WEBVTT - Bloomberg Daybreak Weekend: Retail, Inflation, Indictments 0:00:02.880 --> 0:00:05.560 This is Bloomberg day Break Weekend, our global look at 0:00:05.559 --> 0:00:08.000 the top stories in the coming week from our Daybreak 0:00:08.039 --> 0:00:10.600 anchors all around the world, and straight ahead on the program, 0:00:10.640 --> 0:00:14.400 here comes some big retail earnings. I'm Tom Busby in 0:00:14.480 --> 0:00:14.920 New York. 0:00:15.160 --> 0:00:17.439 I'm Stephen Carroll in London, where we're looking ahead to 0:00:17.480 --> 0:00:20.119 the next CPI print for the UK amid a gloomy 0:00:20.160 --> 0:00:22.560 economic forecast from a leading think tank. 0:00:22.880 --> 0:00:25.680 I'm Derek Krisner. We'll look at the most rapidly growing 0:00:25.760 --> 0:00:27.320 ev market in the world. 0:00:27.480 --> 0:00:30.040 I'm Kaylie Lines in Washington, where all eyes are on 0:00:30.160 --> 0:00:33.960 Georgia ahead of a potential fourth indictment for former President Trump. 0:00:36.920 --> 0:00:40.920 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:40.960 --> 0:00:43.440 E love Them for your owner, York, bloombergon ninety nine 0:00:43.479 --> 0:00:46.879 to one, Washington, d C Bloomberg one O six one, Boston, 0:00:46.920 --> 0:00:51.720 Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 0:00:51.880 --> 0:00:55.120 XM one nineteen and around the world on Bloomberg Radio 0:00:55.200 --> 0:00:57.560 dot com and via the Bloomberg Business App. 0:00:59.320 --> 0:01:01.080 Well, good day to yank you. I'm Tom Busby, and 0:01:01.080 --> 0:01:03.760 we begin today's program with a big week ahead for 0:01:04.000 --> 0:01:06.840 retail earnings with a look at what that tells us 0:01:06.840 --> 0:01:09.640 about the US consumer and maybe what to expect in 0:01:09.640 --> 0:01:12.240 the months ahead. Now, this week we hear from three giants, 0:01:12.520 --> 0:01:15.800 Home Depot on Tuesday, Target on Wednesday, and the biggest 0:01:15.800 --> 0:01:18.880 of them all, Walmart on Thursday. There are other familiar 0:01:18.959 --> 0:01:22.640 names TJX, Ross Stores, Teen Retailer, Buckle, but we're going 0:01:22.720 --> 0:01:25.000 to focus on the biggies now for what we can 0:01:25.080 --> 0:01:28.600 expect to see. We're joined by Bloomberg News retail reporter 0:01:28.680 --> 0:01:31.360 Brendan Case. Brendan, thank you so much for joining us. 0:01:31.600 --> 0:01:32.839 Thanks for having me on, Tom. 0:01:32.920 --> 0:01:36.479 Well, let's start get right into it. Home Depot HD 0:01:36.560 --> 0:01:40.199 cut its financial forecast in May as shoppers finally post 0:01:40.280 --> 0:01:42.880 pandemic kind of tap the brakes on spending on their 0:01:42.880 --> 0:01:46.600 homes and yards. What do we expect to see from 0:01:46.680 --> 0:01:47.240 Home Depot. 0:01:48.160 --> 0:01:51.280 Yeah, we're going to be looking closely for any clues 0:01:51.640 --> 0:01:56.840 on how the home improvement market is doing. That had 0:01:56.840 --> 0:02:01.720 been such a strong area of consumer spending during the pandemic, 0:02:01.840 --> 0:02:04.680 and even the you know, the few quarters coming out 0:02:04.680 --> 0:02:09.400 of the pandemic, it finally slowed down in the first quarter. 0:02:10.160 --> 0:02:12.880 There were also some some sort of temporary issues like weather, 0:02:13.000 --> 0:02:15.920 but definitely you are starting to see some softness in 0:02:15.960 --> 0:02:20.680 that in that category, and of course the whole outlook 0:02:20.760 --> 0:02:23.280 for housing is wrapped up an interest rates. There's a 0:02:23.320 --> 0:02:25.880 lot of different signals coming out of the sector. What 0:02:26.760 --> 0:02:29.919 Home Depot is going to tell us is, above all, 0:02:30.040 --> 0:02:34.000 how how much people are spending on home improvement projects, 0:02:34.919 --> 0:02:38.720 both in terms of do it yourself projects and also contractors, 0:02:38.720 --> 0:02:42.000 which is an area where Home Depot is really strong. 