1 00:00:00,240 --> 00:00:07,720 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,600 --> 00:00:13,520 Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the 3 00:00:13,520 --> 00:00:15,840 Speaker 2: top stories in the coming week from our Daybreak anchors 4 00:00:15,880 --> 00:00:18,279 Speaker 2: all around the world. Straight Ahead on the program, we 5 00:00:18,320 --> 00:00:21,440 Speaker 2: look to how airlines could fare going forward. I'm Nathan 6 00:00:21,480 --> 00:00:22,640 Speaker 2: Hager in Washington. 7 00:00:22,800 --> 00:00:25,520 Speaker 3: I'm Caroline Hepke in London, where we're looking ahead to 8 00:00:25,600 --> 00:00:29,280 Speaker 3: a raft of tax changes in the UK at the 9 00:00:29,320 --> 00:00:31,280 Speaker 3: start of the new financial year. 10 00:00:31,520 --> 00:00:34,440 Speaker 4: I'm Doug Krisner, looking ahead to the latest price reports 11 00:00:34,479 --> 00:00:38,040 Speaker 4: for China and whether deflation is at a turning point. 12 00:00:38,400 --> 00:00:42,440 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:42,479 --> 00:00:46,160 Speaker 1: eleven three year, New York, Bloomberg ninety nine to one, Washington, DC, 14 00:00:46,680 --> 00:00:51,800 Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syrias, 15 00:00:51,960 --> 00:00:55,480 Speaker 1: XM one twenty one, and around the world on Bloomberg Radio, 16 00:00:55,520 --> 00:00:57,720 Speaker 1: dot Com and the Bloomberg Business App. 17 00:01:02,640 --> 00:01:05,280 Speaker 2: Good day to you. I'm Nathan Hager. We begin today's 18 00:01:05,319 --> 00:01:09,000 Speaker 2: program in the air earning season gets underway this week, 19 00:01:09,040 --> 00:01:13,560 Speaker 2: with Delta Airlines reporting its latest results on Wednesday. For 20 00:01:13,640 --> 00:01:15,720 Speaker 2: more on this and what to expect for the airline 21 00:01:15,760 --> 00:01:20,039 Speaker 2: industry as a whole. We're joined by George Ferguson, senior Airspace, 22 00:01:20,120 --> 00:01:24,080 Speaker 2: Defense and Airlines analyst for Bloomberg Intelligence. George, it's great 23 00:01:24,080 --> 00:01:27,280 Speaker 2: to speak with you ahead of the results from Delta. 24 00:01:27,319 --> 00:01:30,960 Speaker 2: How much could we see the outlook for this airline 25 00:01:31,200 --> 00:01:33,720 Speaker 2: affected by what we've seen over the last month of 26 00:01:34,000 --> 00:01:34,800 Speaker 2: war with Iran? 27 00:01:36,720 --> 00:01:39,400 Speaker 5: So thanks for having me on. I think that a 28 00:01:39,440 --> 00:01:43,280 Speaker 5: lot of the outlook and a lot of investor perspectives 29 00:01:43,400 --> 00:01:47,120 Speaker 5: on the airline will be a function of that war 30 00:01:47,640 --> 00:01:51,320 Speaker 5: in Iran and where it's at when earnings are reported. 31 00:01:51,840 --> 00:01:55,760 Speaker 5: How so, So I mean, you know, right now, I 32 00:01:55,800 --> 00:01:57,960 Speaker 5: think we're looking at a scenario where the streets are 33 00:01:58,000 --> 00:02:02,960 Speaker 5: Humus look effectively closed, right. I don't think they're physically closed, 34 00:02:03,400 --> 00:02:06,800 Speaker 5: but they look effectively closed, and the US may walk 35 00:02:06,800 --> 00:02:10,160 Speaker 5: away from the region without reopening it. Some of the 36 00:02:10,200 --> 00:02:13,120 Speaker 5: rhetoric are hearing, you know, out of the Trump administration now, 37 00:02:13,760 --> 00:02:18,840 Speaker 5: and so that is obviously going to play into where 38 00:02:18,880 --> 00:02:22,160 Speaker 5: fuel prices are going. Right, So I think as investors 39 00:02:22,200 --> 00:02:24,880 Speaker 5: go into those earnings, I think, you know, one queue 40 00:02:24,960 --> 00:02:26,920 Speaker 5: is just not going to matter as much. We know 41 00:02:27,000 --> 00:02:31,400 Speaker 5: fuel prices spiked, it's typically a week quarter, so you're 42 00:02:31,400 --> 00:02:34,320 Speaker 5: not going to spend a lot of time parsing those numbers. 43 00:02:34,360 --> 00:02:37,200 Speaker 5: My guess is that Delta will do a lot of 44 00:02:37,200 --> 00:02:40,400 Speaker 5: work to try to keep those earnings kind of in 45 00:02:40,440 --> 00:02:45,080 Speaker 5: a decent place by economizing on maintenance and things like that. 46 00:02:45,480 --> 00:02:47,720 Speaker 5: But again, investor is going to be really focused on 47 00:02:48,480 --> 00:02:51,440 Speaker 5: down the road. We're coming into summer travel season two 48 00:02:51,560 --> 00:02:55,520 Speaker 5: Q and three Q, and so if the price of 49 00:02:55,600 --> 00:02:59,160 Speaker 5: fuel remains high and even potentially goes higher because the 50 00:02:59,160 --> 00:03:02,040 Speaker 5: Straits are removes or closed and the US is pulling 51 00:03:02,040 --> 00:03:05,360 Speaker 5: out of the region, I think that you know, that 52 00:03:05,560 --> 00:03:09,840 Speaker 5: sets up a different demand dynamic for the summer, right. 53 00:03:10,360 --> 00:03:17,240 Speaker 5: I think that Delta's got a fairly well heeled flying 54 00:03:17,400 --> 00:03:22,040 Speaker 5: clientele that can manage an increase in prices twenty thirty 55 00:03:22,040 --> 00:03:25,560 Speaker 5: percent for tickets, But there will be some demand that 56 00:03:25,600 --> 00:03:30,000 Speaker 5: peels away, and so then the dance comes between size 57 00:03:30,040 --> 00:03:34,640 Speaker 5: and capacity correctly for what the new demand is in 58 00:03:34,680 --> 00:03:37,720 Speaker 5: a higher ticket price environment. Or if the US pulls 59 00:03:37,720 --> 00:03:40,520 Speaker 5: away from the Straits and the Iranians say, look, there's nobody, 60 00:03:41,080 --> 00:03:43,640 Speaker 5: there's nobody here to blame anymore. The US is gone, 61 00:03:44,280 --> 00:03:49,119 Speaker 5: We'll let tankers flow the global you know, oil prices 62 00:03:50,200 --> 00:03:54,200 Speaker 5: returned to sort of prewar level or at least you know, 63 00:03:54,320 --> 00:03:57,640 Speaker 5: descend a bit, don't continue to climb. You'll have a 64 00:03:57,720 --> 00:04:01,240 Speaker 5: much better outlook for so or flying season. So I 65 00:04:01,240 --> 00:04:08,400 Speaker 5: think everything everything rides on what the outcome of the 66 00:04:08,880 --> 00:04:12,440 Speaker 5: Iran sort of you know, war or fight, whatever you 67 00:04:12,440 --> 00:04:16,960 Speaker 5: want to call it, is into two Q and three Q, 68 00:04:17,560 --> 00:04:20,640 Speaker 5: and I think that's how investors will We'll look at 69 00:04:20,680 --> 00:04:23,520 Speaker 5: earnings and look at guidance through that lens. 70 00:04:24,120 --> 00:04:27,840 Speaker 2: Given that demand picture you just mentioned, the focus on 71 00:04:27,920 --> 00:04:30,480 Speaker 2: the premium traveler, does that put Delta in a better 72 00:04:30,480 --> 00:04:35,080 Speaker 2: position compared to some of the other major carriers, So. 73 00:04:35,080 --> 00:04:37,480 Speaker 5: We think so, right, We think that United in Delta 74 00:04:38,040 --> 00:04:42,400 Speaker 5: and to a lesser extent American have passengers, have client 75 00:04:42,440 --> 00:04:46,320 Speaker 5: tele that are going to want to travel despite changes 76 00:04:46,360 --> 00:04:49,560 Speaker 5: in prices. Right, So, I mean if fuel prices rise 77 00:04:49,600 --> 00:04:52,040 Speaker 5: by one hundred percent, which is kind of you know 78 00:04:52,240 --> 00:04:56,640 Speaker 5: where we were here as we closed out one Q. Look, 79 00:04:56,680 --> 00:05:00,279 Speaker 5: you know, typically these carriers twenty to thirty percent percent 80 00:05:00,560 --> 00:05:03,680 Speaker 5: of revenues to be consumed by fuel. So maybe the 81 00:05:03,680 --> 00:05:06,520 Speaker 5: way to think about it is that means that ticket 82 00:05:06,520 --> 00:05:11,120 Speaker 5: prices have to rise by what maybe twenty or thirty percent. 