WEBVTT - Bloomberg Daybreak Weekend: Retail, Energy and Inflation (Podcast) 0:00:01.760 --> 0:00:04.720 This is Bloomberg Daybreak Weekend, our global look ahead at 0:00:04.720 --> 0:00:06.680 the top stories in the coming way from my Daybreak 0:00:06.720 --> 0:00:09.079 anchors all around the world, and just a hit on 0:00:09.119 --> 0:00:12.880 the program. How is retail holding up? Are consumers pulling back? 0:00:13.200 --> 0:00:16.040 John Tucker in New York. I'm Stephen Carlin London. But 0:00:16.120 --> 0:00:18.640 we're looking ahead to the results from the struggling German 0:00:18.760 --> 0:00:22.040 energy giants Uniper and Brian Curtis in Hong Kong. Low 0:00:22.160 --> 0:00:25.439 levels of inflation, record low interest rates and a better 0:00:25.480 --> 0:00:28.720 than expected economy. What are we talking about Indonesia? I'm 0:00:28.760 --> 0:00:31.480 Amy Morris in Washington. We're gauging the impact of the 0:00:31.520 --> 0:00:36.960 investigations in the President Trump's dealings on downballot races. That's 0:00:37.000 --> 0:00:41.159 all straight ahead on Bloomberg Daybreak Weekend on Bloomberg Elibam 0:00:41.240 --> 0:00:45.440 Free O, New York, Bloomberg one, Washington, d C, Bloomberg 0:00:45.440 --> 0:00:48.960 one oh six one, Boston, Bloomberg nine sixties, San Francisco, 0:00:49.200 --> 0:00:53.000 d AB, Digital Radio London, Sirius XM one nineteen and 0:00:53.040 --> 0:00:55.960 around the world on Bloomberg Radio dot Com and via 0:00:56.000 --> 0:01:01.360 the Bloomberg Business App. Hi, everybody, I'm John Tucker, and 0:01:01.440 --> 0:01:05.520 let's start today's program with retail and Bloomberg's retail reporter 0:01:05.880 --> 0:01:09.000 Brandon Case joining us from Dallas. We have a bunch 0:01:09.040 --> 0:01:12.039 of retailers opening their books in the coming week home 0:01:12.160 --> 0:01:15.240 Dee Paul, Walmart, parent of t J Banks and Marshall's 0:01:15.240 --> 0:01:19.200 Target calls Macy's Ross Stars. So, before we get to 0:01:19.280 --> 0:01:24.000 some of the specifics, Brendan, how is the American consumer 0:01:24.040 --> 0:01:27.320 holding up? I think the after that is so so. 0:01:27.959 --> 0:01:33.240 What you've seen so far is you've seen pretty steady, 0:01:33.280 --> 0:01:37.280 even sometimes robust, overall spending. But if you break that down, 0:01:37.319 --> 0:01:41.520 what you're seeing is a consumer that is increasingly under 0:01:41.560 --> 0:01:46.800 a lot of stress. And what that is causing is 0:01:47.000 --> 0:01:50.120 a situation where people are being forced to spend a 0:01:50.200 --> 0:01:55.360 lot more on essentials, food, fuel, things like that, and 0:01:55.440 --> 0:01:59.160 that's leaving a lot less money left over for discretionary goods. 0:01:59.440 --> 0:02:04.400 UM and us emerged as a big problem for Walmart, Target, 0:02:05.200 --> 0:02:08.639 pretty much all retailers, UM and I think that with 0:02:09.440 --> 0:02:12.160 the earnings reports coming out the next week and and 0:02:12.160 --> 0:02:15.160 and also after that, we should get a lot more 0:02:15.360 --> 0:02:20.440 insight into how these companies think the consumer will hold 0:02:20.520 --> 0:02:22.919 up the rest of the year. We'll get more about 0:02:22.960 --> 0:02:26.760 the back to school shopping season and probably get there. 0:02:27.200 --> 0:02:32.440 They're kind of the retailer's first predictions about the holiday 0:02:32.560 --> 0:02:35.480 rush at the end of the year. We're already up 0:02:35.520 --> 0:02:39.040 to that. Yeah, we're already there. I mean, of course, 0:02:39.080 --> 0:02:41.000 for a lot of these retailers, they've been planning for 0:02:41.080 --> 0:02:45.760 that since February literally. Um, but it's it's it's it's 0:02:45.800 --> 0:02:48.960 increasingly upon us. You know, last year that holiday season 0:02:49.040 --> 0:02:52.280 started pretty early because of all the supply changes, ruptions, 0:02:52.320 --> 0:02:56.480 people who are out shopping, you know, earlier than usual. Um. 0:02:56.560 --> 0:02:58.320 And we'll see what happens this year. I think the 0:02:58.400 --> 0:03:02.120 question boils down to whether retail spending is going to 0:03:02.280 --> 0:03:05.400 end up being a lot