Daybreak Weekend: US PCE, CBI Conference, BOK Preview

Bloomberg Audio Studios, Podcasts, radio News. 0:00:10.520 --> 0:00:13.000 This is Bloomberg Daybreak Weekend, our global look at the 0:00:13.000 --> 0:00:15.440 top stories in the coming week from our Daybreak anchors 0:00:15.440 --> 0:00:17.840 all around the world. Straight ahead, on the program, we 0:00:17.920 --> 0:00:20.720 discuss some key economic data in the US and how 0:00:20.760 --> 0:00:24.239 it might impact FED policy moving forward, Plus a look 0:00:24.239 --> 0:00:27.160 at corporate earnings from the nation's largest department store chain. 0:00:27.480 --> 0:00:29.040 I'm Tom Busby in New York. 0:00:29.240 --> 0:00:31.840 I'm callin Hedger in London, where we're looking ahead to 0:00:32.000 --> 0:00:34.879 a key gathering of the biggest names in British business. 0:00:35.240 --> 0:00:38.280 I'm dek Krisner, looking ahead to next week's policy decision 0:00:38.320 --> 0:00:40.760 from the Bank of Korea, as well as the state 0:00:40.800 --> 0:00:42.960 of global trade. 0:00:43.320 --> 0:00:46.879 That's all it's truly had on Bloomberg Daybreak Weekend on 0:00:47.000 --> 0:00:51.480 Bloomberg eleven, TRIEO, New York, Bloomberg ninety nine to one, Washington, DC, 0:00:51.880 --> 0:00:55.960 Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 0:00:56.360 --> 0:00:59.360 Sirius XM one twenty one, and around the world on 0:00:59.400 --> 0:01:08.000 Bloomberg Radio, dot Com and The Bloomberg Business. A good 0:01:08.040 --> 0:01:10.080 day to you. I'm Tom Busby, and we begin today's 0:01:10.080 --> 0:01:13.120 program with some key data coming out in the US. 0:01:13.480 --> 0:01:15.800 In this holiday shortened week ahead, we get a second 0:01:15.800 --> 0:01:18.760 read on US third quarter GDP and a read on 0:01:18.800 --> 0:01:22.840 what Americans are earning and spending with October's Personal consumption 0:01:22.920 --> 0:01:24.280 Expenditures Price Index. 0:01:24.360 --> 0:01:25.120 That's a mouthful. 0:01:25.520 --> 0:01:28.880 How might this impact FED policy moving forward? For more, 0:01:29.040 --> 0:01:33.360 we're joined by Stuart Paul, us economist with Bloomberg Economics. Stuart, 0:01:33.360 --> 0:01:35.679 thank you for joining us. Now let's start with what 0:01:35.720 --> 0:01:39.039 you expect to see this Wednesday, the second estimate as 0:01:39.040 --> 0:01:41.040 far as Q three economic growth. 0:01:41.319 --> 0:01:44.040 So, as we saw in the first estimate, GDP growth 0:01:44.200 --> 0:01:46.760 ran at an annualized pace of two point eight percent, 0:01:46.880 --> 0:01:50.000 pretty robust in the third quarter. We still think that 0:01:50.040 --> 0:01:52.400 two point eight percent is about right, but there is 0:01:52.600 --> 0:01:55.120 room for an upward revision. When we look at the 0:01:55.240 --> 0:01:57.600 spending data that we saw over the past few months, 0:01:57.600 --> 0:02:00.919 there have been some upward revisions, especially at August and September, 0:02:01.320 --> 0:02:04.640 and so we can see the already exceptional pace of 0:02:05.120 --> 0:02:08.400 personal spending growth get revised up further to almost an 0:02:08.440 --> 0:02:12.400 annualized pace of four percent, beyond the actual number itself. 0:02:12.639 --> 0:02:14.799 What I think matter is most to the FED is 0:02:14.880 --> 0:02:18.480 where that spending is and some of the categories that 0:02:18.520 --> 0:02:22.960 were revised up were things like spending out at bars 0:02:23.000 --> 0:02:26.000 and restaurants, some of the more discretionary categories that show 0:02:26.040 --> 0:02:28.480 that people aren't raining in their spending habits as much 0:02:28.520 --> 0:02:31.880 as maybe the FED had expected given where rates were. 0:02:32.600 --> 0:02:34.680 And so when the FED is starting to think about 0:02:34.680 --> 0:02:38.359 where policy should go, and it takes into consideration what 0:02:38.440 --> 0:02:41.120 it is likely to see with these revisions, a potential 0:02:41.200 --> 0:02:43.720 upward revision to growth, the back of an upward revision 0:02:43.760 --> 0:02:48.320 to household spending, it's indicative that the FED should be 0:02:48.360 --> 0:02:51.400 maybe moving a little bit slower in its rate cut 0:02:51.480 --> 0:02:53.760 trajectory than it had previously planned. 0:02:54.040 --> 0:02:56.880 Well, let's go back to spending. So you think bars, restaurants, 0:02:56.919 --> 0:03:00.560 I imagine, back to school spending. I imagine also travel. 0:03:00.840 --> 0:03:03.160 Were there laggards and as it always come back to 0:03:03.200 --> 0:03:04.640 housing when it comes to laggards. 0:03:05.160 --> 0:03:08.000 Well, so what we're really looking at in next week's 0:03:08.040 --> 0:03:12.880 data is the revision two Q three data, and fortunately 0:03:12.960 --> 0:03:15.280 we have some monthly data that give us a little 0:03:15.280 --> 0:03:17.360 bit of an insight into what we can expect for 0:03:17.400 --> 0:03:20.320 the revision to the quarterly print. And when we look 0:03:20.320 --> 0:03:24.320 at those monthly figures, households really just were not as 0:03:24.720 --> 0:03:28.440 frugal in some of those discretionary categories as we had 0:03:28.520 --> 0:03:32.360 previously believed. And so the FED, when it started on 0:03:32.440 --> 0:03:36.560 its rate cut trajectory, now has fresher data in hand 0:03:36.600 --> 0:03:39.320 that shows well, at the time that you started making 0:03:39.400 --> 0:03:43.360 those cuts, we previously believed that households were starting to 0:03:43.360 --> 0:03:45.560 get a little bit more frugal, they were starting to 0:03:45.560 --> 0:03:48.040 get a little bit worried, so we started cutting rates. Well, 0:03:48.040 --> 0:03:49.920 now it turns out, based on some of the revisions 0:03:49.920 --> 0:03:52.480 that we've seen to the monthly data, maybe they haven't 0:03:52.480 --> 0:03:54.840 been as frugal as we thought. When we look at 0:03:54.840 --> 0:03:57.880 the quarterly data, there's room for that upward revision, and 0:03:57.920 --> 0:04:00.200 so the FED can sort of slow its pace of 0:04:00.280 --> 0:04:01.480 cuts going forward. 0:04:01.800 --> 0:04:05.080 Okay, got it. So people were emboldened by that do 0:04:05.120 --> 0:04:08.240 a little more spending with that first half a percent 0:04:08.320 --> 0:04:12.320 rate cut, exactly. All right, let's move on. Then. Also Wednesday, 0:04:12.360 --> 0:04:14.360 we get something I know you look at very closely, 0:04:14.440 --> 0:04:18.760 October's Personal Income and Outlayser Report PCE spending and personal income. 0:04:19.400 --> 0:04:21.240 What do you see? What are you looking at there 0:04:21.360 --> 0:04:23.640 and how is that related to that third quarter growth? 0:04:23.760 --> 0:04:25.960 So that third quarter growth, we're probably going to get 0:04:26.000 --> 0:04:28.920 a modest revision upward. And then on the same day, 0:04:29.040 --> 0:04:31.279 at the same time, we're going to get the October 0:04:31.320 --> 0:04:34.400 as you said, Personal Income and Outlayser Report, which really 0:04:34.440 --> 0:04:38.960 has three main components to it October personal spending, October 0:04:39.000 --> 0:04:44.480 personal income, and PCE inflation, the Fed's preferred gauge of prices. 