0:02:42.800 --> 0:02:45.040 Yeah, and it's really a proxy for in a way, 0:02:45.240 --> 0:02:48.120 for the entire housing market because, like you said, the 0:02:48.120 --> 0:02:52.320 home improvement, but also all that building going on the contractors, 0:02:52.520 --> 0:02:55.320 and we have seen, despite the ups and downs in 0:02:55.360 --> 0:02:58.560 the housing market, home construction consistently strong. 0:02:59.680 --> 0:03:03.000 Yeah, that's exactly right. And Home Depot likes to say 0:03:03.600 --> 0:03:08.080 that it can prosper whatever the environment is. If there's 0:03:08.120 --> 0:03:10.040 not a whole lot of new construction, there's going to 0:03:10.080 --> 0:03:12.919 be a lot more renovations. And they went either way 0:03:13.280 --> 0:03:16.600 that are given weekend a little bit in the first quarter, 0:03:16.720 --> 0:03:20.600 especially as the home improvement projects, you know, the remodelings 0:03:20.680 --> 0:03:23.040 kind of you know, there were signs that that it 0:03:23.120 --> 0:03:26.600 was slowing down, especially as reflected in Home Depots business. 0:03:27.000 --> 0:03:29.600 The new construction is certainly something that's going to help 0:03:29.639 --> 0:03:32.840 them though, and we should get a little more information 0:03:32.880 --> 0:03:35.040 from them about how they see that mix kind of 0:03:35.040 --> 0:03:38.600 evolving throughout the year and what their expectations are for 0:03:39.360 --> 0:03:41.240 the remodels and also for the new homes. 0:03:41.560 --> 0:03:44.400 Now, I do have a question about Lows. For a 0:03:44.440 --> 0:03:47.360 long time number two to Home Depot. Home Depot obviously 0:03:47.400 --> 0:03:49.240 the leader and the do it yourself market, but they've 0:03:49.240 --> 0:03:51.880 been making some pretty big gains. They don't report to 0:03:51.960 --> 0:03:54.960 the following week, but are we seeing Lows kind of 0:03:55.560 --> 0:03:57.320 evening the playing field with Home Depot. 0:03:57.840 --> 0:04:01.400 Yeah, and this adds a company specific issue for Home 0:04:01.480 --> 0:04:04.280 Depots earnings next week. Certainly they're going to reflect a 0:04:04.280 --> 0:04:07.040 lot of what's going on in a macro sense, but 0:04:07.320 --> 0:04:11.480 just from a company from a competitive standpoint. You know, 0:04:11.520 --> 0:04:15.600 they've been such a leader for so long, but one 0:04:15.640 --> 0:04:18.279 of the general themes in that part of the retail 0:04:18.320 --> 0:04:22.600 market is that Low's really has been catching up. You know, 0:04:22.640 --> 0:04:27.679 it followed Home Depot by launching same day delivery last month. 0:04:28.360 --> 0:04:32.800 It's trying really hard to get more professional contractors on board, 0:04:32.880 --> 0:04:35.760 which would help Lows make inroads. And what's been a 0:04:35.760 --> 0:04:39.080 real stronghold for Home Depot. There's a lot of signs 0:04:39.120 --> 0:04:42.120 that it's gaining traction, and you know, that's a real 0:04:42.200 --> 0:04:45.720 sort of direct head to head rivalry. And so just 0:04:45.800 --> 0:04:49.200 as we'll be looking for macro clues in Home Depot, 0:04:49.200 --> 0:04:51.360 we also want to know, you know, if there's any 0:04:51.400 --> 0:04:54.640 kind of signals in there about any ground they might 0:04:54.640 --> 0:04:56.800 be losing to their chief rival. 0:04:57.560 --> 0:05:00.120 Next there's Target. It's likely to post its big a 0:05:00.120 --> 0:05:02.120 sales drop in more than six years. A lot of 0:05:02.160 --> 0:05:07.599 Americans starting to pull back on discretionary spending things like toys, apparel, electronics. 0:05:07.920 --> 0:05:11.040 That shift began abruptly last year. Still weighing heavily on Target. 