Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
Speaker 1: global economy to you. This week, we're going to take
Speaker 1: your hand and walk you confidently into twenty with a
Speaker 1: guide to the year ahead from some of the brightest
Speaker 1: mind we have here at Bloomberg Economics, our Chief economist
Speaker 1: Tom Wrlick, Senior Trade reporter and scoopmeister Sean Donnan, and
Speaker 1: our European Economy reporter Yana Randa. We're sitting all in
Speaker 1: different studios in Washington, London, and Frankfurt, and we're just
Speaker 1: going to chat together about what might happen in and
Speaker 1: what it could all mean. I start with trepidation because
Speaker 1: I'm mindful that we spend a lot of time in
Speaker 1: thinking and talking about stuff we didn't expect to be
Speaker 1: talking about this time last year. Protests in Hong Kong,
Speaker 1: for example, or Chili. Not to mention interest rate cuts
Speaker 1: by the US Central Bank year ago. Remember, we were
Speaker 1: expecting monetary policy to be tightening this year, and more
Speaker 1: bond purchases and printing money by the European Central Bank.
Speaker 1: We weren't expecting that. Not to mention Boris Johnson becoming
Speaker 1: Prime Minister. For goodness, sake, so we all know we're
Speaker 1: going to be surprised by what happens in the year ahead,
Speaker 1: and this is about just looking ahead what we can see.
Speaker 1: But very briefly, I wanted to ask all three of
Speaker 1: you what was your most memorable moment covering the global
Speaker 1: economy in t Tom Wrling UM. So back in November,
Speaker 1: we were in Beijing for the New Economy Forum UM
Speaker 1: and Wang Xi Shan, arguably the second most powerful leader
Speaker 1: in China, took to the stage and there he was
Speaker 1: speaking to an assembled crowd of the most powerful chief executives,
Speaker 1: government leaders, thought leaders from around the world. There's so
Speaker 1: many questions about China, questions about the trade war, questions
Speaker 1: about what's happening in Hong Kong Hong, and he was
Speaker 1: a moment where Wang could have really addressed these questions,
Speaker 1: and he didn't do it. He gave a powerful speech
Speaker 1: which spoke to China's domestic political agenda. And what struck
Speaker 1: me about that was that we really just don't have
Speaker 1: a meeting of minds right now. The US and China.
Speaker 1: The trade conflict between US and China, which has really
Speaker 1: defined the global economy this year, is really just scene
Speaker 1: in completely different terms in d C. And in Beijing.
Speaker 1: It was a problem in could well be a big
Speaker 1: problem in twenty twenty as well, Sean Donna. So my
Speaker 1: momentt memorable moment in nineteen had to be sitting in
Speaker 1: a barn with Lorenda Overman, who is a hog farmer
Speaker 1: in North Carolina. Has lived on this piece of land
Speaker 1: for thirty seven years. It's been her husband's family since
Speaker 1: the Civil War, and she had just had the worst
Speaker 1: year that she had had in already seven years as
Speaker 1: a result of the trade wars and the impact on
Speaker 1: pretty much everything she raises or grows. UH. It had
Speaker 1: meant that she had stopped cutting checks to her son
Speaker 1: and her son in law who worked on the farm,
Speaker 1: and that meant that, as she said to me, she
Speaker 1: was literally taking the food out of the mouths of
Speaker 1: her grandchildren. It was a pretty amazing thing. She was
Speaker 1: close to tears as she was laying out the finances
Speaker 1: she ran through UH commodity prices and what that meant
Speaker 1: for her own personal finances. And then she got to
Speaker 1: the end of it all and told me that she
Speaker 1: still remained a strong supporter of Donald Trump. And to me,
Speaker 1: that was the paradox in the US economy and in
Speaker 1: these trade wars in twenty nineteen. That tension between the
Speaker 1: people who are getting hit or suffered as a result
Speaker 1: of the trade wars and their continuing support for Donald Trump,
Speaker 1: and whether that continues into is the big question Yana Randall.