weaker after two very strong 0:03:05.480 --> 0:03:10.000 years during the pandemic. Okay, Um, we're still buying stuff, 0:03:10.080 --> 0:03:12.960 but it's just the stuff that's lower margin. I mean, 0:03:12.960 --> 0:03:16.840 I have to buy groceries. I gotta eat, but maybe 0:03:16.880 --> 0:03:19.400 I'm not going to spend you buy a TV or 0:03:19.440 --> 0:03:22.480 something like that. Yeah, that's exactly right. So if you 0:03:22.480 --> 0:03:25.440 look at that through the prism of of Walmart Target, 0:03:25.440 --> 0:03:28.200 what that means is that people are spending a lot 0:03:28.200 --> 0:03:33.079 more on groceries, which those companies make less money off of. Um, 0:03:33.200 --> 0:03:36.600 they make more money from general merchandise sales, you know, 0:03:36.640 --> 0:03:40.880 like clothing, electronics, home goods, um. And they're selling a 0:03:40.920 --> 0:03:45.440 lot less of those more profitable items and a lot 0:03:45.560 --> 0:03:49.400 more of the low margin items. And so if you 0:03:49.440 --> 0:03:53.240 take a company like Walmart, they actually, you know, they're 0:03:53.240 --> 0:03:56.480 actually doing fine from a revenue perspective. They actually raised 0:03:56.640 --> 0:04:00.840 their revenue forecast a little bit less month. But since 0:04:00.880 --> 0:04:05.160 they're selling more of their less profitable you know stuff 0:04:05.280 --> 0:04:08.720 their their their groceries, UM, it's really hurting profit. And 0:04:08.720 --> 0:04:13.560 it's also causing them to mark down a lot of items, 0:04:13.560 --> 0:04:16.839 which further erode their profit margins. And that's not to 0:04:16.880 --> 0:04:19.080 say that they're cutting all prices. I think what they're 0:04:19.120 --> 0:04:22.080 doing is basically boosting the price any any place they can, 0:04:22.760 --> 0:04:26.000 but in some categories the sales just aren't there and 0:04:26.080 --> 0:04:28.640 so they're having to cut prices. Okay, Well that leads 0:04:28.640 --> 0:04:31.240 me to the next question, as far as the inventories. 0:04:31.640 --> 0:04:35.680 Are the inventories of these places bloated, yes, very much. 0:04:35.800 --> 0:04:41.719 So okay, so why wouldn't they automatically have to discount then? Right, Well, 0:04:41.800 --> 0:04:45.200 that's what they're doing to a certain extent. And the 0:04:46.279 --> 0:04:49.360 mystery is that we don't know exactly what their inventories 0:04:49.360 --> 0:04:52.120 are made up of. But if you imagine the inventories 0:04:52.400 --> 0:04:57.600 as being a little bit overweighted towards discretionary goods they 0:04:57.640 --> 0:05:01.679 thought they could sell earlier this year, that's what they're 0:05:02.520 --> 0:05:04.960 having to mark down more and more aggressively. And we're 0:05:04.960 --> 0:05:09.279 talking about clothing, We're talking about kitchen appliances, we're talking 0:05:09.320 --> 0:05:12.880 about patio furniture, all that stuff that people are stocking 0:05:12.960 --> 0:05:16.040 up on during the pandemic. You know, the retailers knew 0:05:16.080 --> 0:05:18.920 that spending was going to tail off on those categories, 0:05:19.000 --> 0:05:23.800 but what they misjudged is just how fast that would happen. Um. 0:05:24.040 --> 0:05:29.320 But what they're not doing is they're not discounting the 0:05:29.640 --> 0:05:34.560 central goods that people are increasingly, you know, using their 0:05:34.600 --> 0:05:38.039 paychecks to to to die. Do these places they have 0:05:38.040 --> 0:05:41.560 their own credit cards? And the reason I answered do they? 0:05:41.640 --> 0:05:45.160 Does that tell us much about how much debt is 0:05:45.200 --> 0:05:49.480 being racked up by their customers, whether those they're paying 0:05:49.520 --> 0:05:52.960 off those credit card balances? Yeah, a lot of them do. 0:05:53.080 --> 0:05:55.240 Targets got its own credit card. A lot of the 0:05:55.480 --> 0:05:59.040 department stores have their own credit cards, the Hume Gold stores, UM. 0:05:59.080 --> 0:06:00.840 And I think what you're see being there is that 0:06:00.920 --> 0:06:07.400 you know, spending um has been very strong, and savings 0:06:07.520 --> 0:06:11.640 had been going up a lot during the pandemic, in 