0:05:11.440 --> 0:05:16.279 Yes, this could be a real milestone quarter for Target 0:05:16.360 --> 0:05:19.200 in a lot of different ways, not necessarily negatively, but 0:05:19.680 --> 0:05:23.400 you know, there is this expectation on Wall Street that 0:05:23.520 --> 0:05:26.359 sales are going to decline in the neighborhood of about 0:05:26.360 --> 0:05:29.400 three or four percent. There are some indications that the 0:05:29.480 --> 0:05:31.640 drop could be could be even worse. People are going 0:05:31.680 --> 0:05:35.800 to be watching that number really closely. And you know, 0:05:35.839 --> 0:05:40.000 the big picture here is that Target was one of 0:05:40.040 --> 0:05:44.080 the big winners in the pandemic. A lot of demand, 0:05:44.279 --> 0:05:46.360 a lot of people buying stuff from Target. They did 0:05:46.360 --> 0:05:49.760 a great job of sort of shifting to e commerce 0:05:49.800 --> 0:05:53.000 as well as stores during the pandemic, and they did 0:05:53.040 --> 0:05:57.000 really well. That really seems to be running out. And 0:05:57.440 --> 0:06:00.719 problem number one is exactly what you said, the pullback 0:06:00.800 --> 0:06:07.960 and consumer spending from discretionary goods, electronics, toys, apparel, home goods, 0:06:08.000 --> 0:06:11.919 all the type of products that Target is typically so 0:06:12.200 --> 0:06:16.200 good at merchandising, with their whole sort of cheap chic 0:06:16.560 --> 0:06:21.200 approach to to to their their product lines. That's just 0:06:21.279 --> 0:06:23.720 been a real tough part of the market for more 0:06:23.760 --> 0:06:27.400 than a year now. People bought so much during the 0:06:27.440 --> 0:06:31.400 pandemic that there's less demand than there was, you know, 0:06:31.480 --> 0:06:33.880 just because they don't need as much new stuff number 0:06:33.880 --> 0:06:38.200 one and number two, with inflation having been so high 0:06:38.320 --> 0:06:41.040 last year and into the into the beginning of this year, 0:06:41.800 --> 0:06:45.200 a lot of consumers had to just focus on, you know, 0:06:45.400 --> 0:06:49.839 buying the essentials, the groceries. That's a business that Target 0:06:50.000 --> 0:06:52.760 you know, does have in some significance, but not to 0:06:52.800 --> 0:06:56.320 the extent that Walmart has or obviously grocery chants have. 0:06:57.240 --> 0:06:59.960 And then, of course the third pressure on their sales 0:07:00.120 --> 0:07:03.080 is the shift in spending towards services. 0:07:02.800 --> 0:07:05.839 And they're also coming off calls for a boycott. This 0:07:05.960 --> 0:07:10.520 is related to their LGBTQ merchandise collection for Pride month 0:07:10.560 --> 0:07:12.440 and that that may have really hurt things. 0:07:13.160 --> 0:07:15.320 Yes, and this is something that we will learn a 0:07:15.320 --> 0:07:18.520 lot more about next week. In detail, the company really 0:07:18.520 --> 0:07:23.400 hasn't commented on exactly what the effect on sales was. 0:07:23.520 --> 0:07:26.800 But as you'll recall, back in May, towards the end 0:07:26.800 --> 0:07:30.040 of May, they got caught up in a big kind 0:07:30.080 --> 0:07:33.720 of culture war controversy where you know, they've always had 0:07:34.360 --> 0:07:38.640 a pretty a pretty big, a pretty significant collection of 0:07:38.680 --> 0:07:44.400 merchandise for Pride months. In June this year, there were 0:07:44.640 --> 0:07:49.880 some some criticisms on social media, particularly around some of 0:07:49.920 --> 0:07:53.640 their their products. There was a bathing suit that that 0:07:53.640 --> 0:07:57.000 that caused a lot of controversy, and there was a 0:07:57.040 --> 0:08:00.440 misinformation there were there There were some some criticism of 0:08:00.480 --> 0:08:03.600 the bathing suit supposedly being designed for kids, which was 0:08:03.960 --> 0:08:06.360 not accurate. It was a it was an adult product, 0:08:06.720 --> 0:08:09.800 but nonetheless it turned into sort of a public relations 0:08:09.840 --> 0:08:14.400 fiasco for Target and a real hit to its brand 0:08:14.560 --> 0:08:18.440 among some shoppers. There were calls in certain parts of 0:08:18.480 --> 0:08:22.520 social media and online, you know, to do a boycott. 