April 25, 2025 • 38 mins
Bloomberg Daybreak Weekend with Tom Busby takes a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to the April jobs report and big tech earnings.
- In the UK – a look ahead to local elections.
- In Asia – a look ahead to China PMI data.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world, and straight ahead on the program,
look ahead to the April jobs report here in the
US how that may impact FED policy moving forward. I'm
Tom Busby in New York.
Speaker 3 (00:25):
I'm Carolin Hetger here in London, where we're keeping you
up to date as the UK heads to the polls.
Speaker 4 (00:30):
I'm deg Krissner looking ahead to China's PMI data, the
first reading since those higher US tariffs took effect.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 2 (01:02):
Good day to you. I'm Tom Busby, and we begin
today's program with a look ahead to the April jobs report,
with non farm payroll numbers out this Friday eight thirty am.
Wall Street Time Now for more on the strength of
the US labor market how Friday's numbers may impact FED policy,
were joined by Michael McKee, Bloomberg International Economics and Policy correspondent. Well, Michael,
(01:23):
what do you expect to see this Friday in the
April jobs report?
Speaker 5 (01:28):
Well, we expect to see a slowing in hiring, but
we don't really have a good idea good handle on
what the overall number is going to be, because we're
not really sure at this point how companies are reacting
to all of the news that we have seen about
tariffs and the economy. The Base Book, which was out
last Wednesday, used the word uncertainty eighty times and mentioned
(01:52):
that companies didn't seem to be laying off people, but
seem to be making plans to do so if the
tariffs go into effect and start to hurt their business prospects.
So we may see a ratcheting down, but the expectation
is we won't fall off the cliff, and we're not
expecting at this point. According to economists, a big change
(02:13):
in the unemployment rate is still supposed to stay at
four point two percent, So.
Speaker 2 (02:18):
By all appearances, until now, the labor market has remained
pretty resilient, but that uncertainty caused by the Trump tariffs.
I guess the question really is how long can that last?
I mean, the Independence day from President Trump was this
month in April, So we probably won't see any damage
or much damage reflected in this report.
Speaker 5 (02:39):
Correct, that's correct. We may see some increased unemployment or
increased job losses in some of the defense contractor consultants
that will lose jobs because of the DOSEE firings. It
isn't clear how many actual government workers we'll see fall
off the pay rolls because it isn't clear how many
(03:01):
have been let go. So it's all kind of up
in the air, and we won't know necessarily what the
full impact of the tariffs are until del first, because
Trump put a ninety day hold on that. And I
think you go back to the basebook, and it suggests
that companies are waiting to see the impacts because of
(03:22):
course it was hard for them to hire workers coming
out of the pandemic, so they're reluctant to let them go.
They will if they need to to retain their margins,
but they just don't know yet. So I don't think
we see much change.
Speaker 2 (03:35):
Yeah, even though all the ingredients are there. We've seen
consumer sentiment decline, consumers and businesses pulling back spending. But
it's almost like a hurry up and wait, We've got
to see what happens with these tariffs and the impact
on companies.
Speaker 5 (03:49):
It's a little bit like you know, when you'd be
out playing on the sidewalk and mom would say, don't
step into the street. I mean, you're right on the
curb there and we could could fallen into the street.
And that's what worries everybody. That's what worries the folks
at the FED. I spoke with Chris Waller, FED governor
on Thursday, and he said they can only model scenarios
(04:14):
a possibility of a lot of tariffs, the possibility of
lower tariff, but if unemployment starts to rise, they will
have to react.
Speaker 2 (04:21):
You know, I heard that interview put another way, he said,
tariffs are a tax, and you know the fear is
higher taxes will lead to a slow.
Speaker 5 (04:29):
Down in hiring, lead to a slowdown in hiring, and
lead to higher prices. And as prices go up, people
tend to spend less. So you have an impact on
demand as well as the supply talk that people are
talking about. So the general consensus is any level of
tariff are going to be disruptive. It's only a question
(04:50):
of how disruptive they are. And then there's a kind
of psychological aspect to it. If people have heard all this,
we've seen consumer confidence collapse, do they react more quickly
to the tariff that we do get, whether they're large
or small, or do they think, well, we can manage
our way through it, we can muddle through it. Governor
(05:12):
Waller thinks that small tariffs, maybe we just get the
ten percent tariffs would enable people, enable companies to find
ways to survive it and keep going. But anything larger
than that would probably cause people to pull back fairly
quickly because they were scarred by the inflation coming out
of the pandemic.
Speaker 2 (05:32):
Well, the April jobs report out this Friday, eight thirty
am Wall Street Time our thanks to Michael McKee, Bloomberg
International Economics and Policy correspondent. With the first quarter earning
season in full swing, we move now to some key
earnings this week from some of big tech's magnificent seven
meta platforms and Microsoft on Wednesday, Apple and Amazon coming
on Thursday. For more and what to expect, we're joined
(05:55):
by Mandeep Singh Bloomberg Intelligence senior tech industry analyst Mandy Well,
it was just a quarter ago. I think the big
concern for those megacap tech firms was how much they're
spending on AI when they expect all that investment to
start paying off. But that was then. Now it looks
like the Trump tariffs and all the uncertainty they bring
putting AI kind of on a back burner along with
(06:17):
regulatory pressures. I mean, is that what it looks like
right now?
Speaker 6 (06:20):
Yes, Because all the MAC seven companies are global companies.
More than fifty to fifty five percent of their revenue
comes from outside the US. So when you think about
the international revenue exposure they have, I mean, tariffs will
clearly play into that. There could be some retaliation in
(06:43):
terms of, you know, other countries kind of imposing some
sort of attacks or fine on these companies, or or
just a pushback in terms of using their products. So look,
is there any catastrophe lurking for these companies? I would
say no, But on the margin, I feel like the
(07:05):
estimates for these companies in terms of growth and profitability
are likely to go down or sideways simply because of
the tariff uncertainty, and even though AI is a big
secular tailwind that will remain, I think in the near term,
AI won't be enough to make up for any lost
revenue due to tariffs or just you know macro slowdown
(07:29):
where companies may pull back on ads or just kind
of shelf their IT spending projects for now.
Speaker 2 (07:37):
Well, back to tariffs, We've seen that Apple has shifted
some of its production, almost ten percent of it to India,
and that is really to kind of not rely so
much on China a benefit now that we're in this
tariff war. Have any other companies done a similar move.
Speaker 6 (07:53):
Well, everyone is trying to figure out how to best
kind of relocate their supply chains to deal with the uncertainty.
The good things for you know, Meta or Alphabet is
they have very low exposure to the hardware side, you know,
which gets impacted the most in the case of tariffs.
(08:14):
I mean, if you're selling digital services or you know,
if you have an online business, it's not going to
get affected by tariffs. At the same time, as I said,
you know, they will see the impact in terms of
certain advertisers pulling back their ads spending because of uncertainty
That is out there. So there are large Chinese advertisers
(08:36):
like Timu and Shane who were spending almost you know,
ten billion dollars plus on digital ads across Google and Meta.