83 00:05:11,560 --> 00:05:15,039 Speaker 5: If you're you know, a fairly wealthy client, You're not 84 00:05:15,040 --> 00:05:17,279 Speaker 5: going to let twenty to thirty percent increases in in 85 00:05:17,320 --> 00:05:20,040 Speaker 5: your ticket price, right, five hundred to six hundred dollars 86 00:05:20,080 --> 00:05:23,719 Speaker 5: maybe to go to the West Coast, maybe maybe one 87 00:05:23,800 --> 00:05:25,680 Speaker 5: thousand to twelve hundred dollars to go to Europe. You're 88 00:05:25,680 --> 00:05:27,600 Speaker 5: not going to let that get in the way of 89 00:05:27,640 --> 00:05:31,080 Speaker 5: your travel plans. The people whose travel plans will get 90 00:05:31,240 --> 00:05:34,760 Speaker 5: interrupted by that are more of the basic economy traveler, 91 00:05:35,320 --> 00:05:40,360 Speaker 5: the travel that's probably flying you know, Spirit, Frontier, Jet Blue, 92 00:05:41,000 --> 00:05:45,080 Speaker 5: these kind of carriers, And I think that will exacerbate 93 00:05:45,160 --> 00:05:48,400 Speaker 5: this fight for the back of the airplane because because 94 00:05:48,560 --> 00:05:52,800 Speaker 5: United and Delta are filling their airplanes with a bunch 95 00:05:52,880 --> 00:05:56,160 Speaker 5: of premium travelers, but in the back of every United 96 00:05:56,160 --> 00:05:59,080 Speaker 5: Airline flight or Delta Airline flight is a little bit 97 00:05:59,200 --> 00:06:03,359 Speaker 5: of Spirit airline. It's a basic economy traveler, and the 98 00:06:03,400 --> 00:06:05,719 Speaker 5: fight will go on to get them in the airplane 99 00:06:05,760 --> 00:06:08,120 Speaker 5: at least to cover marginal costs. 100 00:06:08,560 --> 00:06:10,640 Speaker 2: Thank you for this, George, again, great having you on 101 00:06:10,680 --> 00:06:14,000 Speaker 2: with us. That's a Bloomberg Intelligence Senior Aerospace, Defense and 102 00:06:14,080 --> 00:06:17,880 Speaker 2: Airlines analyst, George Ferguson. Let's take a look now at 103 00:06:17,920 --> 00:06:20,520 Speaker 2: some stocks making news in the week ahead. I'm Nathan Hager, 104 00:06:20,640 --> 00:06:25,000 Speaker 2: joined by Bloomberg Markets Live strategist Tatiana Daria. I guess 105 00:06:25,040 --> 00:06:27,560 Speaker 2: we could say this is the unofficial start of earning 106 00:06:27,600 --> 00:06:30,400 Speaker 2: season before the banks get things going right. We've got 107 00:06:30,400 --> 00:06:35,760 Speaker 2: a few companies opening things up, including Constellation Brands on Wednesday. 108 00:06:36,320 --> 00:06:39,080 Speaker 2: It's been a tough go for the booze business, hasn't it? 109 00:06:39,720 --> 00:06:44,040 Speaker 6: Yes, exactly. Expectations aren't very high here for the company, 110 00:06:44,080 --> 00:06:47,159 Speaker 6: but some analysts on Wall Street are starting to warm 111 00:06:47,240 --> 00:06:50,560 Speaker 6: up to the stock on valuation concerns, saying that a 112 00:06:50,560 --> 00:06:53,120 Speaker 6: lot of the bad news is already in the stock. 113 00:06:53,240 --> 00:06:57,080 Speaker 6: So Bloomberg Intelligence forecast at net revenue will fall about 114 00:06:57,120 --> 00:07:02,040 Speaker 6: fifteen percent do mainly to their whine and spirits portfolio devestments. 115 00:07:02,520 --> 00:07:07,279 Speaker 6: But they're also anticipating some sluggishness in the beer segment, 116 00:07:07,320 --> 00:07:11,440 Speaker 6: which is obviously their main driver or crown a jewel 117 00:07:11,520 --> 00:07:16,240 Speaker 6: there and especially among Hispanic consumers. BI notes, but some 118 00:07:16,320 --> 00:07:19,120 Speaker 6: analysts are saying that most of that is already in 119 00:07:19,120 --> 00:07:22,160 Speaker 6: the price. Perhaps, you know, the beer segment has room 120 00:07:22,240 --> 00:07:26,960 Speaker 6: to surprise to the upside. We've seen JP Morgan lifting 121 00:07:27,000 --> 00:07:30,920 Speaker 6: their price target. We've seen Evercore adding the stock to 122 00:07:30,960 --> 00:07:35,200 Speaker 6: the Tactical Outperformed list, and it also got an upgrade 123 00:07:35,200 --> 00:07:41,480 Speaker 6: from City earlier this month, citing evaluation that's below historical levels, 124 00:07:41,520 --> 00:07:44,720 Speaker 6: and if you look at the forward price to earnings ratio, 125 00:07:44,880 --> 00:07:49,080 Speaker 6: it has indeed fallen drastically. It's hovering around the lowest 126 00:07:49,160 --> 00:07:53,280 Speaker 6: since twenty twelve now as shares have come down sharply 127 00:07:53,320 --> 00:07:54,120 Speaker 6: over the past year. 128 00:07:54,440 --> 00:07:59,000 Speaker 2: Yeah, valuation concern certainly speaks to that. There before we 129 00:07:59,080 --> 00:08:01,720 Speaker 2: hear from constantly, we're going to get results as well 130 00:08:01,720 --> 00:08:05,440 Speaker 2: from Levi Strauss on Tuesday. Of course, we got that 131 00:08:05,760 --> 00:08:09,240 Speaker 2: big disappointment from Nike this past week. Do you put 132 00:08:09,600 --> 00:08:12,880 Speaker 2: Levi in the same category as Nike in terms of 133 00:08:12,880 --> 00:08:13,880 Speaker 2: what to expect there? 134 00:08:14,240 --> 00:08:17,000 Speaker 6: I think one has to, right because they both speak 135 00:08:17,160 --> 00:08:21,560 Speaker 6: to the consumer. They're both sort of discretionary brands that 136 00:08:21,640 --> 00:08:24,720 Speaker 6: you turn to for sort of luxury and comfort, not 137 00:08:24,800 --> 00:08:30,400 Speaker 6: necessarily because you really need to. And expectations are pretty 138 00:08:30,560 --> 00:08:34,840 Speaker 6: I would say modestly positive. Ubs, for example, expects a 139 00:08:35,040 --> 00:08:38,960 Speaker 6: fourth quarter sales and EPs beat, though they say the 140 00:08:39,040 --> 00:08:43,080 Speaker 6: company may remain cautious on a full year outlook amid 141 00:08:43,280 --> 00:08:46,920 Speaker 6: the macro as certainly, just like we've seen with Nike, 142 00:08:47,360 --> 00:08:50,160 Speaker 6: they know that the US direct to consumer sales likely 143 00:08:50,240 --> 00:08:53,040 Speaker 6: rose about two percent year over year, and that web 144 00:08:53,080 --> 00:08:56,400 Speaker 6: traffic likely increased even more in the US according to 145 00:08:56,520 --> 00:09:01,280 Speaker 6: their industry data that they track. Nonetheless, the company may 146 00:09:01,360 --> 00:09:05,080 Speaker 6: choose to just be cautious and conservative and not raise 147 00:09:05,120 --> 00:09:09,559 Speaker 6: their guidance despite the likely beat. And that's because of 148 00:09:09,600 --> 00:09:12,559 Speaker 6: the reasons that we have seen with the Nike report, 149 00:09:12,679 --> 00:09:16,839 Speaker 6: with potential fresh setbacks in Europe and the Middle East, 150 00:09:17,360 --> 00:09:21,439 Speaker 6: regions that are obviously heavily exposed to the energy costs 151 00:09:22,000 --> 00:09:24,600 Speaker 6: and just the disruptions coming from the year round war. 152 00:09:24,920 --> 00:09:27,720 Speaker 2: Now, were you expecting any further commentary from Levi around 153 00:09:27,800 --> 00:09:30,880 Speaker 2: how they're dealing with trade uncertainty as well after that 154 00:09:31,200 --> 00:09:35,240 Speaker 2: Supreme Court tariff decision and some of the uncertainty around 155 00:09:35,679 --> 00:09:38,160 Speaker 2: how the president might try to rebuild that terrafall and 156 00:09:38,200 --> 00:09:39,600 Speaker 2: how that could affect its business. 157 00:09:40,440 --> 00:09:44,600 Speaker 6: Yes, certainly, you know, tariffs is sort of fallen off 158 00:09:44,640 --> 00:09:48,800 Speaker 6: the radar, but when you look at company earnings, especially 159 00:09:48,840 --> 00:09:52,720 Speaker 6: in the consumer space, it is still a big focus. 160 00:09:53,160 --> 00:09:56,440 Speaker 6: So it will be really interesting to see what the 161 00:09:56,480 --> 00:09:58,120 Speaker 6: company has to say on that matter. 162 00:09:58,400 --> 00:10:02,800 Speaker 2: Yeah, and of course earnings take off with Delta Airlines 163 00:10:02,920 --> 00:10:05,560 Speaker 2: on Wednesday. What kind of a stock move could we 164 00:10:05,679 --> 00:10:07,920 Speaker 2: see following those results? Ta Tiana. 