:27:21,440 Speaker 10: Yes, that's right, Brian. I think what you're most likely 549 00:27:21,560 --> 00:27:24,479 Speaker 10: to see out of this latest economic data is still 550 00:27:24,920 --> 00:27:28,480 Speaker 10: a bit of a mixed picture. The latest survey show 551 00:27:28,560 --> 00:27:31,199 Speaker 10: us that retail sales are expected to pick up at 552 00:27:31,320 --> 00:27:36,000 Speaker 10: least slightly. Industrial production, though might slow if you compare 553 00:27:36,040 --> 00:27:39,560 Speaker 10: it to April, and then most economists are still saying 554 00:27:39,640 --> 00:27:43,000 Speaker 10: that the property sector, despite these recent measures intended to 555 00:27:43,000 --> 00:27:45,240 Speaker 10: help it, it's still going to take quite a while 556 00:27:45,280 --> 00:27:47,960 Speaker 10: for that to feed into the economy. Investment, certainly in 557 00:27:48,000 --> 00:27:50,840 Speaker 10: the sector is still expected to have plunged a year 558 00:27:50,880 --> 00:27:53,080 Speaker 10: on year when you're looking at that cumulative five month 559 00:27:53,119 --> 00:27:56,520 Speaker 10: total for twenty twenty four, So ultimately just a bit 560 00:27:56,560 --> 00:27:58,520 Speaker 10: of a mixed bag. We'll see though, if there's any 561 00:27:58,520 --> 00:28:02,560 Speaker 10: additional greenshets we have. I've seen recently some upticks and exports, 562 00:28:02,560 --> 00:28:05,560 Speaker 10: for example, although I would caution you, Brian, that there's 563 00:28:05,640 --> 00:28:08,119 Speaker 10: a lot of concerns about what that looks like going forward, 564 00:28:08,160 --> 00:28:11,400 Speaker 10: particularly when you've got a lot of Western governments, the US, 565 00:28:11,480 --> 00:28:14,760 Speaker 10: the EU that have looked at for the restrictions and 566 00:28:14,800 --> 00:28:16,120 Speaker 10: tariffs on Chinese goods. 567 00:28:16,520 --> 00:28:18,760 Speaker 4: I wanted to talk a little bit about housing though, 568 00:28:18,800 --> 00:28:20,760 Speaker 4: because that seems to be right at the center of 569 00:28:20,840 --> 00:28:24,560 Speaker 4: spending from consumers in China. Home sales look like they 570 00:28:24,560 --> 00:28:26,679 Speaker 4: have benefited a little bit a couple of things there, 571 00:28:26,880 --> 00:28:30,320 Speaker 4: the government's decision to cut requirements on down payments and 572 00:28:30,480 --> 00:28:34,800 Speaker 4: also to buy unsold homes. Do you think that that 573 00:28:34,920 --> 00:28:35,920 Speaker 4: might be sustainable? 574 00:28:36,160 --> 00:28:38,400 Speaker 10: Yes, Brian, I think it's actually that latest plan that 575 00:28:38,440 --> 00:28:41,640 Speaker 10: you mentioned, that unsold home buying plan that probably has 576 00:28:41,800 --> 00:28:44,800 Speaker 10: the most chance of success in terms of maybe making 577 00:28:44,800 --> 00:28:47,440 Speaker 10: a meaningful turnaround for the property sector here. So, just 578 00:28:47,480 --> 00:28:50,680 Speaker 10: to recap it's a pretty powerful tool here, making about 579 00:28:50,760 --> 00:28:54,600 Speaker 10: three hundred billion un or that's summer roughly about forty 580 00:28:54,600 --> 00:28:58,240 Speaker 10: one billion US dollars worth of cheap credit available for 581 00:28:58,240 --> 00:29:02,080 Speaker 10: banks to fund local government purchases of unsold homes. So essentially, 582 00:29:02,520 --> 00:29:04,680 Speaker 10: the goal here is that they want to chip away 583 00:29:05,040 --> 00:29:07,640 Speaker 10: at the excess housing stock that we've seen in China. 