1
00:00:00,120 --> 00:00:02,480
Speaker 1: Let's get to our guest. Rob Carnell is with us.

2
00:00:02,520 --> 00:00:05,200
Speaker 1: He is the chief economist at I n G is

3
00:00:05,240 --> 00:00:09,840
Speaker 1: also head of a pack Research, joining us from Singapore. Rob,

4
00:00:09,880 --> 00:00:11,640
Speaker 1: thanks for being with us. I guess we've got to

5
00:00:11,680 --> 00:00:14,480
Speaker 1: begin with the inflation story here, and the big question

6
00:00:14,600 --> 00:00:18,040
Speaker 1: is whether or not first are we at peak inflation

7
00:00:18,280 --> 00:00:22,919
Speaker 1: and then secondarily how sticky will it be? Well, I

8
00:00:22,960 --> 00:00:25,520
Speaker 1: think when you start asking questions about peak inflation, you

9
00:00:25,880 --> 00:00:28,560
Speaker 1: first start need to start asking yourself, which inflation rate

10
00:00:28,760 --> 00:00:31,280
Speaker 1: do I really care about? Is the headline, in which

11
00:00:31,320 --> 00:00:33,680
Speaker 1: case you really need to know what's going to happen

12
00:00:33,720 --> 00:00:35,559
Speaker 1: to oil prices, and that you need to know what's

13
00:00:35,560 --> 00:00:37,000
Speaker 1: going to happen to it ran, you need to know

14
00:00:37,080 --> 00:00:40,040
Speaker 1: what plus are going to do, and ultimately you just

15
00:00:40,120 --> 00:00:42,600
Speaker 1: go around in circles and think, well, you can't really tell.

16
00:00:43,360 --> 00:00:47,600
Speaker 1: One thing you might look at, though, is analyzed inflation rates,

17
00:00:47,600 --> 00:00:50,520
Speaker 1: and they're still pretty high. So I think we've yet

18
00:00:50,680 --> 00:00:53,840
Speaker 1: got the to get the message that yet we definitely

19
00:00:53,840 --> 00:00:56,640
Speaker 1: have seen peak inflation and the core rates still going

20
00:00:56,720 --> 00:00:58,880
Speaker 1: up at a reasonable lick as well, And that's basically

21
00:00:58,880 --> 00:01:01,200
Speaker 1: telling you whereas some as going to be in X

22
00:01:01,240 --> 00:01:03,440
Speaker 1: month's time and that's not really showing much signs of

23
00:01:03,480 --> 00:01:06,120
Speaker 1: going down. So I'd be hesitant for jumping into the

24
00:01:06,160 --> 00:01:10,560
Speaker 1: peak inflation camp. Robert, you hesitant about the potential recession

25
00:01:10,600 --> 00:01:12,759
Speaker 1: camp or are you on that side that to consumers

26
00:01:12,760 --> 00:01:16,039
Speaker 1: have enough of a buffer. No, absolutely not. I think

27
00:01:16,040 --> 00:01:18,720
Speaker 1: it's recession. I think, you know, it's one of those

28
00:01:18,720 --> 00:01:22,000
Speaker 1: things that economists like to sort of I wander around

29
00:01:22,040 --> 00:01:24,600
Speaker 1: and talk about muddle through and it will be okay. No,

30
00:01:24,720 --> 00:01:27,800
Speaker 1: I think recessions going. I think recession is required to

31
00:01:27,880 --> 00:01:29,920
Speaker 1: get inflation down. I don't think you can just do

32
00:01:29,959 --> 00:01:32,280
Speaker 1: it by some token rate heights and everything will be

33
00:01:32,319 --> 00:01:35,160
Speaker 1: fine and soft landing is guaranteed. Um. You know, the

34
00:01:35,200 --> 00:01:37,920
Speaker 1: fact that the household sector is pretty well cashed up

35
00:01:38,240 --> 00:01:40,040
Speaker 1: is actually a problem for the FED because they do

36
00:01:40,120 --> 00:01:42,200
Speaker 1: have to slow the economy to get inflation down. It

37
00:01:42,240 --> 00:01:44,640
Speaker 1: doesn't just do it on its own. So is it

38
00:01:44,680 --> 00:01:47,560
Speaker 1: going to be something that is deep and long lasting.

39
00:01:47,640 --> 00:01:49,720
Speaker 1: It's going to be quick and shallow. I mean, how

40
00:01:49,720 --> 00:01:51,680
Speaker 1: do how do you when you say recession, we have

41
00:01:51,760 --> 00:01:56,440
Speaker 1: to begin to describe or characterize what it may look like. Yeah,

42
00:01:56,440 --> 00:01:59,440
Speaker 1: well that is the real question, and that's you know

43
00:01:59,480 --> 00:02:02,280
Speaker 1: that that's still very hard to determine at this stage. Um,

44
00:02:02,320 --> 00:02:04,400
Speaker 1: you know, obviously you'd like it to be short and

45
00:02:04,520 --> 00:02:07,960
Speaker 1: sharp and see inflation responding well, but you know, we

46
00:02:08,040 --> 00:02:10,320
Speaker 1: don't know. I mean, the FED doesn't know, We don't know.