165 00:10:08,080 --> 00:10:11,480 Speaker 6: Well, what it's interesting with Delta Air is that they 166 00:10:11,920 --> 00:10:14,640 Speaker 6: kind of have been the exception among the airlines. It 167 00:10:15,200 --> 00:10:19,240 Speaker 6: is the only airlines stock bucking the weakness among major 168 00:10:19,280 --> 00:10:22,199 Speaker 6: peers since the war started. If you look at an 169 00:10:22,200 --> 00:10:26,600 Speaker 6: index of an industry index, that index has fallen into 170 00:10:26,640 --> 00:10:30,720 Speaker 6: a bear market recently, but Delta shares have actually gained 171 00:10:30,840 --> 00:10:34,920 Speaker 6: three percent since the war started. And maybe because the 172 00:10:34,960 --> 00:10:38,560 Speaker 6: company has already set a positive tone for its earnings 173 00:10:38,600 --> 00:10:42,360 Speaker 6: report after issuing a more optimistic sales target at a 174 00:10:42,400 --> 00:10:46,439 Speaker 6: recent conference, saying that bookings for leisure and corporate customers 175 00:10:46,480 --> 00:10:50,680 Speaker 6: accelerated into March. Actually, and they say they are very 176 00:10:50,679 --> 00:10:54,200 Speaker 6: well positioned to navigate the current environment at the time 177 00:10:54,760 --> 00:10:59,240 Speaker 6: when elevated fuel prices are roiling the industry. And it 178 00:10:59,320 --> 00:11:02,599 Speaker 6: looks like investors are giving Delta the benefit of the 179 00:11:02,720 --> 00:11:06,160 Speaker 6: doubt here. But obviously things change very fast these days, 180 00:11:06,320 --> 00:11:09,040 Speaker 6: so it will be interesting to see how their views 181 00:11:09,040 --> 00:11:12,600 Speaker 6: have changed since they issued that update about two weeks 182 00:11:12,640 --> 00:11:13,439 Speaker 6: for two weeks. 183 00:11:13,240 --> 00:11:15,720 Speaker 2: Ago from now, yeah, absolutely, while we wait for updates 184 00:11:15,720 --> 00:11:18,680 Speaker 2: around the war and how that could develop as well. 185 00:11:18,720 --> 00:11:22,120 Speaker 2: I mean, what kind of changes could we see? What 186 00:11:22,160 --> 00:11:25,559 Speaker 2: are you listening for, particularly from the call from Delta. 187 00:11:25,360 --> 00:11:30,760 Speaker 6: Later on, I'll be listening on clues about the consumer 188 00:11:31,240 --> 00:11:37,880 Speaker 6: right because obviously travel is a discretionary category. Most of 189 00:11:37,960 --> 00:11:40,680 Speaker 6: us do it for fun, for vacations, So I'll be 190 00:11:40,720 --> 00:11:44,760 Speaker 6: interested to see if they have seen a pullback from 191 00:11:44,880 --> 00:11:48,600 Speaker 6: consumers specifically, because if you look at alternative data on 192 00:11:48,640 --> 00:11:51,640 Speaker 6: the Bloomberg as it relates to that, yes, it showed 193 00:11:51,640 --> 00:11:55,600 Speaker 6: that airline spending is hanging in there, but hotel spending 194 00:11:56,240 --> 00:12:01,000 Speaker 6: has sort of fallen off here in recent so I'd 195 00:12:01,000 --> 00:12:03,880 Speaker 6: be sort of curious to see how much is that 196 00:12:03,960 --> 00:12:04,960 Speaker 6: impacting airlines. 197 00:12:05,000 --> 00:12:08,840 Speaker 2: Already, here we go for earning season for Q one. 198 00:12:09,000 --> 00:12:13,199 Speaker 2: Thank you for this, Bloomberg Markets Live Strategist Tatiana Daria, 199 00:12:13,400 --> 00:12:15,719 Speaker 2: And coming up on Bloomberg day Break Weekend, we'll look 200 00:12:15,720 --> 00:12:18,920 Speaker 2: ahead to the new tax year in the UK starting 201 00:12:18,960 --> 00:12:34,000 Speaker 2: April sixth. I'm Nathan Hager, and this is Bloomberg. This 202 00:12:34,080 --> 00:12:36,920 Speaker 2: is Bloomberg Day Break Weekend, our global look ahead at 203 00:12:36,920 --> 00:12:39,439 Speaker 2: the top stories for investors in the coming week. I'm 204 00:12:39,480 --> 00:12:42,400 Speaker 2: Nathan Hager in Washington. Up later in our program, we'll 205 00:12:42,400 --> 00:12:45,600 Speaker 2: look to some key economic data in China. But first 206 00:12:45,679 --> 00:12:47,840 Speaker 2: it is now the new tax year in the UK 207 00:12:48,040 --> 00:12:51,400 Speaker 2: running from April, and it's about to bring major changes 208 00:12:51,440 --> 00:12:54,640 Speaker 2: in taxation and employment rights. Many of them were announced 209 00:12:54,720 --> 00:12:58,480 Speaker 2: last November by UK Chancellor Rachel Reeves. But they land 210 00:12:58,840 --> 00:13:02,680 Speaker 2: just as Britain's growth outlook is deteriorating. Let's go to 211 00:13:02,760 --> 00:13:05,320 Speaker 2: London and get more from Bloomberg day Break europe banker 212 00:13:05,400 --> 00:13:07,040 Speaker 2: Caroline hepger Nathan. 213 00:13:07,080 --> 00:13:09,400 Speaker 3: The tax here in Britain begins on the sixth of 214 00:13:09,440 --> 00:13:11,679 Speaker 3: April and twenty twenty six is going to bring in 215 00:13:11,760 --> 00:13:16,360 Speaker 3: a lot of changes for workers, employers, landlords, business owners 216 00:13:16,480 --> 00:13:20,920 Speaker 3: and investors. The Employment Rights Act starts to come into force. 217 00:13:20,960 --> 00:13:24,600 Speaker 3: That's the biggest change in employment law in decades, designed 218 00:13:24,600 --> 00:13:28,320 Speaker 3: to protect those in low paying or insecure jobs. Also, 219 00:13:28,360 --> 00:13:31,440 Speaker 3: there are a number of tax increases due to tax 220 00:13:31,559 --> 00:13:36,160 Speaker 3: thresholds to dividend and capital gains tax changes. All of 221 00:13:36,200 --> 00:13:39,640 Speaker 3: this part of the Chancellor's so called Smallger's Board budget 222 00:13:40,000 --> 00:13:43,200 Speaker 3: from last autumn. Plus there's an increase in the state 223 00:13:43,280 --> 00:13:47,600 Speaker 3: pension age and higher welfare payments for retirees, people on 224 00:13:47,679 --> 00:13:50,840 Speaker 3: low income, those out of work were unable to work. 225 00:13:51,200 --> 00:13:54,559 Speaker 3: But will it help Britain's economy and workers. Do you 226 00:13:54,600 --> 00:13:54,920 Speaker 3: know what I mean? 227 00:13:54,960 --> 00:13:55,040 Speaker 7: Now? 228 00:13:55,080 --> 00:13:59,160 Speaker 3: As John Steppeck, editor of Bloomberg's award winning Money Distilled newsletter, 229 00:13:59,559 --> 00:14:03,240 Speaker 3: there are so many changes John, that are coming in 230 00:14:03,280 --> 00:14:06,599 Speaker 3: this new financial year in Britain that we're going to 231 00:14:06,679 --> 00:14:09,600 Speaker 3: have to break them all down. So let's start first 232 00:14:10,200 --> 00:14:13,680 Speaker 3: with the changes that are coming under the Employment Rights 233 00:14:13,760 --> 00:14:17,080 Speaker 3: Act of twenty twenty five. This is the so called 234 00:14:17,520 --> 00:14:22,160 Speaker 3: day one employment rights legislation from the Labor government. What 235 00:14:22,280 --> 00:14:24,560 Speaker 3: does it involve and why is it being brought in? 236 00:14:25,320 --> 00:14:27,320 Speaker 8: Well, this one, I mean, this has been brought in 237 00:14:27,560 --> 00:14:31,680 Speaker 8: just to enhanced protections for work case. Now, whether you 238 00:14:31,840 --> 00:14:35,720 Speaker 8: think that is necessary or whether you think we've already 239 00:14:35,840 --> 00:14:38,560 Speaker 8: got in off, it's a different question that will depend 240 00:14:38,600 --> 00:14:42,920 Speaker 8: your politics. But from April the sixth, we're getting day 241 00:14:42,960 --> 00:14:45,320 Speaker 8: one rates to paternity leave. So at the moment you 242 00:14:45,360 --> 00:14:47,880 Speaker 8: have to be with a company for twenty six weeks 243 00:14:48,200 --> 00:14:50,800 Speaker 8: six months, that's been reduced to the FoST day. There's 244 00:14:50,880 --> 00:14:54,360 Speaker 8: extended six p rates, so at the moment you're not 245 00:14:54,520 --> 00:14:57,800 Speaker 8: due statutory sick p until the fourth day your illness. 