Speaker 1: For me, it was the e CBS decision in September,
Speaker 1: so Mario Dragon, just a few weeks away from the
Speaker 1: end of his term, announcing a massive stimulus package of
Speaker 1: rad cut deeper below zero, quantitative easing, more favorable terms
Speaker 1: of long term loans, a bunch of other things, And
Speaker 1: that was just showing how severely the r Area economy
Speaker 1: was hit by the trade war, by uncertainty, how vulnerable
Speaker 1: the economy was. Suan, I guess we have to start
Speaker 1: where we ended with Donald Trump's trade wars. I mean,
Speaker 1: they completely dominated the outlook for the world economy quite
Speaker 1: a lot in and I think particularly when many economists
Speaker 1: were writing their look aheads for this coming year, the
Speaker 1: prospects looked pretty menacing. It seemed like there was a
Speaker 1: rising chance of the global recession in part because of
Speaker 1: trade wars. By the time we got to Christmas, things
Speaker 1: look Calma, Will Donald Trump settle for what he has
Speaker 1: on China and retire gracefully or can we expect something else. Well,
Speaker 1: I think it's first of all worth kind of benchmarking
Speaker 1: where we are and and the point that we ended
Speaker 1: twenty nineteen at and we're starting is a lot worse
Speaker 1: than the point we ended twenty eight and started twenty
Speaker 1: nineteen at. And there's a lot more tariffs in place
Speaker 1: on trade between the world's two largest economies. And even
Speaker 1: though we've had this Phase one deal that should be
Speaker 1: signed in the coming weeks, uh, it has not gotten
Speaker 1: rid of those tariffs or that drag on on the
Speaker 1: global economy that they that they represent. So that I
Speaker 1: think that's one point is is we have gotten to
Speaker 1: and this is a kind of Donald Trump effect. We've
Speaker 1: gotten to a point where we think of calm as
Speaker 1: a lack of escalation, but we forget how far we've
Speaker 1: escalated and and and where we are there. And I
Speaker 1: think that's worth remembering. The second thing is is, you
Speaker 1: know Donald Trump is if we we're gonna look at
Speaker 1: it through a rational political lens and we're gonna look
Speaker 1: at what he's done with China, Uh, it would make
Speaker 1: a lot of sense to kind of pause the trade
Speaker 1: wars here, have some negotiations go on through and uh
Speaker 1: and and leave it there and and leave any further
Speaker 1: deals or achievements or escalations if they need to come
Speaker 1: until after the November election. But this is Donald Trump,
Speaker 1: and Donald Trump is unpredictable. And it could be something
Speaker 1: as simple as a poll coming out showing that he's
Speaker 1: trailing in Iowa at some point, or trailing somewhere in
Speaker 1: the manufacturing states where is gonna be really important in
Speaker 1: the election, That may cause further actions. So, I mean,
Speaker 1: it's I'm dodging the question there, but it's there's a
Speaker 1: reason for that, and that we're dealing with president who's
Speaker 1: more unpredictable than any other we've had beforehand. Tom, I mean,
Speaker 1: share makes a good point that we are going into
Speaker 1: this year. I mean, Donald Trump has normalized a lot
Speaker 1: of things. Heaven knows, but we have. He has to
Speaker 1: some extent normal lies to having tariffs in a way
Speaker 1: that we didn't. We didn't think of that as a
Speaker 1: normal fixture of the environment, at least of the level
Speaker 1: they are now, um even a couple of years ago.
