Daybreak Weekend: US Jobs Preview, France Pressure, Golden Week

Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg day 0:00:10.280 --> 0:00:12.480 Break Weekend, our global look at the top stories in 0:00:12.520 --> 0:00:14.840 the coming week from our day Break anchors all around 0:00:14.840 --> 0:00:17.160 the world. Straight Ahead on the program, a look at 0:00:17.160 --> 0:00:20.160 the September jobs report in the US what it could 0:00:20.200 --> 0:00:23.720 mean to FED policy moving forward. I'm Tom Busby in 0:00:23.800 --> 0:00:24.239 New York. 0:00:24.480 --> 0:00:27.920 I'm Caroline Hetcket in London, where we're asking if France's 0:00:28.080 --> 0:00:31.880 new government can navigate an uncertain political road ahead. 0:00:32.240 --> 0:00:35.960 I'm deg Chrisner previewing Chinese consumer behavior during the Golden 0:00:35.960 --> 0:00:38.880 Week holiday. 0:00:42.479 --> 0:00:45.760 That's all straight ahead on Bloomberg day Break Weekend on 0:00:45.920 --> 0:00:48.760 Bloomberg e Loove on three OW, New York, Bloombergen ninety 0:00:48.840 --> 0:00:52.840 nine to one, Washington, d C, Bloomberg ninety two to nine, Boston, 0:00:52.960 --> 0:00:57.840 Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Syrias 0:00:57.960 --> 0:01:00.480 XM one twenty one, and around the world world on 0:01:00.520 --> 0:01:03.760 Bloomberg Radio dot com and via the Bloomberg Business Chatter. 0:01:07.000 --> 0:01:08.880 Good day to you. I'm Tom Busby, and we begin 0:01:08.920 --> 0:01:11.640 today's program with a look at the September jobs report. 0:01:11.920 --> 0:01:15.360 Here in the US, non farm payroll numbers come out 0:01:15.480 --> 0:01:19.000 this Friday eight thirty am Wall Street Time. What could 0:01:19.000 --> 0:01:22.240 those numbers mean for Fed monetary policy moving forward? Well, 0:01:22.280 --> 0:01:25.560 for more, we're joined by Stuart Paul Us economists with 0:01:25.600 --> 0:01:29.480 Bloomberg Economics. Well, Stuart, no doubt we've seen some softening 0:01:29.480 --> 0:01:31.920 in the US labor market, but we still see growth. 0:01:32.360 --> 0:01:34.679 What are you expecting to see this coming Friday. 0:01:35.000 --> 0:01:38.280 The consensus estimate is for one hundred and thirty thousand jobs. 0:01:38.360 --> 0:01:41.440 That's what folks are expecting was added in September. That's 0:01:41.480 --> 0:01:44.240 a little bit lower than the estimate for August, which 0:01:44.240 --> 0:01:47.280 showed one hundred and forty two thousand jobs added. We 0:01:47.360 --> 0:01:50.240 think risk is actually skewed to the upside for that 0:01:50.360 --> 0:01:52.840 non farm payroll number, and it could be as high 0:01:52.840 --> 0:01:57.160 as double what the consensus estimate is. But that comes 0:01:57.160 --> 0:01:59.840 from our tracking of high frequency data which shows that 0:02:00.000 --> 0:02:03.240 there or fewer layoffs in the hospitality and entertainment industries 0:02:03.280 --> 0:02:07.080 in September, and hiring was way above the seasonal norm 0:02:07.240 --> 0:02:10.320 in education. Now, that could just be a little bit 0:02:10.360 --> 0:02:12.639 of catch up from a week August when it comes 0:02:12.680 --> 0:02:15.840 to hiring in education. So we think that even if 0:02:15.880 --> 0:02:18.440 we do see an upside surprise, the Fed can read 0:02:18.480 --> 0:02:20.239 through it a little bit, and I just want to 0:02:20.320 --> 0:02:24.680 layer on one additional complication there. We know that monthly 0:02:24.840 --> 0:02:28.959 estimates for non farm payrolls are running a bit high 0:02:29.360 --> 0:02:32.480 because of mismeasurement issues at the Bureau of Labor Statistics. 0:02:32.760 --> 0:02:34.880 We know that we're going to get a downward revision, 0:02:35.160 --> 0:02:37.880 and it's our best estimate that we're still seeing monthly 0:02:37.960 --> 0:02:41.400 non farm payroll estimates that are about ninety thousand jobs 0:02:41.400 --> 0:02:45.160 per month overestimated. So we know that even if we 0:02:45.200 --> 0:02:47.840 do see an upside surprise, you got to discount it 0:02:47.919 --> 0:02:50.600 for that mismeasurement problem. And even if we were to 0:02:50.639 --> 0:02:52.919 see something like let's say two hundred and fifty thousand 0:02:53.000 --> 0:02:56.440 jobs added, it's really more like one hundred and sixty thousand. 0:02:56.720 --> 0:02:58.919 If we do see the consensus estimate of one hundred 0:02:58.960 --> 0:03:02.000 and thirty thousand jobs, it's really more like forty to 0:03:02.040 --> 0:03:06.960 fifty thousand jobs added. Under either scenario, that's hiring. That's 0:03:07.000 --> 0:03:11.520 still too slow to maintain a consistent unemployment rate. So 0:03:11.560 --> 0:03:14.440 we do see unemployment rate risk as skewed a little 0:03:14.440 --> 0:03:15.360 bit to the upside. 0:03:15.480 --> 0:03:17.840 Well, right now the unemployment rate is four point two percent, 0:03:18.000 --> 0:03:19.919 or where could it go would it stay the same? 0:03:20.320 --> 0:03:22.640 So we think that four point two is a reasonably 0:03:22.720 --> 0:03:25.520 good estimate, risk is skewed toward four point three percent. 0:03:25.600 --> 0:03:29.120 We have a precise but very knife edge estimate of 0:03:29.240 --> 0:03:31.760 four point two five percent. So it really comes down 0:03:31.800 --> 0:03:35.040 to the rounding at the Bureau of Labor Statistics. If 0:03:35.080 --> 0:03:37.840 we're thinking about the trajectory of the unemployment rate, though, 0:03:37.840 --> 0:03:40.040 where could it be at year end and how might 0:03:40.080 --> 0:03:43.040 the FED respond to that in November and December when 0:03:43.080 --> 0:03:45.840 the FMC meets for the next couple times. We think 0:03:45.840 --> 0:03:48.120 that the unemployment rate can end the year at about 0:03:48.120 --> 0:03:51.120 four and a half percent, we're still seeing the hiring 0:03:51.160 --> 0:03:54.880 that's just too slow to maintain a consistent unemployment rate. 0:03:55.240 --> 0:03:57.120 And when that's the case, the FED is going to 0:03:57.120 --> 0:03:59.640 be inclined to cut a bit more. Again, even if 0:03:59.640 --> 0:04:02.920 we see that upside surprize in payroll numbers. 0:04:02.640 --> 0:04:05.080 Well that sounds like a pretty big upside surprise that 0:04:05.120 --> 0:04:09.600 you're talking about doubling perhaps the one point thirty estimated. 0:04:10.040 --> 0:04:13.920 What's behind these I won't say miscalculations, but the big 0:04:13.960 --> 0:04:15.840 difference in these estimates. 0:04:16.080 --> 0:04:18.960 So part of it comes down to how the Bureau 0:04:18.960 --> 0:04:24.080 of Labor Statistics extrapolates an estimate for nationwide hiring from 0:04:24.120 --> 0:04:27.560 a rather narrow sample of businesses that are surveyed. There's 0:04:27.560 --> 0:04:30.960 still a couple hundred thousand businesses that are surveyed every month, 0:04:31.240 --> 0:04:33.880 but compare that to the tens of millions of businesses 0:04:33.920 --> 0:04:36.480 that are operating the United States. It's still just very 0:04:36.520 --> 0:04:39.560 narrow slice. The BLS has to have a model for 0:04:39.800 --> 0:04:42.799 how it can extrapolate from the survey to the broader economy. 