0:04:44.600 --> 0:04:47.360 So taking those in order, we have some income data 0:04:47.360 --> 0:04:50.280 that again might make the FED want to slow its 0:04:50.400 --> 0:04:53.880 role just a little bit. Personal income growth likely increased 0:04:53.920 --> 0:04:56.760 at a monthly pace in October of zero point four 0:04:56.839 --> 0:04:59.440 percent per month. That's up from a pace of zero 0:04:59.440 --> 0:05:02.000 point three per in September. Now you might be thinking 0:05:02.000 --> 0:05:06.520 to yourself, we had such a dismal jobs report in October, 0:05:06.560 --> 0:05:08.960 how could it be that personal income is growing, but 0:05:09.320 --> 0:05:13.719 wages increase during the month, headcount increase just very slightly 0:05:13.920 --> 0:05:17.440 enough to boost labor income, and we also saw transfer 0:05:17.480 --> 0:05:22.280 payments from unemployment insurance claims and interest income likely increasing 0:05:22.440 --> 0:05:25.400 about one percent during the month. And that's enough to 0:05:25.480 --> 0:05:28.360 keep personal income growing at a pace that's a bit 0:05:28.520 --> 0:05:32.200 too hot for comfort for the FED to cut in 0:05:32.279 --> 0:05:34.680 these big chunks or even to cut maybe even twenty 0:05:34.680 --> 0:05:37.800 five basis points in October. And then the next major 0:05:37.880 --> 0:05:42.279 line item within that personal income and outlaser report spending October. 0:05:42.320 --> 0:05:48.360 Personal spending really supported by spending on autos. And then 0:05:48.400 --> 0:05:51.520 when we think about inflation, it's really auto price. Is 0:05:51.640 --> 0:05:56.240 vehicle prices that put the brakes on the disinflation process. 0:05:56.560 --> 0:05:59.960 We're expecting core PCEE inflation, the annual pace of core 0:06:00.120 --> 0:06:04.000 PC inflation to register two point eight percent in October. 0:06:04.240 --> 0:06:07.640 That's up from two point seven percent, where that figure 0:06:07.720 --> 0:06:10.800 had been lingering for about three months. So all these 0:06:10.880 --> 0:06:13.479 numbers sort of point to the Fed maybe needing to 0:06:13.560 --> 0:06:16.479 slow down just a little bit. It caught up to 0:06:16.520 --> 0:06:19.680 the curve with that fifty bases point cut early. We 0:06:19.760 --> 0:06:22.880 got another twenty five basis points off just during the month, 0:06:23.320 --> 0:06:26.000 and now when we're thinking about December and twenty twenty five, 0:06:26.120 --> 0:06:28.560 the Fed can move just a little bit slower as 0:06:28.600 --> 0:06:29.240 it cuts rates. 0:06:29.400 --> 0:06:31.760 FED Chair Jerome Palce said the bank is in no rush, 0:06:32.120 --> 0:06:34.440 no rush to lower that benchmark rate, and of course, 0:06:34.600 --> 0:06:37.719 as always, it's all data dependent, so he's put the 0:06:37.720 --> 0:06:40.080 signals out there. Don't get too excited, that's right. 0:06:40.160 --> 0:06:42.560 The keyword from all the Fed speak that we've heard 0:06:42.560 --> 0:06:46.080 over the past week has been cautious, cautious, cautious. 0:06:46.800 --> 0:06:49.200 Well, we got a lot of data dump this short 0:06:49.279 --> 0:06:52.279 this holiday shortened week ahead our thanks to Stuart Pohl, 0:06:52.400 --> 0:06:56.120 us economist with Bloomberg Economics. We move next to third 0:06:56.160 --> 0:06:58.599 quarter earning season, which may be winding down, but this 0:06:58.680 --> 0:07:02.200 Tuesday we hear from retail giant Macy's. How will those 0:07:02.200 --> 0:07:05.040 results position the chain ahead of the all important holiday 0:07:05.040 --> 0:07:08.480 shopping season. For more, we're joined by Mary Ross Gilbert 0:07:08.520 --> 0:07:13.640 Bloomberg Intelligence, senior equity analyst covering retail. Mary, thank you 0:07:13.680 --> 0:07:16.679 so much for joining us. Well, we know Americans continue 0:07:16.720 --> 0:07:18.960 to spend a lot of money. Have they been spending 0:07:18.960 --> 0:07:21.200 their money at Macy's, That's the question. 0:07:21.680 --> 0:07:24.760 Tom. They have been spending their money at Macy's, but 0:07:24.960 --> 0:07:28.400 not as much as they're spending money elsewhere. So with 0:07:28.480 --> 0:07:32.000 their third quarter numbers due out on Tuesday, we're expecting 0:07:32.040 --> 0:07:35.480 them to miss the top line estimates, and we think 0:07:35.480 --> 0:07:37.920 they'll probably beat on the profit line. They've done a 0:07:37.920 --> 0:07:42.080 really good job managing costs, managing inventories, and they've beat 0:07:42.120 --> 0:07:45.480 their earnings for the past eight quarters, so we think 0:07:45.520 --> 0:07:47.560 they beat again on the bottom line, but we think 0:07:47.600 --> 0:07:49.880 they miss on the top line. So we're showing they 0:07:49.920 --> 0:07:54.880 could miss consensus estimates for sales to decline about one 0:07:54.920 --> 0:07:57.840 and a half percent. We think it could decline more 0:07:57.960 --> 0:08:00.720 like maybe three to five percent, So we'll see when 0:08:00.760 --> 0:08:04.160 they go to report, But the big focus really will 0:08:04.160 --> 0:08:07.160 be once they come out with the results, what comparable 0:08:07.240 --> 0:08:11.160 sales look like. And while we think generally they'll be down, 0:08:11.720 --> 0:08:15.640 we're really looking for the first fifty stores that they've 0:08:15.680 --> 0:08:20.200 completely transformed. That means they've added personnel to the shoot 0:08:20.240 --> 0:08:23.440 apartment so they have more service, and also in women's 0:08:23.440 --> 0:08:27.720 apparel and men's apparel. So we think that with all 0:08:27.760 --> 0:08:30.320 the improvements that they made to the first fifty stores 0:08:30.760 --> 0:08:33.319 in the first two quarters of the year, they were 0:08:33.360 --> 0:08:36.040 able to show positive comps. So we're looking to see 0:08:36.080 --> 0:08:39.720 if they can still continue that trend in the third quarter, 0:08:40.080 --> 0:08:43.120 and that could show some encouraging signs as they seek 0:08:43.200 --> 0:08:44.960 to transform the business. 0:08:45.200 --> 0:08:49.160 So refreshed stores, more salespeople on the floor, designer brands, 0:08:49.360 --> 0:08:51.480 all of that adding up in the last couple of 0:08:51.520 --> 0:08:54.600 quarters to a little bump in sales. But we think 0:08:55.520 --> 0:08:58.720 is it the consumer, Is it Macy's what may have 0:08:59.040 --> 0:09:01.280 held back sale in the third quarter. 0:09:01.679 --> 0:09:05.679 Clearly department stores has been seeing a weakness there's been 0:09:05.679 --> 0:09:08.760 a trend away from department stores going toward more off 0:09:08.840 --> 0:09:11.160 price and also in the mass channel. So if you 0:09:11.200 --> 0:09:16.360 look at Walmart's numbers out, they reported robust results, exceeded 0:09:16.480 --> 0:09:20.080 estimates on the top line, and they indicated that two 0:09:20.160 --> 0:09:24.320 thirds of their beat was related to consumers who have 0:09:24.559 --> 0:09:28.040 come from households that earn over one hundred thousand. Now 0:09:28.080 --> 0:09:32.200 Macy's their core customer earns under one hundred thousand, so 0:09:32.320 --> 0:09:36.880 the largest contingent that shops Macy's. But they're shutting down 0:09:36.920 --> 0:09:39.240 about one hundred and fifty stores, so they sort of 0:09:39.240 --> 0:09:42.440 have two classifications. One would be the go forward stores. 