Speaker 1: Well here it comes. Oh my goodness, oh wow, in
Speaker 1: your life have you seen anything like that? Hello, and
Speaker 1: welcome to Stephanomics, the podcast that brings the global economy
Speaker 1: to you. And this week also a moment of golfing
Speaker 1: magic from Tiger Woods as he won the US Masters
Speaker 1: in augusta back in two thousand and five. Last year's
Speaker 1: Masters was one of the first big sporting events to
Speaker 1: be canceled due to COVID nineteen one contest kicked off
Speaker 1: in grand form this week, one of many hopeful signs
Speaker 1: of life returning to normal. But a lot of golf
Speaker 1: courses aren't coming back from the pandemic, and it's all
Speaker 1: down to the booming online shopping. Stay tuned to hear
Speaker 1: more that and to learn how the UK is managing
Speaker 1: after a hundred days of being properly out of the
Speaker 1: European Union. First the return of the v shaped recovery.
Speaker 1: In the past few weeks, we've had an outpouring of
Speaker 1: optimism about the economic recovery, especially in the US. They
Speaker 1: are annual meetings. This week, the International Monetary Fund added
Speaker 1: its voice to the chorus with the prediction that developed
Speaker 1: economies could not only enjoy two years of rapid growth
Speaker 1: in one and twenty two, but see little or no
Speaker 1: permanent hit from the downturn of the IMF does see
Speaker 1: inequality increasing due to the pandemic, with ninety five million
Speaker 1: more people having been pushed into extreme poverty, and bumpier
Speaker 1: recoveries in prospect for many emerging market economies. All in all,
Speaker 1: it seems a good opportunity to check in with our
Speaker 1: chief economist, Tom Marlick in d C. Tom, you have
Speaker 1: your own forecast out, just give us, give us some
Speaker 1: of the highlight. So, first of all, Stephanie here at
Speaker 1: Bloomberg Economics, we were a little bit disappointed by the
Speaker 1: I m F rushing out their world economic outlook just
Speaker 1: a few minutes after we published our global forecast. Seemed
Speaker 1: like it rather crass attempts to steal the limelight from us.
Speaker 1: But turning to turning to the substance um, the I
Speaker 1: m F up their forecast from five five to six percent.
Speaker 1: That's an optimistic forecast. We're even more optimistic at Bloomberg Economics.
Speaker 1: We're penciling in six point nine percent growth for the
Speaker 1: world economy this year. What are the big factors at work? Well,
Speaker 1: there's two main forces. First, you've got a virus in
Speaker 1: retreat as vaccines roll out across advanced and some emerging
Speaker 1: market economies. Secondly, you've got that huge US stimulus one
Speaker 1: point nine trillion dollars, perhaps more to come if Biden
Speaker 1: gets his infrastructure deal through. That pushes growth in the
Speaker 1: US up to its highest level all since the early
Speaker 1: nine eighties and sends ripples around the world as trade
Speaker 1: partners benefit from stronger US in boards. And we did think,
Speaker 1: I remember when we were talking about this last year,
Speaker 1: we thought that the emerging market economies would do a
Speaker 1: lot worse than the developed economies economically, and that everywhere
Speaker 1: we would see significant permanent scars from this crisis. Are
Speaker 1: we revisiting either of those of you? So? I think
Speaker 1: on the emerging market side, there's two big points to make.
Speaker 1: The first is a point about China. China really dominates
Speaker 1: the emerging market space if you think about the size
Speaker 1: of its economy. It was remarkably successful in controlling its
Speaker 1: domestic outbreak, is having a v shaped recovery, and that
Speaker 1: significantly shapes the sort of the overall emerging market picture.
Speaker 1: Second point to make about emerging markets is once you
Speaker 1: get past China. You really have to draw a distinction
Speaker 1: between the exporters and the borrowers. The exporters countries like Vietnam,
Speaker 1: for example, they're going to have a stronger year as
Speaker 1: they benefit from resurgent global demand. The borrowers, places like Turkey,
Speaker 1: places like Argentina are already suffering as US yields borrowing
Speaker 1: costs start to rise. Thinking about the sort of the
Speaker 1: largest scarring story, UM, I think the sort of the
Speaker 1: unique character of the crisis was really that it was
Speaker 1: a kind of a pure exogenous shock. It was like
Speaker 1: the world was hit by an asteroid. There really wasn't
Speaker 1: a sort of a fundamental problem of fundamental imbalance with
Speaker 1: the world economy which caused the recession. It was just
Speaker 1: the virus. And so the hope was always that if
Speaker 1: we can get enough stimulus into the economy to keep
Speaker 1: businesses solvent, to keep households afloat until a vaccine is found,
Speaker 1: then we can have a pretty rapid recovery. And so
Speaker 1: now countries like the US and the UK where the
Speaker 1: vaccines are rolling out fast, that's what we're starting to
Speaker 1: see happen. I noticed that the IMF part of their
Speaker 1: reasoning was that the area, the parts of the economy
Speaker 1: that have been worst hit, what they would cause sort
Speaker 1: of contact intensive so places, hospitality, things where people are
Speaker 1: are in contact with each other. That that that the
Speaker 1: damage done to those sectors was more likely to be
Speaker 1: temporary and would not necessarily feed through to the broader economy.