So from that perspective, any pullback from them is going
to impact the growth rates for these companies, and there
is a lot of indirect impact, but in terms of
the direct supply chain impact, I think Apple is the
(08:57):
most exposed. So you're right, they have to do something
about it. They don't have a choice and they are
doing whatever they could do.
Speaker 2 (09:06):
You see the tariffs benefiting anybody or is it all negative?
Speaker 6 (09:11):
Well, I think again, I go back to my comment
about these companies, the large ones being international businesses. So
even if you know, you may say, if dollar is weakening,
that's somewhat helpful, but on the margin, you know, they
benefit a lot more from selling their products outside the US.
(09:31):
You have to remember, you know, Asia has the biggest population.
So because these companies have got large online platforms, more
than one third of their users who use metal properties
or you know, Google apps, they're outside the US. That's
where all of your user growth is. So if there
is any pushback in terms of using US based products,
(09:54):
that's gonna hurt.
Speaker 2 (09:55):
Hurt, Yeah, if a third of your market.
Speaker 7 (09:58):
Yeah.
Speaker 2 (09:59):
Now we've seen reports. I want to talk about AI,
which which the last couple of times you've been here,
that's all we talked about with these tech earnings. We've
seen reports of some of these tech giants pulling back
on leases for AI centers. You know, I mean, is
are we at an inflection point right now or is
it just kind of like, let's hold off on this
(10:19):
capex on AI now and see how this plays out well.
Speaker 6 (10:23):
So two of the four big hyperscalers have reaffirmed their
capex plans for the full year, and you know, Google
and Amazon, they said, even with all the uncertainty, and
this goes like two weeks back, so we had all
this tariff turmoil going on, but they reaffirmed their capex,
(10:44):
which goes to show that everyone is still very bullish
on AI. You're still in the very early innings. They
see a lot of potential with you know, AI driving
a lot of their revenue growth down the line, and
they want to be ahead in terms of investments. So
I think what will be reassuring this quarter is just
(11:05):
companies coming out and saying we still will continue to
invest in AI. Could there be a digestion period in
terms of, you know, building these large scale data centers. Possibly,
That's what all these pauses and leases are suggesting, that
there could be a small pause here and there. But
the trend is still intact and I think you will
(11:27):
see a very quick rebound the moment this uncertainty clears out.
Speaker 4 (11:31):
Just a pause, just a pause.
Speaker 2 (11:32):
One last thing, I want to talk about a lot
of ramped up regulatory pressure on these tech giants, not
just the US, but the EU especially, and how will
that impact things.
Speaker 6 (11:42):
Well, right now, it feels like regulatory site may take
a backseat because of all the tariff's situation and just
you know, this week, Meta and Google were slapped to
find by the EU. But that was a drop in
the bucket. We're talking about seven hundred million euro whereas
these companies have paid billions in dollars of fines. So
(12:05):
from that perspective, it feels like you may see regulatory
stuff take a backseat. But there is that pending case
for Google in the US, you know, the monopolization case
where they're asking for Chrome divestiture. I mean, to me,
that is the big one, and the meta FTC. So
(12:26):
the regulatory overhang is more within the US than outside
the US, whereas previously, you know, these companies were kind
of paying more fines outside the US.
Speaker 2 (12:36):
Wow, well, there's a lot going on and a lot
to look forward to. Our thanks demand Deep, saying Bloomberg
Intelligence senior tech industry analysts. Coming up on Bloomberg day
Break weekend, we'll look ahead to local elections in the UK.
I'm Tom Busby and this is Bloomberg. This is Bloomberg
(13:02):
day Break weekend, our global look ahead at the top
stories for investors in the coming week. I'm Tom Busby
in New York. Up later in our program, look ahead
to a key economic reading from Beijing amid the uncertainty
around US tariffs. But first, just over eight months since
the Labor Party's emphatic victory in the UK general election,
voters will have their first real chance to pass judgment
(13:23):
on the party's progress. Polls around the country will open
in the coming days as local elections get underway. But
as Prime Minister Keir Starmer done enough so far to
convince the British public for more, let's go to London
and bring in Bloomberg Daybreak Europe anchor Caroline hepgar Tom.
Speaker 3 (13:39):
When kir Starmer was elected the first Labor prime minister
in fourteen years, last summer, he said that a burden
had finally been removed from the shoulders of this great nation.
But in twenty twenty five, almost a year into his tenure,
his government might be feeling more burdened than ever. Part
(14:00):
of that weight comes in the form of concerns about
limited economic growth. Just recently, the International Monetary Fund released
a quote significant downward revision to its UK growth forecasts
for the next two years, cutting them more than for
any other leading European country. And that's amid increasing uncertainty
(14:23):
about what President Donald Trump's tariffs will mean for the country.
Despite the gloomy outlook, Bank of England rate setter Meghan
Green has told Bloomberg that there could be some bright spots,
whilst maintaining that uncertainty prevails.
Speaker 7 (14:40):
Look market pricing has moved around a whole lot over
the past couple of weeks, and it's also worth pointing
out that not all of that is focused on what's
going on in the UK, so traditionally about a third
of the moves in the gilt curve have been driven
by things happening outside the UK. These days it's about
half that's been driven by things happening outside the UK.
(15:00):
So part of those moves I think reflect what's going
on globally, and you know, we're just about to go
into an interest right round, so we'll have to see.
But I would highlight that those market moves don't all
reflect to U fundamentals in the UK.
Speaker 8 (15:13):
Because what of the uncertainties If you look at you know,
there seems to be a lot of disinflationary kind of
impact from folly energy prices, we could dollar tightening, financial conditions,
global demand. Does that point to a cont you know,
in may.
Speaker 7 (15:28):
So that there are factors that are both inflationary and disinflationary.
You know, I'm particularly concerned. We've had weakness and output
for about nine months now and we're trying to figure
out what the big driver of that is, whether it's
demand or supply driven. I think there are reasons to
think it's both actually, but I'm more concerned about the
supply side and that actually on balance, would be inflationary.
(15:51):
So that's part of it. When it comes to tariffs
and the developments over the past couple of weeks. There
again are both the inflationary and disinflationary impulses. So when
it comes to tariffs, in particular for the UK, we're
a small, open economy, right. The US is our biggest
single country trade partner, but the EU of course is
our biggest trade partner overall. So if you have export substitution,
(16:15):
then that would tend to push down on growth and inflation.
If you have trade diversion from other countries that are
trying to find a new home for their markets, that
also pushes down on inflation. But we saw during the
pandemic that if you have a repatterning of supply chains,
that can push up on inflation. And also if we
have trade fragmentation writ large, then that tends to reduce
knowledge spillovers, that reduces potential growth, That tends to be inflationary.