584 00:29:07,680 --> 00:29:09,600 Speaker 10: They want to ease some of those cash flow strains 585 00:29:09,600 --> 00:29:12,200 Speaker 10: for developers. And but I also point out here, Brian, 586 00:29:12,280 --> 00:29:14,160 Speaker 10: is that this is a pilot program that has been 587 00:29:14,200 --> 00:29:16,480 Speaker 10: run in I think eight cities, you know, give or 588 00:29:16,560 --> 00:29:18,920 Speaker 10: take over the last year or so. So they've already 589 00:29:19,120 --> 00:29:21,520 Speaker 10: sort of launched this pilot program. Now they're trying to 590 00:29:21,560 --> 00:29:25,640 Speaker 10: build this out nationwide. And that's ultimately what could potentially 591 00:29:25,680 --> 00:29:28,560 Speaker 10: help the housing sector here, the property sector sort of spur, 592 00:29:28,720 --> 00:29:31,040 Speaker 10: you know, just again getting rid of this excess glut 593 00:29:31,040 --> 00:29:34,760 Speaker 10: of these unsold homes. I think though the spending plan 594 00:29:34,840 --> 00:29:36,440 Speaker 10: for that might be a bit tricky. We'll have to 595 00:29:36,440 --> 00:29:39,000 Speaker 10: see how the people spank of China. The Central Bank 596 00:29:39,080 --> 00:29:40,920 Speaker 10: ultimately you know, kind of helps try to you know, 597 00:29:40,960 --> 00:29:43,240 Speaker 10: fund this program, kind of give it some more legs. 598 00:29:43,280 --> 00:29:46,120 Speaker 10: And again, it just might take some time for that 599 00:29:46,240 --> 00:29:49,000 Speaker 10: to fully transmit into the economy. I will just point 600 00:29:49,000 --> 00:29:52,120 Speaker 10: out that while we have seen an uptick in some areas, 601 00:29:52,360 --> 00:29:55,520 Speaker 10: we've also seen new home sales continue to fall in 602 00:29:55,800 --> 00:29:58,560 Speaker 10: most of China's Tier one cities Guangzhou, for example, So 603 00:29:58,640 --> 00:30:01,400 Speaker 10: I mean, really, it might just take some time for 604 00:30:01,440 --> 00:30:04,040 Speaker 10: that to really really take I mean again, I just 605 00:30:04,080 --> 00:30:06,560 Speaker 10: have to stress that this is a property sector problem 606 00:30:06,600 --> 00:30:08,280 Speaker 10: that's been going on for years at this point. 607 00:30:08,280 --> 00:30:10,800 Speaker 4: Brian, Yeah, it certainly takes time. But we did see 608 00:30:10,840 --> 00:30:14,240 Speaker 4: some early indicators, like the sales of home appliances jump 609 00:30:14,240 --> 00:30:16,320 Speaker 4: almost one hundred and fifty percent. Those are some of 610 00:30:16,360 --> 00:30:18,600 Speaker 4: the knock on effects that you know might come along 611 00:30:18,640 --> 00:30:20,920 Speaker 4: with a little bit of recovery in housing. 612 00:30:21,200 --> 00:30:25,880 Speaker 10: Yes, and I am sort of more optimistic about you know, 613 00:30:25,960 --> 00:30:29,080 Speaker 10: maybe this you know, recovery and demand at least from 614 00:30:29,120 --> 00:30:31,880 Speaker 10: a consumption point of view. Again, when you're looking at 615 00:30:31,920 --> 00:30:37,120 Speaker 10: these statistics for this upcoming data release, economists do actually 616 00:30:37,160 --> 00:30:40,320 Speaker 10: think that, you know, retail sales on the whole are improving, 617 00:30:40,400 --> 00:30:42,680 Speaker 10: so you know, maybe there's like some broader recovery there 618 00:30:42,680 --> 00:30:46,160 Speaker 10: in consumption. I mean, you know, again, maybe a little 619 00:30:46,160 --> 00:30:48,880 Speaker 10: bit of a mixed bag recent consumer price data that 620 00:30:48,880 --> 00:30:51,040 Speaker 10: we've just gotten out of China was a bit weaker 621 00:30:51,120 --> 00:30:54,600 Speaker 10: than we expected, although you know, it's still rising a bit, 622 00:30:54,760 --> 00:30:58,720 Speaker 10: so you know, the government continues to try to spur demand, 623 00:30:59,200 --> 00:31:02,840 Speaker 10: you know among people within the economy. Maybe it's picking 624 00:31:02,920 --> 00:31:04,560 Speaker 10: up a little bit. Will have to I think, get 625 00:31:04,600 --> 00:31:06,440 Speaker 10: more months of data to actually see more of a 626 00:31:06,480 --> 00:31:07,280 Speaker 10: sustained trend there. 