Speaker 1: And the way that you've seen, for example, the damage
Speaker 1: and the financial sector and the global financial crisis affect everything.
Speaker 1: Do you think do you think there's some truth in
Speaker 1: that or are they are they underestimating some of the
Speaker 1: possible long term effects. That's a good question. I mean,
Speaker 1: I guess if you think about the global economy, you
Speaker 1: can think about sort of critical nodes in the global
Speaker 1: supply chain and other parts of the economy which are
Speaker 1: important but don't have so many inter connections, don't touch
Speaker 1: so many other points. So at one extreme, if you
Speaker 1: blew up Taiwan semiconductor industry, that would really send some
Speaker 1: really serious ripples around the world. Right, we couldn't make smartphones,
Speaker 1: we couldn't make cars, we couldn't make laptops. The world
Speaker 1: economy would in significant respect grind to a halt um.
Speaker 1: If you blew up your local Kentucky Fried Chicken or
Speaker 1: your local cinema chain. That would be really bad news
Speaker 1: for the for the people who worked there, bad news
Speaker 1: for the local residents who enjoyed that service. But the
Speaker 1: global ripple effects wouldn't be so severe. So perhaps a
Speaker 1: virus that has devastating impacts on those sort of high
Speaker 1: contact service industries that leaves the kind of the sort
Speaker 1: of the hard infrastructure of the industrial sector largely untouched,
Speaker 1: maybe it doesn't leave such long term, such deep scars.
Speaker 1: We were talking to Heavier Blast last week about the
Speaker 1: vulnerable points in the U s A on. I mean,
Speaker 1: I feel like we're developing a bit of a sideline
Speaker 1: and sort of how to guide for for would be
Speaker 1: global terrorists who want to bring down the global economy,
Speaker 1: just pointing up the key places they ought to try
Speaker 1: and hit um. I did see that the head of
Speaker 1: JP Morgan Jamie Diamond, in his letter for this year,
Speaker 1: had been extremely optimistic about the US recovery and thought
Speaker 1: that the boom could continue for for several years. Are
Speaker 1: we seeing risks there? I mean, there is now so
Speaker 1: much optimism about the pace of US growth and so
Speaker 1: much government money pouring into the economy. So I think
Speaker 1: if we go back a couple of months to the
Speaker 1: end of twenty UM, there were a couple of big
Speaker 1: negative factors which people were concerned about for the US
Speaker 1: in addition to the virus UM, so we had a
Speaker 1: really fragile political situation. It looked like there might not
Speaker 1: be sort of a clear control of the White House
Speaker 1: and Congress by a single party, and that could stem
Speaker 1: the attempts at fiscal stimulus. And we had the looming
Speaker 1: threat of US China decoupling and all that could mean
Speaker 1: for exports UM and for global supply chains UM. From
Speaker 1: where we're sitting at the end of the first quarter
Speaker 1: of one, both of those problems looked to have been
Speaker 1: resolved or looked to be moving in a positive direction. UM.
Speaker 1: The Democrats have got control of the White House and
Speaker 1: control of Congress and they're using that to push through
Speaker 1: very significant fiscal stimulus and talking about a big infrastructure bill.