0:04:43.160 --> 0:04:45.919 We've seen time and time again both revisions on a 0:04:45.920 --> 0:04:50.640 monthly basis and downward revisions based on that improper extrapolation 0:04:50.960 --> 0:04:54.320 from the eight hundred eighteen thousand that's exactly right. So 0:04:54.480 --> 0:04:57.400 through the first quarter and the year ending in March 0:04:57.600 --> 0:04:59.760 of this year March of twenty twenty four, we know 0:04:59.880 --> 0:05:03.200 that payrolls we're overestimated by about eight hundred and eighteen 0:05:03.279 --> 0:05:06.000 thousand jobs, So we know that we have that revision coming, 0:05:06.080 --> 0:05:08.840 and we think that since then we're running at a 0:05:08.880 --> 0:05:12.560 pace of about ninety thousand jobs per month overestimated. So 0:05:13.200 --> 0:05:16.120 that helps to resolve this puzzle that we deal with, 0:05:16.160 --> 0:05:19.480 which is we see hiring that seems to be pretty 0:05:19.480 --> 0:05:23.080 stable and robust, but we still see this unemployment rate 0:05:23.080 --> 0:05:25.360 that's rising, and if that's the case, we need to 0:05:25.400 --> 0:05:27.320 square the circle. I think that part of it is 0:05:27.680 --> 0:05:32.480 an overestimate of hiring plus layer in immigration, and we 0:05:32.560 --> 0:05:35.560 know that just the current labor supply is not being 0:05:35.600 --> 0:05:40.000 fully absorbed. Just demand is not entirely sufficient to keep 0:05:40.080 --> 0:05:41.840 that unemployment rate steady. 0:05:42.080 --> 0:05:45.200 Well, for a FED that says it's data dependent, this 0:05:45.279 --> 0:05:47.200 must be pretty vexing for them. 0:05:47.480 --> 0:05:50.000 It is. It's the sort of thing that's troubling. It's 0:05:50.000 --> 0:05:51.719 the sort of this is part of the reason why 0:05:51.720 --> 0:05:54.160 the FED has so many economists on staff to help 0:05:54.200 --> 0:05:57.040 solve these these questions. But I think the one thing 0:05:57.080 --> 0:05:59.800 that's clear is that with cooling inflation, the FED can 0:06:00.040 --> 0:06:03.040 focus its energy is a bit more on achieving the 0:06:03.080 --> 0:06:06.440 maximum employment objective within its dual mandate. And I think 0:06:06.480 --> 0:06:08.000 that that's why we're going to see a FED that's 0:06:08.000 --> 0:06:10.479 still on its rate cutting course, because when you have 0:06:10.640 --> 0:06:13.600 labor supply that's outstripping demand, you're going to have that 0:06:13.720 --> 0:06:16.400 rising unemployment rate and you should see the FED respond 0:06:16.440 --> 0:06:17.520 with additional rate cuts. 0:06:17.880 --> 0:06:18.080 Well. 0:06:18.120 --> 0:06:21.159 The September Jobs report from the Bureau of Labor Statistics 0:06:21.160 --> 0:06:24.279 out this Friday, and our thanks to Stuart Paul, us 0:06:24.360 --> 0:06:28.359 economist with Bloomberg Economics. We move now to politics. With 0:06:28.560 --> 0:06:31.400 just over a month ago ahead of the US general election, 0:06:31.600 --> 0:06:36.080 vice presidential nominees Republican Senator JD. Vans of Ohio Democratic 0:06:36.080 --> 0:06:40.200 Governor Tim Wats of Minnesota will debate this Tuesday, facing 0:06:40.240 --> 0:06:43.280 off for the only time ahead of that November fifth vote. 0:06:43.400 --> 0:06:46.400 Bloomberg Television and Radio will have special coverage and a 0:06:46.400 --> 0:06:50.320 global simulcast of the CBS News debate starting Tuesday at 0:06:50.360 --> 0:06:53.919 eight pm Wall Street Time. Now for more on the 0:06:54.000 --> 0:06:57.640 debate and the economic visions of both vice presidential candidates, 0:06:57.680 --> 0:07:01.920 were joined by Laura Davison, Bloomberg Politics Editor. Laura, thank 0:07:02.000 --> 0:07:04.760 you so much for joining us. I'm going to start 0:07:04.800 --> 0:07:08.240 with what are you looking forward to hear from both 0:07:08.440 --> 0:07:10.800 vice presidential candidates this week? 0:07:11.040 --> 0:07:14.560 So this debate is really going to be different than 0:07:14.760 --> 0:07:18.640 some previous VP debates that we've had one in that 0:07:18.680 --> 0:07:21.640 there's just more interest in both of these figures. Both 0:07:21.640 --> 0:07:23.480 of them, you know, obviously have been on the political 0:07:23.520 --> 0:07:26.440 scene for a little bit, but have not necessarily had 0:07:26.440 --> 0:07:29.520 a quite the same national profile. You know, JD. Vance 0:07:29.560 --> 0:07:32.560 coming sort of into the world of politics from being 0:07:32.560 --> 0:07:35.200 an author in his book Kill Billy Elegy. Wall's more 0:07:35.200 --> 0:07:37.920 low price profile. He was a member of the House 0:07:37.960 --> 0:07:40.760 from a rural from Minnesota district and governor of Minnesota, 0:07:41.240 --> 0:07:44.000 but didn't quite have the same national profile. But what's 0:07:44.080 --> 0:07:46.720 interesting is they both have a very much an economic 0:07:46.800 --> 0:07:50.200 populist message, but what that looks like is very different. 0:07:50.680 --> 0:07:53.200 You know, Vance has spoken a lot about big tech 0:07:53.240 --> 0:07:54.760 and they need to break up big tech in ways 0:07:54.800 --> 0:07:57.040 that he almost sounds like a Democrat, But in other 0:07:57.120 --> 0:07:58.960 things that he talks about in terms of taxes and 0:07:59.040 --> 0:08:03.200 other things, he's he's more in line with the mainstream 0:08:03.200 --> 0:08:06.280 of where the Republican Party now is. Walls as governor 0:08:06.560 --> 0:08:09.640 has spent a lot of time thinking about what we 0:08:09.760 --> 0:08:13.640 kind of call the care economy, so things like childcare, 0:08:14.040 --> 0:08:17.000 preschool lunches, child tax credit. He spent a lot of 0:08:17.040 --> 0:08:19.480 time thinking about, you know, how can you know the 0:08:20.120 --> 0:08:23.120 government implement policies to make life easier for families. 0:08:23.400 --> 0:08:25.480 Well, he certainly has a record of you know that 0:08:25.600 --> 0:08:29.080 one point nine billion dollar jobs and projects act like 0:08:29.120 --> 0:08:32.480 you said, the state established paid sick and medical leave, 0:08:32.760 --> 0:08:37.280 banning non compete agreements. So he has i mean, let's 0:08:37.280 --> 0:08:39.440 face it, a better track record. We can see what 0:08:39.600 --> 0:08:43.960 he has done. But let's compare him and Vance and 0:08:44.040 --> 0:08:46.920 some things. Let's start with a hot button issue right now. 0:08:47.040 --> 0:08:50.920 We are facing a devastating strike right now in Seattle 0:08:50.960 --> 0:08:54.920 at Boeing. What about unions. Let's start with Vance on 0:08:55.120 --> 0:08:56.520 unions and then about wolves. 