Speaker 1: That has an impact on the global economy. If we
Speaker 1: have a sort of steady state of uncertainty around trade
Speaker 1: but no real escalation, the kind of thing that Sean
Speaker 1: just described. You know what does that mean for the
Speaker 1: global economy? And I guess particularly for China. So we've
Speaker 1: run a bunch of numbers on this one, Stephanie. If
Speaker 1: we look at a plausible base case of tariffs rolling
Speaker 1: back some way towards the May two thousand and nineteen
Speaker 1: levels and some reduction in uncertainty, then we're looking at
Speaker 1: a boost global GDP. We think of around no point
Speaker 1: three percent in so that's not nothing. It's about two
Speaker 1: hundred and seventy billion dollars and China, which has been
Speaker 1: one of the main losers from the trade war, does
Speaker 1: a little bit better again. But I would certainly echo
Speaker 1: Sean's point on this. We don't have to go very
Speaker 1: far back in history Buenos Areas, the end of two
Speaker 1: thousand and eighteen, Osaka in summer two thousand and nineteen
Speaker 1: to remember positive moments in the US China trade conflict,
Speaker 1: which evaporated almost before the leader's jets had taken off
Speaker 1: on the runway. There's a bunch of uncertainties in this deal.
Speaker 1: Where's the extra two hundred billion dollars in Chinese purchases
Speaker 1: going to come from. What's the U S going to
Speaker 1: offer in terms of tariff rollback? What commitments is trying
Speaker 1: to going to make in terms of intellectual property. So
Speaker 1: the baselines tentatively positive. There's a bunch of stuff that
Speaker 1: could go wrong. As I should say at this point,
Speaker 1: the very observant listeners will know that we don't have
Speaker 1: anyone talking from Asia for this conversation this time of year.
Speaker 1: I wasn't very keen on making people stay up really
Speaker 1: really late to be on the line. But luckily we
Speaker 1: do have Tom, who lived eleven years in Beijing. We
Speaker 1: were there together in No but Tom, I think President
Speaker 1: Trump would say he had a good year in Sorry,
Speaker 1: he would say we had a great year minus that
Speaker 1: small matter of the impeachment. Would President she Jimping say that?
Speaker 1: I think President she Jimping would certainly say that he's
Speaker 1: had a great year, and he would be resounding lee
Speaker 1: echoed by his fellow members of the Chinese leadership, the
Speaker 1: Chinese official press. It's quite hard to find anyone these
Speaker 1: days who's willing to express a negative view on President
Speaker 1: she or his achievements. Okay, so he's President President she
Speaker 1: in his bath alone, would he would he look back
Speaker 1: and actually also be looking into and think, yes, I'm
Speaker 1: in an ok state. The reality, I think, stephaniely is
Speaker 1: that if we think about the problems which China has
Speaker 1: faced in two thousand and nineteen, to a large extent,
Speaker 1: they reflect a strategic miscalculation which took place in the
Speaker 1: past few years. The Belton Road Initiative, the Made in China,
Speaker 1: the China Five initiative. Both of these were really ambitious
Speaker 1: plans which kind of proclaimed China's arrival on the world stage.
Speaker 1: The Belt and Road Initiative was China's arrival in terms
Speaker 1: of international relations, building infrastructure across the world, wielding more
Speaker 1: political influence across the world. The China Plan announced China's
Speaker 1: arrival as a as an ambitious technological power and ambitious
Speaker 1: technology power um the staking their claim for ownership of
Speaker 1: the technologies which would um determine the pattern of winners
Speaker 1: and losers in the global economy going forward. And both
Speaker 1: of these things just rang really loud alarm bells in
Speaker 1: the rest of the world, especially here in Washington, d C.
Speaker 1: And I think the origin of the trade war partly
Speaker 1: goes back to that overreach by China. So I think
Speaker 1: two thousand and nineteen was a year where China avoided
Speaker 1: the worst possible outcome. They've ended the year with the
Speaker 1: trade truce. They haven't made very, very significant concessions to
Speaker 1: the US on things like intellectual property, technology transfer, industrial subsidies.
Speaker 1: So in that sense, I think they can claim a victory.
Speaker 1: But why do they find themselves in this new difficult
Speaker 1: position facing a newly hostile US and newly hostile world.
Speaker 1: I think it's because of those strategic missteps over the
Speaker 1: past few years. Suspect we'll get back to China's role
Speaker 1: in the future of the of the global recovery a
Speaker 1: little bit later, But yeah, and I want to want
Speaker 1: to bring you in with a with a European perspective.