(16:39):
So something you've mentioned was exchange rates, and those have
not gone as the economic theory would suggest. Normally, if
the US announces or imposes unilateral tarifs some other countries,
the theory suggests the dollars should appreciate the opposite has
actually happened, and so that in and of itself could
be disinflationary for the UK, but courses I mentioned the
(17:00):
EU is the UK's biggest trade partner in the Euro
has appreciated, so net net, if you look at the
kind of Sterling exchange rate index, the pounds up a
little bit. There's a ton of uncertainty around this, but
they are both inflationary and disinflationary forces.
Speaker 8 (17:14):
But are are you concerned about the the slight recent
strength and pound does does that change? Actually, you know,
tightening financial conditions, so it does.
Speaker 7 (17:23):
I mean the currencies have been moving a lot recently
as well. We've also seen off the back of previous
kind of structural shift af after the global financial crisis,
after COVID, the d the dollar didn't always behave immediately
as the theory would suggest. It weakened and then subsequently rebounded.
So I think it's a bit too early to say
kind of where the dust is gonna settle on currencies.
(17:45):
But I will say if the dollar continues to depreciate uh,
on balance, that would be uh disinflationary for the UK,
and and if the opposite happens uh less.
Speaker 8 (17:54):
So So are y are you worried that? And you
said in the past, actually that there's a danger that
it could you know, muddy the water on inflation. The
moves and pounds, so are you're worried that there could
be a reverse and then it becomes an our broad
pressure on inflation quite quickly, it could.
Speaker 7 (18:08):
Be that's right. You know, currency forecasters have the hardest jobs,
second only to energy forecasters. And like I said, it's
been really violatile. We're not quite sure where they dust
will set off.
Speaker 3 (18:19):
So that was the Bank of England policy maker Meghan
Green speaking to Bloomberg's Francine Laqua. Now, an economic resurgence
was the central promise the Labor Party staked their whole
election campaign on. But now as the prospect of growth
moves further off into the horizon and the public face
growing cost pressures, can the party count on keeping that support.
(18:44):
It's something I put to Bloomberg opinion columnist Rosa Prints.
We started by talking about Labour's track records so far.
Speaker 9 (18:52):
It's fair to say that they haven't had a great
start to their time in office. Almost straight away their
opinion poll ratings kind of fell off a cliff. You'll
remember that Labor was elected on a bit of a
landslide last summer, partly, I think because the Conservative government
which had been in beforehand was extremely unpopular, so lots
(19:14):
of people voted Labor to kind of get the Tories out,
and I think maybe didn't fall massively in love with labor,
and that was born out when just a month or
two into their time in government their opinion polls started
to go south as well. To be fair, they had
a really tough hand. The economy was in all sorts
of trouble. They had to deliver a budget that was
(19:34):
very unpopular. People are feeling the pinch. So although they
are doing pretty badly, the Conservatives haven't recovered either, so
kind of everyone's doing badly at the moment.
Speaker 3 (19:45):
What's at stake during these elections then? Why do they matter?
Speaker 10 (19:48):
Well?
Speaker 9 (19:49):
I think they're fascinating elections. There aren't a huge number
of seats up for grabs. It's one six hundred and
forty one council seats. That's the local authorities who come
of run things on the ground. There's also a by
election to a Westminster seat and some mayoralties, so not
a massive change of power. But I think it's just
(20:09):
going to be so interesting to see what the new
politics of the UK is because, as I said, no
one party is really breaking through. You've got the Conservatives
kind of bumping along on about twenty four percent, their
usual Tory rivals doing a bit worse on about twenty
one percent. And the real story I think of these
elections is whether we can see a breakthrough for reform.
(20:33):
That's the kind of upstart, quite right leaning populist party
headed by you'll remember Nigel Farage who was the Brexiteer
in chief during the Brexit wars. And not to forget
the smaller parties. The Liberal Democrats did better than they
had ever done before at the last election. They're on
around fourteen percent, and you've got some Greens doing well
(20:55):
and some kind of protest and independent candidates, particularly on issues.
Speaker 3 (20:59):
Like the How do you think that the kind of
bigger picture is going to affect the local elections? How
do you think that there's going to be that interplay
between the local and the national.
Speaker 9 (21:10):
That's such a good question. How do we know how
anyone votes? I think often what happens is that people
maybe they don't pay attention to politics all that march.
They've kind of got the party that they believe in,
and that they always vote for, so they'll tend to
vote along those traditional lines that they would do, say
at a general election, unless something has happened in their
(21:31):
area that they're particularly unhappy about, less commonly that they're
particularly pleased about, And then it does come down to
the performance of what they've been used to. So, for example,
there's a terrible strike going on among refuse workers in
the second biggest town of Birmingham, I think the people
of Birmingham may feel differently about their labor council than
(21:52):
if they hadn't had rubbish pile duff outside their homes
for weeks. On the other hand, say a party like
Reform almost quite new, so they don't really have hardly
any counselors. So people won't be able to vote on
their record, and it'll be whether they think that they
can actually trust reform In to run things. You know,
Reform hasn't got that record of managing things. Will people
(22:16):
continue to see them as almost a protest vote, or
will they actually trust them to run local services?
Speaker 3 (22:22):
I mean thinking about Birmingham reports of gigantic rats as
a result of that strike and the rubbish in the
streets that we've seen for weeks now in terms of
the campaigns, what have they looked like for the major
parties and how much effort do they put in.
Speaker 9 (22:40):
Just to give you a bit of context, So the
last time these elections were held they held every four years,
Boris Johnson was the Prime Minister and he was doing
very very well. It was Boris Johnson was seen as
being responsible for rushing through the COVID vaccine and the
Conservatives did well. They sort of swept the ball to
(23:00):
the extent that they are now defending most of the seats. Now,
the problem with that is that they've got a long
way to fall and given that, as I said, the
last government was very unpopular. The party doesn't seem to
have picked up any popularity since the election. If anything,
it's gone the other way and is losing ground to
the Tories. It looks like it will be a bad
night for them now. That has meant a rather odd
(23:22):
campaign because you've seen Kenmy Baidenock, the new leader of
the Conservatives, kind of going around saying yes, it's going
to be bad, We're going to lose lots of seats,
which to the extent that you wonder if it will
become a self fulfilling prophecy. Nigel Farage, on the other hand,
he sees an opportunity here, so he's really going for
those parts of the country where the Conservatives are unpopular.
(23:44):
For example, he is around now campaigning in Kent in
the town of Dover, where the Reform think that they
can pick up votes. The Liberal Democrats are often strong
in local government, often stronger than they are nationally. They've
been having their leader, Davey, going out and doing his
usual He likes to do lots of stunts for the
(24:06):
television cameras and labor. They're kind of keeping a low profile,
hoping that their current woes aren't translated and they don't
lose too many seats. The expectation at the moment is
that they did badly last time these seats were fought.
They'll probably do about the same, but it's so hard
to know because of that reform factor.
Speaker 3 (24:23):
And how much you think that the wider economy is
going to affect the elections effectively. We know that, I mean,
employment is still very strong in the UK, wages a
bit more difficult for people, cost of living crisis for
some people. Still continuing, how much do you think the
economy and the economic backdrop will affect people's vote.