0:06:11.720 --> 0:06:14.560 large part because of the government stimulus programs and also 0:06:14.600 --> 0:06:17.880 because people were not going out as much. I think 0:06:17.920 --> 0:06:21.080 what you're seeing now is that people are increasingly kind 0:06:21.080 --> 0:06:25.400 of blowing through those savings. They've got um less of 0:06:25.400 --> 0:06:29.880 a cushion, and you know, that's really starting to eat 0:06:29.960 --> 0:06:34.040 into what they're able to actually spend its stores and 0:06:34.080 --> 0:06:38.920 sort of causing this overhang on retail sales. Brendon will 0:06:38.960 --> 0:06:40.839 leave it there. Thanks very much for joining us. We 0:06:40.839 --> 0:06:45.000 appreciate it. Bloomberg's retail reporter, Brendan Case. And just ahead 0:06:45.040 --> 0:06:49.279 on Bloomberg Daybreak weekend, look at Germany's Uniper and the 0:06:49.360 --> 0:06:57.120 Russian energy crunch on. John Tucker. This is Bloomberg. This 0:06:57.360 --> 0:06:59.880 is Bloomberg Daybreak weekend, our global look ahead of the 0:07:00.000 --> 0:07:02.440 top stories for investors in the coming week. I'm John 0:07:02.480 --> 0:07:05.760 Tucker in New York. Up leader in the program. Indonesia's 0:07:05.800 --> 0:07:09.600 economy has been homming along. Can it continue? But first, 0:07:09.680 --> 0:07:13.440 the German energy giant Uniper will report results that will 0:07:13.480 --> 0:07:16.240 be closely scrutinized this week. That firm has been at 0:07:16.240 --> 0:07:19.640 the center of Europe's energy crisis since it was forced 0:07:19.640 --> 0:07:22.000 to seek a government bail out last month. And for more, 0:07:22.120 --> 0:07:25.160 let's into London now and bring in Bloomberg Daybreak Europe 0:07:25.240 --> 0:07:28.440 anchor Stephen Carroll. Stephen thanks a lot. John. Uniper is 0:07:28.440 --> 0:07:30.960 Germany's biggest buyer of Russian gas and was pushed to 0:07:31.040 --> 0:07:34.120 the brink because Vladimir Putin squeeze supplies and retaliation for 0:07:34.160 --> 0:07:38.320 European sanctions against Russia's invasion of Ukraine. Germany's economy Minister 0:07:38.400 --> 0:07:41.360 Robert Habeck has warned that Russia's gas squeeze posed the 0:07:41.440 --> 0:07:44.760 risk of a Lehman Brothers like contagion with universe failure 0:07:44.760 --> 0:07:47.640 potentially spilling over to the wider economy. So these are 0:07:47.640 --> 0:07:49.960 a set of results very keenly watched. For more, I'm 0:07:50.040 --> 0:07:52.680 joined by Bloomberg's Rachel Morrison, who leads our team of 0:07:52.720 --> 0:07:56.640 energy reporters here in London. Rachel, what exactly is it 0:07:56.920 --> 0:08:01.160 about these results that we're looking out for most importantly, Yes, 0:08:01.160 --> 0:08:03.520 you're right, it's going to be super interesting because a 0:08:03.560 --> 0:08:06.040 lot of what these results will cover will be the 0:08:06.080 --> 0:08:10.400 period before the government bailout. So Uniper has been quite 0:08:10.480 --> 0:08:12.920 upfront with updates to the market on how much money 0:08:13.160 --> 0:08:15.280 they were losing, so a lot of that was in 0:08:15.320 --> 0:08:18.160 the lead up to the bailout. But we expect to 0:08:18.200 --> 0:08:21.560 see a bit more on the losses they're making on 0:08:21.640 --> 0:08:24.520 having to buy gas to replace the gas and not 0:08:24.520 --> 0:08:27.280 getting from Russia and those contracts that you know they 0:08:27.280 --> 0:08:30.880 have to pass onto customers. So we'll see, you know, 0:08:30.920 --> 0:08:35.400 maybe an update on losses and really what their balance 0:08:35.480 --> 0:08:37.960 sheet is looking like. So we don't know how they 0:08:38.000 --> 0:08:40.960 will factor in the government bailout, but we'll get an 0:08:41.000 --> 0:08:44.120 idea of just how quickly they're burning through money, and 0:08:44.200 --> 0:08:46.320 it will be interesting to see how much of a 0:08:46.440 --> 0:08:50.040 problem the gas supply situation is still causing them. It's 0:08:50.080 --> 0:08:52.200 because this is a company that's at the point to end, 0:08:52.240 --> 0:08:54.040 if I can put it that way, of this crisis 0:08:54.040 --> 0:08:57.760 and the supply issues coming from