246 00:14:58,040 --> 00:15:00,480 Speaker 8: Let's all kick in from the FoST day now, to 247 00:15:00,520 --> 00:15:03,480 Speaker 8: be fair enough, A lot of employers don't actually rely 248 00:15:03,560 --> 00:15:06,320 Speaker 8: on statutory sick pay. It is something you just get 249 00:15:06,320 --> 00:15:09,200 Speaker 8: paid your wage. But that's that's something that if your 250 00:15:09,240 --> 00:15:13,640 Speaker 8: employer does that, and there's some tweaks to collective redundancy rules, 251 00:15:13,720 --> 00:15:16,160 Speaker 8: so if they don't do that properly, they've kind of 252 00:15:16,200 --> 00:15:18,920 Speaker 8: double the amount of time you can claim front fair dismissal. 253 00:15:19,800 --> 00:15:23,480 Speaker 8: They've added sexual harassment to the whistle blowing guidelines. There's 254 00:15:23,560 --> 00:15:27,080 Speaker 8: various bits and pieces. Some of the kind of punchier 255 00:15:27,160 --> 00:15:30,880 Speaker 8: stuff has been delayed, I think partly because obviously employers 256 00:15:30,960 --> 00:15:33,120 Speaker 8: need a bit more time to adjust. So one of 257 00:15:33,160 --> 00:15:37,360 Speaker 8: the major things was, at the moment, you can be 258 00:15:37,440 --> 00:15:40,320 Speaker 8: employed for up to two years and not be able 259 00:15:40,320 --> 00:15:43,040 Speaker 8: to claim unfair dismissal. So in effect, you can you 260 00:15:43,080 --> 00:15:45,120 Speaker 8: can need someone out the door if they're not working 261 00:15:45,840 --> 00:15:48,480 Speaker 8: without having to go through that kind of massive process. 262 00:15:48,800 --> 00:15:51,240 Speaker 8: That's going to get reduced to six months. And that 263 00:15:51,280 --> 00:15:54,000 Speaker 8: was one of the more controversial changes because you know, 264 00:15:54,400 --> 00:15:59,040 Speaker 8: it's it will make life more complicated hiring wise. But 265 00:15:59,200 --> 00:16:00,960 Speaker 8: that yeah, so that's why be had at the moment. 266 00:16:02,120 --> 00:16:05,040 Speaker 8: Yeah no, so yeah, so that's what's kicking in for me. 267 00:16:05,080 --> 00:16:07,000 Speaker 3: April the sixth Yeah, So that's in terms of the 268 00:16:07,080 --> 00:16:11,240 Speaker 3: Employment Rights Act, which trade unions like the TUC and 269 00:16:11,320 --> 00:16:13,920 Speaker 3: others see as benefiting workers in terms of their health 270 00:16:14,160 --> 00:16:18,680 Speaker 3: and they're wellbeing. As for the other major tax changes, 271 00:16:18,800 --> 00:16:23,000 Speaker 3: so we know that income taxes are going to effectively 272 00:16:23,040 --> 00:16:26,400 Speaker 3: go up because of fiscal drag, right, so we have 273 00:16:26,480 --> 00:16:29,280 Speaker 3: to think about that in terms of the tax changes 274 00:16:29,320 --> 00:16:30,240 Speaker 3: as being a big one. 275 00:16:30,360 --> 00:16:30,560 Speaker 6: Yeah. 276 00:16:30,560 --> 00:16:32,880 Speaker 8: I think that's really important, and I'm glad you brought 277 00:16:32,880 --> 00:16:37,520 Speaker 8: that up because nothing's changed technically, but that's the basic problem. 278 00:16:37,840 --> 00:16:40,600 Speaker 8: So if you've had a pay raise that is ce 279 00:16:40,720 --> 00:16:44,280 Speaker 8: has gone up with inflation this year, then that means 280 00:16:44,320 --> 00:16:47,320 Speaker 8: that your wages obviously have gone up. But the problem 281 00:16:47,400 --> 00:16:49,800 Speaker 8: is that fiscal drag means the income tax, So the 282 00:16:49,880 --> 00:16:52,880 Speaker 8: income tax thresholds have been frozen, so it means that 283 00:16:53,440 --> 00:16:56,360 Speaker 8: for every extra pound that you get, you're being put 284 00:16:56,360 --> 00:17:00,520 Speaker 8: anty a different tax bracket effectively. So the moment you 285 00:17:00,520 --> 00:17:02,960 Speaker 8: can add up to twelve five hundred and seventy pounds 286 00:17:03,000 --> 00:17:06,160 Speaker 8: and that's your personal allowance, above that you pay twenty 287 00:17:06,200 --> 00:17:09,840 Speaker 8: percent tax. Above fifty two hundred and seventy you pay 288 00:17:09,880 --> 00:17:12,320 Speaker 8: forty percent tax, and then above one hundred and twenty 289 00:17:12,359 --> 00:17:16,159 Speaker 8: five one forty you pay forty five percent tax. The 290 00:17:16,200 --> 00:17:19,240 Speaker 8: point is that's been frozen for several years now, so 291 00:17:19,400 --> 00:17:22,680 Speaker 8: more and moarriors are getting dragged into higher rate tax bands. 292 00:17:23,080 --> 00:17:25,080 Speaker 8: And then the kind of proportion of people who would 293 00:17:25,080 --> 00:17:29,440 Speaker 8: once have been considered not to be high way journals 294 00:17:29,560 --> 00:17:32,600 Speaker 8: like you know, nurseis people like that are increasingly being 295 00:17:32,680 --> 00:17:34,960 Speaker 8: dragged more and more of them into the forty percent 296 00:17:35,000 --> 00:17:37,480 Speaker 8: band and even a bit higher up. You know, some 297 00:17:37,520 --> 00:17:40,119 Speaker 8: people are getting pulled into the forty five percent band 298 00:17:40,320 --> 00:17:43,240 Speaker 8: they wouldn't once have been considered, you know, super wealthy, 299 00:17:43,440 --> 00:17:46,040 Speaker 8: and that's just that's pure inflation. So it's a tax 300 00:17:46,119 --> 00:17:50,560 Speaker 8: on inflation. Your living standard has not improved because your 301 00:17:50,600 --> 00:17:53,119 Speaker 8: wages are buying you the same amount of stuff, but 302 00:17:53,200 --> 00:17:55,439 Speaker 8: you're getting tax more on it. So actually, yeah, if 303 00:17:55,480 --> 00:17:57,600 Speaker 8: you've only had an inflation pay rise, if you've even 304 00:17:57,680 --> 00:18:01,200 Speaker 8: had an inflation pay rise this year, actually wash off. 305 00:18:02,000 --> 00:18:04,280 Speaker 8: And so fiscal drag is pretty brutal, and there REases 306 00:18:04,320 --> 00:18:07,159 Speaker 8: the government a good amount of money. Yeah, so I 307 00:18:07,160 --> 00:18:08,800 Speaker 8: can see why the foind of it. 308 00:18:09,080 --> 00:18:13,439 Speaker 3: Yeah, absolutely, So that's one big change. Then one that 309 00:18:13,480 --> 00:18:16,040 Speaker 3: we've had more advertising is not a lot of advertising 310 00:18:16,080 --> 00:18:19,080 Speaker 3: about a fiscal drive. But there is about this change 311 00:18:19,400 --> 00:18:24,159 Speaker 3: which is making tax digital, which requires self employed workers 312 00:18:24,240 --> 00:18:27,800 Speaker 3: and landlord to earn over a certain money through their 313 00:18:27,840 --> 00:18:32,720 Speaker 3: business or through rental to keep more records. So there's 314 00:18:32,720 --> 00:18:36,159 Speaker 3: going to be more frequent sort of interactions between you 315 00:18:36,280 --> 00:18:37,560 Speaker 3: and the tax authorities. 316 00:18:37,720 --> 00:18:40,520 Speaker 8: Yeah, so if you're doing over fifty thousand pounds as 317 00:18:40,560 --> 00:18:42,680 Speaker 8: a soul trade or aligned lord, then you're going to 318 00:18:42,760 --> 00:18:46,120 Speaker 8: have to start failing digitally. And I mean the big 319 00:18:46,160 --> 00:18:50,800 Speaker 8: issue here is basically admin and a compliance button, so 320 00:18:51,040 --> 00:18:53,840 Speaker 8: you have to get used to the software. The software costs, 321 00:18:53,880 --> 00:18:55,280 Speaker 8: I mean, I kind of the last thing I saw 322 00:18:55,400 --> 00:18:58,680 Speaker 8: was about four hundred to five hundred pounds. A lot 323 00:18:58,720 --> 00:19:01,879 Speaker 8: of people will probably want to ask an accountant to 324 00:19:02,200 --> 00:19:04,440 Speaker 8: sort this out for them because it's you know, it's 325 00:19:04,480 --> 00:19:09,320 Speaker 8: a fave, And I guess the benefit is probably arguably 326 00:19:09,320 --> 00:19:12,800 Speaker 8: mostly on the tax blank side. I mean, you could 327 00:19:12,920 --> 00:19:16,159 Speaker 8: argue that it gives you proay slightly more visibility on 328 00:19:16,200 --> 00:19:18,240 Speaker 8: what your tax bill is likely to be, but to 329 00:19:18,280 --> 00:19:20,840 Speaker 8: be honest, if we keep half decent accounts should probably 330 00:19:20,840 --> 00:19:23,840 Speaker 8: be on top of that already. I would say it's 331 00:19:23,920 --> 00:19:27,280 Speaker 8: another compliance budden on small business more than it is 332 00:19:27,359 --> 00:19:30,160 Speaker 8: a beneficial change. 