Speaker 1: And US China tensions they're they're they're escalating, But early
Speaker 1: indications seemed to be that they could provide a motive
Speaker 1: for the US to kind of invest in its future,
Speaker 1: invest in infrastructure, invest in education in a way which
Speaker 1: if done right and if done on on the right scale,
Speaker 1: could start edging potential growth higher. And so certainly things
Speaker 1: are looking a lot better now than they were three
Speaker 1: months ago. But let's remember also how sort of tenuous,
Speaker 1: how fragile the politics which has underpinned this shift. Is
Speaker 1: that fifty fifty split in the Senate, which is really
Speaker 1: the kind of the fulcrum on which all of this
Speaker 1: is turning, could really move in either direction in the
Speaker 1: years ahead. Well, we're going to hear about the impact
Speaker 1: of Brexit in the UK in a minute, but it
Speaker 1: does make me wonder, I mean, when you that the
Speaker 1: mute music coming out of Europe and the UK at
Speaker 1: the moment is much darker than this feeling that they
Speaker 1: have really messed up the vaccine rollout in the case
Speaker 1: of the europe renewed lockdowns, causing some to to revisit
Speaker 1: their forecast for the European economy. Is that I mean,
Speaker 1: is this the story that we're telling, The sort of bright,
Speaker 1: bright v shaped story we're telling is that primarily the U,
Speaker 1: S and China we're talking about, with Europe in the
Speaker 1: UK potentially suffering more damage. So, um, the US and China,
Speaker 1: they're the biggest economies in the world. They're both going
Speaker 1: to outperform this year. We're penciling in seven point seven
Speaker 1: percent growth for the United States on a four quarter
Speaker 1: four quarter basis, nine point three percent growth for China.
Speaker 1: With those two big economies doing so well, the world
Speaker 1: picture looks pretty positive. Europe, as you as you know,
Speaker 1: is some way behind that. We see four point four
Speaker 1: percent growth for the Eurozone this year and the recovery
Speaker 1: starting later because they haven't done so well at rolling
Speaker 1: out their vaccination program. Still, if you can kind of
Speaker 1: step outside the kind of the intensity of the momentum
Speaker 1: and think about the sort of slightly bigger picture for Europe, Yes,
Speaker 1: their recovery is going to be a bit slower, Yes
Speaker 1: it's going to be a bit later, but we still
Speaker 1: see Europe coming back very strongly from later in the
Speaker 1: second quarter and heading into the second half of the year.
Speaker 1: Tom Marlick, thank you very much. Thanks Stephanie. Now I
Speaker 1: mentioned Brexit. Last time we heard from Bloomberg economic reporter
Speaker 1: Lizzie Burden, she was talking to lorry drivers queuing at
Speaker 1: the port of Dover, wondering whether they would get home
Speaker 1: for Christmas. Since then, Britain has probably left the European
Speaker 1: Union and early heavily distorted numbers suggests that trade between
Speaker 1: the UK and the EU has fallen dramatically. If you
Speaker 1: make your living exporting shellfish, for example, you're hurting. That
Speaker 1: sector's exports to the EU fell by nearly in January.
Speaker 1: But what about everyone else? Are all those gloomy forecasts
Speaker 1: of what Brexit would do to the British economy finally
Speaker 1: coming true? We asked Lizzie to give us an update.
Speaker 1: Almost a hundred days since the chimes of Big Ben
Speaker 1: marked that Brexit was formally completed. The UK government has
Speaker 1: seemingly banned the B word, while coronavirus has overshadowed reports
Speaker 1: of trade disruption. Still, like any divorce, UK EU relations
Speaker 1: have been messy since January one. Some sectors have been
Speaker 1: hit particularly hard. I asked James Withers, chief executive of
Speaker 1: Scotland Food and Drink, why it's been so tough for
Speaker 1: his industry. So for a lot of this a hundred
Speaker 1: days of paid. They have gone from a position where
Speaker 1: it was as easy to sell their cheap drink products
Speaker 1: to Manchester and England as it was to say, into Madrid.
Speaker 1: And what's happened just trying to get it into the EU.
Speaker 1: Then a wave of new paper work, complexity, a lot
Speaker 1: of cost into that, and we've seen systems breakdowns or
Speaker 1: even partly product aisee league. But when they don't go partially,
Speaker 1: the product doesn't move at all. David Hennig, director of
Speaker 1: the UK Trade Policy Project at the European Center for
Speaker 1: International Political Economy, says British firms are disadvantaged because import
Speaker 1: checks have been postponed for goods entering the UK unlike
Speaker 1: those sent to the EU. It's really unbalanced. So explots
Speaker 1: us to to Europe are perhaps wondering why they're the
Speaker 1: only people who are having to go from the full
Speaker 1: set of new checks and nobody else does. When you can,
Speaker 1: you can understand that that frustration, and I'm hearing it
Speaker 1: pretty much up and down the country. Northern Ireland has
Speaker 1: been especially affected because of the Northern Ireland Protocol, which
Speaker 1: effectively draws a trade boarder down the Irish Sea. Ashley
Speaker 1: Piggott is managing director of craig Oven based a j Power,
Speaker 1: a manufacturing company that's been crippled by additional post Brexit
Speaker 1: surcharges to bring components into Northern Ireland from Britain. In
Speaker 1: January there was one hundred and eighteen thousand, three hundred
Speaker 1: consignments into all Ireland, which is a very low number.