Russian gas as well. 0:08:58.040 --> 0:09:01.360 We are seeing governments across Europe trying to address these 0:09:01.360 --> 0:09:03.840 issues with big state owned energy companies when they're dealing 0:09:03.920 --> 0:09:07.000 with different supply issues. Another case of that z d 0:09:07.120 --> 0:09:10.040 F and France, where the French government, which already owned 0:09:10.080 --> 0:09:12.240 the vast majority of that company, has now stepped in 0:09:12.280 --> 0:09:14.960 to try and buy more of it. Is this a 0:09:15.000 --> 0:09:18.600 big challenge facing governments in Europe to try and manage 0:09:19.040 --> 0:09:22.400 crises and energy giants. Yes, we're really seeing a time 0:09:22.480 --> 0:09:25.120 when energy companies are just too big to fail. So 0:09:25.160 --> 0:09:28.120 the chaos that would ensue from the downfall of one 0:09:28.120 --> 0:09:31.520 of these big companies. So on the kind of industrial side, 0:09:31.520 --> 0:09:35.160 these companies by wholesale gas and sell it to industry, 0:09:35.440 --> 0:09:40.280 and also they both have customer facing parts to the business, 0:09:40.760 --> 0:09:43.280 not just at home but in other countries too, and 0:09:43.320 --> 0:09:45.440 the disruption that that would cause if they were to 0:09:45.480 --> 0:09:49.400 fail just wouldn't be fathomable at this time. You know, 0:09:49.440 --> 0:09:53.280 in the past, perhaps another company could step in UM 0:09:53.400 --> 0:09:56.079 and so there wouldn't be the same kind of impetus 0:09:56.360 --> 0:09:59.640 from governments to bail out companies. But at the moment, 0:09:59.840 --> 0:10:03.640 the same pressures face most of the other companies and 0:10:03.679 --> 0:10:05.839 it would be difficult to find anyone else to step in, 0:10:05.840 --> 0:10:08.880 particularly with some of the bills we've seen that UM 0:10:09.840 --> 0:10:12.120 governments have picked up with the likes of Uniper and 0:10:12.160 --> 0:10:14.160 e d F. You know, that's not going to be 0:10:14.200 --> 0:10:17.520 something that another company can easily provide, which is really 0:10:17.520 --> 0:10:20.520 why it has to be government intervention. And does that 0:10:20.559 --> 0:10:23.320 mean for governments essentially, no prices too high to pay 0:10:23.360 --> 0:10:27.000 to save these companies In a way, that is what 0:10:27.040 --> 0:10:28.960 we were trying to What we were seeing with Uniper 0:10:29.160 --> 0:10:32.520 was the kind of discussion with Finland trying to get 0:10:32.559 --> 0:10:35.280 them to help out as well, and the pushback sort 0:10:35.320 --> 0:10:37.960 of saying, you know, we don't because the cost obviously 0:10:38.000 --> 0:10:42.160 gets passed on two people. So the government, the German government, 0:10:42.200 --> 0:10:46.000 will pass those costs on eventually to German consumers, and 0:10:46.000 --> 0:10:47.920 so they wanted to try to spread some of that 0:10:48.000 --> 0:10:51.600 burden because you know it it fixes things today. But 0:10:51.640 --> 0:10:53.720 in a way, a lot of the costs get kicked 0:10:53.720 --> 0:10:56.920 down the road, and it means the crisis could last 0:10:56.960 --> 0:10:59.920 longer and longer as those costs continue to feed for 0:11:00.800 --> 0:11:03.120 two bills. Indeed, there's an element of this that's quite 0:11:03.120 --> 0:11:05.679 reminiscent of the Eurozone crisis as well, where we were 0:11:05.679 --> 0:11:08.000 talking about big government intervention. At the time, it was 0:11:08.040 --> 0:11:11.720 more related to banks and how and exactly who pays 0:11:11.760 --> 0:11:14.560 for that. Further down the line as well, how much 0:11:14.559 --> 0:11:18.480 of a challenge is this for governments to manage these 0:11:18.520 --> 0:11:22.480 sorts of unruly issues around how predictable I suppose is 0:11:22.520 --> 0:11:25.920 that these problems would arise for governments. Yes, I think 0:11:25.920 --> 0:11:28.080 it's exactly that. It's a sort of short term sigh 0:11:28.120 --> 0:11:32.000 of relief from everybody, But then later, you know, there 0:11:32.040 --> 0:11:34.480 needs it needs to be worked out, what happens and 0:11:34.480 --> 0:11:37.280 how to how to pay for it, because a lot 0:11:37.360 --> 