333 00:19:30,840 --> 00:19:33,879 Speaker 3: Overall, and this is only a few of the changes. 334 00:19:34,400 --> 00:19:37,560 Speaker 3: Do we know how all of these changes are actually 335 00:19:37,560 --> 00:19:39,800 Speaker 3: going to affect the economy? 336 00:19:40,440 --> 00:19:43,640 Speaker 8: Well, the problem is, you can look at these changes, 337 00:19:44,280 --> 00:19:46,879 Speaker 8: you can probably make a case on the basis of 338 00:19:47,000 --> 00:19:50,920 Speaker 8: you know, fairness or particular interest group as to why 339 00:19:51,080 --> 00:19:52,760 Speaker 8: or this is a good thing. You know, but this 340 00:19:53,400 --> 00:19:55,679 Speaker 8: we should be doing this. We should be giving people 341 00:19:56,040 --> 00:19:58,359 Speaker 8: poternality to leave from day one, all of that sort 342 00:19:58,359 --> 00:20:01,280 Speaker 8: of stuff. The problem is, though, the you're starting to 343 00:20:01,520 --> 00:20:06,760 Speaker 8: kind of push even more compliance costs onto Yeah, small 344 00:20:06,800 --> 00:20:10,080 Speaker 8: businesses and large businesses, but large businesses are usually set 345 00:20:10,160 --> 00:20:12,520 Speaker 8: up for this kind of thing already. They can swallow 346 00:20:12,560 --> 00:20:15,320 Speaker 8: the costs. And you know, this is coming at a 347 00:20:15,320 --> 00:20:18,480 Speaker 8: time when the labor market in the UK is kind 348 00:20:18,520 --> 00:20:22,520 Speaker 8: of turning down, cooling off. We've already seen a massive 349 00:20:22,600 --> 00:20:26,159 Speaker 8: kind of minimum wage. There's another one coming in at 350 00:20:26,160 --> 00:20:28,920 Speaker 8: the same time. And you know, but we were saying 351 00:20:28,960 --> 00:20:31,399 Speaker 8: kind of like young people struggling to get jobs basically 352 00:20:31,400 --> 00:20:36,200 Speaker 8: because they are too expensive to hire. And I mean 353 00:20:36,200 --> 00:20:38,199 Speaker 8: this is don't get me wrong, It's not just about that. 354 00:20:38,240 --> 00:20:41,440 Speaker 8: We're also we've got a hangover from COVID still, so 355 00:20:41,600 --> 00:20:45,160 Speaker 8: you know, during COVID. The labor market was massively disrupted 356 00:20:45,200 --> 00:20:48,600 Speaker 8: because obviously the leisure industry was shut down and then 357 00:20:48,680 --> 00:20:51,800 Speaker 8: it reopened and everyone had found other jobs elsewhere, so 358 00:20:51,880 --> 00:20:53,840 Speaker 8: they had to hire, you know, and pay more to 359 00:20:53,920 --> 00:20:56,280 Speaker 8: hire people at that point. And I think we're actually 360 00:20:56,320 --> 00:20:59,320 Speaker 8: still going through that sort of like corrective phase now. 361 00:20:59,560 --> 00:21:01,800 Speaker 8: The problem is making it very hard for anyone either 362 00:21:01,800 --> 00:21:03,760 Speaker 8: getting out of UNI or it just wants a kind 363 00:21:03,800 --> 00:21:06,960 Speaker 8: of part time job to find work because again it's 364 00:21:06,960 --> 00:21:11,320 Speaker 8: become too expensive and this sort of extra compliance buton 365 00:21:11,440 --> 00:21:14,520 Speaker 8: and also the awareness that there's more to come is 366 00:21:14,560 --> 00:21:18,280 Speaker 8: going to put employers off taking people on even more. 367 00:21:18,880 --> 00:21:21,760 Speaker 8: So I do think it's it's not the ideal time 368 00:21:21,800 --> 00:21:24,639 Speaker 8: to be doing this, even if you agreed with the 369 00:21:24,760 --> 00:21:28,320 Speaker 8: kind of underlying, you know, kind of principle, and I 370 00:21:28,320 --> 00:21:33,280 Speaker 8: think a lot of it's arguably driven by ideology more 371 00:21:33,320 --> 00:21:38,159 Speaker 8: than practicality. I mean, obviously labor is kind of funded 372 00:21:38,160 --> 00:21:41,360 Speaker 8: by the trade unions to a great extent. Again, nothing 373 00:21:41,440 --> 00:21:43,439 Speaker 8: necessarily wrong with that, but means they're going to operate 374 00:21:43,520 --> 00:21:46,800 Speaker 8: in you know, in line with what they want. And 375 00:21:46,840 --> 00:21:49,560 Speaker 8: the problem is that it's all very well, but it's 376 00:21:49,600 --> 00:21:52,280 Speaker 8: great having worker protections if you've got a job, but 377 00:21:52,320 --> 00:21:54,080 Speaker 8: if it makes it harder for you to get a job, 378 00:21:54,119 --> 00:21:56,800 Speaker 8: it's not so great. Yeah, it's a similar thing with 379 00:21:56,960 --> 00:21:59,520 Speaker 8: the actually the renter's rights. But you know, one of 380 00:21:59,560 --> 00:22:02,000 Speaker 8: the problems that is that is if you're already a 381 00:22:02,119 --> 00:22:04,160 Speaker 8: rent up your phine, it's going to make it hard 382 00:22:04,200 --> 00:22:08,159 Speaker 8: dot actually get a flat because landlords are going to 383 00:22:08,200 --> 00:22:09,680 Speaker 8: be more locked in and they're going to be much 384 00:22:09,680 --> 00:22:13,800 Speaker 8: more care for about people. 385 00:22:13,960 --> 00:22:19,520 Speaker 3: Yeah. I haven't even got into the from the first 386 00:22:19,520 --> 00:22:21,600 Speaker 3: of May, not the sixth of April, but you are 387 00:22:21,720 --> 00:22:25,520 Speaker 3: right to bring it up because the Renters Reform Act 388 00:22:25,680 --> 00:22:29,560 Speaker 3: is all about limiting competition, for example, bidding wars for 389 00:22:30,000 --> 00:22:34,199 Speaker 3: flats or apartments or homes. It also limits the amount 390 00:22:34,200 --> 00:22:37,000 Speaker 3: that you can increase the rent buy if you are 391 00:22:37,040 --> 00:22:41,080 Speaker 3: a landlord. So there are beneficial things for renters, which 392 00:22:41,119 --> 00:22:44,320 Speaker 3: perhaps again would if politically the Labor Party wants to 393 00:22:44,359 --> 00:22:47,520 Speaker 3: discuss that, then surely that might be a positive. But 394 00:22:47,680 --> 00:22:49,640 Speaker 3: as you say, if you can't get an apartment, then 395 00:22:49,680 --> 00:22:52,720 Speaker 3: it's a problem. There are lots of other tax changes. 396 00:22:52,800 --> 00:22:55,840 Speaker 3: Some have had lots of attention, like the change to 397 00:22:55,960 --> 00:23:00,359 Speaker 3: inheritance tax on family businesses and farms, like the changenges 398 00:23:00,440 --> 00:23:04,240 Speaker 3: to dividend and capital gains taxes, which have had quite 399 00:23:04,280 --> 00:23:07,879 Speaker 3: a bit of attention i'd say from investors because again 400 00:23:08,080 --> 00:23:11,919 Speaker 3: they're rashting up the tax. Take the Chancellor you know, 401 00:23:12,160 --> 00:23:15,800 Speaker 3: wants to increase the revenue from that. What is it 402 00:23:15,880 --> 00:23:16,879 Speaker 3: going to mean for people? 