0:08:22.560 --> 0:08:27.960 As you said, we do not know exactly what kind 0:08:27.960 --> 0:08:30.760 of hit that delivered. Was it big, was it small, 0:08:30.880 --> 0:08:33.800 was it noticeable, was it you know, we just don't know, 0:08:34.080 --> 0:08:36.880 and we should learn a lot more next week. But 0:08:36.920 --> 0:08:40.079 that you know, clearly had some effect, and so that'll 0:08:40.080 --> 0:08:41.120 be another headwind for them. 0:08:41.679 --> 0:08:44.200 Now Walmart, if there's any chain that's going to benefit 0:08:44.240 --> 0:08:47.800 from high inflation and a pullback in consumer spending, it's 0:08:47.880 --> 0:08:51.160 going to be Walmart. What do we see happening there? 0:08:51.840 --> 0:08:54.320 So Walmart's really been hitting the cover off the ball 0:08:54.400 --> 0:08:59.000 for about a year now. They had a huge problem 0:08:59.080 --> 0:09:04.400 last year, as did Target in terms of getting overstocked 0:09:04.400 --> 0:09:08.840 on inventories. They both companies guessed wrong and really badly 0:09:08.920 --> 0:09:11.320 wrong on how much of the discretionary products they were 0:09:11.360 --> 0:09:13.760 going to need, and so you know, for both of 0:09:13.760 --> 0:09:16.560 them that led to a lot of markdowns last year 0:09:16.600 --> 0:09:19.240 and a big hit to profits. But for Walmart, at 0:09:19.240 --> 0:09:23.080 the same time, with inflation going up, a lot of 0:09:23.160 --> 0:09:27.440 people were thinking themselves, well, where do I get the 0:09:27.440 --> 0:09:30.160 best prices? You know, prices are going up, but where 0:09:30.160 --> 0:09:32.439 can I find the best prices on food, on other 0:09:32.520 --> 0:09:36.160 basic goods? And a lot of them shows Walmart Walmart 0:09:36.160 --> 0:09:39.920 has talked a lot about upper income households, households with 0:09:40.000 --> 0:09:44.160 incomes over one hundred thousand dollars accounting for you know, 0:09:44.400 --> 0:09:48.679 half to three quarters of the gains in their comparable 0:09:48.720 --> 0:09:51.840 store sales. And so they've been getting a lot of 0:09:51.880 --> 0:09:55.719 trade down activity even as they see some weakness in 0:09:56.120 --> 0:09:58.600 their core customer and in kind of the middle income 0:09:59.200 --> 0:10:04.720 or lower income of consumers. But if you net it 0:10:04.760 --> 0:10:07.200 all out, what they've gotten at the big uptick in 0:10:07.320 --> 0:10:12.800 sales that's expected to continue, But the question is going 0:10:12.880 --> 0:10:17.280 to be how much with inflation coming down, you know, 0:10:17.400 --> 0:10:19.800 one challenge for Walmart is going to be whether they 0:10:19.840 --> 0:10:22.920 can hold on to some of the more affluent shoppers 0:10:22.920 --> 0:10:26.840 that they've gotten at the same time. You know, with 0:10:27.280 --> 0:10:29.640 obviously we're not in a recession. The job market is 0:10:29.679 --> 0:10:32.000 still strong, but there's a lot of pressure on lower 0:10:32.040 --> 0:10:37.319 income consumers right now, and for Walmart, you know, it's 0:10:37.320 --> 0:10:39.520 going to be sort of a question mark how well 0:10:39.559 --> 0:10:40.600 they can hold up well. 0:10:40.640 --> 0:10:43.920 A lot to look forward to. Brendan Case, Bloomberg Retail Reporter, 0:10:44.000 --> 0:10:46.120 thank you so much for joining us and coming up 0:10:46.160 --> 0:10:49.440 on Bloomberg Daybreak weekend. Leading UK think tanks as Britain 0:10:49.480 --> 0:10:52.960 must confront reality rather than reject it when it comes 0:10:53.000 --> 0:10:56.240 to its economic flight. We'll explain. I'm Tom Busby and 0:10:56.320 --> 0:11:05.760 this is Bloomberg. This is Bloomberg Daybreak weekend, our global 0:11:05.760 --> 0:11:07.920 look ahead at the top stories for investors in the 0:11:07.920 --> 0:11:10.880 coming week. I'm Tom Busby in New York. Up later 0:11:10.920 --> 0:11:13.440 in our program. Former President Trump could be in the 0:11:13.480 --> 0:11:16.920 headlines again this coming week. But first, a leading UK 0:11:17.120 --> 0:11:21.280 think tank says Britain must confront reality rather than rejected 0:11:21.520 --> 0:11:24.400 when it comes to its economic plight. This ahead of 0:11:24.400 --> 0:11:27.080 the latest UK inflation data coming in the next few days, 0:11:27.120 --> 0:11:30.560 expected to show price increases continuing to plague the UK 0:11:31.160 --> 0:11:33.440 for more. Let's head to London and bring in Bloomberg 0:11:33.480 --> 0:11:36.520 Daybreak Europe anchors Caroline Hepger and Stephen. 