Speaker 1: You know, your expectation would be more into the half
Speaker 1: million plus. And all those consignments have to go through
Speaker 1: eventually a process with transportation and typically that adds somewhere
Speaker 1: in the region off between twenty and thirty point surcharge
Speaker 1: per consignment, irrespective of the value. It's a different story
Speaker 1: south of the Irish border. County Dublin based Hollyer Hannon Transport,
Speaker 1: which specializes in moving mixed loads of fresh produce, says
Speaker 1: it's never been busier as Irish importers and wholesalers are
Speaker 1: switching from GB to EU based suppliers. I spoke to
Speaker 1: Donald McCann, the company's managing director. Certainly in the first
Speaker 1: couple of months um that was a very very big
Speaker 1: reduction in the volumes and the that was certainly head
Speaker 1: off in a way that the volumes were in Christo
Speaker 1: our other which was from the entire island of Ireland
Speaker 1: to mainland EU. We were fortunate and that the NI
Speaker 1: protocol hasn't greatly affected us. I mean not in terms
Speaker 1: of whilst we have obviously customers and Northern DAN customers,
Speaker 1: and we have Britain. We've been goods back and forward
Speaker 1: between TV and n I that it would make up
Speaker 1: a reasonably small fraction of the overall volumes that we transport.
Speaker 1: Some businesses in Britain's more distant EU neighbors are suffering too,
Speaker 1: and A Stalinger, deputy director of the Confederation of Swedish Enterprise,
Speaker 1: says a fifth of Swedish companies have had problems trading
Speaker 1: with the UK since January. More companies say that they
Speaker 1: will start finding other suppliers than the supplies from the UK.
Speaker 1: What we can see now is that with the higher cost,
Speaker 1: the higher it shapes, and the intitulation, the liberty and
Speaker 1: the problems in the logistics, Swedish companies are actually looking
Speaker 1: at other countries to source from. So there is less
Speaker 1: of optimism when it comes to imports from the UK
Speaker 1: to Sweden beyond individual companies experiences. The first official UK
Speaker 1: trade data since Brexit for the month of January reskewed
Speaker 1: by the impact of COVID nineteen stop piling ahead of
Speaker 1: the end of the transition period and a hangover effect
Speaker 1: from the pre Christmas chaos at the port of Dover
Speaker 1: when France shut its borders. So I asked David Hennig
Speaker 1: what lies ahead. There's still a lot to happen in
Speaker 1: the UK trade story. This is just the beginning hundred days.
Speaker 1: I mean, there is a reason why I can again
Speaker 1: back assessments for trade deals and normally take place over
Speaker 1: ten years. There's a huge amount of adjustment still to
Speaker 1: happen in the UK you trade. It seems clear that
Speaker 1: what the UK government has described as teething problems could
Speaker 1: be here to stay. M Now, finally, I promised I
Speaker 1: was going to explain why golf courses were turning out
Speaker 1: to be one of the less obvious casualties of COVID ninety.
Speaker 1: Our real estate reporter Alex Wittenberg in New York is
Speaker 1: going to explain everything. Alex, um, what why is it
Speaker 1: that the golf courses are disappearing at an increased rate
Speaker 1: thanks to the pandemic. Yeah, so they're about There are
Speaker 1: kind of two trends that are converging that make up
Speaker 1: this trend we're seeing, and the first one has to
Speaker 1: do with the decline in the rate of people playing golf.
Speaker 1: So in the late nineties and early two thousand's a
Speaker 1: lot of golf courses started to be built, and that
Speaker 1: had to do with Tiger Woods coming on the scene
Speaker 1: and becoming a sensation, and by most accounts today they
Speaker 1: over built. So since around the mid odds there have
Speaker 1: been more golf courses closed than opened and um since
Speaker 1: around two thousand and six, two thousand four courses have closed.
Speaker 1: So during the pandemic, we've seen a slight uptick in
Speaker 1: the number of players playing golf, So there's around of
Speaker 1: four increase in the number of rounds played and that
Speaker 1: was the first time there was an increase in a while.