0:08:57.240 --> 0:08:59.319 Yeah, so this is kind of one of those areas 0:08:59.400 --> 0:09:01.840 they both talk about the American worker. This is something 0:09:01.880 --> 0:09:04.160 that they're both you know, sort of central to their messaging, 0:09:04.800 --> 0:09:06.880 you know, Vance and and you know and Trump of 0:09:06.880 --> 0:09:11.120 course have also been less favorable towards unions. Trump recently, 0:09:11.200 --> 0:09:14.080 in a conversation with Elon Musk even you know, sort 0:09:14.080 --> 0:09:17.160 of talked about, you know, firing workers for striking. And 0:09:17.200 --> 0:09:19.280 so this is sort of a position that Vance has 0:09:19.280 --> 0:09:23.280 adopted as well, and is less favorable uh towards unions 0:09:23.280 --> 0:09:26.840 and basically you know, sort of wants people uh to uh, 0:09:27.200 --> 0:09:29.200 you know, have a little bit more freedom. Of course, 0:09:29.240 --> 0:09:31.400 you know, both sides are very much courting the union vote, 0:09:31.400 --> 0:09:34.800 and they both tout that the teamsters just recently declined 0:09:34.840 --> 0:09:38.280 to endorse either ticket, and so both sides have sort 0:09:38.280 --> 0:09:40.040 of been taking that as a win, saying, hey, look, 0:09:40.120 --> 0:09:42.360 you know that this is we have the working man 0:09:42.480 --> 0:09:43.400 on the side of us. 0:09:43.520 --> 0:09:46.240 But a lot of Teamsters, though, have come out right 0:09:46.559 --> 0:09:46.960 in phase. 0:09:48.640 --> 0:09:48.840 Yes. 0:09:48.960 --> 0:09:51.440 One of the reasons that the Teamsters didn't endorse is 0:09:51.480 --> 0:09:54.560 they put out this polling thing. Look are our membership 0:09:54.640 --> 0:09:57.000 is very split. Uh you know, you know, upwards of 0:09:57.000 --> 0:09:59.160 fifty percent. You know, I think fifty fifty nine percent 0:09:59.440 --> 0:10:01.760 of the teams actually said they wanted to endorse Trump. 0:10:02.320 --> 0:10:06.040 Only about you know, forty percent wanted to endorse Harris. 0:10:06.080 --> 0:10:08.480 But of course, the Teamsters have long endorsed Democrats, so 0:10:08.520 --> 0:10:10.400 they decided to just stay out of this fight. But 0:10:10.400 --> 0:10:13.760 at the local level, you've seen both both Vance Trump, 0:10:13.840 --> 0:10:18.320 Harris and Walls campaigning with Teamsters members from specific states. 0:10:18.440 --> 0:10:22.040 Walls was with Teamsters members from Arizona, and Harris has 0:10:22.040 --> 0:10:26.160 also been with Teamsters from some of those Blue Wall Michigan, Pennsylvania, 0:10:26.200 --> 0:10:27.640 and Wisconsin areas. 0:10:27.720 --> 0:10:31.680 Now, let's talk taxes. Walls has raised taxes on wealthy 0:10:31.720 --> 0:10:35.440 earners one percent tax capital gains, dividends, investments, stopping a 0:10:35.440 --> 0:10:38.920 million a year. He also raised corporate taxes. They're the 0:10:39.040 --> 0:10:43.040 highest in the US nine point eight percent. However, some 0:10:43.280 --> 0:10:47.160 giant corporations based there three m general Mills, Cargill, target 0:10:47.240 --> 0:10:49.760 US Bank, just to name a few, are staying there. 0:10:49.920 --> 0:10:54.120 So is it working those taxes on corporations and what's 0:10:54.480 --> 0:10:56.280 Vance's view on that. 0:10:56.640 --> 0:10:59.320 Yes, the general Walls philosophy, and this is something that 0:10:59.360 --> 0:11:02.160 Harris also up is that you know, you raise taxes 0:11:02.200 --> 0:11:06.079 on corporations on the wealthy to pay for tax benefits 0:11:06.480 --> 0:11:09.160 for lower earners and middle income earners. So that's what 0:11:09.200 --> 0:11:12.040 you saw play out in Minnesota when he was governor, 0:11:12.640 --> 0:11:14.599 that he raised taxes on on the wealthy, you know, 0:11:14.679 --> 0:11:17.520 raised that corporate tax you know, to a level that 0:11:17.559 --> 0:11:19.439 you know, corporations still said, okay, it still makes sense 0:11:19.440 --> 0:11:21.199 for me to keep my business based in Minnesota and 0:11:21.280 --> 0:11:23.320 not not so high that they would leave. But then 0:11:23.360 --> 0:11:26.720 you can use that money to expand a child tax credit, 0:11:26.760 --> 0:11:29.160 to pay for you know, pay leave, to pay for 0:11:29.240 --> 0:11:31.680 school lunches and some of these things. So that's sort 0:11:31.679 --> 0:11:34.679 of like the the basically what the Harris vision is 0:11:34.720 --> 0:11:37.480 to do on a national level, what Tim Walls has done, 0:11:37.920 --> 0:11:40.760 you know, broadly speaking, in Minnesota. Vance has a very 0:11:40.800 --> 0:11:43.720 different view about tax station. He has also proposed tax 0:11:43.760 --> 0:11:47.400 cuts for for lower earners, particularly a big increase to 0:11:47.440 --> 0:11:49.920 the trial tax credit. That's been something that he's been 0:11:50.360 --> 0:11:51.280 very vocal about. 0:11:51.080 --> 0:11:51.880 On the campaign trail. 0:11:52.080 --> 0:11:54.880 This is something that also that Walls and Harris want 0:11:54.880 --> 0:11:56.880 to do, but they have different approaches and how they 0:11:56.880 --> 0:11:58.760 would do it. Basically, Advance wants to give this tax 0:11:58.840 --> 0:12:02.240 credit you sort of regardless of income status, whereas We'll 0:12:02.520 --> 0:12:04.480 wants to target this more just to sort of lower 0:12:04.480 --> 0:12:06.679 and middle income earners so that they would get the 0:12:06.679 --> 0:12:08.960 biggest benefit. When it comes to corporate tax for Vance, 0:12:09.000 --> 0:12:13.040 he is not in favor of increasing those. It's actually 0:12:13.240 --> 0:12:15.280 a big goal for Trump and for the Republican ticket 0:12:15.320 --> 0:12:17.439 to lower corporate taxes. It's something to talk about on 0:12:17.520 --> 0:12:20.120 the campaign trail a lot. Trump during his first term 0:12:20.240 --> 0:12:23.199 lowered the federal corporate rate. It was that thirty five percent. 0:12:23.240 --> 0:12:24.880 He lowered it down to twenty one percent, so a 0:12:24.960 --> 0:12:27.400 really big jump. Trump has been talking about wanting to 0:12:27.440 --> 0:12:29.960 lower that down to fifteen percent. So that's something that 0:12:30.360 --> 0:12:33.080 is sort of a big gap between the two party's 0:12:33.080 --> 0:12:34.800 tickets and something that you'll probably hear about on the 0:12:34.840 --> 0:12:36.439 debate stage on Tuesday. 0:12:36.600 --> 0:12:38.760 Well, there's a lot to look forward to that debate 0:12:38.840 --> 0:12:42.120 this Tuesday, October First. In our thanks to Laura Davison, 0:12:42.360 --> 0:12:46.319 Bloomberg Politics Editor. A reminder Bloomberg Television and Radio, we'll 0:12:46.320 --> 0:12:49.559 have special coverage and a global simulcast of the CBS 0:12:49.559 --> 0:12:53.400 News debate starting Tuesday at eight pm Wall Street Time. 0:12:53.679 --> 0:12:55.920 Coming up on Bloomberg day Break Weekend, we'll look at 0:12:55.920 --> 0:13:00.440 whether France's new government can navigate an uncertain political row ahead. 0:13:00.760 --> 0:13:16.080 I'm Tom Busby, and this is Bloomberg. This is Bloomberg 0:13:16.160 --> 0:13:18.200 day Break Weekend, our global look ahead at the top 0:13:18.240 --> 0:13:21.280 stories for investors in the coming week. I'm Tom Busby 0:13:21.320 --> 0:13:24.120 in New York. Up later in the program, a look 0:13:24.160 --> 0:13:27.560 at what China's Golden Week means to the Chinese economy. 0:13:27.840 --> 0:13:30.800 But first, France has chosen its new government with a 0:13:30.880 --> 0:13:34.400 seventy three year old statesman Michelle Barnier as Prime minister. 