0:09:42.760 --> 0:09:45.560 We really think that's the most important metric to look at, 0:09:45.840 --> 0:09:49.200 but we will also look at the fifty refresh store 0:09:49.880 --> 0:09:52.920 performance too as a sign of what could come in 0:09:53.000 --> 0:09:56.400 terms of improving performance. But generally the department store space 0:09:56.480 --> 0:10:00.480 has seen a decline, and looking at our transaction data 0:10:01.080 --> 0:10:04.800 early we only have fifteen days in their fourth quarter, 0:10:05.280 --> 0:10:08.080 but we haven't seen an improvement. One of the things 0:10:08.160 --> 0:10:10.240 that we've noticed in looking at this data is that 0:10:10.320 --> 0:10:12.920 October was pretty weak across the board, and we think 0:10:12.960 --> 0:10:16.840 it was because of unusual warm weather around the country 0:10:17.160 --> 0:10:20.600 and now that the weather has turned colder, that should 0:10:20.679 --> 0:10:24.840 improve outerwear sales, which are higher margin. But a change 0:10:24.880 --> 0:10:29.640 in weather is the number one reason why consumers will 0:10:29.640 --> 0:10:32.320 buy something new, according to a survey that we just 0:10:32.440 --> 0:10:34.120 conducted this week and published. 0:10:34.440 --> 0:10:37.680 Wow. And speaking of weather, how do you think Macy's 0:10:37.760 --> 0:10:40.839 was impacted by a series of devastating storms? I mean 0:10:40.840 --> 0:10:43.280 one affecting about a quarter of the country. 0:10:43.840 --> 0:10:48.319 That's exactly right, Florida, in North Carolina, but mainly Florida. 0:10:48.400 --> 0:10:50.959 So yes, they will be impacted by that. We saw 0:10:51.000 --> 0:10:54.760 that with tj X, which reported their results and again 0:10:54.960 --> 0:10:58.880 they beat, and they their guidance was sort of light, 0:10:58.960 --> 0:11:02.240 but they typically beat, so we think generally the news 0:11:02.280 --> 0:11:05.480 coming out of TJX was very positive. But they did 0:11:05.559 --> 0:11:09.280 say that they were impacted by the hurricanes and then 0:11:09.480 --> 0:11:15.160 also impacted by unseasonably warm weather in October. So we 0:11:15.200 --> 0:11:17.640 think we'll hear something similar to that when we get 0:11:17.679 --> 0:11:19.040 results out of Macy's. 0:11:19.400 --> 0:11:23.760 And now you talked about the discount stores Walmart. How 0:11:23.840 --> 0:11:27.120 is Macy's faring in online sales? And of course you 0:11:27.160 --> 0:11:29.160 know the big bugaboo there is Amazon. 0:11:29.840 --> 0:11:32.800 Yes, absolutely, well it's not just Amazon. If you look 0:11:32.840 --> 0:11:37.280 at Walmart, and Target. They both reported double digit increases 0:11:37.320 --> 0:11:41.160 in online sales, so they're actually doing really well on 0:11:41.200 --> 0:11:46.560 the e comm part. Now for Macy's, Macy's online sales 0:11:46.559 --> 0:11:48.720 are about, you know, sort of a little. It's over 0:11:48.800 --> 0:11:51.640 thirty percent, somewhere around that thirty three thirty four percent 0:11:51.679 --> 0:11:56.720 of sales is online, and that business has been doing okay. 0:11:57.240 --> 0:12:00.480 But again they're really more of an omni channel, Taylor. 0:12:00.880 --> 0:12:04.559 So you might have a consumer originated transaction and then 0:12:04.600 --> 0:12:06.800 pick it up in store. So I think it's going 0:12:06.880 --> 0:12:10.200 to follow the trend that the overall business is seeing 0:12:10.280 --> 0:12:12.040 generally in terms of increases. 0:12:12.480 --> 0:12:14.800 Wow, A lot to look forward to. Macy's Q three 0:12:14.840 --> 0:12:18.120 earnings out this Tuesday. Our thanks to Mary Ross Gilbert, 0:12:18.120 --> 0:12:22.440 Bloomberg Intelligence senior echoity analyst covering retail. Coming up on 0:12:22.440 --> 0:12:24.520 Bloomberg day Break weekend, we look ahead to a key 0:12:24.559 --> 0:12:28.240 gathering in the biggest names in British business. I'm Tom 0:12:28.280 --> 0:12:42.840 Busby and this is Bloomberg. This is Bloomberg day Break Weekend, 0:12:42.840 --> 0:12:45.280 our global look ahead at the top stories for investors 0:12:45.360 --> 0:12:47.760 in the coming week. I'm Tom Busby in New York. 0:12:48.000 --> 0:12:50.120 Up later in the program, we look ahead to a 0:12:50.160 --> 0:12:53.120 meeting from the Bank of Korea. But first, it's been 0:12:53.120 --> 0:12:55.520 an eventful year for British business, the first change in 0:12:55.559 --> 0:12:59.240 government in fourteen years, a pivotal autumn budget announcement, an 0:12:59.400 --> 0:13:03.680 uncertain g' your political environment. This week, entrepreneurs, finance leaders, 0:13:03.720 --> 0:13:07.840 politicians all convene at the Confederation for British Industry's annual 0:13:07.840 --> 0:13:11.360 conference to discuss what's ahead in twenty twenty five and 0:13:11.400 --> 0:13:13.520 for more, let's go to London and bring in Bloomberg 0:13:13.600 --> 0:13:16.559 day break, euro banker Caroline hepgar Tom. 0:13:16.720 --> 0:13:19.880 The UK's business leaders and politicians may be at odds 0:13:19.920 --> 0:13:23.440 on some matters, but both groups agree on one thing, 0:13:23.840 --> 0:13:28.080 the need for sustainable economic growth in Britain. It is 0:13:28.120 --> 0:13:31.880 something that has proven elusive in twenty twenty four, but 0:13:32.040 --> 0:13:34.880 with a new Labour government to out the country's helm, 0:13:35.160 --> 0:13:40.120 many are still hoping that next year will bring more prosperity. 0:13:40.240 --> 0:13:44.079 The Confederation for British Industry says that the problem is evident. 0:13:44.160 --> 0:13:47.839 The economy is faltering and firms are struggling to solve 0:13:47.960 --> 0:13:52.240 challenges without support. The group has also bemoaned the cost 0:13:52.280 --> 0:13:55.800 of doing business in the UK against the backdrop of 0:13:56.040 --> 0:14:00.440 unreliable supply chains and a declining stock market in London. 0:14:00.960 --> 0:14:04.520 In response, the Chancellor Rachel Reeves is doing her best 0:14:04.600 --> 0:14:08.440 to rev up the engine of industry. The Chancellor used 0:14:08.440 --> 0:14:13.079 her landmark mansion House address to announce a swathe of measures, 0:14:13.120 --> 0:14:18.000 including bringing bonus payments forwards for financial professionals and a 0:14:18.040 --> 0:14:23.480 reassessment of Posts two thousand and eight crisis regulation. But 0:14:23.520 --> 0:14:26.480 will her efforts be enough to spur growth given the 0:14:26.560 --> 0:14:29.880 uncertain backdrop? The threat of headwinds is something I've been 0:14:29.880 --> 0:14:33.080 discussing with the director of research at the think tank 0:14:33.120 --> 0:14:37.040 the Resolution Foundation, James Smith. I started off by asking 0:14:37.120 --> 0:14:41.160 him where the recent hard than expected UK inflation numbers 0:14:41.440 --> 0:14:43.560 are an indicator of worse to come. 0:14:44.280 --> 0:14:47.440 It's a pretty disappointing inflation release all round. As you say, 0:14:47.800 --> 0:14:50.720 inflation is up. We expected that. 0:14:50.720 --> 0:14:53.239 Because energy bills were going. 