Speaker 1: I mean, Germany was one of the economy's worst hit
Speaker 1: by the trade wars, in the worst hit in many
Speaker 1: ways than the US or China because it's so bound
Speaker 1: up with the global trading system. How would you say
Speaker 1: things are looking now for twenty in Germany? And I
Speaker 1: guess the Eurozone economy generally. I think if you had
Speaker 1: to summon summed up in one sentence, you would say
Speaker 1: we can be lucky that if it doesn't get any worse.
Speaker 1: So there are signs that both the German economy and
Speaker 1: the Eurozone economy have stabilized. UM. For the past couple
Speaker 1: of months, we've seen some indicators suggesting and ever so
Speaker 1: slow pick up in momentum. Others have pointed to setbacks.
Speaker 1: So right now we're in this in this phase where
Speaker 1: the optimists say we're about to bottom out. If you
Speaker 1: look at momentum over or forecast momentum over twenty it
Speaker 1: won't pick up significantly. So we're not talking about any
Speaker 1: v U shaped recoveries here. Um, we're talking about very
Speaker 1: very um slow growth stabilization at the current level. So
Speaker 1: the forecast don't look any better next year than they
Speaker 1: then they do. Look now, the problem really is that
Speaker 1: the manufacturing slump has been so deep, um, the recession
Speaker 1: in industry has been so severe, uh that there is
Speaker 1: only so much domestic demand private consumption investment can do
Speaker 1: to offset that. And we're starting to see that confidence
Speaker 1: is also declining in in the domestic economy. Uh. You
Speaker 1: see labor markets being slowly affected. And it's that very
Speaker 1: that very fine line we're walking at the moment where
Speaker 1: things can improve from here, but it won't take much
Speaker 1: for things to get significantly worse. So I think we
Speaker 1: need to be very very careful in looking at what
Speaker 1: the German and the Eurozone economy can do over the
Speaker 1: next couple of months and over the next couple of quarters. Now,
Speaker 1: listening to Christine look are the new ECB president, she said,
Speaker 1: risks are still on the downside, but she also made
Speaker 1: sure to stress in her in her first public press conference,
Speaker 1: in her first official remarks on monetary policy, that those
Speaker 1: risks from trade, those risks from protectionism, from vulnerabilities and
Speaker 1: emerging markets have actually diminished somewhat. So there is a
Speaker 1: willingness to be optimistic and see the signs of improvement,
Speaker 1: but people are also very very aware that things can
Speaker 1: go terribly wrong. Yeah, I guess it's a reminder. You know,
Speaker 1: when we we do think about the overall picture for
Speaker 1: the economy in we tend to say, you know, everything
Speaker 1: is reliant on the consumer, and if you're sitting in
Speaker 1: the US or even the UK, very consumer led economies,
Speaker 1: that kind of sounds like good news because it's such
Speaker 1: a big um. It's always the source of momentum in
Speaker 1: the economy. But the countries like Germany, which have have
Speaker 1: to some extent struggled to have that more consumer driven side,
Speaker 1: have been so dependent on manufacturing. It is a it
Speaker 1: is a potential weakness that we are now so dependent
Speaker 1: on consumption globally. I mean, yeah, I should also ask
Speaker 1: you about new leadership in Europe. You know, there was
Speaker 1: a famous question about you know, if I want to
Speaker 1: call Europe, who do I call? I mean, all of
Speaker 1: those top jobs changed hands in the last twelve months,
Speaker 1: not just at the European Central Bank you mentioned, but
Speaker 1: a lot of the key jobs in Brussels, at the
Speaker 1: European Commission and such. I mean, will will ordinary people
Speaker 1: or even failing that, the people listening to Stephanomics notice
Speaker 1: anything different with this new leadership. Are they going to
Speaker 1: try and make their mark? I think so, and I
Speaker 1: think we already have to be honest. Um, the past Commission,