627 00:31:07,400 --> 00:31:09,680 Speaker 4: You mentioned a little bit of a pickup in exports, 628 00:31:10,000 --> 00:31:12,920 Speaker 4: but we do have the geopolitics. It's a big overhang 629 00:31:13,240 --> 00:31:17,200 Speaker 4: and just recently the European Union's decision to impose additional 630 00:31:17,240 --> 00:31:21,280 Speaker 4: tariffs China pushing back a little bit on that. Is 631 00:31:21,280 --> 00:31:23,600 Speaker 4: that something that weighs pretty heavily at the moment. 632 00:31:23,760 --> 00:31:26,160 Speaker 10: Oh God, yes, Brian. I'd say that this is one 633 00:31:26,160 --> 00:31:28,240 Speaker 10: of the biggest concerns right for the outlook for the 634 00:31:28,280 --> 00:31:30,440 Speaker 10: economy going into the rest of this year. I mean, 635 00:31:30,680 --> 00:31:33,200 Speaker 10: when we were starting off the year, Brian, you know, 636 00:31:33,400 --> 00:31:37,640 Speaker 10: we were pretty optimistic about manufacturing sector in China. How 637 00:31:37,680 --> 00:31:40,720 Speaker 10: much you know that was actually going to contribute to growth. Actually, 638 00:31:40,840 --> 00:31:44,520 Speaker 10: I think somewhat surprisingly, manufacturing and exports in particular are 639 00:31:44,560 --> 00:31:46,800 Speaker 10: a bit stronger than expected to start off the year. 640 00:31:46,840 --> 00:31:50,360 Speaker 10: And so given these continued issues within the property sector, 641 00:31:50,400 --> 00:31:53,600 Speaker 10: given ongoing concerns about you know, the consumer recovery, what 642 00:31:53,640 --> 00:31:56,280 Speaker 10: that's actually going to take to recover. Was seen that 643 00:31:56,440 --> 00:32:00,000 Speaker 10: you know, manufacturing exports would actually be a really key 644 00:32:00,600 --> 00:32:03,720 Speaker 10: of economic growth this year. But the geopolitics I think 645 00:32:03,840 --> 00:32:05,480 Speaker 10: is just too big to ignore it at this point. 646 00:32:05,480 --> 00:32:08,320 Speaker 10: So the latest news being that the European Union, after 647 00:32:08,360 --> 00:32:11,720 Speaker 10: this months and months long probe into China's electric vehicle 648 00:32:12,040 --> 00:32:15,440 Speaker 10: sector electric vehicles, euro buys up quite a lot of 649 00:32:15,480 --> 00:32:18,640 Speaker 10: those or some concerns they're pricing there. I mean, they're 650 00:32:18,760 --> 00:32:21,920 Speaker 10: now raising tariffs to as much as forty eight percent 651 00:32:22,160 --> 00:32:24,440 Speaker 10: on certain car buyers. I think that's going to continue 652 00:32:24,440 --> 00:32:26,640 Speaker 10: to escalate those trade tensions and then ultimately there could 653 00:32:26,680 --> 00:32:28,080 Speaker 10: be some China retaliation there. 654 00:32:28,480 --> 00:32:32,080 Speaker 4: Jill, thanks so much for your insights. That's Bloomberg's News 655 00:32:32,080 --> 00:32:36,800 Speaker 4: Desk editor Jill Desis. Next up, we turned to Australia 656 00:32:36,840 --> 00:32:38,960 Speaker 4: with Doug Krisner Doug Brian. 657 00:32:39,000 --> 00:32:41,840 Speaker 11: It's all about the Central Bank meeting in the week ahead. 