0:11:40.200 of what's happening in the energy markets has not gone away. 0:11:40.440 --> 0:11:43.440 You know, high prices haven't changed, the Russian situation is 0:11:43.480 --> 0:11:47.760 still going. Gas supply is still being curbed, so those 0:11:48.520 --> 0:11:52.440 factors that were causing big problems are still there. So 0:11:52.760 --> 0:11:54.680 you know, it may become to a point where the 0:11:54.679 --> 0:11:57.400 government's tested on how deep their pockets are if if 0:11:57.480 --> 0:12:01.160 Uniper continues to need cash, what they can cut back 0:12:01.160 --> 0:12:03.480 on what they can do with passing on the cost 0:12:03.520 --> 0:12:06.120 to customers, which has been a big issue in Germany 0:12:06.160 --> 0:12:08.960 that they can't pass a lot of those extra costs 0:12:08.960 --> 0:12:12.679 onto their industrial customers. We're in the summer in Europe now, 0:12:12.760 --> 0:12:14.839 so this is the period where normally we'd see demand 0:12:14.840 --> 0:12:16.840 for these sort of energy companies being lower. That's not 0:12:16.880 --> 0:12:19.000 been the case due to some of the heat waves involved. 0:12:19.040 --> 0:12:21.240 But how much worse could this problem get later in 0:12:21.240 --> 0:12:23.600 the year when we head into winter. Yes, that's right. 0:12:23.640 --> 0:12:25.960 It's that's really the most surprising thing about some of 0:12:26.000 --> 0:12:30.679 the sort of supply issues that we've seen from um 0:12:30.800 --> 0:12:33.720 the warm rivers in particular in Germany and in France, 0:12:33.720 --> 0:12:36.720 we've seen some output cuts at power plants. And this 0:12:36.760 --> 0:12:39.760 is summer. As you said, demand is low, so we're 0:12:39.760 --> 0:12:42.920 really seeing a kind of fear about what will happen 0:12:43.120 --> 0:12:45.920 if demand continues to rise, as we know that it 0:12:45.960 --> 0:12:48.160 will a winter. What happens when the weather gets cold, 0:12:48.480 --> 0:12:51.760 and if you cannot find any more supply for the market, 0:12:51.800 --> 0:12:54.040 then the only thing you can do is cut demand. 0:12:54.400 --> 0:12:56.920 And we're seeing government starting to draw up their emergency 0:12:56.920 --> 0:13:00.480 plans figure out which industries they'll cut, who who can 0:13:00.559 --> 0:13:02.760 who can give back some of the demand that they 0:13:03.040 --> 0:13:06.000 usually need, because we're not going to be able to 0:13:06.040 --> 0:13:08.400 supply power and gas to everybody in the same way 0:13:08.400 --> 0:13:10.960 as we did last winter. And of course that's not 0:13:11.200 --> 0:13:14.160 just a continental European problem. We're seeing the UK government 0:13:14.200 --> 0:13:17.600 also prepare for that problem leading up to blackouts. Were 0:13:17.600 --> 0:13:20.680 told yes, it's looking like there's a four day period 0:13:20.679 --> 0:13:23.560 in January that they're particularly worried about, where if the 0:13:23.600 --> 0:13:28.320 weather gets cold, if supply on interconnectors, both power coming 0:13:28.320 --> 0:13:32.400 from the continent and gas is limited that there wouldn't 0:13:32.400 --> 0:13:35.400 be enough gas perhaps for power generation, and at that 0:13:35.440 --> 0:13:38.840 point they may need to take action to cut industry 0:13:38.920 --> 0:13:42.439 and also households. So that's sort of likely to be 0:13:42.480 --> 0:13:44.200 in a sort of rolling way where they may say 0:13:44.200 --> 0:13:46.680 to one region at a time that you know, you 0:13:46.720 --> 0:13:48.560 have to have no electricity for an hour or so, 0:13:48.679 --> 0:13:51.319 and then swap between the different regions. But I mean, 0:13:51.440 --> 0:13:54.520 that's really quite shocking to think that, you know, a 0:13:54.559 --> 0:13:57.920 G seven economy can can be facing that in just 0:13:58.000 --> 0:14:00.400 a few months time. Are there any other i'll turnative 0:14:00.400 --> 0:14:03.800 options for energy sources? So gases has been traditionally been 0:14:03.880 --> 0:14:06.760 the filler to pick up where other energy sources can't 0:14:06.800 --> 0:14:11.040 compete either any other choices that governments have. That's really 0:14:11.080 --> 0:14:14.280 the reason why Europe is rushing to fill gas storage. 