Speaker 1: the past leadership of Europe was still very much engulfed
Speaker 1: in crisis fighting or picking up the pieces after after
Speaker 1: Europe's debt crisis. It's not remember it's not too long
Speaker 1: ago that Grace almost dropped out. So it was very
Speaker 1: much fixing the problems, but not very much time for
Speaker 1: problems that are inevitably coming our way. In the few
Speaker 1: chure and I think was alla funderlying the new Commission
Speaker 1: President set out very ambitious agenda. She made very very
Speaker 1: clear that her commission, her her term, will be about
Speaker 1: defining and shaping Europe's future. So it's about transforming society,
Speaker 1: it's about fighting climate change, about making countries and society
Speaker 1: ready for UM a life in in UH, embracing new
Speaker 1: technologies UM, but also to look at aging society UM,
Speaker 1: looking at how demographics shifts will affect living and and
Speaker 1: sustaining economies in in Europe in particular. So I think
Speaker 1: the agenda the Commission set out is very ambitious. We've
Speaker 1: heard the first the first ideas about what they want
Speaker 1: to do on climate and in particular it's a very
Speaker 1: it's a topic that will be with us probably for
Speaker 1: for a very long time, in particularly next year. So
Speaker 1: I think we've already seen that they have ambitious plans
Speaker 1: and how much of those will materialize that we will
Speaker 1: find out. I suppose they will be interesting. This year.
Speaker 1: I mean, I think was definitely a year when the
Speaker 1: urgency of the climate debate became much more evident to
Speaker 1: people that entered the mainstream, especially in Europe, and it's
Speaker 1: interesting we've also that we have now seen the President
Speaker 1: um in the head of the Commission putting that green
Speaker 1: new Deal on the agenda. Will we see a lot
Speaker 1: more practical action in You know, this would be the
Speaker 1: obvious time for me to say something about Brexit, but
Speaker 1: you know what, I'm not going to because we've talked
Speaker 1: plenty about Brexit on this podcast and many other podcasts.
Speaker 1: I guess the only thing I'll say is that I
Speaker 1: can say with quite a lot of confidence that but
Speaker 1: in the next few months, sometime in almost certainly the
Speaker 1: end of January, Britain will have brexited. We will have left,
Speaker 1: but there will still be plenty of uncertainty about what
Speaker 1: our future relationships are going to be, well, pretty much
Speaker 1: with anybody. I mean. At the end of it looked possible,
Speaker 1: maybe not likely, but possible that the UK would be
Speaker 1: coming into with a radical left winger as Prime Minister,
Speaker 1: Jeremy Corbyn. That didn't happen, But at the end of
Speaker 1: this year we could have a US president about to
Speaker 1: take office with an agenda that's almost as radical as Corbin's.
Speaker 1: Looking at some of the democratic that the leading Democratic candidates.
Speaker 1: You know, assume one of those, say Elizabeth Warren has
Speaker 1: won the presidency, how do you think that would change
Speaker 1: how we would see the global economic outlook in the year.
Speaker 1: So I think there's a prior question there, Stephanie, and
Speaker 1: that's will the US Democratic Party look at what happened
Speaker 1: in the UK election and say, okay, there's a lesson
Speaker 1: here for us. The UK Labor Party tried a radical agenda.
Speaker 1: It didn't resonate the ballot box. Maybe we need to
Speaker 1: think about that when we're making a decision between a
Speaker 1: Biden and a Warren and Assanders. But let's say they
Speaker 1: go ahead. Let's say we get one of the more
Speaker 1: progressive Democrat leaders um coming into the twenty election and winning.
Speaker 1: If we think about the international aspect of it, the
Speaker 1: most important thing is trade policy. And my reading of
Speaker 1: the sort of the tea leaves the sort of initials
Speaker 1: policy statements from the Democratic candidates is actually, they're going
Speaker 1: to be as tough on trade as Donald Trump is.