0:11:36.200 --> 0:11:39.440 Carroll Tom we get the next set of consumer price 0:11:39.480 --> 0:11:43.160 inflation data in the coming few days. Prime Minister Rishi Sinak, 0:11:43.240 --> 0:11:46.400 of course, has set himself the goal of harving inflation 0:11:46.600 --> 0:11:49.280 by the end of the year from a starting point 0:11:49.400 --> 0:11:52.439 at that time of ten point seven percent. There was 0:11:52.480 --> 0:11:54.720 a point earlier in the year where that looked really 0:11:54.800 --> 0:11:58.280 quite tricky, like a really tall order. The last inflation 0:11:58.360 --> 0:12:02.800 print has shown prices cooling. The Bank of England Governor 0:12:02.840 --> 0:12:06.480 Andrew Bailey, who spoke to Bloomberg pretty recently, was warning 0:12:06.520 --> 0:12:10.160 Stephen that the last male in the inflation fight is, 0:12:10.960 --> 0:12:13.560 you know, looking very difficult. He was very committed to it, 0:12:14.160 --> 0:12:16.040 but it looks like quite a long mile Carolin. 0:12:16.080 --> 0:12:18.200 This is something we've heard over and over from the 0:12:18.320 --> 0:12:21.000 likes of Dan Hanson from Bloomberg Economics, who tells us 0:12:21.000 --> 0:12:23.680 that the easy bit is coming down the higher level inflation. 0:12:23.760 --> 0:12:26.600 When that number starts to get closer to that two 0:12:26.640 --> 0:12:28.959 percent level, that's going to be the really difficult part, 0:12:29.040 --> 0:12:30.800 and that's the part where you enter into the risk 0:12:30.840 --> 0:12:33.480 of overtightening by the Bank of England. Now, the latest 0:12:33.520 --> 0:12:37.400 forecast from Bloomberg Economics does see the UK CPI coming 0:12:37.440 --> 0:12:39.640 below five percent by the end of this year, but 0:12:39.679 --> 0:12:41.920 as you say, it's a very shaky path and there 0:12:41.920 --> 0:12:44.640 are lots of quite gloomy opinions out there about the 0:12:44.640 --> 0:12:46.199 trajectory for the UK economy. 0:12:46.320 --> 0:12:50.840 Absolutely so. That includes the National Institute of Economic and 0:12:50.920 --> 0:12:54.360 Social Research, a think tank here in London, which came 0:12:54.400 --> 0:12:56.960 out in the last few days with a major bit 0:12:57.200 --> 0:13:02.240 of reporting around where they see inflation. Economic growth, inequality 0:13:02.440 --> 0:13:05.200 and on all of those funds, it's pretty bad news. 0:13:05.559 --> 0:13:09.680 NISA sees the UK economy stagnating for years, says the 0:13:09.760 --> 0:13:12.680 UK is actually unlikely to return to pre pandemic levels 0:13:12.720 --> 0:13:15.120 of activity before twenty twenty four. 0:13:15.240 --> 0:13:15.440 Yeah. 0:13:15.480 --> 0:13:17.520 Look, that's something that makes the UK economy an outlier 0:13:17.559 --> 0:13:19.600 in the G seven as well. The outlook for inflation 0:13:19.640 --> 0:13:21.960 as well as a very slow climb down. They're saying 0:13:21.960 --> 0:13:25.240 they're still seeing inflation at two point three percent in 0:13:25.360 --> 0:13:29.240 twenty twenty five. They've also pointed to rising inequality among 0:13:29.280 --> 0:13:32.720 the regions of the UK, falling wages in some places, 0:13:32.720 --> 0:13:35.720 and a government whose hands are tied because if it's 0:13:35.720 --> 0:13:39.480 continually spending more than it's bringing in. We've been speaking 0:13:39.520 --> 0:13:42.720 to the director of NISER, jag Jit Chada about this 0:13:42.880 --> 0:13:43.679 latest report. 0:13:44.040 --> 0:13:46.760 It's not a very pleasant picture. And I think in 0:13:46.800 --> 0:13:50.480 as an economy, as a set of decision makers and policymakers, 0:13:50.520 --> 0:13:52.880 particularly with the election in front of us next year, 0:13:53.360 --> 0:13:56.079 I think it's time to come. The time has come 0:13:56.120 --> 0:13:59.640 to confront reality rather than reject it. So if we 0:13:59.640 --> 0:14:02.079 could think of the report as a plane of another 0:14:02.160 --> 0:14:04.920 description of where we are and where we're likely to go, 0:14:05.480 --> 0:14:08.120 I think our ultimate hope is that could prompt better policy. 