0:14:14.600 --> 0:14:17.679 So that's the best way that you know, we can 0:14:17.760 --> 0:14:19.840 keep those reserves. We know how much we have, we 0:14:19.880 --> 0:14:22.440 can use it. However, the problem is is that even 0:14:22.480 --> 0:14:26.200 if we get those levels full, if Russia cuts off 0:14:26.200 --> 0:14:29.200 the gas, you know, just quite soon into the winter, 0:14:29.280 --> 0:14:32.720 say October November, then analysts do think that we will 0:14:32.840 --> 0:14:36.160 run out of gas in storage. Okay, Rachel Morrison leading 0:14:36.200 --> 0:14:38.640 our team of energy reporters here in London. Thank you 0:14:38.720 --> 0:14:42.120 very much for your time. I'm Stephen Caroline, London. You 0:14:42.120 --> 0:14:45.040 can catch us every weekday morning here for Bloomberg Daybreak Europe, 0:14:45.080 --> 0:14:47.480 beginning at six am in London and one am on 0:14:47.480 --> 0:14:50.760 Wall Street. John Justly Hill on Bloomberg Daybreak Weekend. Name 0:14:50.800 --> 0:14:53.600 one country where the economy has been coming along and 0:14:53.720 --> 0:14:57.080 inflation isn't a problem yet. We'll take a look at 0:14:57.160 --> 0:15:07.320 Indonesia and John Tucker broadcasting live from the Bloomberg Interactive 0:15:07.360 --> 0:15:11.480 Broker Studio in New York. Bloomberg Trio to Washington, d C, 0:15:11.680 --> 0:15:16.400 Bloomberg to Boston, Bloomberg one oh six one to San Francisco, 0:15:16.440 --> 0:15:19.880 Bloomberg nine sixty to the country, Sirius XM Channel one 0:15:19.960 --> 0:15:23.400 nineteen to London, d A B digital radio, and around 0:15:23.440 --> 0:15:27.320 the globe the Bloomberg Business app and Bloomberg Radio dot Com. 0:15:27.320 --> 0:15:36.400 This is Bloomberg day Break Weekend. I'm John Zuckery in 0:15:36.440 --> 0:15:38.640 New York with your global looking ahead of the top 0:15:38.640 --> 0:15:41.200 stories for investors in the coming week. You know, we 0:15:41.280 --> 0:15:44.520 talked a lot about how inflation is slamming Asian countries 0:15:44.760 --> 0:15:47.600 and growth has been slow, but you know that's not 0:15:47.640 --> 0:15:50.080 true everywhere in Asia for more. Let's go to Hong 0:15:50.160 --> 0:15:53.080 Kong and Bloomberg day Break Asia hosts Brian Curtis and 0:15:53.320 --> 0:15:56.160 his colleague Doun Krisner, John Doug and I thought it 0:15:56.200 --> 0:15:59.480 would be a good time to talk about Indonesia. Indonesia's 0:15:59.520 --> 0:16:03.400 annual budget comes out on August. The economy has been 0:16:03.480 --> 0:16:06.480 humming along very nicely this year, even with some of 0:16:06.480 --> 0:16:10.840 the extraordinary challenges of supply chain disruptions and inflation around 0:16:10.880 --> 0:16:13.920 the world. The Jakarta Composite Index is one of the 0:16:13.960 --> 0:16:17.160 few global stock benchmarks to actually be in the green 0:16:17.240 --> 0:16:21.640 for the year, and unlike many countries, inflation in Indonesia 0:16:21.720 --> 0:16:25.320 is not being viewed as a major issue. Bank Indonesia's 0:16:25.360 --> 0:16:28.160 core inflation measure is near the midpoint of its goal 0:16:28.240 --> 0:16:31.600 that between two to four percent. Even so, the central 0:16:31.640 --> 0:16:35.680 bank is expected to raise infest rates this month. Joining 0:16:35.760 --> 0:16:39.000 us is Claire Jao, who reports on the Indonesian economy 0:16:39.080 --> 0:16:42.840 for Bloomberg News. So a lot, Claire is going right 0:16:42.920 --> 0:16:45.560 in Indonesia. It's been helped a lot, I guess by 0:16:45.720 --> 0:16:48.800 high commodity prices for a big part of the first 0:16:49.200 --> 0:16:52.360 half of the year. But they're also getting policy right. 0:16:52.480 --> 0:16:55.120 In Indonesia, what would you say is the sweet spot 0:16:55.160 --> 0:16:58.400 at the moment. Yeah, Indonesia has really been one of 0:16:58.440 --> 0:17:01.880 the few lucky countries of twenty two. As you've said, well, 0:17:01.960 --> 0:17:04.760 the rest of the world has been worried about inflation. 0:17:05.240 --> 0:17:09.840 Indonesia has had manageable inflation. The budget is in surplus, 0:17:09.840 --> 0:17:13.639 and record low interest rates until now, well everyone is hiking. 