Speaker 1: But I think it's also fair to say that they
Speaker 1: would be more predictable. There'd be a policy process, there'd
Speaker 1: be more transparency, there'd be announcements rather than tweets. And
Speaker 1: when we look at the drag from the trade war,
Speaker 1: a bunch of it has come from tariffs, but a
Speaker 1: bunch of it has come from uncertainty as well. If
Speaker 1: the uncertain he goes down, if the predictability goes up,
Speaker 1: that's going to be a positive for global growth. Second
Speaker 1: aspect of it is the domestic agenda. And here too
Speaker 1: there's a there's a prior question, which is Democrats might
Speaker 1: well win the presidency, do they win the Senate. If
Speaker 1: they don't win the Senate, it's going to be very
Speaker 1: difficult for them to push through any far reaching domestic
Speaker 1: policy reforms, and so I think we'd be looking very
Speaker 1: much at the kind of the status quo in terms
Speaker 1: of US tax policy. For example, if they do win
Speaker 1: the Senate, which is going to be a stretch, then
Speaker 1: I think we would be looking in a more ambitious
Speaker 1: domestic reform agenda. We'd be looking at changes in tax policy,
Speaker 1: we'd be looking at changes in healthcare policy. And I
Speaker 1: think one of the impacts of that would be margin
Speaker 1: compression for the US corporate sector, with pretty far reaching
Speaker 1: implications for the markets. Because it was interesting that there
Speaker 1: had not been a lot of discussion around the economic
Speaker 1: or the potential market impact of a Trump victory until
Speaker 1: he was actually elected, and then everyone claimed to be
Speaker 1: not at all surprised by the US stock markets, you know,
Speaker 1: soaring upwards. Um, you know, sometimes these things become obvious
Speaker 1: only only just after something has happened. So you know,
Speaker 1: we'll see. But Sean we if you looked at the
Speaker 1: booking odds right now, you would say a Trump victory
Speaker 1: was more likely than not, in part because the U
Speaker 1: s economy looks like it's going to continue to be okay,
Speaker 1: even with the uncertainty you talked about and the tariffs
Speaker 1: from the trade wars. You have spent a good chunk
Speaker 1: of I'm rather jealous. Actually, you've spent a good chunk
Speaker 1: of the last few months out in the field. We
Speaker 1: heard your discussion on stephonomics around the places you've been
Speaker 1: in North Carolina. You've been to Granite City, You've been
Speaker 1: on the Mississippi. When you cut through it all and
Speaker 1: you talk to these people, has the trade war been
Speaker 1: good or bad for Trump's chances of reelection? I think
Speaker 1: if there is one weakness in Trump's economic argument going
Speaker 1: into the election, it is the impact of his trade
Speaker 1: wars on swing states like Wisconsin, Michigan, Pennsylvania, even Ohio,
Speaker 1: And what we've seen in all of those places is
Speaker 1: a slow down in manufacturing growth and in some cases
Speaker 1: a the start of layoffs in manufacturing, some of which
Speaker 1: is tied directly to the trade wars and impact of
Speaker 1: everything from rising costs due to tariffs on inputs from
Speaker 1: China or steel, but also just the damper on demand
Speaker 1: that you've had, the retaliation that you've had from the Chinese,
Speaker 1: which means US exports to China are going down, and
Speaker 1: that you know, while the US exported less to China
Speaker 1: or exports less to China than it than it imports,
Speaker 1: that's still an important market for a lot of American companies. Uh.
Speaker 1: So you're starting to see that filter through the economy
Speaker 1: where you know, it started off in the agricultural sector.
Speaker 1: We saw it a lot in agricultural equipment suppliers early on.