0:14:53.040 --> 0:14:55.560 Up some falls in the past, we dropping out of 0:14:55.640 --> 0:15:01.400 the twelvemonth calculation. But what we've seen is inflation tacking 0:15:01.480 --> 0:15:04.840 up a little bit. We've seen services inflation up from 0:15:04.840 --> 0:15:08.640 four point nine percent in September to five percent in October, 0:15:09.000 --> 0:15:12.600 and those underlying measures of inflation what really the Bank 0:15:12.640 --> 0:15:13.800 of England is watching. 0:15:14.000 --> 0:15:16.240 So those rises there. 0:15:16.040 --> 0:15:19.000 They're not big, but and they have been a little 0:15:19.000 --> 0:15:22.640 bit erratic in recent months, but still there's a disappointing 0:15:23.080 --> 0:15:27.160 release and doesn't really encourage us to think there's very 0:15:27.280 --> 0:15:29.160 rapid cuts and interest rates coming. 0:15:29.200 --> 0:15:30.840 Inflation still looks quite sticky. 0:15:31.640 --> 0:15:34.400 Okay, Yeah, in terms of the work that you have 0:15:34.520 --> 0:15:37.880 done then on the pressures that there might be for 0:15:38.000 --> 0:15:41.480 higher inflation, and also on the data, it's quite fascinating. 0:15:41.520 --> 0:15:44.720 We've known for two years that the official Labor for 0:15:45.000 --> 0:15:48.720 survey that's produced by the RNs has had significant problems. 0:15:49.280 --> 0:15:51.520 What do you think that the official data has missed 0:15:51.600 --> 0:15:53.560 because you know it's close to a million people. 0:15:53.600 --> 0:15:54.080 Maybe. 0:15:54.960 --> 0:15:55.200 Yeah. 0:15:56.320 --> 0:15:58.280 We've known for as you say, for quite some time 0:15:58.320 --> 0:16:02.640 that the Labor four Survey, the key measure of employment 0:16:02.720 --> 0:16:06.480 lad market quantities in the UK, has had problems of 0:16:06.560 --> 0:16:10.280 declining response rates. So what we've been doing is trying 0:16:10.320 --> 0:16:13.480 to figure out what the lad market might look like 0:16:13.520 --> 0:16:17.960 if you just use ADMIN data, so the HMRC Real 0:16:18.000 --> 0:16:23.800 Time Indicators measure of employment and HRC data on self 0:16:23.880 --> 0:16:26.360 employment to try and give you an overall sense of employment. 0:16:26.400 --> 0:16:29.320 And if you do that calculation, it suggests that as 0:16:29.360 --> 0:16:32.960 you say, something like a million more people might be 0:16:33.840 --> 0:16:34.640 in employment. 0:16:34.720 --> 0:16:35.480 So the laborforce. 0:16:35.480 --> 0:16:41.440 Ser they could be really seriously underestimating the amount of 0:16:41.720 --> 0:16:44.400 the extent of which people are in employment in the UK, 0:16:44.560 --> 0:16:47.600 and we really think, you know, that could be quite 0:16:47.600 --> 0:16:49.560 a big difference. We're not at all certain about what 0:16:49.600 --> 0:16:52.400 that level looks like. This is giving you a sense 0:16:52.440 --> 0:16:55.480 of where employment might be. But the key thing here 0:16:55.560 --> 0:16:57.920 is in terms of future inflation is if you look 0:16:58.360 --> 0:17:03.000 at measures of un employment, particularly unemployment relative to the 0:17:03.040 --> 0:17:05.879 amount of vacancies in the economy, the so called tightness 0:17:05.960 --> 0:17:09.639 of the labor market, this doesn't radically change your view there. 0:17:09.760 --> 0:17:15.080 So the counterpart to higher employment is lower inactivity. So 0:17:15.119 --> 0:17:18.600 the thing we've been talking about is lots of people 0:17:18.640 --> 0:17:20.960 falling out the labor market. If more people are in 0:17:21.040 --> 0:17:25.240 employment that we expect, then the obvious counterpart that would 0:17:25.320 --> 0:17:28.639 be the less of a problem on the inactivity side. 0:17:28.800 --> 0:17:31.119 I'm interested to hear more from you on that front, 0:17:31.200 --> 0:17:34.520 because this is a narrative that we've had in the 0:17:34.640 --> 0:17:37.760 UK since the pandemic, that so many more people were 0:17:37.800 --> 0:17:42.560 inactive in the workforce. Would looking at the calculations that 0:17:42.600 --> 0:17:44.840 you've done, I mean, how differently should we be thinking 0:17:44.880 --> 0:17:46.000 about that problem. 0:17:46.080 --> 0:17:49.480 Well, it's still clear that we have got a problem 0:17:49.800 --> 0:17:55.320 of higher levels of poor health, so more people say 0:17:55.400 --> 0:17:59.600 that they have stability. We certainly are paying more for 0:17:59.640 --> 0:18:02.680 this little benefit, so that that's not quite the same 0:18:02.720 --> 0:18:04.160 thing as a sort of survey. 0:18:03.880 --> 0:18:05.560 Measures of ill health. 0:18:05.560 --> 0:18:09.000 So there's still the types of problems we've been talking about. 0:18:09.080 --> 0:18:13.320 Those are still there, but the overall effect on in 0:18:13.400 --> 0:18:17.160 activity through higher employment might be quite a lot smaller. 0:18:17.200 --> 0:18:20.639 So there could be other things going on pushing down 0:18:21.200 --> 0:18:25.600 in activity. So more people in work or older people 0:18:25.880 --> 0:18:29.840 you know, without health problems, and more women participating in 0:18:29.840 --> 0:18:32.560 the labor market for example, could be the ways in 0:18:32.640 --> 0:18:35.360 which you reconcile those two estimates. 0:18:35.800 --> 0:18:38.359 How much does it mean that government policy has to shift? 0:18:38.400 --> 0:18:40.920 I mean only last month Kirs Starmer told the Labor 0:18:40.920 --> 0:18:44.360 Party conference that the long term sick needed to get 0:18:44.359 --> 0:18:48.560 back to work where they could, saying quote that he 0:18:48.680 --> 0:18:51.199 was talking to his Labour party. Obviously we have to 0:18:51.240 --> 0:18:55.000 do everything we can to tackle worklessness. Liz Kendall, who's 0:18:55.040 --> 0:18:57.280 the Working Pension Secretary, is meant to be launching big 0:18:57.280 --> 0:19:00.800 reforms of job centers later this then you know, the 0:19:00.840 --> 0:19:03.920 way that people get back into work sort of extraordinary. 0:19:03.920 --> 0:19:06.560 But it does mean that government policy that has flowed 0:19:06.560 --> 0:19:08.760 from this data probably has to change. 0:19:09.080 --> 0:19:11.000 I think the key thing here is that the government 0:19:11.119 --> 0:19:14.560 have said that they want to get the employment rate 0:19:14.680 --> 0:19:15.680 up to eighty percent. 0:19:15.800 --> 0:19:18.200 So that's a very ambitious target. 