0:13:34.720 --> 0:13:37.199 But this comes as an EU budget deadline looms and 0:13:37.240 --> 0:13:40.480 the country awaits policy announcements. We should get a first 0:13:40.520 --> 0:13:43.080 look at his plans this week. But can the former 0:13:43.080 --> 0:13:47.079 Breakit negotiator quiet the political turmoil in Paris? For more, 0:13:47.360 --> 0:13:49.320 Let's go to London and bring in Bloomberg day Break 0:13:49.320 --> 0:13:51.800 Europe anchor Caroline Hepger Tom. 0:13:51.840 --> 0:13:54.199 In the next few days, we're expecting to hear from 0:13:54.240 --> 0:13:57.880 the new French Prime Minister, Michelle Barnier in an important speech. 0:13:58.240 --> 0:14:02.080 His new cabinet has only being created after a record 0:14:02.160 --> 0:14:07.440 long two month transition period that politically paralyzed France. It 0:14:07.520 --> 0:14:11.240 has been described by one veteran commentator as the most 0:14:11.320 --> 0:14:15.240 right wing cabinet in more than a decade. More broadly, 0:14:15.360 --> 0:14:20.240 concerned about France's finances are also growing. Rattled investors have 0:14:20.360 --> 0:14:24.520 resumed selling the country's bombs and so in short, Michele 0:14:24.720 --> 0:14:28.120 Barnier is under a great deal of pressure in terms 0:14:28.120 --> 0:14:34.240 of political stability, popularity and economics. Recently, lawmakers have had 0:14:34.280 --> 0:14:37.400 to warn that the budget deficit has widened much more 0:14:37.440 --> 0:14:41.760 than expected, and politicians have pledged tough action to ensure 0:14:41.920 --> 0:14:45.880 credibility in the face of the bond markets. Maria Jakels 0:14:45.880 --> 0:14:51.000 from Edmund de Rothschild asset Management in France says lawmakers 0:14:51.040 --> 0:14:54.800 are now under significant pressure to deliver a solution. 0:14:55.800 --> 0:14:59.760 The issue is that fiscal policy and decisions have clearly 0:14:59.800 --> 0:15:04.240 not been at the heart of president maximum consultations in 0:15:04.320 --> 0:15:07.520 the recent past, so the government is really going to 0:15:07.760 --> 0:15:12.360 have to work under a huge time pressure and it's 0:15:12.440 --> 0:15:15.040 at this point of time, very difficult to say what 0:15:15.080 --> 0:15:18.280 sort of measures they are going to come up with, 0:15:18.400 --> 0:15:20.640 but one thing it's sure is that it's the absolute 0:15:20.640 --> 0:15:23.360 priority for this government and they have very little time 0:15:23.400 --> 0:15:26.480 to implement. So what it means is that he's going 0:15:26.520 --> 0:15:28.880 to be able to get anything done, He's going to 0:15:28.960 --> 0:15:33.680 have to at the bare minimum get the abstention from 0:15:33.840 --> 0:15:39.520 some of the non affiliated deputies or lot for example, 0:15:40.240 --> 0:15:42.880 if not the active support from some of the extreme 0:15:43.720 --> 0:15:48.280 deputies in parliament. Otherwise he's going to have to use 0:15:48.320 --> 0:15:50.480 the forty nine point three over and over again, and 0:15:50.520 --> 0:15:54.000 then he risks a vote of no confidence and then 0:15:54.080 --> 0:15:56.560 you know nothing is going to get done. 0:15:56.560 --> 0:16:00.040 Really, so it all seems like a very scary, in 0:16:00.120 --> 0:16:02.960 a very kind of frustrating, an intense situation that doesn't 0:16:02.960 --> 0:16:05.920 necessarily yield up positive results given given the time crunch. 0:16:06.200 --> 0:16:08.600 But on a positive side, if I may inject some 0:16:09.480 --> 0:16:14.880 happiness here, is that Michelle Barnier is a skilled diplomat, 0:16:14.960 --> 0:16:17.480 He is a skilled negotiator, so I think the logic 0:16:17.800 --> 0:16:20.720 from some has been that he can actually manage the 0:16:21.320 --> 0:16:23.520 division that you're seeing in parliament. The other side of 0:16:23.600 --> 0:16:25.520 is that from the EU side, there may actually be 0:16:25.560 --> 0:16:28.840 concessions to the French government. If this deficit doesn't quite 0:16:28.840 --> 0:16:33.000 match their standards, does that change your view on France 0:16:33.000 --> 0:16:36.400 and the investibility of France given the cushion that they 0:16:36.480 --> 0:16:39.320 may get from the EU and given the global confidence 0:16:39.360 --> 0:16:41.880 that perhaps is growing in this peck. 0:16:42.040 --> 0:16:44.600 That would certainly be helpful. And when you look at 0:16:44.600 --> 0:16:48.280 how the markets have reacted so far and French equities, 0:16:48.360 --> 0:16:51.520 for example, you see that the French stocks that were 0:16:51.920 --> 0:16:56.000 purely domestic ones have actually already recovered from the time 0:16:56.080 --> 0:17:00.560 from the losses from the snap election time. And we 0:17:00.680 --> 0:17:04.240 have to remember that eighty five percent of the MSc 0:17:04.320 --> 0:17:09.880 iPhones and the CAC is actually you know, driven by 0:17:09.960 --> 0:17:12.480 stocks that are you know, global stocks and having a 0:17:12.520 --> 0:17:15.959 global exposure. So I think that's you know, their their 0:17:16.000 --> 0:17:18.639 their volatility and the way they behave is actually quite 0:17:19.640 --> 0:17:24.919 independent from from French politics. We our position at the 0:17:24.920 --> 0:17:29.080 moment is that we've taken profits from Europe in equities 0:17:29.200 --> 0:17:34.840 and we're neutral. We're more interested in emerging markets in 0:17:34.960 --> 0:17:37.439 the equity space, but also in the credit space, and 0:17:37.440 --> 0:17:40.960 that's really because of you know, the recent announcement of 0:17:41.080 --> 0:17:44.639 the easing policy by the FED, and we believe that 0:17:44.720 --> 0:17:47.679 it will you know, help get flows into emerging markets 0:17:47.720 --> 0:17:51.639 who have actually weather the inflation crisis pretty well. So 0:17:51.720 --> 0:17:55.560 we're quite excited about you know that part. And that's region, 0:17:55.680 --> 0:17:57.160 if I may say, equities. 0:17:57.240 --> 0:17:59.639 So you're in Europe, so your interest is elsewhere? And 0:17:59.760 --> 0:18:02.600 is that because you think that there are risks that 0:18:02.640 --> 0:18:04.879 we just do all this again in a year we 0:18:04.920 --> 0:18:08.840 go into further parliamentary elections in a year or so, maary? 0:18:08.920 --> 0:18:10.240 Is that? Is that one of the. 0:18:10.160 --> 0:18:13.199 Reasons why you look elsewhere, because we could see volatility 0:18:13.280 --> 0:18:15.320 or even negativity attached to politics. 0:18:15.560 --> 0:18:19.439 It's one of the reasons definitely. And if we go 0:18:19.560 --> 0:18:22.240 from you know, vote of no confidence that the government 0:18:22.280 --> 0:18:24.679 doesn't survive, then you know it's very likely that it 0:18:24.680 --> 0:18:29.040 will happen. But I think the other argument is independent 0:18:29.119 --> 0:18:32.320 of this, and it's really linked to the worries around 0:18:33.160 --> 0:18:36.720 European growth and more genuinely, when you look at growth 0:18:36.760 --> 0:18:40.800 in developed markets you know, recent year and then expected 0:18:40.880 --> 0:18:43.280 for the years to come, it's more around you know, 0:18:43.760 --> 0:18:46.920 one point six point eight percent, whether you know you 0:18:47.000 --> 0:18:49.760 look at you know, emerging markets, you're around four percent. 