Speaker 1: We're now seeing it in the trucking business. Uh. You know,
Speaker 1: a few years ago or a year ago even Uh,
Speaker 1: the you know, one great promise, Uh, if you were
Speaker 1: a young blue collar man who might support tunnel Trump
Speaker 1: in terms of employment, was signing up as a truck
Speaker 1: driver where they were offering good salaries and benefits, and
Speaker 1: trucking companies were shortening delivery routes so that they were
Speaker 1: more family friendly and so on. Well, trucking companies are
Speaker 1: starting to lay off people. We're seeing truck makers start
Speaker 1: to lay off people. We're seeing digital engine makers starting
Speaker 1: to lay off people. So that kind of industrial economy
Speaker 1: in America, a lot of which is is concentrated in
Speaker 1: those important swing states, is weakening. And how that carry
Speaker 1: is through in is going to be really important to
Speaker 1: the election prospects of Donald Trump. I mean, we need
Speaker 1: to remember that all of these swing states were states
Speaker 1: that Donald Trump won by not many votes. It's not
Speaker 1: like you take a five percent swing even in those
Speaker 1: states for a Democrat to win them. It could be
Speaker 1: less than one percent that swings. And if you have,
Speaker 1: you know, just enough people who are slightly disenchanted with
Speaker 1: Donald Trump's economic policies or more broadly, with his presidency,
Speaker 1: those you know, the fortune his fortunes could change very
Speaker 1: quickly in those states. Well, of course, you know, the
Speaker 1: irony is that a lot of those states were supposedly
Speaker 1: the kind of voters that he was doing the trade
Speaker 1: war four. I mean it is is um perhaps going
Speaker 1: to be a striking feature of in the UK as well,
Speaker 1: at the places where you've got this more nationalistic and
Speaker 1: potentially protectionist policies, um end up hurting the very people
Speaker 1: who voted for it and damaging their their interests more
Speaker 1: more than anyone. But we shall we shall see how
Speaker 1: that plays out. I'm not going to get anyone to
Speaker 1: call the result of the US presidential election. I'm going
Speaker 1: to remind listeners that Michael Bloomberg, the majority owner of
Speaker 1: Bloomberg News, is running for president himself, running at least
Speaker 1: for and for the for the Democratic candidacy. But Tom,
Speaker 1: in your gut, do you think we will get to
Speaker 1: the November US election with the US and the global
Speaker 1: economy still looking broadly Okay, we know it's not great,
Speaker 1: but still in decent shape. So I was really interested
Speaker 1: to hear Sean's on the ground observations from some of
Speaker 1: those swing states and how the trade war has been
Speaker 1: impacting them if we're thinking about the US economy as
Speaker 1: a whole. Though, we've got unemployment at the lowest level
Speaker 1: since the late nineties sixties. The November job report, which
Speaker 1: remember came in a very robust two sixty six thousand
Speaker 1: new jobs significantly changed the narrative on where we're going
Speaker 1: into I think a few people now expect a recession
Speaker 1: in the year ahead. Most people, including US, expect low unemployment,
Speaker 1: rising wages, robust consumption to keep growth chugging along. I
Speaker 1: think the bet has to be when we look at
Speaker 1: the national picture, President Trump is going to be coming
Speaker 1: into the election with a pretty strong economy behind him.