0:19:18.280 --> 0:19:20.320 You know, we were in the early seventies in terms 0:19:20.359 --> 0:19:24.640 of employment rate at the moment, but if the ADMIN 0:19:24.760 --> 0:19:27.040 measure of employment is to be believed, we're a lot 0:19:27.080 --> 0:19:30.679 closer to that target than we work previously. So we still, 0:19:30.720 --> 0:19:32.760 as I say, we still have a challenge in terms 0:19:32.840 --> 0:19:37.440 of the overall welfare bill for those receiving benefits related 0:19:37.480 --> 0:19:41.320 to health. So the set of policy issues that are there, 0:19:41.400 --> 0:19:43.399 and we be hearing about that in the budget with 0:19:43.520 --> 0:19:47.400 the chance of saying that she would continue to try 0:19:47.440 --> 0:19:50.480 and make cuts to disability benefits put. 0:19:50.280 --> 0:19:52.640 In place by her predecessor, Jeremy Hunt. 0:19:52.760 --> 0:19:56.639 So there are definitely, you know, still problems there that 0:19:56.680 --> 0:19:57.960 the government need to be addressed. 0:19:57.960 --> 0:20:00.800 But it's good news potentially for their if. 0:20:00.680 --> 0:20:04.240 More people are in work, more people are paying tax, 0:20:04.320 --> 0:20:07.639 and you know that's the kind of key counterpart to 0:20:07.680 --> 0:20:07.960 all this. 0:20:08.440 --> 0:20:11.560 That was the director of research at the Resolution Foundation, 0:20:11.760 --> 0:20:15.560 James Smith, speaking to me and Stephen Caroll on Bloomberg Radio. 0:20:16.000 --> 0:20:18.199 So growth is the name of the game. How to 0:20:18.359 --> 0:20:20.800 get there though, no doubt that will be the question 0:20:20.960 --> 0:20:25.040 on the lips of different sector leaders and influential voices 0:20:25.320 --> 0:20:30.240 at the upcoming CBI Industry Conference. I've been discussing what's 0:20:30.240 --> 0:20:33.640 ahead with Bloomberg's UK Business editor Julian Harris. 0:20:34.080 --> 0:20:36.800 I mean, it never ends for British businesses really. I 0:20:36.840 --> 0:20:38.680 guess you could say that in a lot of countries 0:20:38.720 --> 0:20:42.120 as well. Just as they think the coast is clear, 0:20:42.240 --> 0:20:45.560 something comes up. The latest thing, of course, was the budget. 0:20:45.680 --> 0:20:48.080 It was expected to be quite severe, but it probably 0:20:48.119 --> 0:20:51.879 went further than many expected, and the hit from tax 0:20:52.400 --> 0:20:56.280 is huge. It does depend what kind of business you are, though, 0:20:56.400 --> 0:20:59.720 and sometimes the CBI has been accused in the past 0:20:59.720 --> 0:21:04.560 of of just representing the biggest businesses in the UK 0:21:06.080 --> 0:21:08.520 and not focusing as much on the smaller ones. And 0:21:08.520 --> 0:21:12.719 then a hit from NI really depends on how the 0:21:12.760 --> 0:21:15.600 form of your business, how many staff you employed, how 0:21:15.600 --> 0:21:18.280 many of them are part time. So businesses are real 0:21:18.320 --> 0:21:21.320 link to a certain extent, but that there's certainly a 0:21:21.320 --> 0:21:22.480 big hit from costs. 0:21:22.760 --> 0:21:24.919 What do you think is the biggest concern for British 0:21:25.000 --> 0:21:28.439 businesses currently? Is it the new incoming US president. Is 0:21:28.480 --> 0:21:32.560 it the regulatory changes for example that Rachel Reeves announced 0:21:32.560 --> 0:21:35.359 that Manchin hows or is it that budget that is 0:21:35.480 --> 0:21:37.160 the big issue, perhaps something else. 0:21:37.840 --> 0:21:39.800 I think there are the things that they know about 0:21:39.880 --> 0:21:42.040 and that they can plan for, and then the things 0:21:42.040 --> 0:21:44.800 that they can't. So from most businesses that we speak 0:21:44.840 --> 0:21:46.879 to at the moment, when you talk about Trump and 0:21:47.600 --> 0:21:50.320 the thread of trade war and tariffs, they just kind 0:21:50.359 --> 0:21:53.720 of shrugged their shoulders and well, we don't know what's 0:21:53.760 --> 0:21:57.400 going to happen there. There's so many different factors in play. Obviously, 0:21:57.440 --> 0:22:00.679 if Trump did introduce all his tariffs that the effect 0:22:00.760 --> 0:22:04.199 would be huge. In the UK is so exposed to 0:22:04.280 --> 0:22:07.680 what happens internationally that it can't be neglected. And that's 0:22:07.760 --> 0:22:11.040 why we're seeing people like Rachel Reeves and even Andrew 0:22:11.040 --> 0:22:15.720 Bailey kind of almost evangelizing about free trade because that 0:22:16.160 --> 0:22:19.400 is what the UK needs. But business executives themselves are 0:22:19.400 --> 0:22:21.640 just saying, well, there's not a huge amount they can 0:22:21.680 --> 0:22:24.440 do about that. What they do know is happening are 0:22:24.480 --> 0:22:27.800 these changes from labor that we talked about, sort of taxes, 0:22:27.800 --> 0:22:30.760 but also the increase in the minimum wage, the workers 0:22:30.840 --> 0:22:33.960 rights packages, these things are all written down now and 0:22:34.000 --> 0:22:36.320 are coming down the line. The worker's rights one is 0:22:36.359 --> 0:22:39.879 still in negotiation, but the others can be planned for. 0:22:40.119 --> 0:22:43.240 But from a lot of businesses sort of we're hearing 0:22:43.480 --> 0:22:45.960 you know that the effect is very, very big. So 0:22:46.000 --> 0:22:48.760 they're figuring out how to manage that. Do they put 0:22:48.840 --> 0:22:52.840 up prices or do they try to stay competitive? 0:22:53.680 --> 0:22:56.959 There are a lot of different sectors of British business 0:22:57.040 --> 0:23:00.560 who are concerned post a budget. Do you think that 0:23:00.640 --> 0:23:03.199 the government is getting the tone right? What do you 0:23:03.200 --> 0:23:07.440 think businesses will be saying at this event. Obviously the 0:23:07.560 --> 0:23:14.320 Labor leadership courted business assiduously, but then business confidence absolutely 0:23:14.359 --> 0:23:17.560 slumped ahead of the budget, and then after the budget 0:23:17.640 --> 0:23:19.879 has as I said, a lot of different sectors have 0:23:20.000 --> 0:23:23.200 criticized Rachel Reeves's choices and decisions in the budget. What 0:23:23.240 --> 0:23:24.399 do you think the tone will be like? 0:23:25.520 --> 0:23:28.200 Yeah, I don't think they've got the tone right at all. 0:23:28.840 --> 0:23:32.119 And there has been a real change in the months 0:23:32.119 --> 0:23:34.600 since Labor came to power. So they had this sort 0:23:34.640 --> 0:23:38.800 of schmoozy event in Downing Street Garden shortly after their 0:23:39.040 --> 0:23:43.080 landslide victory and the mood was said to be absolutely buoyant. 0:23:43.119 --> 0:23:46.159 I mean it helped that it was summer and it 0:23:46.240 --> 0:23:50.040 was all very very positive and people, you know, business 0:23:50.440 --> 0:23:52.440 leaders were coming out of that and they were talking 0:23:52.440 --> 0:23:57.160 to journalists and being very upbeat. That's now really changed 0:23:57.200 --> 0:23:59.399 in terms of sectors you ask about, I mean a 0:23:59.560 --> 0:24:04.080 retail obvious one, hospitalities another, and there are business figures 0:24:04.080 --> 0:24:07.440 in those areas saying, you know, this really is not 0:24:07.560 --> 0:24:09.960 what we expected. We knew that there was going to 0:24:10.000 --> 0:24:12.560 be some fiscal adjustment, but the scale of it is 0:24:13.280 --> 0:24:15.840 far beyond what we thought. And there just seems to 0:24:15.880 --> 0:24:18.440 be a sort of lack of understanding from laboring in 0:24:18.520 --> 0:24:21.960 terms of how kind of devastating that can be, and 0:24:22.600 --> 0:24:25.960 Labour's emphasize growth so much, and a lot of people 0:24:25.960 --> 0:24:29.080 in business are saying, well, well, how can the economy 0:24:29.160 --> 0:24:32.320 grow when you're imposing these costs on it? 0:24:32.320 --> 0:24:33.639 It doesn't really make sense. 