0:18:50.320 --> 0:18:53.920 So the risk of recession is also lower in emerging 0:18:53.920 --> 0:18:55.040 markets than developed markets. 0:18:55.080 --> 0:18:55.560 At the moment. 0:18:56.240 --> 0:18:59.919 That was Maria Jacquo there from Edmund the Rothschild Asset 0:19:00.040 --> 0:19:03.359 Management France. She was speaking to my colleagues Critie Gupta 0:19:03.400 --> 0:19:07.480 and Anna Edwards on Bloomberg Television. So Barnier is the 0:19:07.560 --> 0:19:11.399 oldest premier in the history of the French Republic. So 0:19:11.520 --> 0:19:15.600 will his experience be enough to see him through France's 0:19:15.600 --> 0:19:20.479 political storm. It's something I've been discussing with Bloomberg's Caroline Connor, 0:19:20.840 --> 0:19:22.360 our reporter in Paris. 0:19:22.960 --> 0:19:26.280 It took two months for President Macron to name new 0:19:26.320 --> 0:19:28.920 Prime Minister, Michelle Bernier. 0:19:28.760 --> 0:19:31.040 Since the second one of the snap elections on July. 0:19:30.880 --> 0:19:34.600 Seventh, and then it took another two weeks for Michelle 0:19:34.600 --> 0:19:38.960 Barnier to actually form his government. In the end, he 0:19:39.040 --> 0:19:42.960 unvelved it over the last weekend. You've got foreign ministers, 0:19:43.200 --> 0:19:46.639 health men, health women, with most of them coming from 0:19:46.880 --> 0:19:50.960 the center and from Macon's ranks, the Renaissance Party, a 0:19:51.000 --> 0:19:55.800 few from the Republicans, which is Michelle Barnier's party, and 0:19:56.040 --> 0:19:58.359 just one from the center left. 0:19:58.359 --> 0:19:59.960 The Justice minister did Jimmy. 0:20:00.880 --> 0:20:03.480 One surprising thing I could say, but this new government 0:20:03.560 --> 0:20:06.640 is that it doesn't really include a lot of heavyweights, 0:20:07.040 --> 0:20:10.639 apart from maybe Bruno Retaillo, who was the leader of 0:20:10.680 --> 0:20:14.280 the Republicans in the Senate and is now Interior Minister. 0:20:15.280 --> 0:20:18.520 So Michelle Barney is due to give a big policy 0:20:18.560 --> 0:20:21.199 speech then in the coming days. Why is that going 0:20:21.240 --> 0:20:22.080 to be so important? 0:20:23.040 --> 0:20:25.959 So the reason it's very important is because it could 0:20:26.160 --> 0:20:31.359 trigger or not the first vote of no confidence against 0:20:31.840 --> 0:20:34.840 this Barnie government. We know, of course this government is 0:20:34.960 --> 0:20:38.520 very fragile, given there is no majority in Parliament, and 0:20:38.600 --> 0:20:40.959 already this week you've seen a lot of controversies, for 0:20:41.000 --> 0:20:45.680 example with the new Finance Minister Antoine Armont, who said 0:20:45.720 --> 0:20:49.119 the National Rally was not part of the so called 0:20:49.560 --> 0:20:52.639 Republican front. The problem, as you know, is that the 0:20:52.760 --> 0:20:56.000 National Valley has become kind of the king maker in 0:20:56.080 --> 0:20:59.879 Parliament because if they do support any emotion of sansuur, 0:21:00.560 --> 0:21:03.919 then the government can collapse. So Michelle Barnie had to 0:21:04.000 --> 0:21:08.600 call Mariinlopen personally to reassure her, and Antoine Armore then 0:21:08.680 --> 0:21:12.440 send an email saying that indeed all the parties, including 0:21:12.480 --> 0:21:15.600 the National Value will be invited to the Finance Ministry 0:21:15.960 --> 0:21:20.080 to discuss the state of public finances. So there was 0:21:20.119 --> 0:21:22.440 a lot of back pedaling here, and you can see 0:21:22.480 --> 0:21:26.840 that any comment in the political debate could actually backfire 0:21:27.200 --> 0:21:28.400 against the Barney government. 0:21:29.200 --> 0:21:33.560 So lots of tricky issues then for Barnier. But in 0:21:33.600 --> 0:21:36.240 all of this, what does the public want to hear 0:21:36.359 --> 0:21:37.400 from Michelle Barnier? 0:21:38.119 --> 0:21:42.040 Probably not that austerity measures are coming, and yet that's 0:21:42.080 --> 0:21:46.320 probably what's coming, given the deficit, according to the Budget Minister, 0:21:46.440 --> 0:21:49.600 could actually rise to more than six percent of GDP 0:21:50.359 --> 0:21:54.000 this year. Then the right wing electorate, of course, is 0:21:54.040 --> 0:21:58.359 also keen to hear more about new measures to control immigration. 0:21:59.160 --> 0:22:00.639 The left wing wants more. 0:22:00.520 --> 0:22:03.560 Social justice and most of the French would actually like 0:22:03.760 --> 0:22:07.120 Barnier to abandon the pension reform which passed last year 0:22:07.160 --> 0:22:10.240 and raised the retirement age to sixty four years old. 0:22:10.560 --> 0:22:14.320 But that's unlikely given Barnier needs to do some savings 0:22:14.359 --> 0:22:16.560 in the budget and he's already said he'll only make 0:22:16.880 --> 0:22:20.320 a few adjustments to the pension reform. 0:22:20.400 --> 0:22:22.280 Barney is new to as well as Prime Minisiciter, but 0:22:22.320 --> 0:22:25.439 obviously is an old hand in terms of politics. What 0:22:25.560 --> 0:22:30.000 has he said so farther about his parties in this role. 0:22:30.359 --> 0:22:32.800 Well, he keeps repeating that he's going to tell the 0:22:32.960 --> 0:22:37.160 truth even if the truth is difficult to hear, meaning 0:22:37.200 --> 0:22:40.960 that even if there is some mysterity measures in the 0:22:41.000 --> 0:22:45.080 short term, these are necessary. He's repeated that the budget 0:22:45.080 --> 0:22:48.560 situation is very serious. Is also said he wants to 0:22:48.600 --> 0:22:53.159 fight against social fraud, those who take advantage, perhaps of 0:22:53.240 --> 0:22:55.400 the welfare state when they shouldn't. 0:22:56.040 --> 0:22:56.720 Another of his. 0:22:56.720 --> 0:23:00.600 Priorities again is to fight illegal immigration. But he's also 0:23:00.680 --> 0:23:04.159 tried to reassure the left wing on some social laws 0:23:04.200 --> 0:23:07.359 such as abortion and gay marriage, saying he's not going 0:23:07.440 --> 0:23:08.199 to touch any of this. 0:23:09.200 --> 0:23:12.240 One of the other priorities is going to be the budget. 0:23:12.960 --> 0:23:15.720 France has got to submit a draft copy to the 0:23:15.760 --> 0:23:19.600 EU by mid October. What are the main sticking points 0:23:19.600 --> 0:23:20.600 with that issue? 0:23:20.880 --> 0:23:23.640 Again, the deficit could slip to as much as six 0:23:23.680 --> 0:23:26.320 percent or even more this year when the initial forecast 0:23:26.560 --> 0:23:30.120 was five point one percent, so some savings will definitely 0:23:30.160 --> 0:23:33.200 be needed. According to the Bando France governor, as much 0:23:33.280 --> 0:23:36.840 as one hundred billion euros of savings are actually needed 0:23:36.880 --> 0:23:39.679 to bring the deficit back to the three percent target 0:23:39.720 --> 0:23:43.400 within five years, so that could be around twenty billions 0:23:43.440 --> 0:23:46.720 a year at least of spending cuts. We are even 0:23:46.760 --> 0:23:49.480 taken into account the increase of spending that we saw 0:23:49.520 --> 0:23:53.760 from local authorities for example this year. So Badney has 0:23:53.800 --> 0:23:58.199 already said that he could increase some taxes for multinationals 0:23:58.240 --> 0:24:02.680 for the wealthiest individual a few areas are being explored, 0:24:02.840 --> 0:24:06.679 for example increasing the thirty percent flat tax on capitol, 0:24:07.040 --> 0:24:09.400 which was of course one of the key measures of 0:24:09.480 --> 0:24:14.080 Imaguel Macroon. There's also discussions of an exceptional tax on 0:24:14.240 --> 0:24:18.720 super profits of some multinationals, or perhaps a tax on 0:24:18.840 --> 0:24:25.040 share buybacks, and also of course targeted income tax for 0:24:25.359 --> 0:24:27.679 the wealthiest individuals. 