403 00:23:17,400 --> 00:23:19,479 Speaker 8: Well, the things I mean, so the dividend tax has 404 00:23:19,520 --> 00:23:22,000 Speaker 8: going up by two percentage points and the basical rate 405 00:23:22,119 --> 00:23:25,280 Speaker 8: and the higher rate additional rates staying the same because 406 00:23:25,320 --> 00:23:27,439 Speaker 8: if it went up any further it would basically almost 407 00:23:27,440 --> 00:23:31,160 Speaker 8: be inlane because the end tax straight and I mean 408 00:23:31,800 --> 00:23:35,640 Speaker 8: there's not I mean beyond using your tax shells, there's 409 00:23:35,720 --> 00:23:38,000 Speaker 8: basically that you can do. But that's except for swallow 410 00:23:38,040 --> 00:23:42,680 Speaker 8: it inheritance taxes a head covered change. So the IHD 411 00:23:42,920 --> 00:23:45,720 Speaker 8: changes are if you basically, if you want to have 412 00:23:45,800 --> 00:23:50,920 Speaker 8: farm or business property, then now rather than basically having 413 00:23:51,160 --> 00:23:57,480 Speaker 8: uncapped relief or an inheritance tax, you can pass on 414 00:23:57,640 --> 00:24:00,639 Speaker 8: up to two point five million per individual, so it 415 00:24:00,720 --> 00:24:03,040 Speaker 8: means five million in total. And to be feeled, that 416 00:24:03,080 --> 00:24:05,439 Speaker 8: went up because it was originally one million, but the 417 00:24:05,480 --> 00:24:07,800 Speaker 8: government kind of back down a bit on that and 418 00:24:07,880 --> 00:24:10,239 Speaker 8: raised it and image you pass that over and then 419 00:24:10,280 --> 00:24:14,040 Speaker 8: after that you get HD effectively. The relief is half, 420 00:24:14,160 --> 00:24:16,880 Speaker 8: so it means you're paying HD at twenty percent rather 421 00:24:16,920 --> 00:24:19,840 Speaker 8: than forty percent. And that's on everything above the two 422 00:24:19,840 --> 00:24:22,920 Speaker 8: point five of the five million am stocks. It gets 423 00:24:22,960 --> 00:24:26,360 Speaker 8: them too. This they don't have the two point five 424 00:24:26,400 --> 00:24:29,440 Speaker 8: million allowance. They just have the normal allowance, but now 425 00:24:29,480 --> 00:24:31,680 Speaker 8: they'll have after two years. You used to be able 426 00:24:31,680 --> 00:24:35,000 Speaker 8: to hold certain ame stocks and pass them all free 427 00:24:35,000 --> 00:24:38,120 Speaker 8: of inheritance tax. Now they'll be taxed at twenty percent 428 00:24:38,359 --> 00:24:39,480 Speaker 8: rather than forty percent. 429 00:24:40,160 --> 00:24:44,400 Speaker 3: Yeah. But all of this raft of tax changes and 430 00:24:44,680 --> 00:24:48,240 Speaker 3: employment rights changes coming on the sixth of April, and 431 00:24:48,320 --> 00:24:51,000 Speaker 3: we shall see what happens in terms of its impact 432 00:24:51,080 --> 00:24:54,879 Speaker 3: on the economy, even as we know that the economic backdrop, 433 00:24:54,960 --> 00:24:57,520 Speaker 3: of course for the UK and for many other countries 434 00:24:57,720 --> 00:24:59,560 Speaker 3: because of the war in Iran, does seem to be 435 00:24:59,640 --> 00:25:02,159 Speaker 3: dark a little bit. John, thank you so much for 436 00:25:02,200 --> 00:25:05,520 Speaker 3: being with me talking over all of the details. Bloomberg's 437 00:25:05,560 --> 00:25:07,920 Speaker 3: John Steppek. Thanks for your time, and you can catch 438 00:25:08,000 --> 00:25:12,440 Speaker 3: up of course with John's Money Distilled newsletter in the week. 439 00:25:12,560 --> 00:25:14,800 Speaker 3: I'm Karin Hepka here in London. You can catch us 440 00:25:14,800 --> 00:25:17,600 Speaker 3: every weekday morning for Bloomberg Daybreak. You up that's the 441 00:25:17,640 --> 00:25:22,000 Speaker 3: beginning at six am in London, one am on Wall Street, Nathan. 442 00:25:22,160 --> 00:25:25,320 Speaker 2: Thanks Caroline, and coming up on Bloomberg day Break Weekend, 443 00:25:25,359 --> 00:25:29,840 Speaker 2: we'll look ahead to China's March CPI and PPI data releases. 444 00:25:30,040 --> 00:25:44,640 Speaker 2: I'm Nathan Hager, and this is Bloomberg. This is Bloomberg 445 00:25:44,720 --> 00:25:47,719 Speaker 2: Daybreak Weekend, our global look ahead at the top stories 446 00:25:47,720 --> 00:25:51,200 Speaker 2: for investors in the coming week. I'm Nathan Hager in Washington. 447 00:25:51,520 --> 00:25:55,000 Speaker 2: This week we get March readings on inflation in China. 448 00:25:55,200 --> 00:25:58,399 Speaker 2: Let's get a preview now from Bloomberg's Doug Prisner, host 449 00:25:58,400 --> 00:26:00,320 Speaker 2: of the Daybreak Asia podcast. 450 00:26:00,800 --> 00:26:04,679 Speaker 4: Thanks Nathan. China has been mired in a record streak 451 00:26:04,680 --> 00:26:07,920 Speaker 4: of deflation, especially at the wholesale level. However, there are 452 00:26:08,000 --> 00:26:12,040 Speaker 4: signs of change. For example, in February, producer prices slumped 453 00:26:12,080 --> 00:26:15,080 Speaker 4: nine tens of one percent last year a negative reading, yes, 454 00:26:15,160 --> 00:26:18,119 Speaker 4: but it was much better than economist at forecast. And 455 00:26:18,320 --> 00:26:22,200 Speaker 4: more recently we've seen signs of building price momentum. The 456 00:26:22,320 --> 00:26:26,480 Speaker 4: latest manufacturing PMI show the Chinese companies recorded their fastest 457 00:26:26,520 --> 00:26:30,800 Speaker 4: surge in both raw material cost and output prices in 458 00:26:30,840 --> 00:26:33,960 Speaker 4: about four years now. This represents one of the first 459 00:26:34,000 --> 00:26:37,000 Speaker 4: tangible signs of the spillover from the conflict in the 460 00:26:37,000 --> 00:26:39,679 Speaker 4: Middle East. So a few questions here, what does this 461 00:26:39,760 --> 00:26:42,520 Speaker 4: mean for the Chinese economy and where does the Chinese 462 00:26:42,560 --> 00:26:45,640 Speaker 4: inflation story go from here? For a closer look, let's 463 00:26:45,640 --> 00:26:48,359 Speaker 4: bring in Bloomberg economist Eric Jeu, who joins us from 464 00:26:48,440 --> 00:26:51,679 Speaker 4: Hong Kong. Thank you so much, Eric for being here. So, 465 00:26:51,800 --> 00:26:56,080 Speaker 4: the price component of that PMI report indicated largely that 466 00:26:56,200 --> 00:26:59,720 Speaker 4: inflation was being imported, and I'm wondering, is that a 467 00:26:59,720 --> 00:27:01,400 Speaker 4: wealth come signed for China. 468 00:27:01,680 --> 00:27:04,320 Speaker 9: In terms of the result. Yeah, I think definitely is 469 00:27:04,359 --> 00:27:07,920 Speaker 9: going new that we might finally get out of deflation 470 00:27:08,440 --> 00:27:11,200 Speaker 9: this year or very soon. I think the next next 471 00:27:11,240 --> 00:27:15,320 Speaker 9: week's much price data. I think it's becoming quite consensus 472 00:27:15,359 --> 00:27:19,040 Speaker 9: now the PPI should turn positive, you know, thanks to 473 00:27:19,119 --> 00:27:23,560 Speaker 9: the energy caused shock from the Iran War. So I 474 00:27:23,600 --> 00:27:28,600 Speaker 9: think it's probably the first inflation reading for PPI in 475 00:27:28,640 --> 00:27:31,760 Speaker 9: more than three years. So last time it's the end 476 00:27:31,800 --> 00:27:33,840 Speaker 9: of the war, your career in the Russian War, right, 477 00:27:33,920 --> 00:27:36,400 Speaker 9: So it's been more than three years, and I think 478 00:27:36,760 --> 00:27:40,200 Speaker 9: finally now the PPI is going to get out of deflation. 479 00:27:40,680 --> 00:27:44,000 Speaker 9: And CPI is already in the inflationary doom. So I 480 00:27:44,000 --> 00:27:49,600 Speaker 9: think it's we're expecting the GDP deflator could turn positive maybe, 481 00:27:49,800 --> 00:27:53,040 Speaker 9: if not the first quarter, it must be the second part. 482 00:27:53,359 --> 00:27:56,560 Speaker 9: So in terms of final result, I think it's it's 483 00:27:56,640 --> 00:28:00,280 Speaker 9: it's what part the makers they're really looking forward, you know, 484 00:28:00,440 --> 00:28:03,680 Speaker 9: to see a party of inflation, but it's probably get 485 00:28:03,680 --> 00:28:07,120 Speaker 9: there by the wrong reason because we're always talking. They 486 00:28:07,119 --> 00:28:09,600 Speaker 9: want to you know, push domest demand to drive the 487 00:28:09,800 --> 00:28:12,679 Speaker 9: price up. But now I think it sends to some 488 00:28:12,760 --> 00:28:17,000 Speaker 9: external shock. Actually it's it's it's essentially helping China, but 489 00:28:17,080 --> 00:28:20,719 Speaker 9: probably not the recent supposi makers have been you know, 490 00:28:21,359 --> 00:28:25,080 Speaker 9: making efforts. But anyway, it's the androidult here that we 491 00:28:25,160 --> 00:28:26,000 Speaker 9: are getting there. 492 00:28:26,240 --> 00:28:28,679 Speaker 4: That's an interesting point because you and I have spoken 493 00:28:28,720 --> 00:28:31,080 Speaker 4: in the past about the weak growth story in China. 494 00:28:31,160 --> 00:28:34,879 Speaker 4: So if things don't improve and energy prices were to 495 00:28:34,920 --> 00:28:38,720 Speaker 4: remain elevated, is stagflation of possibility? 