0:24:33.960 --> 0:24:36.560 At the same time, like Reeves has been very positive 0:24:36.600 --> 0:24:39.159 towards the city, so there are some people in the 0:24:39.160 --> 0:24:42.240 city who are probably quite happy, but that's very different 0:24:42.280 --> 0:24:44.399 from say, supermarket CEOs. 0:24:45.040 --> 0:24:47.879 My thanks to Bloomberg's Julian Harris for looking ahead to 0:24:47.960 --> 0:24:52.359 the CBI's annual conference. In recent days, they've talked about 0:24:52.359 --> 0:24:57.000 how the UK economy stalled over the third quarter. Uncertainty 0:24:57.080 --> 0:25:00.399 ahead of the budget probably played a big part in 0:25:00.440 --> 0:25:05.320 their words and their expectations that bompier inflation will rule 0:25:05.440 --> 0:25:08.119 out the prospect of a faster pace of Bank of 0:25:08.160 --> 0:25:11.479 England rate cuts in the year ahead. So it'll be 0:25:11.600 --> 0:25:14.439 an interesting moment then to get the temperature of business 0:25:14.520 --> 0:25:18.160 leaders and their biggest trade group in the next few days. 0:25:18.200 --> 0:25:21.080 And we will have full coverage of the gathering in 0:25:21.119 --> 0:25:25.000 central London here on Bloomberg Radio. I'm Caroline Hepkeitt in London. 0:25:25.080 --> 0:25:27.600 You can catch us every weekday morning for Bloomberg Daybreak. 0:25:27.600 --> 0:25:30.040 Youre at beginning at six am in London. That's one 0:25:30.080 --> 0:25:31.159 am on Wall Street. 0:25:31.320 --> 0:25:34.439 Tom, Thank you, Caroline, and coming up on Bloomberg day 0:25:34.440 --> 0:25:37.280 Break weekend and look ahead to a Bank of Korea meeting. 0:25:37.640 --> 0:25:51.600 I'm Tom Busby and this is Bloomberg. This is Bloomberg 0:25:51.640 --> 0:25:53.560 day Break weekend, our global look ahead at the top 0:25:53.600 --> 0:25:56.440 stories for investors in the coming week. I'm Tom Busby 0:25:56.440 --> 0:25:59.200 in New York. This past week, the IMF lowered it's 0:25:59.200 --> 0:26:02.600 forecast for South Korea's economic growth, pointing to rising headwinds 0:26:02.920 --> 0:26:06.800 facing the export reliant nation. Those are the same headwinds 0:26:06.800 --> 0:26:10.400 that'll be weighed by the country seven central bankers this week, 0:26:10.440 --> 0:26:12.560 and for more, we turned to the host of the 0:26:12.640 --> 0:26:15.000 Daybreak Asia podcast, Doug Krisner. 0:26:15.560 --> 0:26:17.680 Tom in the coming week, we'll get a great decision 0:26:17.720 --> 0:26:21.080 from the Bank of Korea. Now, the bok has recently 0:26:21.160 --> 0:26:25.520 tilted toward cutting rates, so question will the duvishnists prevail 0:26:25.600 --> 0:26:28.160 in the coming days. For a closer look, I'm joined 0:26:28.160 --> 0:26:32.040 by Paul Jackson, Bloomberg Asia Eco GUV editor. Paul joins 0:26:32.040 --> 0:26:35.760 from our studios in Tokyo. Help me understand the dynamic. 0:26:35.920 --> 0:26:39.680 I really enjoy talking with you because you're so abreast 0:26:39.720 --> 0:26:41.879 of everything that's happening, not just in South Korea but 0:26:41.960 --> 0:26:45.879 Japan as well. Last month, the Bokay cut rates for 0:26:45.920 --> 0:26:47.639 the first time in more than four years, and it 0:26:47.680 --> 0:26:50.360 seemed at that time that it was really the concern 0:26:50.440 --> 0:26:54.440 over the weakness in the economy that outweighed concern about 0:26:54.800 --> 0:26:58.000 high household debt. Is that going to continue to be 0:26:58.440 --> 0:27:02.040 kind of the underlying fabri here, the basic assumption that 0:27:02.040 --> 0:27:02.840 we should be making. 0:27:03.600 --> 0:27:06.640 Yeah, I think going forward it's going to be on 0:27:06.760 --> 0:27:11.320 this rate cutting path. I think next week's meeting we're 0:27:11.359 --> 0:27:12.960 going to have a hold. I think it's one of 0:27:13.000 --> 0:27:18.679 those classic central bank Okay, let's wait and monitor and 0:27:18.800 --> 0:27:22.800 see how the impact of our previous decision filters through 0:27:22.840 --> 0:27:25.760 the economy. So I think it's hold for now, and 0:27:25.800 --> 0:27:31.280 then the rate cuts start again next year, probably in January, 0:27:31.600 --> 0:27:37.199 and economists are forecasting three rate cuts next year. But 0:27:37.880 --> 0:27:41.359 of course we do have the emergency of Donald Trump, 0:27:41.760 --> 0:27:46.280 which is getting some economists to change their views of 0:27:46.359 --> 0:27:48.520 how the Bank of Career will act. 0:27:48.680 --> 0:27:51.440 Before we get to the issue of US South Korean trade, 0:27:51.880 --> 0:27:53.920 talk to me a little bit about the inflation story 0:27:53.920 --> 0:27:57.160 as we understand it right now for South Korea. Are 0:27:57.200 --> 0:27:59.480 things under control at this point? 0:27:59.640 --> 0:28:02.360 I think think that if you look at the statement 0:28:02.400 --> 0:28:05.800 that came out in October, the policymakers on the board 0:28:06.600 --> 0:28:11.000 said that sees clear signs of stabilization in the inflation trend. 0:28:11.400 --> 0:28:15.480 We saw it slow below two percent in September and 0:28:15.600 --> 0:28:19.040 even further in October. So I think the checkbox of 0:28:19.160 --> 0:28:25.520 inflation is marked. But the matrix of calculations, the calculus 0:28:26.200 --> 0:28:29.960 for the Bank of Career is rather complicated because we've 0:28:30.000 --> 0:28:33.240 got this household debt that you alluded to, and obviously 0:28:33.320 --> 0:28:36.560 you want to keep the rates, you know, relatively high 0:28:36.600 --> 0:28:41.040 and restrictive to stop that trend continuing. Also, you know 0:28:41.120 --> 0:28:43.960 the currency remains weak, and of course you know you 0:28:44.040 --> 0:28:48.000 cut the rates, that's going to encourage further weakness in 0:28:48.040 --> 0:28:53.200 the currency going forward. On the side in favoring cutting rates, 0:28:53.240 --> 0:28:55.120 obviously you've got the economic growth. 0:28:55.160 --> 0:28:56.200 Now, you know, the. 0:28:56.200 --> 0:28:59.880 Economy is ticking over well over two percent growth does 0:29:00.120 --> 0:29:02.880 seemed too bad for many economies. I think Japan would 0:29:03.200 --> 0:29:06.080 jump at those kind of figures. But if you look 0:29:06.080 --> 0:29:09.600 at the trend of Korean growth for the economy over 0:29:09.600 --> 0:29:12.760 the last ten years, it's usually around two point six percent. 