0:24:28.320 --> 0:24:31.680 Well, speaking of President Emmanuel Macon, what is the relationship 0:24:32.040 --> 0:24:36.040 alike between Barnier and macro How will barneer is difficult 0:24:36.040 --> 0:24:40.280 decisions as you laid them out affect macro his popularity 0:24:40.359 --> 0:24:41.480 is standing as president. 0:24:41.920 --> 0:24:45.760 Well, it's quite interesting because of course email Macroon has 0:24:45.960 --> 0:24:50.520 very low popularity, especially since the snap elections. About twenty 0:24:50.600 --> 0:24:53.280 five percent of the French currently think that Macron is 0:24:53.320 --> 0:24:56.680 a good president and that's the lowest popularity has ever 0:24:56.760 --> 0:25:00.840 had since his first elections in twenty seventeen, seven years ago, 0:25:01.480 --> 0:25:06.320 initially when Michelle Barnie was named the worst kind of 0:25:06.520 --> 0:25:11.359 nomination effect. So the first polls were showing that he 0:25:11.440 --> 0:25:15.960 had fifty seven percent of positive opinion. But the state 0:25:16.000 --> 0:25:18.600 of grace actually didn't last very long. And there's another 0:25:18.680 --> 0:25:22.840 recent poll by Udoxa that says that fifty nine percent 0:25:22.920 --> 0:25:25.320 of the French thing that Bardi is not a good 0:25:25.400 --> 0:25:29.600 prime minister and many are skeptical about his capacity to 0:25:29.640 --> 0:25:34.479 actually pass a budget. But that's also mainly because the 0:25:34.480 --> 0:25:38.960 French think that President Macon is actually holding the reins 0:25:39.160 --> 0:25:39.640 in the back. 0:25:40.160 --> 0:25:44.280 My thanks there to Bloombery's Caroline Connor in France. So 0:25:44.480 --> 0:25:48.120 we look ahead to Michelle Barnier and a tricky speech 0:25:48.240 --> 0:25:51.679 to deliver in the next few days. I'm Caroline Hepge 0:25:51.760 --> 0:25:54.200 here in London. You can catch us every weekday morning 0:25:54.200 --> 0:25:57.199 for Bloomberg Daybreak Europe, beginning at six am in London. 0:25:57.320 --> 0:25:58.840 That's one am on Wall Street. 0:25:58.840 --> 0:26:02.080 Tom, Thank you Caroline, and coming up on Bloomberg day 0:26:02.080 --> 0:26:04.720 Break weekend to look ahead to what China's Golden Week 0:26:05.080 --> 0:26:08.280 will mean to the Chinese economy. I'm Tom Busby, and 0:26:08.400 --> 0:26:21.919 this is Bloomberg. This is Bloomberg day Break weekend, our 0:26:21.920 --> 0:26:24.159 global look ahead at the top stories for investors in 0:26:24.200 --> 0:26:27.120 the coming week. I'm Tom Busby in New York. This year, 0:26:27.160 --> 0:26:30.440 the People's Republic of China will celebrate as seventy fifth anniversary. 0:26:30.520 --> 0:26:34.600 This week, the country celebrates its annual Golden Week travel holidays, 0:26:34.600 --> 0:26:37.679 and this Tuesday, it's National Day in China. For more 0:26:37.760 --> 0:26:40.280 on what all that means to the Chinese economy, we 0:26:40.359 --> 0:26:43.280 turned to Bloomberg Daybreak Asia co host Doug Krisner. 0:26:43.760 --> 0:26:46.439 Tom the holiday may provide the first test as to 0:26:46.480 --> 0:26:50.440 whether consumers will respond to this blitz of economic stimulus 0:26:50.520 --> 0:26:53.719 that was unveiled last week. Several key interest rates are 0:26:53.760 --> 0:26:57.120 being lowered, the level of required bank capital is being 0:26:57.160 --> 0:27:00.879 reduced so more lending is feasible, and there will be 0:27:00.920 --> 0:27:04.080 support for both the housing and equity markets. This plan, 0:27:04.119 --> 0:27:07.600 i think it's fair to say, is aggressive and comprehensive, 0:27:07.720 --> 0:27:10.760 and on top of that, in a highly unusual move, 0:27:10.840 --> 0:27:14.240 the government will provide one off cash handouts within the 0:27:14.280 --> 0:27:19.199 coming week to disadvantaged groups, including orphans and those in 0:27:19.280 --> 0:27:22.199 extreme poverty. Now for a closer look at what we 0:27:22.280 --> 0:27:26.280 may see in Chinese consumer behavior during the Golden Week holiday, 0:27:26.600 --> 0:27:30.880 I'm joined by John Leeu, Bloomberg Executive editor in Beijing, 0:27:31.400 --> 0:27:35.960 and Katya Dmitrieva, who is Bloomberg Asia Economics correspondent in 0:27:36.119 --> 0:27:39.520 Hong Kong. Thanks to both of you for joining John. 0:27:39.560 --> 0:27:41.919 Since you're in the capital city, let me begin with you. 0:27:42.720 --> 0:27:44.520 One of the critical issues I think it's fair to 0:27:44.560 --> 0:27:47.919 say that it's holding back a lot of domestic recovery 0:27:48.000 --> 0:27:51.960 is this sentiment problem, particularly where consumers are involved. And 0:27:52.040 --> 0:27:56.800 I'm wondering from your perspective, how that's distributed across the country. 0:27:57.000 --> 0:28:01.000 I think there's a big difference between the big cities, 0:28:01.160 --> 0:28:04.560 your mega cities like Beijing and Shahai and Shenjin, and 0:28:04.960 --> 0:28:10.120 smaller towns and the countryside. And that's just a reflection 0:28:10.280 --> 0:28:13.360 of the fact that there's a lot more wealth in Beijing, 0:28:13.400 --> 0:28:16.399 Shahai and Shinjin than there is in the countryside. And 0:28:16.440 --> 0:28:19.600 in any economic downturn, it's always sort of the people 0:28:19.600 --> 0:28:21.399 at the top that feel it the least and the 0:28:21.400 --> 0:28:23.040 people at the bottom that feel it the most. 0:28:23.240 --> 0:28:25.960 Katya is the elephant in the room. The property market, 0:28:26.040 --> 0:28:28.000 I think, is are you going to tell me yes? 0:28:28.320 --> 0:28:32.879 Yes, I am yes. The property sector is still the 0:28:32.960 --> 0:28:37.800 number one issue. It's so much more so in China 0:28:37.800 --> 0:28:40.760 than in other countries. Just looking at the data. I mean, 0:28:40.840 --> 0:28:46.400 ninety percent of Chinese people own their homes. You've got 0:28:46.640 --> 0:28:50.360 more than seventy percent of household wealth that's tied up 0:28:50.400 --> 0:28:53.040 in properties. It's quite different from other parts of the 0:28:53.040 --> 0:28:56.840 world where a lot more people rent. They don't They're 0:28:56.840 --> 0:28:59.800 not as exposed to the property sector. So as long 0:28:59.840 --> 0:29:01.840 as you have weakness there, as long as you still 0:29:01.880 --> 0:29:05.040 have prices falling, the demand is just not going to 0:29:05.080 --> 0:29:10.520 come back. And the stimulus package address that on the margin. 