658 00:32:42,080 --> 00:32:45,360 Speaker 11: Over the last four meetings, the RBA has held its 659 00:32:45,400 --> 00:32:48,920 Speaker 11: target rates steady at four point three five percent, and 660 00:32:49,120 --> 00:32:52,480 Speaker 11: at the last meeting in May, policymakers said keeping rates 661 00:32:52,560 --> 00:32:55,880 Speaker 11: higher was the stronger option rather than raising rates further 662 00:32:56,080 --> 00:32:59,560 Speaker 11: as a way of tackling high consumer prices. Let's preview 663 00:32:59,600 --> 00:33:03,000 Speaker 11: the RBA meeting now with our own Paul Allen, Bloomberg 664 00:33:03,040 --> 00:33:07,240 Speaker 11: TV Australia correspondent who joins us from Sydney. Paul, thanks 665 00:33:07,280 --> 00:33:09,200 Speaker 11: for being with us. I think we need to begin 666 00:33:09,280 --> 00:33:12,680 Speaker 11: with an assessment of the overall Australian economy. How well 667 00:33:13,000 --> 00:33:15,360 Speaker 11: is it performing right now under the weight of these 668 00:33:15,400 --> 00:33:16,400 Speaker 11: higher interest rates. 669 00:33:16,760 --> 00:33:19,080 Speaker 12: Well, we have a sense that the economy here is 670 00:33:19,120 --> 00:33:21,800 Speaker 12: kind of firing on three cylinders at the moment. I mean, 671 00:33:22,200 --> 00:33:25,600 Speaker 12: everything's trucking along. We're all still here, we're not in recession. 672 00:33:25,680 --> 00:33:27,960 Speaker 12: But then at the same time we're battling many of 673 00:33:28,040 --> 00:33:32,040 Speaker 12: the same factors that other developed economies are key among 674 00:33:32,080 --> 00:33:34,280 Speaker 12: them inflation. Maybe we can come back to that in 675 00:33:34,280 --> 00:33:37,680 Speaker 12: a minute. But growth is a severe problem as well. 676 00:33:37,760 --> 00:33:39,960 Speaker 12: The last quarter we had a growth rate I believe 677 00:33:40,000 --> 00:33:43,760 Speaker 12: it was one tenth of one percent. I mean that 678 00:33:43,920 --> 00:33:47,840 Speaker 12: that is tep it. That was the first quarter of 679 00:33:48,360 --> 00:33:51,160 Speaker 12: year to March, so it gives us an annualized number 680 00:33:51,200 --> 00:33:53,440 Speaker 12: of one point one percent. Now, we haven't seen growth 681 00:33:53,440 --> 00:33:56,680 Speaker 12: that slow in Australia since the early nineteen nineties if 682 00:33:56,720 --> 00:33:59,840 Speaker 12: you take the pandemic out of the equation, so growth 683 00:33:59,920 --> 00:34:03,480 Speaker 12: is not terrific. And at the same time, as I mentioned, 684 00:34:03,640 --> 00:34:06,600 Speaker 12: we've got inflation here just like you do tug, just 685 00:34:06,720 --> 00:34:08,799 Speaker 12: like many developed economies around the world. 686 00:34:08,880 --> 00:34:12,200 Speaker 11: Well, let's talk about that. My reading indicates that the 687 00:34:12,600 --> 00:34:15,359 Speaker 11: inflation reading for the month of April and Australia showed 688 00:34:15,360 --> 00:34:17,759 Speaker 11: an unexpected increase. Do we know what was driving that? 689 00:34:17,840 --> 00:34:22,319 Speaker 12: Primarily, Yes, it did, and that has potentially thrown a 690 00:34:22,320 --> 00:34:24,400 Speaker 12: spanner into the works for this at June meeting, but 691 00:34:24,600 --> 00:34:27,880 Speaker 12: driven mainly by if you start digging into the data, 692 00:34:28,640 --> 00:34:31,640 Speaker 12: some of the numbers are pretty ugly. Housing, for example, 693 00:34:31,680 --> 00:34:34,360 Speaker 12: that came down, but it's still at four point nine percent. 694 00:34:34,800 --> 00:34:37,760 Speaker 12: The big one here is in services are particularly insurance 695 00:34:37,800 --> 00:34:41,960 Speaker 12: financial services inflation that's running at eight point one percent. 696 00:34:42,320 --> 00:34:45,240 Speaker 12: So if you take out some of these big factors though, 697 00:34:45,480 --> 00:34:51,480 Speaker 12: like housing, insurance, financial services, suddenly the inflation rate the 698 00:34:51,520 --> 00:34:54,719 Speaker 12: CPI is getting back towards target. It's hovering within that 699 00:34:54,880 --> 00:34:57,839 Speaker 12: RBA target band of two to three percent. So those 700 00:34:57,880 --> 00:35:01,120 Speaker 12: are the big drivers. So it's a really mix muddy picture, 701 00:35:01,680 --> 00:35:05,640 Speaker 12: which is making the debate more complex than just the binary. 