0:29:12.800 --> 0:29:14.600 That's been the average over the last ten years. If 0:29:14.600 --> 0:29:17.480 you go back to twenty ten, it's like averaging three 0:29:17.520 --> 0:29:20.840 point one percent. So it's looking a bit anemic. And 0:29:21.200 --> 0:29:24.440 one of the key things here is that the Korean 0:29:24.520 --> 0:29:30.640 economy is very, very reliant upon export performance. You know, 0:29:30.680 --> 0:29:34.520 we're talking exports. So the equivalent of forty percent of 0:29:34.640 --> 0:29:38.280 GDP in South Korea. Now look over the over in 0:29:38.360 --> 0:29:41.800 Japan and the figures closer to twenty percent, which speaks 0:29:41.800 --> 0:29:44.400 to a kind of broader economy that they have over 0:29:44.480 --> 0:29:48.440 in Tokyo. So for South Korea. You know what happens 0:29:48.440 --> 0:29:52.520 to the exports going down the line, and you know 0:29:52.560 --> 0:29:57.160 the policy that is implemented by Donald Trump. You know 0:29:57.240 --> 0:30:01.120 that has key implications for growth going forward. 0:30:01.320 --> 0:30:05.000 So protectionism obviously is a theme that mister Trump has 0:30:05.000 --> 0:30:07.320 been touting, and it would make I would imagine a 0:30:07.400 --> 0:30:11.520 very strong case in the future for deeper raid cuts 0:30:11.560 --> 0:30:13.840 from the b Okay right to make up for what 0:30:13.880 --> 0:30:17.000 you're expecting to see as a drag on exports. Do 0:30:17.040 --> 0:30:17.720 I have that right? 0:30:18.080 --> 0:30:21.600 That's right? So, I mean if the Trump administration were 0:30:21.640 --> 0:30:26.920 to go ahead with your sixty percent tariffs on Chinese 0:30:27.360 --> 0:30:30.720 goods and twenty percent blanket rate for the rest of 0:30:30.760 --> 0:30:33.840 the world, and of course we imagine this is kind 0:30:33.880 --> 0:30:37.720 of like your starting point for negotiation. Remember it's all 0:30:37.720 --> 0:30:41.840 the art of the deal, right. However, if he actually 0:30:42.280 --> 0:30:46.960 ended up coming out at that extreme, Bloomberg Economics estimates 0:30:47.080 --> 0:30:51.560 that South Korean exports to the US would fall by 0:30:51.720 --> 0:30:55.640 fifty five percent by twenty twenty eight. So that is 0:30:56.080 --> 0:31:01.400 a concerning figure, as you can imagine, and that's also 0:31:01.520 --> 0:31:06.240 leading into Bloomberg Economics predicting more rate cuts now that 0:31:06.560 --> 0:31:09.920 Donald Trump has been voted in they're seeing four cuts 0:31:09.960 --> 0:31:12.720 in twenty twenty five and another one to follow up 0:31:12.800 --> 0:31:14.320 in early twenty twenty six. 0:31:14.400 --> 0:31:16.520 So you mentioned the behavior of the currency, and I 0:31:16.560 --> 0:31:20.520 have to ask, because I know the BOKA monitors the 0:31:20.520 --> 0:31:23.960 financial system quite closely in South Korea, how is that 0:31:24.080 --> 0:31:26.520 holding up? I mean, has there been volatility right now, 0:31:26.560 --> 0:31:30.400 particularly since the US election or are things fairly stable? 0:31:30.800 --> 0:31:31.000 No? 0:31:31.000 --> 0:31:34.440 No, we have had quite a lot of high volatility. 0:31:35.200 --> 0:31:38.440 We're around close to this one thousand, four hundred mark 0:31:38.520 --> 0:31:42.840 the Korean one to the dollar. That scene as kind 0:31:42.840 --> 0:31:45.440 of it's not exactly a line in the sand, but 0:31:45.520 --> 0:31:48.520 it's certainly seen as a very weak level. I think 0:31:48.560 --> 0:31:52.080 back in twenty twenty two we got up to four 0:31:52.120 --> 0:31:56.040 hundred and fifty, so any moves in that direction will 0:31:56.080 --> 0:32:00.640 be a cause of concern. And of course Korea does 0:32:00.800 --> 0:32:04.480 tend to dip into the market to try and smooth 0:32:04.520 --> 0:32:08.840 over movements in the currency. Does spend billions of dollars 0:32:09.160 --> 0:32:14.320 doing this, and recently it was added to the US 0:32:14.400 --> 0:32:18.440 Treasury's monitoring list for special attention in terms of its 0:32:18.520 --> 0:32:19.480 currency policy. 0:32:20.000 --> 0:32:22.520 Paul, thanks so much for your time. That's Paul Jackson, 0:32:22.640 --> 0:32:26.320 Asia Eco, guv editor for Bloomberg News. Joining us from Tokyo. 0:32:26.920 --> 0:32:30.520 We move next to global trade. As President electromp builds 0:32:30.520 --> 0:32:33.640 out his cabinet, there are questions as to whether or 0:32:33.720 --> 0:32:36.080 not he will make good on his campaign promise for 0:32:36.120 --> 0:32:40.880 those sweeping tariffs, specifically those targeting China. We are joined 0:32:40.920 --> 0:32:45.000 now by Katherine Thorbeck, tech columnist for Bloomberg Opinion. She 0:32:45.120 --> 0:32:48.440 joins us from our studios in Tokyo. Catherine, you write 0:32:48.440 --> 0:32:53.240 that Trump's policies will only strengthen Beijing's push for self sufficiency. 0:32:53.560 --> 0:32:57.080 When I read that, I immediately thought, semiconductors. Is that 0:32:57.120 --> 0:32:58.280 what you're alluding to. 0:32:58.680 --> 0:33:01.320 So semiconductors is sort of a big part of this, 0:33:01.440 --> 0:33:04.440 and I think that's probably the strongest argument from the 0:33:04.520 --> 0:33:07.000 US side, that you know, China won't be able to 0:33:07.000 --> 0:33:09.080 get ahead. But at the same time, I think, you know, 0:33:09.120 --> 0:33:12.200 there was new research from my Bloomberg Economics and Bloomberg 0:33:12.280 --> 0:33:14.920 Intelligence colleagues that came out last month that said, you know, 0:33:15.360 --> 0:33:18.800 despite years of sanctions and export controls and all of 0:33:18.800 --> 0:33:21.040 these US efforts to sort of hold China back, it's 0:33:21.080 --> 0:33:24.320 still made pretty good headway in terms of sort of 0:33:24.360 --> 0:33:27.240 dominating industries of the future and sort of leading the 0:33:27.320 --> 0:33:30.160 US in the tech race. It's still behind in some areas, 0:33:30.160 --> 0:33:32.880 but it's it's made some significant gains and other sort 0:33:32.880 --> 0:33:35.880 of strategic areas. And I think chips, whether it can 0:33:35.920 --> 0:33:38.640 catch up in chips will sort of ultimately decide if 0:33:38.680 --> 0:33:41.640 it does come out ahead. But I think right now, 0:33:41.680 --> 0:33:44.000 the US I think historically has had a sort of 0:33:44.000 --> 0:33:47.440 tendency to underestimate China, and I worry that when it 0:33:47.480 --> 0:33:50.520 comes to the current you know, battle for tech supremacy, 0:33:51.080 --> 0:33:53.120 that's that's not a good thing to do at this juncture. 0:33:53.240 --> 0:33:55.120 So what do we know about the extent to which 0:33:55.400 --> 0:34:00.120 President Chi jinping has been allocating resources to a lot 0:34:00.120 --> 0:34:03.200 of these industries, whether it's semiconductors or anything that may 0:34:03.200 --> 0:34:05.960 be kind of connected to that ecosystem. 