47
00:02:10,480 --> 00:02:12,200
Speaker 1: We would like to think that would be the case,

48
00:02:12,880 --> 00:02:15,320
Speaker 1: but as as we seem to have been for very

49
00:02:15,360 --> 00:02:19,080
Speaker 1: many years now, uncharted waters, the policy tools and the

50
00:02:19,120 --> 00:02:21,760
Speaker 1: reaction functions don't work as they used to in the past.

51
00:02:22,120 --> 00:02:24,639
Speaker 1: So you know, it's a wet finger waving exercise when

52
00:02:24,639 --> 00:02:26,200
Speaker 1: we say, yeah, we'd like to think it will be

53
00:02:26,400 --> 00:02:28,480
Speaker 1: short and sharp, but you know, it could be anything.

54
00:02:29,160 --> 00:02:32,120
Speaker 1: All of these worries continuing to support the US dollar.

55
00:02:32,240 --> 00:02:37,040
Speaker 1: How much does this impact economies in Asia? Yeah, Well,

56
00:02:37,040 --> 00:02:40,720
Speaker 1: the interesting thing is that Asian inflation hasn't been quite

57
00:02:40,760 --> 00:02:42,880
Speaker 1: as bad as it has been in either the US

58
00:02:43,000 --> 00:02:45,760
Speaker 1: or Europe, and so consequently we haven't seen anything like

59
00:02:45,919 --> 00:02:49,240
Speaker 1: the degree of central bank policy tightening that's happened around

60
00:02:49,240 --> 00:02:50,960
Speaker 1: the rest of the world. That is helping a bit.

61
00:02:51,320 --> 00:02:52,760
Speaker 1: In the background of all of this, we've got a

62
00:02:52,840 --> 00:02:55,720
Speaker 1: very very weak China and that's the single biggest expert

63
00:02:55,720 --> 00:02:58,320
Speaker 1: partner for every economy in this region. So while that

64
00:02:58,400 --> 00:03:01,880
Speaker 1: remains the case going to weigh on growth. But one

65
00:03:02,080 --> 00:03:06,720
Speaker 1: silver lining in this cloud is China was stronger. Things

66
00:03:06,720 --> 00:03:09,160
Speaker 1: like gas prices in the region be way way higher,

67
00:03:09,160 --> 00:03:12,720
Speaker 1: so that could shift the inflation story back up again.

68
00:03:13,160 --> 00:03:14,839
Speaker 1: Um and so you know, be careful what you wish

69
00:03:14,880 --> 00:03:17,720
Speaker 1: for most and certainly and we were looking at the

70
00:03:17,840 --> 00:03:19,840
Speaker 1: trade data for Japan for the month of August, and

71
00:03:19,880 --> 00:03:22,000
Speaker 1: as a part of that, the import story was kind

72
00:03:22,000 --> 00:03:25,320
Speaker 1: of staggering again year over year in August of let's

73
00:03:25,320 --> 00:03:28,600
Speaker 1: call it fift I mean, a week end obviously is

74
00:03:28,639 --> 00:03:31,480
Speaker 1: at play here. It's inflating the value of commodity imports.

75
00:03:31,520 --> 00:03:36,440
Speaker 1: I mean, is Japan alone in this situation. Japan does

76
00:03:36,520 --> 00:03:39,000
Speaker 1: look quite special right at the moment. I mean also,

77
00:03:39,280 --> 00:03:42,880
Speaker 1: one of the things that differentiates Japan from some of

78
00:03:42,880 --> 00:03:46,480
Speaker 1: the other Asian economies is the timing of its reopening.

79
00:03:46,520 --> 00:03:49,760
Speaker 1: It's been slower, so we're still seeing that that reopening

80
00:03:49,800 --> 00:03:52,120
Speaker 1: feed through into things like imports at the moment where

81
00:03:52,160 --> 00:03:54,720
Speaker 1: that happened a lot earlier. In other parts of the

82
00:03:54,720 --> 00:03:57,880
Speaker 1: region where the reopening happened a lot sooner than than

83
00:03:57,880 --> 00:04:00,040
Speaker 1: it is happening right now, So that should just a

84
00:04:00,120 --> 00:04:03,160
Speaker 1: paint over over the time being. So We're continuing to

85
00:04:03,200 --> 00:04:07,400
Speaker 1: see these ambitious growth targets for China diminished being cut

86
00:04:07,520 --> 00:04:11,400
Speaker 1: by our forecasters. Do things change after the Party Congress?