0:17:13.920 --> 0:17:15.760 So it's curious because if you look at the latest 0:17:15.800 --> 0:17:18.480 reading on consumer confidence for the month of July, I 0:17:18.480 --> 0:17:20.400 think the index was down a little bit more than 0:17:20.440 --> 0:17:23.959 what we saw in June. How is the Indonesian consumer faring? 0:17:24.280 --> 0:17:27.800 If you look at inflation in Indonesia, the headline inflation 0:17:27.840 --> 0:17:29.920 has been a pretty good number. We're still at five 0:17:30.000 --> 0:17:33.120 percent uh, it's breached the central banks target of two 0:17:33.160 --> 0:17:35.879 to four percent. However, if you strip out all of 0:17:35.920 --> 0:17:39.040 the volatile items and look at just core inflation, which 0:17:39.040 --> 0:17:40.920 is what the central bank is looking at, it's still 0:17:40.960 --> 0:17:43.280 at three percent, which is still at the midpoint of 0:17:43.320 --> 0:17:46.440 its target. That's really what's helped it keep interest rates 0:17:46.440 --> 0:17:50.359 at record lows. However, as you mentioned, consumer sentiment is 0:17:50.400 --> 0:17:54.040 going down, and the reason for that is because volatile 0:17:54.119 --> 0:17:57.640 food items are surging, the prices are searching for that. 0:17:57.640 --> 0:18:01.000 That's for important foods like so if for example, and 0:18:01.400 --> 0:18:05.600 um crops like chili, garlic that have been affected by 0:18:05.640 --> 0:18:09.080 bad weather. So there is there does seem to be 0:18:09.119 --> 0:18:11.480 a bit of a divide between what the central bank 0:18:11.560 --> 0:18:16.040 is tracking, which is core inflation, and what consumers really 0:18:16.040 --> 0:18:19.040 feel on the ground based on what everyday items they 0:18:19.080 --> 0:18:21.080 buy and what every day items they have to consume. 0:18:21.480 --> 0:18:25.400 What happens when commodity prices really turn. We've seen some 0:18:25.520 --> 0:18:29.240 easing of commodity prices, generally a big drop in oil prices. 0:18:29.280 --> 0:18:32.159 In such if there's a bigger fall off, how does 0:18:32.200 --> 0:18:35.440 that affect the country? I guess that's the mystery that 0:18:35.440 --> 0:18:38.639 that Indonesia has to face next year. The government is 0:18:38.680 --> 0:18:42.000 well aware that the commodity we've has to turn at 0:18:42.040 --> 0:18:45.080 some point UM and that much of what's driving price 0:18:45.119 --> 0:18:48.159 pressures up to day is what's happening in supply chains 0:18:48.200 --> 0:18:51.359 and the war in Ukraine UM. And that's really given 0:18:51.400 --> 0:18:54.280 them a lot of leeway this year. That's given them 0:18:54.280 --> 0:18:58.000 record high exports, that's given them government revenues, that's allowed 0:18:58.040 --> 0:19:00.439 them to pour in as much as thirty four billion 0:19:00.480 --> 0:19:04.160 dollars in subsidies and compensation to keep energy costs low 0:19:04.240 --> 0:19:08.199 for ordinary Indonesians. That same situation may not happen in 0:19:09.680 --> 0:19:13.080 once these coal and oil prices fall. So what they're 0:19:13.080 --> 0:19:15.840 hoping for is to start to taper off UM some 0:19:16.000 --> 0:19:20.640 of their unnecessary spending UM. President Joco Weddo has told 0:19:20.680 --> 0:19:24.040 his ministers, don't start new projects, Let's focus on just 0:19:24.080 --> 0:19:27.680 finishing the existing ones. So it's very interesting that you 0:19:27.800 --> 0:19:30.119 bring up the president because in the coming week, the 0:19:30.240 --> 0:19:32.720 editor in chief of Bloomberg News, John mickel Thwaite, will 0:19:32.720 --> 0:19:38.000 be sitting down in conversation with President Joco Weddo. Recently, Joco, 0:19:38.080 --> 0:19:41.320 we ordered the cabinet to keep using the budget. Fore 0:19:41.400 --> 0:19:44.480 is I think the way the Finance minister described it 0:19:44.520 --> 0:19:48.240 as a shock absorber keeping that budget deficit below three 0:19:48.240 --> 0:19:51.480 percent of total GDP. So talk to us a little 0:19:51.480 --> 0:19:54.959 bit about the importance of government subsidies in keeping the 0:19:55.000 --> 0:19:57.640 Indonesian economy in this current sweet spot. I think that's 