0:34:06.280 --> 0:34:08.800 So I think when Xi jinping has signaled that something 0:34:08.880 --> 0:34:11.439 is a strategic priority for the country, he really has 0:34:11.480 --> 0:34:13.840 the power to sort of move a lot of levers 0:34:13.920 --> 0:34:17.319 to you know, to boost these industries. And I think 0:34:17.520 --> 0:34:19.400 how the US plays into this and and sort of 0:34:19.400 --> 0:34:22.480 one example is, you know, Huawei. The US really went 0:34:22.520 --> 0:34:25.840 all out, and this started under Trump's first term to 0:34:25.960 --> 0:34:28.200 sort of you know, strangle Huawei and make sure that 0:34:28.239 --> 0:34:30.440 it doesn't get ahead, and there was a point when 0:34:30.440 --> 0:34:34.080 it really seemed like Huawei was done for. But then 0:34:34.480 --> 0:34:38.000 Xijinping and Beijing got involved and sort of use their 0:34:38.040 --> 0:34:40.080 muscles to sort of prop up its own you know, 0:34:40.120 --> 0:34:43.120 domestic tech giant, and now by a lot of measures, 0:34:43.160 --> 0:34:46.000 Huawei is sort of stronger than ever. And I think 0:34:46.040 --> 0:34:49.000 that the US should should be careful with how it 0:34:49.080 --> 0:34:52.800 sort of attacks these you know, Chinese tech industries because 0:34:53.040 --> 0:34:55.080 in some senses, it's coming back stronger. 0:34:55.400 --> 0:34:58.160 You're going to test my memory here because as I recalled, 0:34:58.239 --> 0:35:01.560 during the first administration, it wasn't Tuahwei, it was Zte, 0:35:02.040 --> 0:35:04.840 and the concern was that some of this telecom equipment, 0:35:05.200 --> 0:35:09.000 the devices that these companies manufactured, the concern was there 0:35:09.080 --> 0:35:13.480 may have been firmware embedded in those chips that could 0:35:13.520 --> 0:35:19.440 potentially be used by actors in China to spy on communications. 0:35:19.480 --> 0:35:23.520 And as I also recall, the Trump administration tried to 0:35:23.600 --> 0:35:29.000 gather other countries to think similarly about what the Chinese 0:35:29.040 --> 0:35:31.720 may have the capability to do, and they were trying 0:35:31.760 --> 0:35:39.560 to curtail usage of Huawei or Zte products in telcosystems globally, right. 0:35:39.719 --> 0:35:41.960 Right, So, I think the Zte example is actually a 0:35:42.200 --> 0:35:47.160 really interesting example specifically for Trump, because he sort of 0:35:47.200 --> 0:35:50.000 has a history of flip flopping when it comes to 0:35:50.080 --> 0:35:54.480 issues related to China's tech sector specifically and ZTE, for example, 0:35:54.560 --> 0:35:57.840 you know, it faced punishments from Washington for violating sanctions, 0:35:58.200 --> 0:36:00.680 and then Trump actually tried to lift those actions, and 0:36:00.719 --> 0:36:03.200 he announced this in a tweet at one point saying 0:36:03.680 --> 0:36:06.040 it was because too many Chinese jobs were lost, which 0:36:06.040 --> 0:36:07.719 he he sort of faced a lot of criticism for, 0:36:08.640 --> 0:36:11.200 and then later he said that he was actually negotiating 0:36:11.239 --> 0:36:14.400 a broader trade deal with She and that this this 0:36:14.520 --> 0:36:18.960 move to sort of save ZT essentially was especially reflective 0:36:18.960 --> 0:36:20.360 of his what he said at the time was his 0:36:20.400 --> 0:36:23.560 close personal relationship with She. So I think for Trump, 0:36:23.640 --> 0:36:26.359 it's like he focuses a lot on sort of transactions 0:36:26.360 --> 0:36:29.000 and deal making, and there's a lot of uncertainty when 0:36:29.000 --> 0:36:30.879 it comes to, you know, what he will actually do 0:36:31.520 --> 0:36:33.279 and sort of going off that. I think another sort 0:36:33.320 --> 0:36:35.839 of more recent high profile u turn that we've seen 0:36:35.880 --> 0:36:38.680 Trump do when it comes to Chinese tech is on TikTok, 0:36:39.200 --> 0:36:41.880 which you know, he initially in his first term sort 0:36:41.920 --> 0:36:44.320 of spearheaded a lot of the scrutiny on TikTok in Washington. 0:36:44.360 --> 0:36:46.759 You know, he signed an executive order that would ban 0:36:46.880 --> 0:36:50.120 it in the US because of these perceived national security 0:36:50.120 --> 0:36:52.960 concerns over its parent company being a Chinese parent company, 0:36:53.000 --> 0:36:55.600 Bye Dance, And he sort of tried to broker a 0:36:55.680 --> 0:36:58.440 sale of TikTok in the US and that ultimately didn't 0:36:58.440 --> 0:37:01.040 go through and his executive orders didn't hold up in court. 0:37:01.160 --> 0:37:03.600 But you know, if you flash forward to two earlier 0:37:03.640 --> 0:37:07.920 this year, President Biden actually signed legislation that would once 0:37:07.960 --> 0:37:10.960 again force TikTok to divest from its Chinese parent company 0:37:11.040 --> 0:37:13.840 or face a US ban. And then on the campaign trail, 0:37:14.040 --> 0:37:17.319 Trump posted a video to his True social platform where 0:37:17.320 --> 0:37:19.560 he said, you know, if you want to save TikTok 0:37:19.560 --> 0:37:21.279 in the US, you should vote for me. So he 0:37:21.360 --> 0:37:24.640 really campaigned on actually saving TikTok, which is a little 0:37:24.680 --> 0:37:27.399 bit confusing, but at the same time it's it sort 0:37:27.440 --> 0:37:30.000 of shows this tendency of him to sort of flip flop. 0:37:30.040 --> 0:37:33.719 And I think it's interesting because you know, he historically 0:37:33.760 --> 0:37:37.319 hasn't necessarily been a huge national security hawk when it 0:37:37.320 --> 0:37:39.759 comes to China. You know, he campaigned a lot on 0:37:39.800 --> 0:37:41.760 the economy and on sort of you know, the prices 0:37:41.760 --> 0:37:45.720 that Americans are feeling. But he's surrounded himself in his cabinet, 0:37:45.800 --> 0:37:48.040 or it seems like he's surrounding himself with some real 0:37:48.440 --> 0:37:51.120 sort of China security hawks, you know, from Marco Rubio 0:37:51.160 --> 0:37:54.520 to Mike Walls. So it's going to be interesting to 0:37:54.520 --> 0:37:56.920 see how this plays out if he can, you know, 0:37:57.400 --> 0:38:00.040 sort of bring his art of the deal making to this, 0:38:00.160 --> 0:38:03.239 you know, US technology at US China Tech race what 0:38:03.360 --> 0:38:05.840 sort of ends up on the negotiating table and what 0:38:06.000 --> 0:38:07.440 sort of becomes bargaining chips. 0:38:07.680 --> 0:38:10.160 Catherine, I appreciate you taking the time to chat with us. 0:38:10.400 --> 0:38:14.120 Katherine Thorbeck is Bloomberg Opinion columnists, joining us from our 0:38:14.160 --> 0:38:17.080 studios in Tokyo. You can read her work and other 0:38:17.120 --> 0:38:20.600 stories from Bloomberg Opinion at Bloomberg dot com, slash Opinion, 0:38:20.960 --> 0:38:24.160 or on the terminal by typing opin than the Green 0:38:24.239 --> 0:38:27.160 go Key. I'm Doug Krisner. You can catch us weekdays 0:38:27.239 --> 0:38:31.080 for the Daybreak Asia podcast. You can find us on Apple, Spotify, 0:38:31.320 --> 0:38:36.200 the Bloomberg Podcast YouTube channel, or wherever you get your podcast. Tom. 0:38:36.760 --> 0:38:39.040 Thank you, Doug, and that does it for this edition 0:38:39.080 --> 0:38:41.799 of Bloomberg day Break Weekend. Join us again Monday morning 0:38:41.800 --> 0:38:43.680 at five am Wall Street Time for the latest on 0:38:43.760 --> 0:38:46.600 markets overseas and the news you need to start your day. 0:38:47.040 --> 0:38:50.000 I'm Tom Buzby. Stay with US. Top stories and global 0:38:50.000 --> 0:38:52.960 business headlines are coming up right now.