Speaker 1: I started with some of the stories that caught us
Speaker 1: by surprise in There'll be plenty more surprises in twenty
Speaker 1: we know. But what are you all especially looking out
Speaker 1: for possible places for surprises that could could really matter
Speaker 1: for the global economy? Yana Randa. I'm keeping my eye
Speaker 1: on trade, on uncertainty about the economic outlook, and as
Speaker 1: apecially on inflation because the numbers we've seen on wages,
Speaker 1: they are actually coming up. The labor market is not
Speaker 1: looking too shabby. In fact, we have unemployment close to
Speaker 1: a record low across most of the region. So I
Speaker 1: am I am really um looking out for for inflation
Speaker 1: to pick up. Now it's not in the official statistics,
Speaker 1: but there there is a risk that that, um, we
Speaker 1: will see you a slight increase. You heard it here. First,
Speaker 1: the correspondent from Frankfurt is worried about inflation, and Sean Donnan,
Speaker 1: I'm going to be spending looking at the Swing States
Speaker 1: and what's happening in industrial America. The big wild card, though,
Speaker 1: uh in may come from China. We ended with a
Speaker 1: wave of corporate defaults coming out of China and it's
Speaker 1: starting to filter into the government sector there. Uh that
Speaker 1: could build into something more consequential for both China and
Speaker 1: the global economy. Tom So, if we think about the
Speaker 1: global economy in I think the first word which pops
Speaker 1: into everyone's head is trade. Um. But I think we
Speaker 1: can make a case that actually the most important word
Speaker 1: to characterize the global economy has been uncertainty. UM. Let
Speaker 1: me give you three really brief examples. First, US trade
Speaker 1: policy uncertainty, that surprise move on Mexico, all of the
Speaker 1: surprises on China which Sean, Jenny Leonard and others have
Speaker 1: reported on so well over the course of the year. Um. Secondly, Brexit,
Speaker 1: all of that misinformation about the positives and negatives of Brexit,
Speaker 1: the scope to get negotiations done quickly or not. And
Speaker 1: thirdly China, this was probably below most people's radar. But
Speaker 1: there was a report which came out in the middle
Speaker 1: of the year by some really serious Chinese academics with
Speaker 1: involvement from an adviser to the People's Bank of China,
Speaker 1: and it said, you know what, China's GDP growth for
Speaker 1: the last five years hasn't actually been six or seven percent,
Speaker 1: It's been four and so on some of the most
Speaker 1: important dimensions of the global economy. There's just a really
Speaker 1: elevated level of uncertainty. And I'm reminded of a famous
Speaker 1: statement by by Hannah Arrant, the great twentieth century philosopher,
Speaker 1: made in a very different context, but I think really
Speaker 1: relevant to the type of situation we face today, and
Speaker 1: she said, when all we hear are lies, the consequence
Speaker 1: is not that we start believing lies. It's that we
Speaker 1: stopped believing anything um. And I think the biggest risk
Speaker 1: for the economy globally in heading into and further forwards,
Speaker 1: is that in this kind of miasthma of misinformation UM,
Speaker 1: the uncertainty which has clouded the outlook this year, just
Speaker 1: proves really hard to lift. And that uncertainty premium, that
Speaker 1: uncertainty drag stays in place and drags on global growth
Speaker 1: going forwards. Well said, thanks Tom, I mean having if
Speaker 1: I'm going to give myself a few wild cards, having
Speaker 1: been made a cheap joke about Yano and inflation, I
Speaker 1: actually agree with her that that would be the big
Speaker 1: surprise for markets and others this year. And let's face it,
Speaker 1: it's perfectly likely when you have a consumer led economy
Speaker 1: driven a recovery with a problem on the investment side
Speaker 1: in that in those circumstances we often have seen inflation
Speaker 1: in the past. I guess the other obvious go to
Speaker 1: place for surprises and problems would be Italy. We could
Speaker 1: certainly have a flare up at any time in Italy.
Speaker 1: And finally, I think we have to remember the potential
Speaker 1: seriousness of what's happening in Hong Kong and how that
Speaker 1: could actually reverberate, not just on the geopolitical front, but
Speaker 1: potentially economically as well. Plenty to think about. Thank you
Speaker 1: very much to everyone here, Yano round out, Tom Marlick
Speaker 1: and Sean Donnan. Thanks definitely, thanks for having us, Thanks
Speaker 1: for listening to Stephanomics. We'll be back next week with
Speaker 1: more on the ground insights into the global economy. In
Speaker 1: the meantime. You can find us on the Bloomberg Terminal, website, app,
Speaker 1: or wherever you get your podcasts, and please do take
Speaker 1: the time to rate and review our show so it
Speaker 1: can reach more listeners. For more news and analysis from
Speaker 1: Bloomberg Economics, follow at Economics on Twitter, and you can
Speaker 1: also find me on at my Stephanomics. This episode was
Speaker 1: produced by Magnus Hendrickson special thanks to Sean Donnan, Tom Marlick,
Speaker 1: and Yana Randall. Scott Lamman is our executive producer and
Speaker 1: the head of Bloomberg Podcast is Francescani.