Speaker 9 (24:44):
I think the economy always affects people's votes. I think
people are feeling the pinch and it's going to come
down to who they blame for that. Now, the reason
that the Conservatives became so suddenly unpopular and did so
badly at the last election, I think can be traced
back to the disaster that was Liz Trust and her
brief premiership, and the Conservative never really recovered from that.
(25:06):
Now Labor has spent their eight months in power kind
of pointing to her and pointing to the last government
and saying it's not our ful. We inherited a mess
and we're doing our best. And I think what it
comes down to is whether people on the ground believe
that or whether they're fed up enough to shift over
to reform. I don't see much time that people are
(25:27):
ready to trust the Conservatives again.
Speaker 3 (25:30):
My thanks to Bloomberg Opinion columis Rosa Prince. Now we
will have full coverage and analysis of the local election
and its outcomes right here on Bloomberg and on our
Bloomberg UK Politics podcast in the days ahead. I'm Caline
Hepke in London. You can catch us every weekday morning
for Bloomberg Daybreak. You at the beginning at six am
in London. That's one am on Wall Street.
Speaker 2 (25:52):
Tom, Thanks Caroline, And coming up on Bloomberg day Break weekend,
we'll look ahead to a key economic reading from Beijing.
I'm Tom, and this is Bloomberg. This is Bloomberg day
(26:13):
Break Weekend, our global look ahead at the top stories
for investors in the coming week. I'm Tom Busby in
New York. A key economic data point from Beijing this week,
as uncertainty lingers over the US tariffs. Now for more,
let's get to the host of the Daybreak Asia podcast,
Doug Krisner.
Speaker 4 (26:29):
Tom. In the last week, the International Monetary Fund revised
its annual growth forecast for China to just four percent
this year, and it came with a warning the outlook
could deteriorate further due to those US tariffs. Now in
the week ahead, we'll get China's official PMI data. These
readings will provide a measure of sentiment among businesses and
(26:52):
how they view overall economic activity. The PMIS can provide
an early indication of growth. Closer look. Now, I'm joined
by Bloomberg's Chang Chu She is the chief Asia economist
for Bloomberg Economics. Chang joins us from our studios in
Hong Kong. Thank you for making time to chat with me.
There's a lot to cover. I want to begin with
(27:14):
the PMI data, Chang. What do you think we're going
to learn from these numbers in the week ahead?
Speaker 10 (27:20):
Thank you Doug for having me on the program. Yes,
it's the PMI reading for April is going to be
very important. That's going to be the first reading since
the elevated tariffs came into place. We suspect we're going
to see dichotomy between the manufacturing and non manufacturing readings.
(27:44):
On the manufacturing reading PMI, we could see damage, quite
noticeable damage from the tariffs. At this point, we don't
have very conclusive data from various sources. We could be
uh looking at shipping data, for example, for prices and
(28:10):
volumes in terms of shipping between the US and China.
They are only showing something with a significant lag, and
perhaps they are some indications, but not quite conclusive. We
do hear a lot of stories of Chinese factories not
(28:34):
taking any further orders from US customers, and some may
even have stopped production. So uh, those data we don't
have yet. So the PMI reading is quite important, and
we do see potentially manufacturing PMI see a quite significant
(28:57):
job in the activity. At this point, we're projecting the
manufacturing PMI to drop into contractional territory from expansion of
fifty point five in March to perhaps you know, around
(29:18):
forty nine point eight sort of reading. So that's on
the manufacturing side. But if we want to go into
the non manufacturing side, we do see expansion to continue.
Speaker 4 (29:31):
Are we going to get any clues as to whether
supply chains are being reconfigured in a way that China
would be able to divert some shipments elsewhere into jurisdictions
that don't have terrorf rates as high as China does
coming into the US market.
Speaker 10 (29:48):
It's a good question, but a very tough one to answer.
We here again on the ground, lots of stories firms
on the ground that try neing to diversify the supply chains,
maybe accelerating the move out of China, the move of
(30:10):
the production facilities out of China. I think it's very hard,
even over the longer term to look at the shift
of supply chain. But it's going to be even tougher
to pick up those trends from PMI data. So it's
something that will keep looking out for. But unfortunately we
(30:35):
don't have sufficient data to give any clarity on this issue.
Speaker 4 (30:40):
So when I think of the Chinese domestic economy, what
I really think of is just a lack of demand.
Is it too much to think that Beijing could try
to stimulate demand in a way that would compensate for
the reduction that the export economy is faced with right now?
Or is that just in entirely out of the question.
(31:01):
Is that an impossibility.
Speaker 10 (31:03):
It's very tough. It's very tough for the government to
purely by stimulating the domestic econometer off sets the shock
from the external demands. It certainly in the short term
that's even tougher. Right, You have to think of different ways.
The firms are trying different ways. Certainly they are diverting
(31:27):
some of the were intended to be exports to divert
some of that products domestically, and as you alluded to,
they may think of rerouting the exports, but they offsets
will not come that quickly. I think the government has
(31:48):
certainly realized the importance of domestic demands and it has
been doing something over the past a few months, and
that's showing.
Speaker 6 (31:58):
Uh.
Speaker 10 (31:59):
Some improvement we do see in the first quarter in
China's GDP growth was stronger than expected, and if we're
looking to the March data, this improvement certainly on the
production sites, but also on the demand side, as we
saw quite noticeable improvement in consumption in retail cells. So
(32:25):
we can see some positivity there. But I think it's
too big a ask for domestic amount to immediately offset
the external shock.
Speaker 4 (32:37):
So I mentioned that the IMF revised down its annual
forecast for Chinese growth this year to around four percent annualized,
And in the last week, your colleagues at Bloomberg Economics
found that, based on a review of previous IMF forecast,
the Fund tends to underestimate the depth of these economic downturns.
(32:58):
So are you beginning to model a growth rate that
is below four percent for twenty twenty five? I mean,
clearly that's below what the government is shooting for. Is
China really at risk of seeing something that is sub
four percent growth?
Speaker 10 (33:13):
We have already downgraded our China forecast from four point
five percent we projected at the beginning of the year
from zero point two percent. The reason for the relatively
modest downgrades of the forecast reflects a couple of considerations.
(33:35):
First of all, as I already mentioned, in the first quarter,
the growth was decent, was above a slighter above our projection,
so that provides a bit of a cushion for the
year as a whole. And secondly, we do see the
government to strengthen its supports for the economy and that
(33:59):
should help. But as we again discuss earlier, we don't
think the supports come fully off set the dunting in
excellental demands. So taking account in all those consituations, we
have a modest downngrad of the projection. But we can
(34:23):
come to the discussion clearly what the government is going
to do, how they are going to support the economy,
and how effective those policies stimulus will be will be
very critical for China's growth trajectory going forward.