87
00:04:11,440 --> 00:04:14,119
Speaker 1: Could we see a pivot away from dynamic zero which

88
00:04:14,120 --> 00:04:18,400
Speaker 1: could bode well for the economy. It's a great question.

89
00:04:18,440 --> 00:04:20,640
Speaker 1: I think a lot of people have been speculating that

90
00:04:20,640 --> 00:04:22,200
Speaker 1: that would be the case. But I mean, if you

91
00:04:22,200 --> 00:04:24,120
Speaker 1: look at what's going on on the ground right now,

92
00:04:24,160 --> 00:04:28,159
Speaker 1: there's very little evidence that the you know, the dynamic

93
00:04:29,400 --> 00:04:31,880
Speaker 1: zero COVID has really made that much of a difference.

94
00:04:31,880 --> 00:04:33,839
Speaker 1: We're still seeing sit is being shut down, We're still

95
00:04:33,839 --> 00:04:37,240
Speaker 1: seeing mass testing, and that's still weighing on retail sales

96
00:04:37,279 --> 00:04:40,320
Speaker 1: and a bunch of other economic activities. So the fingers crossed.

97
00:04:40,360 --> 00:04:42,920
Speaker 1: And there's a little bit of talk of things like

98
00:04:43,680 --> 00:04:46,600
Speaker 1: reducing quarantine periods yet further in Hong Kong, which may

99
00:04:46,680 --> 00:04:48,920
Speaker 1: just give us a hint that something's coming. But I

100
00:04:48,960 --> 00:04:51,000
Speaker 1: wouldn't want to count my chickens on this one. Yeah,

101
00:04:51,080 --> 00:04:54,080
Speaker 1: And the head of Moderna, Stefan bond Cell, was telling

102
00:04:54,160 --> 00:04:57,080
Speaker 1: Reuters that his company has been having discussions with Beijing

103
00:04:57,120 --> 00:05:00,280
Speaker 1: on providing those COVID nine Team m R and A

104
00:05:00,440 --> 00:05:03,640
Speaker 1: vaccines to China. That would be stunning were that to happen.

105
00:05:04,240 --> 00:05:06,800
Speaker 1: I'd like to get your reaction to some Bloomberg work

106
00:05:07,080 --> 00:05:11,000
Speaker 1: or economics team did some calculations and they've concluded that

107
00:05:11,200 --> 00:05:15,720
Speaker 1: reverligning property supply and demand in China will require about

108
00:05:15,800 --> 00:05:20,159
Speaker 1: a tent decline in construction and that would have a

109
00:05:20,240 --> 00:05:23,279
Speaker 1: severe impact on the economy on the mainland. Do you

110
00:05:23,279 --> 00:05:27,160
Speaker 1: think that's right? Yeah, the numbers out about right. I mean,

111
00:05:27,240 --> 00:05:30,400
Speaker 1: typically speaking, that property development sector used to provide you know,

112
00:05:30,520 --> 00:05:32,720
Speaker 1: up to a third of the actual growth in the

113
00:05:33,160 --> 00:05:36,440
Speaker 1: GDP numbers in previous years, and you take that away,

114
00:05:36,800 --> 00:05:39,680
Speaker 1: it's going to have a very substantial impact. And of

115
00:05:39,680 --> 00:05:43,480
Speaker 1: course it's not just the property sector that suppers. You

116
00:05:43,520 --> 00:05:46,760
Speaker 1: get the spillover effects to people making iron girders and

117
00:05:46,800 --> 00:05:49,400
Speaker 1: the polythene and the couple wiring, all the other stuff,

118
00:05:49,400 --> 00:05:51,800
Speaker 1: the white goods, all those things that go into new

119
00:05:51,839 --> 00:05:55,159
Speaker 1: properties and marble tops. It all feeds through. So it

120
00:05:55,200 --> 00:05:57,440
Speaker 1: has very, very wide reaching impacts if you're gonna have

121
00:05:57,480 --> 00:06:01,000
Speaker 1: a very very soft construction sector. We have got a

122
00:06:01,080 --> 00:06:04,560
Speaker 1: Bloomberg News story about Singapore coming back to life and

123
00:06:04,640 --> 00:06:07,880
Speaker 1: hotel rooms for f one surging past two thousand dollars

124
00:06:07,880 --> 00:06:10,719
Speaker 1: a night. I can tell you as a rental person

125
00:06:10,920 --> 00:06:13,880
Speaker 1: person paying rent in Singapore, it is very hefty there too.