496 00:28:39,880 --> 00:28:42,920 Speaker 9: Not quite, because in the first quarter we actually have 497 00:28:43,000 --> 00:28:46,000 Speaker 9: seen some signs of domestic demand is picking up, but 498 00:28:46,200 --> 00:28:49,120 Speaker 9: it's still at a very low level compared to a 499 00:28:49,240 --> 00:28:52,120 Speaker 9: very weak final quarter of last year. So you know, 500 00:28:52,840 --> 00:28:59,320 Speaker 9: investment is picking up. Also, consumption slightly accelerating, so it's 501 00:28:59,360 --> 00:29:01,480 Speaker 9: I think at least you can see that the bottom 502 00:29:01,520 --> 00:29:05,760 Speaker 9: and the demand might have bottomed out, but still it 503 00:29:05,760 --> 00:29:09,640 Speaker 9: takes a quite time for us to see a robust tomorrow, 504 00:29:09,720 --> 00:29:14,160 Speaker 9: but recovery on those demands sides, so I'm not really 505 00:29:14,200 --> 00:29:17,520 Speaker 9: seeing it's more like stagnation for China. I think the 506 00:29:17,600 --> 00:29:22,480 Speaker 9: demand is still slowly, slowly recovering, but now after the 507 00:29:22,480 --> 00:29:26,480 Speaker 9: supply shock is really helping more on the price side. 508 00:29:26,840 --> 00:29:30,240 Speaker 4: So I'm wondering about how the consumer is performing right 509 00:29:30,240 --> 00:29:33,080 Speaker 4: now in China and whether demand is beginning to pick 510 00:29:33,160 --> 00:29:35,920 Speaker 4: up ever so slightly. You talk about the fact that 511 00:29:36,000 --> 00:29:40,520 Speaker 4: retail inflation in China is out of deflation right now, 512 00:29:40,560 --> 00:29:42,840 Speaker 4: are we're seeing a little bit more exuberance on the 513 00:29:42,840 --> 00:29:43,680 Speaker 4: part of the consumer. 514 00:29:46,040 --> 00:29:49,600 Speaker 9: I think the first two months it's it's quite positive. 515 00:29:49,720 --> 00:29:53,200 Speaker 9: But you know, because China this year, this year's Luna 516 00:29:53,240 --> 00:29:55,520 Speaker 9: new Your holiday is longer than usual, have a nine 517 00:29:55,600 --> 00:29:59,800 Speaker 9: days holiday, so it's still not clear whether the holiday 518 00:29:59,840 --> 00:30:03,520 Speaker 9: is boosting up to the retail sales or it's just after holidays, 519 00:30:03,560 --> 00:30:05,800 Speaker 9: So the machas data will be more interesting after the 520 00:30:05,840 --> 00:30:09,080 Speaker 9: holiday demand is if they did, we're going to see 521 00:30:09,200 --> 00:30:12,560 Speaker 9: how you know that the much retail sales is doing. 522 00:30:12,920 --> 00:30:16,000 Speaker 9: If that's still kind of robust, so that would be 523 00:30:16,040 --> 00:30:19,600 Speaker 9: a more incredible sign of demanding and pulling up. If 524 00:30:19,600 --> 00:30:23,760 Speaker 9: you see retail sales out decelerating slowly again, then it's 525 00:30:23,800 --> 00:30:26,680 Speaker 9: probably just a one off booster from the holidays. So 526 00:30:26,800 --> 00:30:30,120 Speaker 9: that means the comment still needs more work to you know, 527 00:30:30,240 --> 00:30:32,000 Speaker 9: stimulate consumption. 528 00:30:32,200 --> 00:30:33,840 Speaker 4: So Eric, give me a sense of what that might 529 00:30:33,920 --> 00:30:37,280 Speaker 4: look like. I know from the most recent NPC gathering, 530 00:30:37,680 --> 00:30:41,440 Speaker 4: creating inflation was a top priority, So I'm curious about 531 00:30:41,480 --> 00:30:44,520 Speaker 4: what more the government could do to change the narrative here. 532 00:30:45,840 --> 00:30:48,880 Speaker 9: I think if you look at NPC, actually the policy 533 00:30:48,880 --> 00:30:54,160 Speaker 9: it broadly continuing, so they don't add much more additional stimulus. 534 00:30:54,200 --> 00:30:57,840 Speaker 9: So on the consumption side, I think basically they're continuing 535 00:30:57,880 --> 00:31:03,560 Speaker 9: what they're doing last year, you know, subsidy for consumption upgrading, 536 00:31:03,960 --> 00:31:07,720 Speaker 9: and also they'll continue going to give child subsidies as 537 00:31:07,840 --> 00:31:11,840 Speaker 9: kind of you know, small incremental structure reforms in trying 538 00:31:11,880 --> 00:31:16,800 Speaker 9: to address the high living costs for ready on child, 539 00:31:17,080 --> 00:31:20,520 Speaker 9: for child education, that kind of stuff. Our view is 540 00:31:20,560 --> 00:31:24,760 Speaker 9: that those steps will be will help in the end, 541 00:31:24,880 --> 00:31:27,760 Speaker 9: but it will be a long process, so it's not 542 00:31:27,840 --> 00:31:32,520 Speaker 9: going to you know, change consumer behind behavior overnight. So 543 00:31:32,920 --> 00:31:36,480 Speaker 9: it does require long community from the government to continueing 544 00:31:36,960 --> 00:31:40,280 Speaker 9: or even step up with those small steps, and this 545 00:31:40,440 --> 00:31:45,320 Speaker 9: can gradually improve consumer sentiment and help them to spend 546 00:31:45,440 --> 00:31:46,240 Speaker 9: more hopefully. 547 00:31:46,560 --> 00:31:49,280 Speaker 4: Obviously, the property market is a big part of the story, 548 00:31:49,520 --> 00:31:54,080 Speaker 4: and housing prices continue to remain very very weak. Give 549 00:31:54,120 --> 00:31:56,480 Speaker 4: me your sense of where we we go from here 550 00:31:56,560 --> 00:31:58,920 Speaker 4: just in terms of real estate and what the government 551 00:31:58,960 --> 00:32:01,200 Speaker 4: can do to kind of verse what we have been 552 00:32:01,280 --> 00:32:03,080 Speaker 4: seeing month on month on month. 553 00:32:03,400 --> 00:32:06,280 Speaker 9: Yeah, it's a good point. Actually, we just this some 554 00:32:07,360 --> 00:32:10,640 Speaker 9: assessment up to the assessment of the property market. Actually 555 00:32:10,720 --> 00:32:13,719 Speaker 9: after we saw some green shoots in the first two months, 556 00:32:14,240 --> 00:32:17,840 Speaker 9: the jopping the declining home prices and hoome sales were 557 00:32:17,920 --> 00:32:21,080 Speaker 9: actually narrowing in the first two months of this year, 558 00:32:21,240 --> 00:32:25,520 Speaker 9: so we revised our long term outto for property market. 559 00:32:25,640 --> 00:32:29,160 Speaker 9: I think we think it's if you look at the 560 00:32:29,200 --> 00:32:33,160 Speaker 9: whole correction which started like five years ago, that's a 561 00:32:33,200 --> 00:32:37,160 Speaker 9: starting point, and if we believe the whole process is 562 00:32:37,200 --> 00:32:42,320 Speaker 9: to readjust the demand supply property supply to align with 563 00:32:42,480 --> 00:32:45,520 Speaker 9: the declining demand. We think the whole process now is 564 00:32:45,920 --> 00:32:49,280 Speaker 9: like seventy percent done, So that means that could be 565 00:32:49,320 --> 00:32:53,320 Speaker 9: still thirty percent to be adjusted before we see a stabilidation, 566 00:32:53,480 --> 00:32:56,920 Speaker 9: so we think that may take one or two more years. 567 00:32:57,000 --> 00:33:00,640 Speaker 9: So I think most by the end of next year 568 00:33:00,760 --> 00:33:04,800 Speaker 9: we might find out a stabilization. You know how they market. 569 00:33:05,000 --> 00:33:09,480 Speaker 4: To what extent is the overcapacity problem in China being addressed, 570 00:33:09,520 --> 00:33:11,880 Speaker 4: because I know that was blamed for a long time 571 00:33:12,800 --> 00:33:15,600 Speaker 4: for kind of fueling this deflationary trend. 572 00:33:17,360 --> 00:33:20,360 Speaker 9: I think the government that I was actually doing something 573 00:33:20,400 --> 00:33:24,400 Speaker 9: since last year, and but it's basically focusing on the 574 00:33:24,440 --> 00:33:29,640 Speaker 9: supply side. And you know, they're asking some sectors, evs, 575 00:33:29,920 --> 00:33:34,920 Speaker 9: solar panel and also some online platforms. So I think 576 00:33:34,920 --> 00:33:37,960 Speaker 9: they just called it. I think they just had some 577 00:33:38,120 --> 00:33:40,920 Speaker 9: statement the last week, you know, seeing they need to 578 00:33:41,480 --> 00:33:43,880 Speaker 9: on our platform, they need to stop the price wars 579 00:33:43,920 --> 00:33:48,640 Speaker 9: and you know, cut the subsidies for those sales. So 580 00:33:49,120 --> 00:33:52,600 Speaker 9: I think the government definitely, you know, they're trying to 581 00:33:53,240 --> 00:33:57,640 Speaker 9: prevent a more cuss throat price war in those industries 582 00:33:57,720 --> 00:34:02,000 Speaker 9: and trying to h make the price up so in 583 00:34:02,080 --> 00:34:07,240 Speaker 9: order to you know, have inflation returns sooner than they expected. 