Speaker 4 (34:42):
It seems as though China is in a very vulnerable
position right now, given the fact that these tariffs are
so biting. Is there anything that could come out of
this upcoming pollut Bureau meeting that would give the markets
a sign that Beijing is willing to indu a long
period of negotiation or is this something that is out
(35:05):
of the question, and it's more likely that China over
a short period of time will capitulate and kind of
give in a little bit to what the US is
demanding of it.
Speaker 10 (35:16):
Yeah, it's a very tough question. I think the Chinese
side certainly is willing to talk, and it has and
various signals, but it also laid down the conditions for
discussions respect and I think the government it's something we
(35:39):
have written in reports. There are various considerations why it's
taking on these very tough stance, and it can be
a simple sort of face issue you come back down
and one thing you could be that China doesn't know
at this point what's the US ones. So those are
(36:02):
the domestic issues considerations. In the meantime, there's also the
international dimension to it in this particular case, unlike in
the First Street War, in China was the only one
more or less the only one affected by tariff, but
this time it's a wide range of countries, or indeed
(36:27):
all the countries are facing tariffs, and all the countries
except China are trying to talk to trying to talk
to the US. So from again theory perspective, there's a
risk when everybody tries, every country tries to talk to
the US, China will end up having a worse deal,
(36:52):
which is why China kind of takes this particular stance
to push back strongly. So for various reasons, China is
holding holding strong stands at this point, but I think
it's still hoping to to at some point to be
able to see them to talk to the US and
(37:13):
get a trade deal to cut down the tariffs. But
in the meantime, the Chinese economy certainly will suffer. There's costs,
certainly from the U s side, but on the China side,
the hit can be quite immediate on the export sector,
(37:34):
which could spread to the rest of the economy. I
think the government certainly is prepared for that, and in
terms of the prelicted Bureau meeting, we think you will
have to send quite strong signal that it's going to
support the economy. And I think possibly, like you alluded
(37:58):
to suggest, this is going to be a long enduring
standoff with the US, and the government is prepared to
support the economy.
Speaker 4 (38:11):
Chog thank you so much for joining us and helping
us understand more of what's going on in the Chinese
economy these days. Chang Chu is Chief Asia Economist at
Bloomberg Economics. She was joining us from our studios in
Hong Kong. I'm Deug Prisner. You can catch us weekdays
for the Daybreak Asia podcast. It's available wherever you get
your podcast. Tom, thank you, Doug.
Speaker 2 (38:32):
And that does it for this edition of Bloomberg day
Break Weekend. Join us again Monday morning at five am
Wall Street Time for the latest on markets overseas and
the news you need to start your day. I'm Tom Buzby.
Stay with us. Top stories and global business headlines are
coming up right now.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world, and straight ahead on the program,
look ahead to the April jobs report here in the
US how that may impact FED policy moving forward. I'm
Tom Busby in New York.
Speaker 3 (00:25):
I'm Carolin Hetger here in London, where we're keeping you
up to date as the UK heads to the polls.
Speaker 4 (00:30):
I'm deg Krissner looking ahead to China's PMI data, the
first reading since those higher US tariffs took effect.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 2 (01:02):
Good day to you. I'm Tom Busby, and we begin
today's program with a look ahead to the April jobs report,
with non farm payroll numbers out this Friday eight thirty am.
Wall Street Time Now for more on the strength of
the US labor market how Friday's numbers may impact FED policy,
were joined by Michael McKee, Bloomberg International Economics and Policy correspondent. Well, Michael,
(01:23):
what do you expect to see this Friday in the
April jobs report?
Speaker 5 (01:28):
Well, we expect to see a slowing in hiring, but
we don't really have a good idea good handle on
what the overall number is going to be, because we're
not really sure at this point how companies are reacting
to all of the news that we have seen about
tariffs and the economy. The Base Book, which was out
last Wednesday, used the word uncertainty eighty times and mentioned
(01:52):
that companies didn't seem to be laying off people, but
seem to be making plans to do so if the
tariffs go into effect and start to hurt their business prospects.
So we may see a ratcheting down, but the expectation
is we won't fall off the cliff, and we're not
expecting at this point. According to economists, a big change
(02:13):
in the unemployment rate is still supposed to stay at
four point two percent, So.
Speaker 2 (02:18):
By all appearances, until now, the labor market has remained
pretty resilient, but that uncertainty caused by the Trump tariffs.
I guess the question really is how long can that last?
I mean, the Independence day from President Trump was this
month in April, So we probably won't see any damage
or much damage reflected in this report.
Speaker 5 (02:39):
Correct, that's correct. We may see some increased unemployment or
increased job losses in some of the defense contractor consultants
that will lose jobs because of the DOSEE firings. It
isn't clear how many actual government workers we'll see fall
off the pay rolls because it isn't clear how many
(03:01):
have been let go. So it's all kind of up
in the air, and we won't know necessarily what the
full impact of the tariffs are until del first, because
Trump put a ninety day hold on that. And I
think you go back to the basebook, and it suggests
that companies are waiting to see the impacts because of
(03:22):
course it was hard for them to hire workers coming
out of the pandemic, so they're reluctant to let them go.
They will if they need to to retain their margins,
but they just don't know yet. So I don't think
we see much change.
Speaker 2 (03:35):
Yeah, even though all the ingredients are there. We've seen
consumer sentiment decline, consumers and businesses pulling back spending. But
it's almost like a hurry up and wait, We've got
to see what happens with these tariffs and the impact
on companies.
Speaker 5 (03:49):
It's a little bit like you know, when you'd be
out playing on the sidewalk and mom would say, don't
step into the street. I mean, you're right on the
curb there and we could could fallen into the street.
And that's what worries everybody. That's what worries the folks
at the FED. I spoke with Chris Waller, FED governor
on Thursday, and he said they can only model scenarios
(04:14):
a possibility of a lot of tariffs, the possibility of
lower tariff, but if unemployment starts to rise, they will
have to react.
Speaker 2 (04:21):
You know, I heard that interview put another way, he said,
tariffs are a tax, and you know the fear is
higher taxes will lead to a slow.
Speaker 5 (04:29):
Down in hiring, lead to a slowdown in hiring, and
lead to higher prices. And as prices go up, people
tend to spend less. So you have an impact on
demand as well as the supply talk that people are
talking about. So the general consensus is any level of
tariff are going to be disruptive. It's only a question
(04:50):
of how disruptive they are. And then there's a kind
of psychological aspect to it. If people have heard all this,
we've seen consumer confidence collapse, do they react more quickly
to the tariff that we do get, whether they're large
or small, or do they think, well, we can manage
our way through it, we can muddle through it. Governor
(05:12):
Waller thinks that small tariffs, maybe we just get the
ten percent tariffs would enable people, enable companies to find
ways to survive it and keep going. But anything larger
than that would probably cause people to pull back fairly
quickly because they were scarred by the inflation coming out
of the pandemic.