0:29:10.720 --> 0:29:13.480 But you know, even having a lower down payment for 0:29:13.520 --> 0:29:16.360 a second home, I mean, if your first home is 0:29:16.400 --> 0:29:20.000 still below the value it was pre pandemic and it's 0:29:20.040 --> 0:29:23.800 not clear when it'll go back up, you probably aren't 0:29:23.800 --> 0:29:26.520 going to be motivated to spend that much more. 0:29:26.840 --> 0:29:29.160 John Interest rates in China have been low for quite 0:29:29.240 --> 0:29:31.880 some time, and we're talking about, you know, very very 0:29:31.920 --> 0:29:35.960 small adjustments to the downside, and yet those lower rates 0:29:36.000 --> 0:29:40.320 really haven't reinvigorated the economy, and we have seen kind 0:29:40.320 --> 0:29:43.680 of a deflationary spiral, which I would imagine has been very, 0:29:43.800 --> 0:29:48.960 very troubling to authorities in Beijing. How are people impacted 0:29:49.000 --> 0:29:52.480 when they see this protracted period of inflation, How is 0:29:52.520 --> 0:29:53.840 it showing up anecdotally? 0:29:54.360 --> 0:29:58.479 I think the trend that we've seen is people have 0:29:58.600 --> 0:30:02.720 focused much more households and corporates much more on pain 0:30:02.920 --> 0:30:07.000 down their debt than we have people borrowing to make 0:30:07.040 --> 0:30:10.360 additional purchases, to make new investments, to build a factory, 0:30:10.400 --> 0:30:13.320 et cetera. And I think it was maybe two months 0:30:13.360 --> 0:30:15.080 ago we had the first time in a long time 0:30:15.120 --> 0:30:19.840 where bank lending actually contracted on a monthly basis, And 0:30:19.880 --> 0:30:24.240 so you're seeing people are doing whatever they can to 0:30:24.280 --> 0:30:26.160 pay down the debt, and so that I think is 0:30:26.240 --> 0:30:31.320 a reflection of uncertainty about the future, about future earnings, 0:30:31.360 --> 0:30:35.640 about their future economic outlook, and that is what's keeping 0:30:35.680 --> 0:30:39.800 people from spending. And I think why more people are 0:30:39.880 --> 0:30:41.360 saving as opposed to borrowing. 0:30:41.400 --> 0:30:43.840 The savings point, I think is very interesting. I spoke 0:30:43.880 --> 0:30:48.440 earlier with p Chan Lu, who is Asia economistic Fidelity International, 0:30:48.480 --> 0:30:50.440 and one of the things that I wanted to get 0:30:50.480 --> 0:30:53.600 her take on was the indicators that we should be 0:30:53.680 --> 0:30:57.360 watching to understand the health of the Chinese consumer. 0:30:57.680 --> 0:31:01.200 So firstly, the consumer confidence in DEX. I think everybody 0:31:01.240 --> 0:31:04.600 knew that the pandemic has hard hit the household sector, 0:31:05.040 --> 0:31:08.920 and consumer confidence index has been coming down sharply, but 0:31:09.040 --> 0:31:12.080 at this moment, on the path of recovery. We have 0:31:12.320 --> 0:31:17.040 actually seen consumer sentiments stabilizing at low levels, so they 0:31:17.080 --> 0:31:22.360 are not rebounding sharply. Neither did they deteriorate significantly from 0:31:22.480 --> 0:31:25.080 where we are right now. I think the underlying reason 0:31:25.160 --> 0:31:28.320 for that is perhaps because the divergent pattern of the 0:31:28.360 --> 0:31:33.080 consumption that's been emerging from both the wealth impact on 0:31:33.160 --> 0:31:36.160 property sector as well as some of the consumers might 0:31:36.200 --> 0:31:39.560 have been hurt by the employment pressure as well as 0:31:39.760 --> 0:31:44.120 income growth. So overall, I think another indicator we're also 0:31:44.240 --> 0:31:49.520 working out for closely is the pboc's depositor survey. On 0:31:49.600 --> 0:31:55.200 that survey, we see divergence between depositors preference oversaving, consumption 0:31:55.320 --> 0:32:00.200 and investment. We have observed wider divergence between saving and ines. 0:32:00.920 --> 0:32:04.320 But surprisingly, I think the consumption is more or less 0:32:04.320 --> 0:32:08.200 stabilizing even though as stew moderate levels, but they are 0:32:08.200 --> 0:32:10.200 on a gradual recovery pattern right now. 0:32:10.280 --> 0:32:14.040 She is p Chanlou from Fidelity International. Katia, let me 0:32:14.080 --> 0:32:16.280 to go to you next. Is there anything that the 0:32:16.320 --> 0:32:20.520 government can do to encourage people to release money from 0:32:20.560 --> 0:32:22.880 their savings accounts and put that money to work in 0:32:22.920 --> 0:32:23.640 the economy. 0:32:23.880 --> 0:32:26.440 Yeah, there are a few things. I mean, we talked 0:32:26.440 --> 0:32:31.840 about the property sector. I think more guarantees would certainly help, 0:32:32.760 --> 0:32:36.280 just to see those prices start to rise and consumer 0:32:36.360 --> 0:32:39.240 sentiments start to improve a bit. We also didn't even 0:32:39.320 --> 0:32:43.800 mention the job sector. We didn't even talk about unemployment 0:32:43.920 --> 0:32:48.560 and the labor market, where unemployment for youth is at 0:32:48.600 --> 0:32:51.560 an all time high this year, even after the government 0:32:51.600 --> 0:32:57.520 made some revisions to that data set. So the jobs market, 0:32:57.520 --> 0:32:59.760 if you're going to work and of course not getting 0:32:59.760 --> 0:33:04.000 both is let alone job cuts or getting your pay cut. 0:33:04.680 --> 0:33:07.080 That's also one big factor here as well, because if 0:33:07.080 --> 0:33:10.000 the money is not coming in, you are also feeling 0:33:10.000 --> 0:33:13.240 a little less likely to spend, especially on holidays, during 0:33:13.240 --> 0:33:16.640 holidays when we see in China a couple key holidays 0:33:16.680 --> 0:33:19.160 each year when there's lots of time off and people 0:33:19.200 --> 0:33:21.640 tend to travel quite a bit and make those big 0:33:21.800 --> 0:33:26.600 item purchases for the year. So there are certain big things. 0:33:26.640 --> 0:33:28.880 I think the stimulus package was one of them. Was 0:33:28.920 --> 0:33:32.360 one way for the government to say, okay, we acknowledge 0:33:32.400 --> 0:33:36.000 that we acknowledge that things are getting a little rocky here. 0:33:36.480 --> 0:33:39.000 Which had been a question for economists for some time 0:33:39.120 --> 0:33:42.600 is whether the government even knew about how bad the 0:33:42.640 --> 0:33:45.160 situation was or wanted to address it. So this is 0:33:45.200 --> 0:33:48.440 at least an improvement and sentiment. The next thing they 0:33:48.480 --> 0:33:52.200 have to do is perhaps more targeted. You know, could 0:33:52.200 --> 0:33:55.240 you targeted stimulus. I've heard from economists in terms of 0:33:55.920 --> 0:33:59.920 fiscal stimulus similar to what they've done during the pandemic. 0:34:00.320 --> 0:34:02.600 But it really does come back to, at the end 0:34:02.640 --> 0:34:06.360 of the day, the property sector and the property sector improvement. 0:34:06.440 --> 0:34:09.080 Kind of like chicken and egg. With a lot of 0:34:09.080 --> 0:34:11.480 these companies, you have an improvement in the property sector, 0:34:12.000 --> 0:34:16.359 consumers are happier, companies are starting to invest more, higher more. 0:34:16.360 --> 0:34:18.400 It's sort of that good virtuous cycle. 