0:14:08.480 --> 0:14:11.800 So what we have is an economy that went into 0:14:11.960 --> 0:14:16.000 COVID with a weak structural supply side, as well as 0:14:16.000 --> 0:14:20.440 having just affected Brexit breaking relations with our nearest and 0:14:20.520 --> 0:14:24.760 richest trading neighbors. The COVID crisis revealed all kinds of 0:14:24.840 --> 0:14:28.400 weaknesses in our health service that still haven't been addressed 0:14:28.400 --> 0:14:31.360 that seemed to me to be intimately linked with labour 0:14:31.360 --> 0:14:34.600 supply and the economy. Subsequently, that labour supply has been 0:14:34.640 --> 0:14:38.760 hampered because people fearing ill health haven't returned to labor force. 0:14:38.800 --> 0:14:42.960 That's older people, but as well, we find ourselves short 0:14:43.000 --> 0:14:47.640 in many sectors, with vacancies still at elevated left levels. 0:14:48.760 --> 0:14:52.600 The food and energy crisis, created by the increase in 0:14:53.280 --> 0:14:56.000 by Russia's invasion of Ukraine led to a large increase 0:14:56.040 --> 0:14:59.200 in energy and food prices, which we don't produce largely 0:14:59.240 --> 0:15:01.800 on the margin. That meant that as an economy, we 0:15:01.880 --> 0:15:04.520 suffered a fall in income what economists call the terms 0:15:04.520 --> 0:15:06.800 of trade shock. That was not the same for example, 0:15:06.800 --> 0:15:08.880 for the United States, that is a net producer of 0:15:09.360 --> 0:15:11.960 energy and food, but for us it meant that we 0:15:11.960 --> 0:15:14.920 were importing goods that had become more expensive, and for 0:15:14.960 --> 0:15:17.520 a large time at an exchange rate that had depreciated. 0:15:17.560 --> 0:15:20.160 You remember sterling was in decline for much of twenty 0:15:20.240 --> 0:15:25.560 twenty two. This then upward pressure on inflation as well 0:15:25.680 --> 0:15:28.760 as the constricted supply side. That's meant the Bank of 0:15:29.080 --> 0:15:32.440 had to respond very rapidly to that and raise interest rates. 0:15:32.640 --> 0:15:34.920 And when we had all this up, it leads to 0:15:34.960 --> 0:15:37.360 an economy that on average is not likely to grow 0:15:37.480 --> 0:15:39.840 very much at all, and I think that's something we 0:15:40.320 --> 0:15:43.680 all need to think about hard except and address. 0:15:44.120 --> 0:15:47.560 You are tearing strips off the government as far as 0:15:47.600 --> 0:15:51.360 I can see in this report. You talk about facing reality. 0:15:51.840 --> 0:15:54.200 How much of this is the government's fault. 0:15:55.640 --> 0:16:00.440 Well, we've had an immense amount of political churn in 0:16:00.440 --> 0:16:01.840 the last three or four years. You don't need me 0:16:01.920 --> 0:16:04.800 to go through all the episodes, but I would say 0:16:05.720 --> 0:16:08.920 the height of that was the mini budget crisis of 0:16:09.280 --> 0:16:12.040 September twenty twenty two, which is certainly scarred in my memory, 0:16:12.440 --> 0:16:15.720 if not yours. That demonstrated that there are no quick 0:16:15.760 --> 0:16:18.600 fixes to the problems that we face in the economy. 0:16:19.160 --> 0:16:22.720 Nurturing the supply side, whether it's in the public sector, 0:16:22.880 --> 0:16:27.760 the health sector, transport, or in the private sector by 0:16:27.760 --> 0:16:31.600 getting firms to invest, to encourage them to invest both 0:16:31.640 --> 0:16:35.640 in physical and intangible capital, but also in their workers' 0:16:35.640 --> 0:16:39.600 skills is something that will take a generation or so 0:16:39.840 --> 0:16:43.440 to achieve. No quick boost is going to work here, 0:16:43.480 --> 0:16:46.240 and I think we're kind of at the end of 0:16:46.280 --> 0:16:49.760 those short run political plans a dash for growth or 0:16:49.800 --> 0:16:52.440 some announcement that will quickly lead to growth. It's not 0:16:52.600 --> 0:16:55.400 really the way the supply side of the economy works. 