584 00:34:07,440 --> 00:34:11,399 Speaker 9: I think that definitely we have seen some effects from 585 00:34:11,480 --> 00:34:14,080 Speaker 9: those efforts in the price data, and I think this 586 00:34:14,239 --> 00:34:17,399 Speaker 9: year they're going to continue to do those things and 587 00:34:19,040 --> 00:34:22,120 Speaker 9: combining with you know, the price the war shock, I 588 00:34:22,120 --> 00:34:25,680 Speaker 9: think that's also why we see the PPI or CPI 589 00:34:25,880 --> 00:34:29,480 Speaker 9: is actually getting out of deflationary, although it's still in 590 00:34:29,560 --> 00:34:32,480 Speaker 9: mind the inflation, but they're getting there. 591 00:34:32,640 --> 00:34:34,960 Speaker 4: Can you give me a sense of the latest readings 592 00:34:35,040 --> 00:34:37,520 Speaker 4: on sentiment that we know on the manufacturing side, the 593 00:34:37,560 --> 00:34:40,759 Speaker 4: pm I data was pretty robust, But I'm curious as 594 00:34:40,760 --> 00:34:43,920 Speaker 4: to how people are generally feeling about what's happening in 595 00:34:43,920 --> 00:34:44,880 Speaker 4: the Chinese economy. 596 00:34:45,680 --> 00:34:49,440 Speaker 9: I think domestically, I think it's they have similar feeling 597 00:34:49,480 --> 00:34:52,920 Speaker 9: in me that probably the warst time over right, we 598 00:34:53,000 --> 00:34:56,919 Speaker 9: see some domestic demanded picking up. This is a very 599 00:34:56,920 --> 00:35:01,160 Speaker 9: slow pick cup, I think. I think many people economists 600 00:35:01,160 --> 00:35:04,520 Speaker 9: they would agree that probably this year we're going to 601 00:35:04,560 --> 00:35:08,200 Speaker 9: see some milder inflation and demand is stolen picking up, 602 00:35:08,719 --> 00:35:12,120 Speaker 9: although it comes the lowers across tuget. But I think 603 00:35:12,160 --> 00:35:15,960 Speaker 9: it's a more pragmatic move means that it's not going 604 00:35:16,000 --> 00:35:19,440 Speaker 9: to be strong stimulus. But they called me is still 605 00:35:19,600 --> 00:35:22,600 Speaker 9: holding up. You know, the experts are also strong despite 606 00:35:22,600 --> 00:35:25,480 Speaker 9: the terrorists, So I think the whole komy is not 607 00:35:26,360 --> 00:35:29,160 Speaker 9: at least it's not as as bad as last year. 608 00:35:29,320 --> 00:35:31,520 Speaker 9: So right, the last the final quote of last year 609 00:35:31,920 --> 00:35:34,440 Speaker 9: is the worst GDP liking how many years. So I 610 00:35:34,480 --> 00:35:38,600 Speaker 9: think I think that's the bottom of the economy right now. 611 00:35:38,800 --> 00:35:42,279 Speaker 4: So things have bottom blout and we're improving in China. Yeah, right, okay, good. 612 00:35:42,440 --> 00:35:45,960 Speaker 4: That is Bloomberg economist Eric Jeu in Hong Kong. In 613 00:35:46,000 --> 00:35:48,640 Speaker 4: the last two week, City Group hosted its Hong Kong 614 00:35:48,760 --> 00:35:53,560 Speaker 4: Macro Conference. There were discussions about geopolitics and monetary policy 615 00:35:54,000 --> 00:35:56,959 Speaker 4: as well as economic outlooks, and that's where we caught 616 00:35:57,040 --> 00:36:00,400 Speaker 4: up with Patrick Harker. He is the former president of 617 00:36:00,440 --> 00:36:04,320 Speaker 4: the Federal Reserve Bank of Philadelphia. Pat spoke with Bloomberg 618 00:36:04,400 --> 00:36:06,359 Speaker 4: TV host Heidi Stroud, Watts and. 619 00:36:06,320 --> 00:36:08,680 Speaker 7: Cherry on what a time to be a central banker? 620 00:36:08,719 --> 00:36:10,160 Speaker 7: And I guess perhaps a better to have to be 621 00:36:10,200 --> 00:36:11,560 Speaker 7: an ex central banker. 622 00:36:12,200 --> 00:36:15,160 Speaker 6: What do you think the conversations would be like happening 623 00:36:15,160 --> 00:36:16,160 Speaker 6: at the FED right now? 624 00:36:16,800 --> 00:36:18,960 Speaker 10: I think what the Fed's dealing with right now is 625 00:36:19,000 --> 00:36:24,000 Speaker 10: the triple whammy of deportations, tariffs, and now the war, 626 00:36:24,600 --> 00:36:27,960 Speaker 10: and so that just adds to the uncertainty the economy 627 00:36:28,080 --> 00:36:30,840 Speaker 10: is already facing. You know, it's amazing the US economy 628 00:36:30,840 --> 00:36:33,520 Speaker 10: has been very resilient, but it's showing real signs of 629 00:36:33,560 --> 00:36:35,600 Speaker 10: fragility right now, and so the Fed's. 630 00:36:35,400 --> 00:36:36,239 Speaker 9: Very worried. 631 00:36:37,520 --> 00:36:38,960 Speaker 1: On the balance of risk. 632 00:36:39,320 --> 00:36:41,279 Speaker 7: If you were still in the hot seat, what would 633 00:36:41,320 --> 00:36:42,200 Speaker 7: you be voting for? 634 00:36:42,520 --> 00:36:45,799 Speaker 10: Oh, I'd vote the whole no question in that this 635 00:36:45,960 --> 00:36:51,560 Speaker 10: uncertainty is there. We're probably mildly restrictive when it comes 636 00:36:51,600 --> 00:36:54,839 Speaker 10: to the FED country, but I would just hold right now, 637 00:36:54,960 --> 00:36:57,759 Speaker 10: let some of this uncertainly resolve itself, because inflation is 638 00:36:57,760 --> 00:37:00,600 Speaker 10: still above two percent and the FED has to commit 639 00:37:00,719 --> 00:37:02,040 Speaker 10: to getting it to two percent. 640 00:37:03,000 --> 00:37:05,719 Speaker 7: The argument against that would also be that inflation has 641 00:37:05,760 --> 00:37:08,560 Speaker 7: been elevator for a while, right so we continue to 642 00:37:08,600 --> 00:37:11,400 Speaker 7: see this play out, especially with no resolution in Iran. 643 00:37:11,719 --> 00:37:15,399 Speaker 7: Wouldn't the economic hit to the US be greater? Why 644 00:37:15,400 --> 00:37:17,640 Speaker 7: are you still leaning towards holding now? 645 00:37:17,920 --> 00:37:22,320 Speaker 10: I think the inflation issue is paramount. The FED actually 646 00:37:22,320 --> 00:37:25,160 Speaker 10: cannot do that much when it comes to the labor market. 647 00:37:25,600 --> 00:37:27,600 Speaker 10: What's happening in the labor market in the US is 648 00:37:27,840 --> 00:37:31,640 Speaker 10: the impact of AI and other changes that are well 649 00:37:31,680 --> 00:37:34,640 Speaker 10: outside the realm of monetary policy. So I think the 650 00:37:34,680 --> 00:37:37,799 Speaker 10: FED should really focus first and foremost on inflation right now. 651 00:37:38,440 --> 00:37:40,520 Speaker 4: That is Patrick Harker. He is the former head of 652 00:37:40,520 --> 00:37:44,040 Speaker 4: the Philadelphia Fed, speaking there with Bloomberg TV host Heidi 653 00:37:44,080 --> 00:37:47,400 Speaker 4: Stroud Watts and Sherry On at the City Hong Kong 654 00:37:47,520 --> 00:37:50,760 Speaker 4: Macro Conference. I'm Doug Krisner. You can catch us weekdays 655 00:37:50,800 --> 00:37:54,000 Speaker 4: for the Daybreak Asia podcast. It's available wherever you get 656 00:37:54,040 --> 00:37:54,719 Speaker 4: your podcast. 657 00:37:55,040 --> 00:37:58,520 Speaker 2: Nathan, Thanks Doug, and that does it for this edition 658 00:37:58,560 --> 00:38:01,719 Speaker 2: of Bloomberg Daybreak Weekend. Join us again Monday morning at 659 00:38:01,719 --> 00:38:04,480 Speaker 2: five am Wall Street Time for the latest don markets, 660 00:38:04,480 --> 00:38:06,839 Speaker 2: overseas and the news you need to start your day. 661 00:38:07,200 --> 00:38:10,360 Speaker 2: I'm Nathan Hager. Stay with us. Top stories and global 662 00:38:10,400 --> 00:38:12,360 Speaker 2: business headlines are coming up right now.