0:34:18.600 --> 0:34:21.640 John, I'm recalling a program that some referred to as 0:34:21.719 --> 0:34:24.480 kind of cash for clunkers. Do you remember that where 0:34:24.600 --> 0:34:28.120 people were being given some sort of incentive to trade 0:34:28.200 --> 0:34:31.480 up in home appliances. Was that very effective? 0:34:31.280 --> 0:34:33.319 They've been trying to do that. They did it during 0:34:33.360 --> 0:34:36.439 the financial crisis back in eight they've rolled it out 0:34:36.480 --> 0:34:41.319 this year. We've seen some limited take up. I think 0:34:41.400 --> 0:34:45.200 the criticism I've heard most about that plan is that 0:34:45.280 --> 0:34:48.319 what it really does is it brings forward purchases. So 0:34:48.600 --> 0:34:52.400 people who were going to get a new refrigerator anyway, 0:34:52.480 --> 0:34:54.560 people who are going to get a new car anyway. 0:34:54.600 --> 0:34:56.440 Now they're going to do it now instead of waiting 0:34:56.480 --> 0:34:59.799 three or four or five months. It's not really generating 0:35:00.080 --> 0:35:02.520 new demand because if you didn't have the money to 0:35:02.560 --> 0:35:05.480 begin with to get a new refrigerator, you know, getting 0:35:05.520 --> 0:35:08.480 ten percent or fifteen percent back probably is not going 0:35:08.520 --> 0:35:09.880 to change your decision making. 0:35:09.680 --> 0:35:12.720 On that contiera. In the context of the Golden Week holiday, 0:35:12.760 --> 0:35:16.600 I think of spending on discretionary items. Jewelry is in there. 0:35:16.719 --> 0:35:20.239 I also think of travel. Do we have any indication 0:35:20.400 --> 0:35:23.440 that the appetite now is at a level where it 0:35:23.480 --> 0:35:24.480 may move the needle. 0:35:24.960 --> 0:35:30.520 Consumer sentiment is near all time lows in China right now, 0:35:31.400 --> 0:35:35.799 and it is tough to get engauge. Aside from that, 0:35:35.960 --> 0:35:39.400 I mean in terms of how consumers are feeling. We 0:35:39.440 --> 0:35:42.600 can see on social media, for example. That's why we 0:35:42.640 --> 0:35:46.560 write so much more about social media sentiment in China 0:35:46.600 --> 0:35:50.439 than other countries. And there's this term that is going 0:35:50.480 --> 0:35:54.239 around called the garbage economy, and that's something that's been 0:35:55.000 --> 0:35:57.319 that's been a couple, you know, almost a year now, 0:35:57.360 --> 0:36:01.640 where people online have been talking about this this current 0:36:01.760 --> 0:36:05.280 period as sort of the worst you know, the silver 0:36:05.360 --> 0:36:08.160 lining of courses that it can't get any worse. But 0:36:08.200 --> 0:36:12.520 the idea there is that you know, people are just 0:36:12.640 --> 0:36:16.040 not in a good mood to spend during the May 0:36:16.120 --> 0:36:18.400 Day holiday. This year we did see a bit of 0:36:18.400 --> 0:36:22.640 a pickup compared to last year. Kind of a mixed picture, 0:36:23.640 --> 0:36:26.680 but this upcoming holiday is one of the bigger ones 0:36:26.880 --> 0:36:29.680 in China and so places that I'll be looking for. 0:36:29.719 --> 0:36:33.520 In addition to the indicators that we're mentioned is travel spending, 0:36:33.680 --> 0:36:38.040 so plane tickets, train tickets, buses. We're seeing this trend 0:36:38.320 --> 0:36:42.440 of people just traveling more locally, so less travel abroad 0:36:42.600 --> 0:36:46.719 to places like Thailand, Malaysia, South Korea, a lot more 0:36:46.719 --> 0:36:49.600 internal travel, but it would be interesting to see if 0:36:49.600 --> 0:36:52.319 there is more international travel at this time of year. 0:36:53.080 --> 0:36:57.480 There's also a lot more purchases of you know, think 0:36:57.560 --> 0:37:00.960 of like food or clothing, those kinds of smaller items. 0:37:00.960 --> 0:37:05.480 We could hear from potentially executives commenting on that or 0:37:05.560 --> 0:37:07.799 during the next quarter, which I know is a bit 0:37:07.840 --> 0:37:10.120 of time to wait for, but yeah, there's a couple 0:37:10.160 --> 0:37:10.879 of places to look. 0:37:11.040 --> 0:37:13.120 John. I refer to the fact that in the last 0:37:13.160 --> 0:37:15.839 week the government announced that it will provide some one 0:37:15.960 --> 0:37:20.040 off cash handouts to disadvantaged groups. Has this happened in 0:37:20.120 --> 0:37:22.000 the past, and then talk to me a little bit 0:37:22.000 --> 0:37:24.920 about the symbolism and how that may resonate across the 0:37:24.960 --> 0:37:25.840 broader economy. 0:37:26.160 --> 0:37:29.480 This sort of handout is pretty rare. The government does 0:37:29.760 --> 0:37:33.920 give sort of cash handouts to disadvantage groups ahead of 0:37:33.960 --> 0:37:37.160 the Lunar New Year festival every year, and they have 0:37:37.320 --> 0:37:39.640 in the past before We're coming up on the National 0:37:39.719 --> 0:37:41.840 Day holiday, so this is celebrating the founding of the 0:37:41.840 --> 0:37:45.080 People's Republic. They have in the past given sort of 0:37:45.120 --> 0:37:48.480 cash out to World War Two veterans ahead of this holiday. 0:37:49.000 --> 0:37:52.280 This is relatively rare that they would in this instance 0:37:52.440 --> 0:37:57.880 give cash out to lower income earning brackets at this time. 0:37:57.960 --> 0:38:03.000 That is fairly unusual. They are also offering assistance to 0:38:03.360 --> 0:38:06.640 college graduates who have not found a job in two years. 0:38:06.440 --> 0:38:09.640 That is unusual as well. There's been a big debate 0:38:10.120 --> 0:38:13.440 here in Beijing among policy makers about whether giving cash 0:38:13.480 --> 0:38:18.000 directly to the consumer would actually do any good. The 0:38:18.120 --> 0:38:20.640 sort of argument against it is that because the savings 0:38:20.719 --> 0:38:22.480 rate is so high, a lot of people might just 0:38:22.520 --> 0:38:24.480 take that money and save it and not spend it. 0:38:24.960 --> 0:38:28.560 And so I think this seems to show a greater 0:38:29.440 --> 0:38:31.439 willingness to try new things out. 0:38:31.760 --> 0:38:33.719 John, we'll leave it there. Thank you so much for 0:38:33.760 --> 0:38:36.280 making time to chat with us, John Lou, Bloomberg, Executive 0:38:36.400 --> 0:38:40.480 Editor in Beijing. And thanks as well to Kntria Dmitrieva, 0:38:40.600 --> 0:38:44.560 who is Bloomberg's Asia Economics correspondent. She's joining us from 0:38:44.560 --> 0:38:47.880 Hong Kong, helping us understand what we may see in 0:38:47.880 --> 0:38:51.400 the week ahead as we approach Golden Week and the 0:38:51.640 --> 0:38:54.799 Chinese consumer. I'm Doug Prisner, and you can join Brian 0:38:54.840 --> 0:38:58.920 Curtison myself weekdays here for Bloomberg Daybreak Asia beginning at 0:38:58.920 --> 0:39:02.080 eight am in Hong Kong eight pm on Wall Street. 0:39:02.280 --> 0:39:05.040 Tom, Thank you, Doug, and that does it for this 0:39:05.200 --> 0:39:07.920 edition of Bloomberg day Break Weekend. Join us again Monday 0:39:07.920 --> 0:39:10.000 morning at five am Wall Street time for the latest 0:39:10.040 --> 0:39:12.560 on markets overseas and the news you need to start 0:39:12.600 --> 0:39:16.000 your day. I'm Tom Buzzby. Stay with us. Top stories 0:39:16.000 --> 0:39:19.520 and global business headlines are coming up right now.