126
00:06:13,960 --> 00:06:16,560
Speaker 1: How does the reopening theme across the likes of as

127
00:06:16,839 --> 00:06:19,480
Speaker 1: and play into your view of which economies are performing

128
00:06:19,520 --> 00:06:22,600
Speaker 1: incredibly well here because there is a dichonomy between these

129
00:06:22,600 --> 00:06:24,760
Speaker 1: countries that still have their borders closed, like Hong Kong

130
00:06:24,760 --> 00:06:29,160
Speaker 1: and China. Yeah. I mean that's the single big differentiator

131
00:06:29,720 --> 00:06:32,799
Speaker 1: amongst countries in the region. Those that are very open

132
00:06:32,839 --> 00:06:34,839
Speaker 1: are you know, pretty much back to normal. Any problem

133
00:06:34,880 --> 00:06:37,160
Speaker 1: is that, you know, we are hitting things like the

134
00:06:37,279 --> 00:06:39,880
Speaker 1: supply issues that you're talking about, and f one here

135
00:06:40,000 --> 00:06:42,159
Speaker 1: is a bit special um and so you know, we

136
00:06:42,200 --> 00:06:43,560
Speaker 1: haven't had that for a while. So I think that

137
00:06:43,640 --> 00:06:46,040
Speaker 1: is getting a lot of attention. I wouldn't want to

138
00:06:46,080 --> 00:06:49,160
Speaker 1: be booking any hotels right right now, Hey, Rob, a

139
00:06:49,240 --> 00:06:52,160
Speaker 1: big data dump in China tomorrow. Any surprises. I mean

140
00:06:52,200 --> 00:06:55,640
Speaker 1: we're talking home sales here, retail sales. I mean we're

141
00:06:55,680 --> 00:06:59,440
Speaker 1: looking for signs of some relative strength in the domestic economy.

142
00:06:59,480 --> 00:07:04,720
Speaker 1: Will you see any of that? I mean it depends, uh,

143
00:07:04,800 --> 00:07:07,240
Speaker 1: you know, whether your glass is half empty or halfful.

144
00:07:07,480 --> 00:07:09,520
Speaker 1: I think the numbers will look pretty similar to those

145
00:07:09,560 --> 00:07:11,400
Speaker 1: that we've got last month, and on balance you have

146
00:07:11,440 --> 00:07:14,320
Speaker 1: to say they were pretty weak. The construction side, of course,

147
00:07:14,400 --> 00:07:17,360
Speaker 1: is going to remain fairly awful. We'll have at least

148
00:07:17,360 --> 00:07:19,840
Speaker 1: a sort of positive retail sales figgure, but it won't

149
00:07:19,880 --> 00:07:22,360
Speaker 1: be it won't be anything alike you'd you'd expect to

150
00:07:22,400 --> 00:07:23,560
Speaker 1: see if you were going to hit a five and

151
00:07:23,640 --> 00:07:26,720
Speaker 1: hour percent growth rate. So that's uh, that's one way

152
00:07:26,720 --> 00:07:29,680
Speaker 1: of ever putting it. And the industrial production biga's investment,

153
00:07:29,720 --> 00:07:32,080
Speaker 1: I think they're all going to look fairly soggy. What

154
00:07:32,200 --> 00:07:34,960
Speaker 1: sort of further up policy action are you expecting and

155
00:07:35,040 --> 00:07:40,800
Speaker 1: and do we continue to see the defensively one here too? Uh, yeah,

156
00:07:40,840 --> 00:07:42,920
Speaker 1: that's a good question. I mean, I think the policy

157
00:07:42,960 --> 00:07:47,240
Speaker 1: actions are getting more limited. Monetary policies are awkward because

158
00:07:47,280 --> 00:07:49,000
Speaker 1: that does feed through into the you are and so

159
00:07:49,320 --> 00:07:51,960
Speaker 1: you know, we can't we're not expecting big cuts to

160
00:07:52,120 --> 00:07:55,920
Speaker 1: rates over the rest of the year. Likewise, the fiscal

161
00:07:56,000 --> 00:07:57,960
Speaker 1: attempts to try and get things going just seem like

162
00:07:58,000 --> 00:07:59,880
Speaker 1: they've run out of PEP. I mean, there's there's a

163
00:07:59,880 --> 00:08:02,560
Speaker 1: lot lots of exhortation of local governments to to use

164
00:08:02,640 --> 00:08:04,240
Speaker 1: funds and get things going, but you just get the

165
00:08:04,280 --> 00:08:06,920
Speaker 1: feeling they're kind of maxed out on all their zero

166
00:08:06,960 --> 00:08:09,120
Speaker 1: COVID policies and they just don't have that much more

167
00:08:09,200 --> 00:08:11,920
Speaker 1: room to move on these things. All right, Robie, thank

168
00:08:11,960 --> 00:08:13,760
Speaker 1: you as always, Rob kind of i n G Chief

169
00:08:13,760 --> 00:08:16,120
Speaker 1: economist in a head of Asia Pacific Research, joining us

170
00:08:16,240 --> 00:08:17,080
Speaker 1: from Singapore,