702 00:35:05,880 --> 00:35:07,919 Speaker 12: Well do we cut, do we hike? 703 00:35:08,120 --> 00:35:10,080 Speaker 11: Right, Well, let's talk a little bit more about the 704 00:35:10,120 --> 00:35:14,080 Speaker 11: real estate market, because from what I understand, Australia as 705 00:35:14,080 --> 00:35:17,720 Speaker 11: a country is very very sensitive to changes in interest 706 00:35:17,760 --> 00:35:21,160 Speaker 11: rates where housing is concerned. How well is real estate 707 00:35:21,280 --> 00:35:23,200 Speaker 11: holding up? I mean, and maybe we can talk a 708 00:35:23,239 --> 00:35:25,040 Speaker 11: little bit about the rental market as well. 709 00:35:25,280 --> 00:35:28,359 Speaker 12: Yeah, definitely. Well, yes, we've talked about before housing, real 710 00:35:28,440 --> 00:35:31,239 Speaker 12: estate and Australia. It's practically a national sport. This is 711 00:35:31,280 --> 00:35:33,640 Speaker 12: what people talk about around the barbecue. You know, it 712 00:35:33,719 --> 00:35:37,440 Speaker 12: dominates every conversation that you have. It's a country of 713 00:35:37,520 --> 00:35:41,440 Speaker 12: real estate investors. But that has a downside as well. 714 00:35:41,760 --> 00:35:44,640 Speaker 12: There's a real shortage of supply. That is one of 715 00:35:44,800 --> 00:35:49,120 Speaker 12: a whole small gosport of factors that's keeping not just 716 00:35:49,200 --> 00:35:53,200 Speaker 12: house prices here elevated. But as you say, rents now. 717 00:35:53,320 --> 00:35:55,920 Speaker 12: I had an interesting experience last month. I managed to 718 00:35:55,920 --> 00:35:57,560 Speaker 12: get out to Perth. I don't get to do that 719 00:35:57,680 --> 00:36:03,400 Speaker 12: very often. It's West Coast right alright, it's basically La 720 00:36:03,520 --> 00:36:06,279 Speaker 12: to your New York, you know, it's the other side 721 00:36:06,280 --> 00:36:09,400 Speaker 12: of the country. It's a very very big resources area. 722 00:36:09,440 --> 00:36:12,080 Speaker 12: This is where more of Australia's iron are comes from. 723 00:36:12,080 --> 00:36:14,000 Speaker 12: A lot of the gas reserves are out there as well, 724 00:36:14,040 --> 00:36:17,040 Speaker 12: So when commodities do well, Perth does well, and in 725 00:36:17,080 --> 00:36:20,080 Speaker 12: some respects it's a victim of its own success. It's 726 00:36:20,120 --> 00:36:25,319 Speaker 12: had seventy eight thousand new arrivals internationally and interstates since 727 00:36:25,360 --> 00:36:27,920 Speaker 12: September twenty twenty three. This is new data that we 728 00:36:28,000 --> 00:36:30,440 Speaker 12: just got from the ABS, the Bureau of Statistics a 729 00:36:30,480 --> 00:36:34,680 Speaker 12: few days ago, and that's put tremendous pressure on the 730 00:36:34,880 --> 00:36:38,480 Speaker 12: housing market, particularly for rentals. Now, the vacancy rate in 731 00:36:38,560 --> 00:36:42,240 Speaker 12: Perth the worst in Australia and one of the worst 732 00:36:42,239 --> 00:36:44,480 Speaker 12: cities in the developed world to find a house. For 733 00:36:44,600 --> 00:36:48,400 Speaker 12: every one thousand homes, just four are vacant, So you 734 00:36:48,400 --> 00:36:50,920 Speaker 12: can imagine what that has done to the price of rent. 735 00:36:51,560 --> 00:36:54,759 Speaker 12: Median ransom Perth seven hundred and twelve Busie dollars a month, 736 00:36:54,800 --> 00:36:58,760 Speaker 12: that's four hundred and seventy four US. But as I say, 737 00:36:58,840 --> 00:37:01,759 Speaker 12: I went out there to film a story and there 738 00:37:01,840 --> 00:37:05,640 