Speaker 2 (05:32):
Well, the April jobs report out this Friday, eight thirty
am Wall Street Time our thanks to Michael McKee, Bloomberg
International Economics and Policy correspondent. With the first quarter earning
season in full swing, we move now to some key
earnings this week from some of big tech's magnificent seven
meta platforms and Microsoft on Wednesday, Apple and Amazon coming
on Thursday. For more and what to expect, we're joined
(05:55):
by Mandeep Singh Bloomberg Intelligence senior tech industry analyst Mandy Well,
it was just a quarter ago. I think the big
concern for those megacap tech firms was how much they're
spending on AI when they expect all that investment to
start paying off. But that was then. Now it looks
like the Trump tariffs and all the uncertainty they bring
putting AI kind of on a back burner along with
(06:17):
regulatory pressures. I mean, is that what it looks like
right now?
Speaker 6 (06:20):
Yes, Because all the MAC seven companies are global companies.
More than fifty to fifty five percent of their revenue
comes from outside the US. So when you think about
the international revenue exposure they have, I mean, tariffs will
clearly play into that. There could be some retaliation in
(06:43):
terms of, you know, other countries kind of imposing some
sort of attacks or fine on these companies, or or
just a pushback in terms of using their products. So look,
is there any catastrophe lurking for these companies? I would
say no, But on the margin, I feel like the
(07:05):
estimates for these companies in terms of growth and profitability
are likely to go down or sideways simply because of
the tariff uncertainty, and even though AI is a big
secular tailwind that will remain, I think in the near term,
AI won't be enough to make up for any lost
revenue due to tariffs or just you know macro slowdown
(07:29):
where companies may pull back on ads or just kind
of shelf their IT spending projects for now.
Speaker 2 (07:37):
Well, back to tariffs, We've seen that Apple has shifted
some of its production, almost ten percent of it to India,
and that is really to kind of not rely so
much on China a benefit now that we're in this
tariff war. Have any other companies done a similar move.
Speaker 6 (07:53):
Well, everyone is trying to figure out how to best
kind of relocate their supply chains to deal with the uncertainty.
The good things for you know, Meta or Alphabet is
they have very low exposure to the hardware side, you know,
which gets impacted the most in the case of tariffs.
(08:14):
I mean, if you're selling digital services or you know,
if you have an online business, it's not going to
get affected by tariffs. At the same time, as I said,
you know, they will see the impact in terms of
certain advertisers pulling back their ads spending because of uncertainty
That is out there. So there are large Chinese advertisers
(08:36):
like Timu and Shane who were spending almost you know,
ten billion dollars plus on digital ads across Google and Meta.
So from that perspective, any pullback from them is going
to impact the growth rates for these companies, and there
is a lot of indirect impact, but in terms of
the direct supply chain impact, I think Apple is the
(08:57):
most exposed. So you're right, they have to do something
about it. They don't have a choice and they are
doing whatever they could do.
Speaker 2 (09:06):
You see the tariffs benefiting anybody or is it all negative?
Speaker 6 (09:11):
Well, I think again, I go back to my comment
about these companies, the large ones being international businesses. So
even if you know, you may say, if dollar is weakening,
that's somewhat helpful, but on the margin, you know, they
benefit a lot more from selling their products outside the US.
(09:31):
You have to remember, you know, Asia has the biggest population.
So because these companies have got large online platforms, more
than one third of their users who use metal properties
or you know, Google apps, they're outside the US. That's
where all of your user growth is. So if there
is any pushback in terms of using US based products,
(09:54):
that's gonna hurt.
Speaker 2 (09:55):
Hurt, Yeah, if a third of your market.
Speaker 7 (09:58):
Yeah.
Speaker 2 (09:59):
Now we've seen reports. I want to talk about AI,
which which the last couple of times you've been here,
that's all we talked about with these tech earnings. We've
seen reports of some of these tech giants pulling back
on leases for AI centers. You know, I mean, is
are we at an inflection point right now or is
it just kind of like, let's hold off on this
(10:19):
capex on AI now and see how this plays out well.
Speaker 6 (10:23):
So two of the four big hyperscalers have reaffirmed their
capex plans for the full year, and you know, Google
and Amazon, they said, even with all the uncertainty, and
this goes like two weeks back, so we had all
this tariff turmoil going on, but they reaffirmed their capex,
(10:44):
which goes to show that everyone is still very bullish
on AI. You're still in the very early innings. They
see a lot of potential with you know, AI driving
a lot of their revenue growth down the line, and
they want to be ahead in terms of investments. So
I think what will be reassuring this quarter is just
(11:05):
companies coming out and saying we still will continue to
invest in AI. Could there be a digestion period in
terms of, you know, building these large scale data centers. Possibly,
That's what all these pauses and leases are suggesting, that
there could be a small pause here and there. But
the trend is still intact and I think you will
(11:27):
see a very quick rebound the moment this uncertainty clears out.
Speaker 4 (11:31):
Just a pause, just a pause.
Speaker 2 (11:32):
One last thing, I want to talk about a lot
of ramped up regulatory pressure on these tech giants, not
just the US, but the EU especially, and how will
that impact things.
Speaker 6 (11:42):
Well, right now, it feels like regulatory site may take
a backseat because of all the tariff's situation and just
you know, this week, Meta and Google were slapped to
find by the EU. But that was a drop in
the bucket. We're talking about seven hundred million euro whereas
these companies have paid billions in dollars of fines. So
(12:05):
from that perspective, it feels like you may see regulatory
stuff take a backseat. But there is that pending case
for Google in the US, you know, the monopolization case
where they're asking for Chrome divestiture. I mean, to me,
that is the big one, and the meta FTC. So
(12:26):
the regulatory overhang is more within the US than outside
the US, whereas previously, you know, these companies were kind
of paying more fines outside the US.
Speaker 2 (12:36):
Wow, well, there's a lot going on and a lot
to look forward to. Our thanks demand Deep, saying Bloomberg
Intelligence senior tech industry analysts. Coming up on Bloomberg day
Break weekend, we'll look ahead to local elections in the UK.
I'm Tom Busby and this is Bloomberg. This is Bloomberg
(13:02):
day Break weekend, our global look ahead at the top
stories for investors in the coming week. I'm Tom Busby
in New York. Up later in our program, look ahead
to a key economic reading from Beijing amid the uncertainty
around US tariffs. But first, just over eight months since
the Labor Party's emphatic victory in the UK general election,
voters will have their first real chance to pass judgment
(13:23):
on the party's progress. Polls around the country will open
in the coming days as local elections get underway. But
as Prime Minister Keir Starmer done enough so far to
convince the British public for more, let's go to London
and bring in Bloomberg Daybreak Europe anchor Caroline hepgar Tom.
Speaker 3 (13:39):
When kir Starmer was elected the first Labor prime minister
in fourteen years, last summer, he said that a burden
had finally been removed from the shoulders of this great nation.