Speaker 1: But still because of the you know, flood into the
Speaker 1: e commerce space during the pandemic, so many people wanting
Speaker 1: to shop online, not go out into physical stories and
Speaker 1: not being able to. Developers have seen the kind of
Speaker 1: decline of golf as an opportunity to get into a
Speaker 1: sector that is um really booming because of the pandemic
Speaker 1: and should we be And I bet some of the
Speaker 1: people living near these golf courses complained when the golf
Speaker 1: course arrived, and then they had no idea they could
Speaker 1: be much worse. They could be just a gigantic cupboard
Speaker 1: for Amazon. Is that what we're talking about, just big
Speaker 1: wares is sitting on top of what we're greens. Yeah,
Speaker 1: that's right, and it could be a real challenge when
Speaker 1: the proposed development is close to where people live, because
Speaker 1: people don't want big trucks driving through their streets throughout
Speaker 1: the night, and that's often where they are. Yeah, because
Speaker 1: usually golf courses are worth more when they're closer to
Speaker 1: where people live, when they're in more affluent areas. In fact,
Speaker 1: a golf course can actually bring up the price of
Speaker 1: a home if there's a home nearby a course. So
Speaker 1: there are a number of challenges to conversion. But this
Speaker 1: is those big warehouses as usually what we're talking about.
Speaker 1: So all those people who complain should now rush to
Speaker 1: sign up to their local club to make sure it
Speaker 1: stays there. In general, we've tended to think commercial real
Speaker 1: estate is not done very well out of COVID nineteen.
Speaker 1: Is this just one of the exceptions, Yeah, exactly. The
Speaker 1: industrial space is an exception. Um. It actually had its
Speaker 1: strongest year on record in and for the first time
Speaker 1: ever at least since the you know, at least at
Speaker 1: the end of investors had poured more money into the
Speaker 1: ind real space then into the office space for the
Speaker 1: first time, um, since we've been tracking it. So this
Speaker 1: was an exception and a lot of that was driven
Speaker 1: by the e commerce boom. And so that is just
Speaker 1: like I mean, we know that people have assuming or
Speaker 1: thinking now that a few people are going to be
Speaker 1: working in offices, or they're going to work less time
Speaker 1: in offices, um, but we surely are spending a lot
Speaker 1: more online. You mentioned that there had been a massive overbuild,
Speaker 1: and of course that's what happens in real estate all
Speaker 1: the time. There's a long lead times and then you
Speaker 1: end up having overdone it. I mean, this is it's
Speaker 1: quite hard to reverse once you've dug up a golf course.
Speaker 1: Do you think this is going to turn out to
Speaker 1: be overkilled as well? Yeah, it might be. I think
Speaker 1: there's already some expectations that the rate of growth that
Speaker 1: we saw in is going to decline in this year
Speaker 1: when people are starting to go back to shopping in person.
Speaker 1: It's it's hard to say. I was on a call
Speaker 1: with analysts from CBR not long ago and they seemed
Speaker 1: very bullish about the growth of the market and beyond.
Speaker 1: So I think some a place like a golf or
Speaker 1: is it really depends as well on whether players are
Speaker 1: going to stay. There are new players who, because they're
Speaker 1: confined to their homes during the pandemic, didn't want or
Speaker 1: didn't see many other options for being active and taking
Speaker 1: up a sport. So if that trend does stay, then
Speaker 1: maybe this is kind of an unwise investment at this point.
Speaker 1: But I think most people are expecting that once other
Speaker 1: activities become available, that the old trends are going to
Speaker 1: come back, and that golf courses are not going to
Speaker 1: be um as in demand as they once were. So well,
Speaker 1: so that's again there's one piece of the market, many
Speaker 1: pieces of the market where people are feeling bullish. Alex Whittenberg,
Speaker 1: thank you very much. Thank you. So that's it for
Speaker 1: this episode of Stephanomics. I'll be back next week with
Speaker 1: a special conversation with the economist and sometime revolutionary Marianna Matsukata.
Speaker 1: For more news and analysis from Bloomberg Economics during the week,
Speaker 1: you can follow as Economics on Twitter, or you can
Speaker 1: also find me on at my Stephanomics. This episode was
Speaker 1: produced by Magnus Hendrickson, with special thanks to Tom Warlick,
Speaker 1: Lizzie Burden, and Alex Wittenberg. Lucy Meekin is the executive
Speaker 1: producer of Stephanomics, and the head of Bloomberg Podcast is
Speaker 1: Francesco Leafy.