0:19:57.640 --> 0:20:01.400 how Brian described it. Yeah. So, and as we've seen 0:20:01.400 --> 0:20:04.679 with many countries, inflation can be a very political issue, 0:20:04.760 --> 0:20:07.879 and Ko we saw that earlier this year. When cocaing 0:20:07.920 --> 0:20:12.000 oil prices surged and his popularity ratings fell. So this 0:20:12.040 --> 0:20:15.280 is something that's very very close to his heart. Um. 0:20:15.359 --> 0:20:21.240 He was a very firm advocate in streamlining fuel subsidies, 0:20:21.400 --> 0:20:24.600 energy subsidies, but that's something that they've really stepped back 0:20:24.640 --> 0:20:27.679 on this year, and instead they've said, whatever money that 0:20:27.720 --> 0:20:30.960 we're earning from our record high exports, let's pour it 0:20:31.040 --> 0:20:34.240 back into the economy through these subsidies instead. Clara, thanks 0:20:34.240 --> 0:20:36.600 so much for joining us and for sharing your insights 0:20:36.640 --> 0:20:40.240 on Indonesia. Claire Joe, who reports on the Indonesian economy 0:20:40.280 --> 0:20:44.040 for Bloomberg News, Brian Curtis along with Doug Krisner. You 0:20:44.080 --> 0:20:47.399 can catch us every weekday here for Bloomberg Daybreak Asia, 0:20:47.720 --> 0:20:50.720 beginning at six am in Hong Kong and six pm 0:20:50.880 --> 0:20:53.919 on morste John, Brian, and Duck. Thanks a lot. Just 0:20:54.000 --> 0:20:56.840 to Hill of Bloomberg day Break Weekend, former President Trump 0:20:57.000 --> 0:21:07.119 and the g This is Bloomberg Daybreak Weekend, our global 0:21:07.160 --> 0:21:09.280 look ahead of the top stories for investors in the 0:21:09.280 --> 0:21:12.600 coming week. I'm John Tucker in New York. Watch for 0:21:12.720 --> 0:21:15.840 Republicans to either continue to try to capitalize on former 0:21:15.880 --> 0:21:20.280 President Trump's recent headlines or try to distance themselves from 0:21:20.320 --> 0:21:23.720 them for more or let's head to our bloombergroom in 0:21:23.880 --> 0:21:27.960 Washington and Amy Morris Amy. All right, thank you, John, 0:21:28.000 --> 0:21:30.920 And we do have more primaries underway in the coming week, 0:21:30.960 --> 0:21:34.280 more investigations unfolding as well. Joining me now to talk 0:21:34.320 --> 0:21:37.520 about this and to connect some dots. Bloomberg National political 0:21:37.560 --> 0:21:40.120 reporter barn Naquette, Mark, thank you so much for taking 0:21:40.160 --> 0:21:42.760 the time with us. Good to be with you. Now, 0:21:42.800 --> 0:21:45.840 let's start with the GOP and former President Trump and um, 0:21:45.920 --> 0:21:49.240 some Republicans you've seen casting Trump as a victim in 0:21:49.320 --> 0:21:54.360 all of this these investigations. How has this galvanized them? Well, 0:21:54.400 --> 0:22:00.440 particularly the search warrant that the FBI executed at Trump's 0:22:00.480 --> 0:22:05.080 Morilago resort this week. Um. The Republicans have really sought 0:22:05.160 --> 0:22:08.679 to capitalize, I think on that rate in in a 0:22:08.680 --> 0:22:12.240 couple of ways. One by firing up the Republican base 0:22:12.320 --> 0:22:15.200 for the mid term elections where in control of Congress 0:22:15.640 --> 0:22:19.560 will be determined. Uh. And also President Trump, I think 0:22:19.600 --> 0:22:22.920 is going to try to use it to solidify support 0:22:22.960 --> 0:22:26.600 around him. Um. You know we've seen you know, Trump 0:22:26.640 --> 0:22:30.200 and prominent Republicans for a long time. Um, try and 0:22:30.520 --> 0:22:35.600 undermine UH credibility and and and trust in major institutions, 0:22:36.440 --> 0:22:40.280 essentially saying these institutions are broken and are after Trump 0:22:40.320 --> 0:22:43.000 in particular and Republicans in general, whether it's the Justice 0:22:43.040 --> 0:22:46.320 Department and the FBI and the media and fake news 0:22:46.359 --> 0:22:51.200 and big tech which censors conservatives. So this rate in Florida, UM, 0:22:51.240 --> 0:22:53.679 you know, sort of being used to reinforce that idea 0:22:53.760 --> 0:22:58.080 that UM, you know, the Democrats in particular and UH 0:22:58.359 --> 0:23:00.879 control of the machinery of government are are out to 0:23:00.960 --> 0:23:04.000