Speaker 12: are cues of people that line up at open homes 739 00:37:05,680 --> 00:37:09,320 Speaker 12: for empty properties, and it's not who you would normally 740 00:37:09,360 --> 00:37:13,320 Speaker 12: see in a situation like this. Usually you would expect 741 00:37:13,320 --> 00:37:16,840 Speaker 12: to see low income families, those who are struggling getting 742 00:37:16,840 --> 00:37:19,600 Speaker 12: into trouble here. I spoke to a guy who was 743 00:37:19,640 --> 00:37:23,480 Speaker 12: an electrical engineer for Rio Tinto. He's making over one 744 00:37:23,520 --> 00:37:26,760 Speaker 12: hundred thousand US a year. He can't find a house. Wow, 745 00:37:27,560 --> 00:37:28,799 Speaker 12: this is who it's affecting now. 746 00:37:28,880 --> 00:37:31,919 Speaker 11: Obviously, as you point out, migration is a big factor here. 747 00:37:31,920 --> 00:37:34,760 Speaker 11: But overall, how is the labor market in Australia holding 748 00:37:34,800 --> 00:37:35,440 Speaker 11: up right now? 749 00:37:35,600 --> 00:37:38,399 Speaker 12: Well, that's one of the good news stories here is 750 00:37:38,480 --> 00:37:41,759 Speaker 12: that unemployment still pretty low. I believe it has a 751 00:37:41,800 --> 00:37:44,480 Speaker 12: four in front of it, so it's creeping up, but 752 00:37:44,640 --> 00:37:49,600 Speaker 12: the labor market's still tight. That's keeping wages relatively high, 753 00:37:49,960 --> 00:37:53,719 Speaker 12: which means a lot of Australians are able to absorb 754 00:37:54,200 --> 00:37:57,440 Speaker 12: the cost of living increases that we've seen. There is 755 00:37:57,480 --> 00:38:00,000 Speaker 12: more help on the way in that regard as well. 756 00:38:00,160 --> 00:38:02,880 Speaker 12: The first of July we have what's known as the 757 00:38:02,920 --> 00:38:06,880 Speaker 12: Stage three tax cuts about to kick in. This is 758 00:38:07,120 --> 00:38:10,400 Speaker 12: an electrim promise that the Albanese government has kept. This 759 00:38:10,560 --> 00:38:13,879 Speaker 12: was an initiative introduced by the previous government and during 760 00:38:13,920 --> 00:38:16,120 Speaker 12: the election they promised they would keep these Stage three 761 00:38:16,160 --> 00:38:18,840 Speaker 12: tax cuts. So everyone's getting a little bit of a 762 00:38:18,840 --> 00:38:21,399 Speaker 12: bump in their pay packet in a couple of weeks time. 763 00:38:21,480 --> 00:38:25,799 Speaker 12: But of course is that going to impact inflation? And 764 00:38:26,000 --> 00:38:27,239 Speaker 12: back we aret of square one. 765 00:38:27,400 --> 00:38:30,319 Speaker 11: Okay, Paul, always a pleasure to chat with you. Thanks 766 00:38:30,360 --> 00:38:33,680 Speaker 11: for helping us preview the RBA Meeting of the week Ahead. 767 00:38:33,719 --> 00:38:38,400 Speaker 11: He is Paul Allen, Bloomberg TV Australia correspondent. I'm Doug Krisner. 768 00:38:38,400 --> 00:38:41,279 Speaker 11: You can join Brian Curtis and myself weekdays here for 769 00:38:41,360 --> 00:38:44,480 Speaker 11: Bloomberg day Break Asia beginning at eight am in Hong 770 00:38:44,600 --> 00:38:46,600 Speaker 11: Kong eight pm on Wall Street. 771 00:38:46,960 --> 00:38:47,440 Speaker 3: Tom. 772 00:38:47,760 --> 00:38:50,200 Speaker 2: Thank you Doug, and thank you Brian. And that does 773 00:38:50,239 --> 00:38:52,960 Speaker 2: it for this edition of Bloomberg day Break Weekend. Join 774 00:38:53,040 --> 00:38:55,239 Speaker 2: us again Monday morning at five am Wall Street Time 775 00:38:55,280 --> 00:38:57,680 Speaker 2: for the latest on markets overseas and the news you 776 00:38:57,800 --> 00:39:01,080 Speaker 2: need to start your day. I'm Tom. Stay with us. 777 00:39:01,239 --> 00:39:04,600 Speaker 2: Top stories and global business headlines are coming up right now.