0:16:55.920 --> 0:16:58.960 And we really need our political classes and decision makers 0:16:58.960 --> 0:17:02.840 to accept that the decisions that they now may make, 0:17:03.600 --> 0:17:05.760 ultimately they're going to help the supply side of the economy, 0:17:05.840 --> 0:17:09.840 ones that won't necessarily lead to benefits over the political cycle. 0:17:10.320 --> 0:17:12.120 And one of the problems we have is that we're 0:17:12.200 --> 0:17:14.960 focused always on the next election, which means we're looking 0:17:15.000 --> 0:17:17.440 for quick fixes, which we can see time and time 0:17:17.440 --> 0:17:20.879 and again episode after episode political cycle of the political 0:17:20.960 --> 0:17:23.960 cycle just haven't worked to have five years without growth 0:17:24.000 --> 0:17:28.800 on average, and alongside that widening disparitied. If we look, 0:17:28.840 --> 0:17:32.760 for example, that where we think that on average workers 0:17:32.760 --> 0:17:34.880 in London will be by the end of next year, 0:17:35.520 --> 0:17:37.919 their real wages will be seven percent above the pre 0:17:38.040 --> 0:17:41.560 COVID peak, whereas if I take one region at random, 0:17:41.600 --> 0:17:45.600 the West Midlands, they will be five percent below. There's 0:17:45.720 --> 0:17:48.480 widening disparities when we take the average of That is 0:17:48.520 --> 0:17:50.960 the reason we have such low growth in the economy. 0:17:51.280 --> 0:17:56.399 We need consistency of planning to help the other parts 0:17:56.440 --> 0:18:00.160 of the economy outside of London and the Southeast catch up, 0:18:00.760 --> 0:18:06.680 create productivity, high level, high income jobs that will propel 0:18:06.800 --> 0:18:09.639 this economy onto a better path. And we've been stuck 0:18:09.640 --> 0:18:11.280 at this level for quite some time. 0:18:12.080 --> 0:18:13.679 There are a couple of points that I think are 0:18:13.760 --> 0:18:16.680 really important though, to pull out of your report. One 0:18:16.760 --> 0:18:21.160 the idea that the UK is at nearly full employment, 0:18:21.520 --> 0:18:24.200 a very very low unemployment, and that we still haven't 0:18:24.240 --> 0:18:28.280 managed to grow, and that also there isn't actually much 0:18:28.400 --> 0:18:30.919 fiscal leeway, are you The amount of money that the 0:18:30.960 --> 0:18:34.000 government is bringing in in order to achieve its goals 0:18:34.280 --> 0:18:37.640 because we're not growing is very very little, And that 0:18:37.840 --> 0:18:41.840 crunch I'm not sure people necessarily understand. Why is that 0:18:41.880 --> 0:18:45.040 so important? You know, to understand that, I mean that 0:18:45.119 --> 0:18:47.720 we would be a real outlier in the G seven, 0:18:48.080 --> 0:18:50.120 you know, to have so little fiscal headroom. 0:18:50.359 --> 0:18:53.119 I think that's absolutely right, and that's the critical question 0:18:53.240 --> 0:18:56.920 that any government will have to face when it wins 0:18:56.960 --> 0:18:59.400 the election next year. We see unemployment rising a bit, 0:19:00.160 --> 0:19:03.639 something like just slightly over five percent in a year 0:19:03.680 --> 0:19:06.760 and a half or so. That's not high by historical 0:19:06.800 --> 0:19:09.520 standards at all, and what you would expect under the 0:19:09.560 --> 0:19:12.120 circumstances if we were at full employment, with people paying 0:19:12.160 --> 0:19:14.959 taxes on their income, that we were then being in 0:19:15.080 --> 0:19:18.560 fiscal balance or a small fiscal surplus. Sadly, of course, 0:19:18.640 --> 0:19:22.000 because in part because of these income inequalities that I've 0:19:22.040 --> 0:19:25.959 been talking about, even those high levels of employment don't 0:19:26.080 --> 0:19:29.840 generate sufficient taxes to lead to the balance budget or 0:19:29.880 --> 0:19:33.480 the fiscal surplus that we would require that would then 0:19:33.520 --> 0:19:37.040 give us funds to address the fundamental lack of public 0:19:37.080 --> 0:19:40.280 investment in the economy and also to help grow the 0:19:40.320 --> 0:19:42.760 skills base that we see around the country. 