But in twenty twenty five, almost a year into his tenure,
his government might be feeling more burdened than ever. Part
(14:00):
of that weight comes in the form of concerns about
limited economic growth. Just recently, the International Monetary Fund released
a quote significant downward revision to its UK growth forecasts
for the next two years, cutting them more than for
any other leading European country. And that's amid increasing uncertainty
(14:23):
about what President Donald Trump's tariffs will mean for the country.
Despite the gloomy outlook, Bank of England rate setter Meghan
Green has told Bloomberg that there could be some bright spots,
whilst maintaining that uncertainty prevails.
Speaker 7 (14:40):
Look market pricing has moved around a whole lot over
the past couple of weeks, and it's also worth pointing
out that not all of that is focused on what's
going on in the UK, so traditionally about a third
of the moves in the gilt curve have been driven
by things happening outside the UK. These days it's about
half that's been driven by things happening outside the UK.
(15:00):
So part of those moves I think reflect what's going
on globally, and you know, we're just about to go
into an interest right round, so we'll have to see.
But I would highlight that those market moves don't all
reflect to U fundamentals in the UK.
Speaker 8 (15:13):
Because what of the uncertainties If you look at you know,
there seems to be a lot of disinflationary kind of
impact from folly energy prices, we could dollar tightening, financial conditions,
global demand. Does that point to a cont you know,
in may.
Speaker 7 (15:28):
So that there are factors that are both inflationary and disinflationary.
You know, I'm particularly concerned. We've had weakness and output
for about nine months now and we're trying to figure
out what the big driver of that is, whether it's
demand or supply driven. I think there are reasons to
think it's both actually, but I'm more concerned about the
supply side and that actually on balance, would be inflationary.
(15:51):
So that's part of it. When it comes to tariffs
and the developments over the past couple of weeks. There
again are both the inflationary and disinflationary impulses. So when
it comes to tariffs, in particular for the UK, we're
a small, open economy, right. The US is our biggest
single country trade partner, but the EU of course is
our biggest trade partner overall. So if you have export substitution,
(16:15):
then that would tend to push down on growth and inflation.
If you have trade diversion from other countries that are
trying to find a new home for their markets, that
also pushes down on inflation. But we saw during the
pandemic that if you have a repatterning of supply chains,
that can push up on inflation. And also if we
have trade fragmentation writ large, then that tends to reduce
knowledge spillovers, that reduces potential growth, That tends to be inflationary.
(16:39):
So something you've mentioned was exchange rates, and those have
not gone as the economic theory would suggest. Normally, if
the US announces or imposes unilateral tarifs some other countries,
the theory suggests the dollars should appreciate the opposite has
actually happened, and so that in and of itself could
be disinflationary for the UK, but courses I mentioned the
(17:00):
EU is the UK's biggest trade partner in the Euro
has appreciated, so net net, if you look at the
kind of Sterling exchange rate index, the pounds up a
little bit. There's a ton of uncertainty around this, but
they are both inflationary and disinflationary forces.
Speaker 8 (17:14):
But are are you concerned about the the slight recent
strength and pound does does that change? Actually, you know,
tightening financial conditions, so it does.
Speaker 7 (17:23):
I mean the currencies have been moving a lot recently
as well. We've also seen off the back of previous
kind of structural shift af after the global financial crisis,
after COVID, the d the dollar didn't always behave immediately
as the theory would suggest. It weakened and then subsequently rebounded.
So I think it's a bit too early to say
kind of where the dust is gonna settle on currencies.
(17:45):
But I will say if the dollar continues to depreciate uh,
on balance, that would be uh disinflationary for the UK,
and and if the opposite happens uh less.
Speaker 8 (17:54):
So So are y are you worried that? And you
said in the past, actually that there's a danger that
it could you know, muddy the water on inflation. The
moves and pounds, so are you're worried that there could
be a reverse and then it becomes an our broad
pressure on inflation quite quickly, it could.
Speaker 7 (18:08):
Be that's right. You know, currency forecasters have the hardest jobs,
second only to energy forecasters. And like I said, it's
been really violatile. We're not quite sure where they dust
will set off.
Speaker 3 (18:19):
So that was the Bank of England policy maker Meghan
Green speaking to Bloomberg's Francine Laqua. Now, an economic resurgence
was the central promise the Labor Party staked their whole
election campaign on. But now as the prospect of growth
moves further off into the horizon and the public face
growing cost pressures, can the party count on keeping that support.
(18:44):
It's something I put to Bloomberg opinion columnist Rosa Prints.
We started by talking about Labour's track records so far.
Speaker 9 (18:52):
It's fair to say that they haven't had a great
start to their time in office. Almost straight away their
opinion poll ratings kind of fell off a cliff. You'll
remember that Labor was elected on a bit of a
landslide last summer, partly, I think because the Conservative government
which had been in beforehand was extremely unpopular, so lots
(19:14):
of people voted Labor to kind of get the Tories out,
and I think maybe didn't fall massively in love with labor,
and that was born out when just a month or
two into their time in government their opinion polls started
to go south as well. To be fair, they had
a really tough hand. The economy was in all sorts
of trouble. They had to deliver a budget that was
(19:34):
very unpopular. People are feeling the pinch. So although they
are doing pretty badly, the Conservatives haven't recovered either, so
kind of everyone's doing badly at the moment.
Speaker 3 (19:45):
What's at stake during these elections then? Why do they matter?
Speaker 10 (19:48):
Well?
Speaker 9 (19:49):
I think they're fascinating elections. There aren't a huge number
of seats up for grabs. It's one six hundred and
forty one council seats. That's the local authorities who come
of run things on the ground. There's also a by
election to a Westminster seat and some mayoralties, so not
a massive change of power. But I think it's just
(20:09):
going to be so interesting to see what the new
politics of the UK is because, as I said, no
one party is really breaking through. You've got the Conservatives
kind of bumping along on about twenty four percent, their
usual Tory rivals doing a bit worse on about twenty
one percent. And the real story I think of these
elections is whether we can see a breakthrough for reform.
(20:33):
That's the kind of upstart, quite right leaning populist party
headed by you'll remember Nigel Farage who was the Brexiteer
in chief during the Brexit wars. And not to forget
the smaller parties. The Liberal Democrats did better than they
had ever done before at the last election. They're on
around fourteen percent, and you've got some Greens doing well
(20:55):
and some kind of protest and independent candidates, particularly on issues.
Speaker 3 (20:59):
Like the How do you think that the kind of
bigger picture is going to affect the local elections? How
do you think that there's going to be that interplay
between the local and the national.
Speaker 9 (21:10):
That's such a good question. How do we know how
anyone votes? I think often what happens is that people
maybe they don't pay attention to politics all that march.
They've kind of got the party that they believe in,
and that they always vote for, so they'll tend to
vote along those traditional lines that they would do, say
at a general election, unless something has happened in their
(21:31):
area that they're particularly unhappy about, less commonly that they're
particularly pleased about, And then it does come down to
the performance of what they've been used to. So, for example,
there's a terrible strike going on among refuse workers in
the second biggest town of Birmingham, I think the people
of Birmingham may feel differently about their labor council than
(21:52):
if they hadn't had rubbish pile duff outside their homes
for weeks. On the other hand, say a party like
Reform almost quite new, so they don't really have hardly
any counselors. So people won't be able to vote on
their record, and it'll be whether they think that they
can actually trust reform In to run things. You know,
Reform hasn't got that record of managing things. Will people
(22:16):
continue to see them as almost a protest vote, or
will they actually trust them to run local services?