0:19:43.119 --> 0:19:45.680 That was Professor jag Jitchado, who is director of the 0:19:45.760 --> 0:19:49.760 National Institute of Economic and Social Research, speaking to us 0:19:49.760 --> 0:19:52.280 here on Bloomberg Radio as we get ready, of course 0:19:52.280 --> 0:19:55.480 for the next UK inflation reading at what it means 0:19:55.480 --> 0:19:56.280 for the economy. 0:19:56.720 --> 0:19:57.879 I'm Stephen Carroll. 0:19:57.680 --> 0:19:59.359 And I'm Caroline Hepgar here in London. 0:19:59.440 --> 0:20:01.600 You can catch us every weekday warning here for Bloomberg 0:20:01.680 --> 0:20:04.360 Daybreak Europe, beginning at six am in London and one 0:20:04.400 --> 0:20:05.439 am on Wall Streets. 0:20:05.640 --> 0:20:09.080 Tom, thank you, Steven and Caroline, and coming up on 0:20:09.119 --> 0:20:12.480 Bloomberg day Break weekend. Former President Trump in the headlights 0:20:12.520 --> 0:20:16.399 once again. I'm Tom Busby. This is Bloomberg. 0:20:22.400 --> 0:20:26.880 Broadcasting live from the Bloomberg Interactive Brokers Studio in New York. 0:20:27.000 --> 0:20:30.400 Bloomberg Elemon three oh to Washington, d C, Bloomberg ninety 0:20:30.480 --> 0:20:33.560 nine one to Boston, Bloomberg one oh six one to 0:20:33.640 --> 0:20:37.280 San Francisco, Bloomberg nine sixty to the country, Serrius XM 0:20:37.359 --> 0:20:41.359 Channel one nineteen to London DAB Digital Radio, and around 0:20:41.359 --> 0:20:45.200 the globe the Bloomberg Business app in Bloomberg Radio dot Com. 0:20:45.240 --> 0:20:47.600 This is Bloomberg Daybreak Weekend. 0:20:53.800 --> 0:20:55.920 I'm Tom Busby in New York with your global look 0:20:55.920 --> 0:20:58.440 ahead at the top stories for investors in the coming week. 0:20:59.000 --> 0:21:02.520 Another indictment could be coming for President Trump. For more, 0:21:02.600 --> 0:21:05.000 let's add to our Bloomberg ninety nine one newsroom in 0:21:05.119 --> 0:21:08.720 Washington and Bloomberg Sound On. Co host Kaylee Lines. 0:21:09.119 --> 0:21:11.960 That's right, Tom, the former president has already been indicted 0:21:12.000 --> 0:21:14.560 three times, first in the state of New York related 0:21:14.560 --> 0:21:17.680 to hush money payments to adult film actress Stormy Daniels, 0:21:17.880 --> 0:21:20.040 then in Florida, where he was shit with federal charges 0:21:20.080 --> 0:21:23.840 in the classified documents case, and most recently another federal 0:21:23.880 --> 0:21:27.080 indictment brought in Washington over efforts to overturn the results 0:21:27.080 --> 0:21:29.959 of the twenty twenty election and obstruct the transition of power. 0:21:30.440 --> 0:21:33.080 And now a fourth indictment could be coming. The district 0:21:33.119 --> 0:21:36.680 attorney in Fulton County, Georgia, Fannie Willis, is widely expected 0:21:36.720 --> 0:21:39.560 to bring charges related to efforts to overturn the election 0:21:39.680 --> 0:21:43.240 results in that state. President Trump was actually talking about 0:21:43.280 --> 0:21:45.679 that this past week in an interview on Newsmax. 0:21:45.960 --> 0:21:47.080 And I don't know what she'said. 0:21:47.200 --> 0:21:47.959 I really don't know. 0:21:48.000 --> 0:21:50.280 All I know is she could have done it two 0:21:50.320 --> 0:21:52.800 and a half years ago if she was going to 0:21:52.840 --> 0:21:55.440 do something. And this is about a perfect phone call, 0:21:55.520 --> 0:21:59.240 a call where I'm questioning the election. I'm telling them 0:21:59.280 --> 0:22:03.000 that in my op the election was rigged, and this 0:22:03.160 --> 0:22:05.119 saying that I was I did something in Greek I 0:22:05.119 --> 0:22:07.480 didn't do or anything wrong. I believe I won that 0:22:07.520 --> 0:22:09.879 election by many, many votes. 0:22:10.480 --> 0:22:13.080 Of course, he's referring to that phone call between himself 0:22:13.119 --> 0:22:16.120 and Brad Raffensberger, the Georgia Secretary of State, in which 0:22:16.160 --> 0:22:19.480 he said, quote, I just want to find eleven seven 0:22:19.640 --> 0:22:22.880