Speaker 3 (22:22):
I mean thinking about Birmingham reports of gigantic rats as
a result of that strike and the rubbish in the
streets that we've seen for weeks now in terms of
the campaigns, what have they looked like for the major
parties and how much effort do they put in.
Speaker 9 (22:40):
Just to give you a bit of context, So the
last time these elections were held they held every four years,
Boris Johnson was the Prime Minister and he was doing
very very well. It was Boris Johnson was seen as
being responsible for rushing through the COVID vaccine and the
Conservatives did well. They sort of swept the ball to
(23:00):
the extent that they are now defending most of the seats. Now,
the problem with that is that they've got a long
way to fall and given that, as I said, the
last government was very unpopular. The party doesn't seem to
have picked up any popularity since the election. If anything,
it's gone the other way and is losing ground to
the Tories. It looks like it will be a bad
night for them now. That has meant a rather odd
(23:22):
campaign because you've seen Kenmy Baidenock, the new leader of
the Conservatives, kind of going around saying yes, it's going
to be bad, We're going to lose lots of seats,
which to the extent that you wonder if it will
become a self fulfilling prophecy. Nigel Farage, on the other hand,
he sees an opportunity here, so he's really going for
those parts of the country where the Conservatives are unpopular.
(23:44):
For example, he is around now campaigning in Kent in
the town of Dover, where the Reform think that they
can pick up votes. The Liberal Democrats are often strong
in local government, often stronger than they are nationally. They've
been having their leader, Davey, going out and doing his
usual He likes to do lots of stunts for the
(24:06):
television cameras and labor. They're kind of keeping a low profile,
hoping that their current woes aren't translated and they don't
lose too many seats. The expectation at the moment is
that they did badly last time these seats were fought.
They'll probably do about the same, but it's so hard
to know because of that reform factor.
Speaker 3 (24:23):
And how much you think that the wider economy is
going to affect the elections effectively. We know that, I mean,
employment is still very strong in the UK, wages a
bit more difficult for people, cost of living crisis for
some people. Still continuing, how much do you think the
economy and the economic backdrop will affect people's vote.
Speaker 9 (24:44):
I think the economy always affects people's votes. I think
people are feeling the pinch and it's going to come
down to who they blame for that. Now, the reason
that the Conservatives became so suddenly unpopular and did so
badly at the last election, I think can be traced
back to the disaster that was Liz Trust and her
brief premiership, and the Conservative never really recovered from that.
(25:06):
Now Labor has spent their eight months in power kind
of pointing to her and pointing to the last government
and saying it's not our ful. We inherited a mess
and we're doing our best. And I think what it
comes down to is whether people on the ground believe
that or whether they're fed up enough to shift over
to reform. I don't see much time that people are
(25:27):
ready to trust the Conservatives again.
Speaker 3 (25:30):
My thanks to Bloomberg Opinion columis Rosa Prince. Now we
will have full coverage and analysis of the local election
and its outcomes right here on Bloomberg and on our
Bloomberg UK Politics podcast in the days ahead. I'm Caline
Hepke in London. You can catch us every weekday morning
for Bloomberg Daybreak. You at the beginning at six am
in London. That's one am on Wall Street.
Speaker 2 (25:52):
Tom, Thanks Caroline, And coming up on Bloomberg day Break weekend,
we'll look ahead to a key economic reading from Beijing.
I'm Tom, and this is Bloomberg. This is Bloomberg day
(26:13):
Break Weekend, our global look ahead at the top stories
for investors in the coming week. I'm Tom Busby in
New York. A key economic data point from Beijing this week,
as uncertainty lingers over the US tariffs. Now for more,
let's get to the host of the Daybreak Asia podcast,
Doug Krisner.
Speaker 4 (26:29):
Tom. In the last week, the International Monetary Fund revised
its annual growth forecast for China to just four percent
this year, and it came with a warning the outlook
could deteriorate further due to those US tariffs. Now in
the week ahead, we'll get China's official PMI data. These
readings will provide a measure of sentiment among businesses and
(26:52):
how they view overall economic activity. The PMIS can provide
an early indication of growth. Closer look. Now, I'm joined
by Bloomberg's Chang Chu She is the chief Asia economist
for Bloomberg Economics. Chang joins us from our studios in
Hong Kong. Thank you for making time to chat with me.
There's a lot to cover. I want to begin with
(27:14):
the PMI data, Chang. What do you think we're going
to learn from these numbers in the week ahead?
Speaker 10 (27:20):
Thank you Doug for having me on the program. Yes,
it's the PMI reading for April is going to be
very important. That's going to be the first reading since
the elevated tariffs came into place. We suspect we're going
to see dichotomy between the manufacturing and non manufacturing readings.
(27:44):
On the manufacturing reading PMI, we could see damage, quite
noticeable damage from the tariffs. At this point, we don't
have very conclusive data from various sources. We could be
uh looking at shipping data, for example, for prices and
(28:10):
volumes in terms of shipping between the US and China.
They are only showing something with a significant lag, and
perhaps they are some indications, but not quite conclusive. We
do hear a lot of stories of Chinese factories not
(28:34):
taking any further orders from US customers, and some may
even have stopped production. So uh, those data we don't
have yet. So the PMI reading is quite important, and
we do see potentially manufacturing PMI see a quite significant
(28:57):
job in the activity. At this point, we're projecting the
manufacturing PMI to drop into contractional territory from expansion of
fifty point five in March to perhaps you know, around
(29:18):
forty nine point eight sort of reading. So that's on
the manufacturing side. But if we want to go into
the non manufacturing side, we do see expansion to continue.
Speaker 4 (29:31):
Are we going to get any clues as to whether
supply chains are being reconfigured in a way that China
would be able to divert some shipments elsewhere into jurisdictions
that don't have terrorf rates as high as China does
coming into the US market.
Speaker 10 (29:48):
It's a good question, but a very tough one to answer.
We here again on the ground, lots of stories firms
on the ground that try neing to diversify the supply chains,
maybe accelerating the move out of China, the move of
(30:10):
the production facilities out of China. I think it's very hard,
even over the longer term to look at the shift
of supply chain. But it's going to be even tougher
to pick up those trends from PMI data. So it's
something that will keep looking out for. But unfortunately we
(30:35):
don't have sufficient data to give any clarity on this issue.
Speaker 4 (30:40):
So when I think of the Chinese domestic economy, what
I really think of is just a lack of demand.
Is it too much to think that Beijing could try
to stimulate demand in a way that would compensate for
the reduction that the export economy is faced with right now?
Or is that just in entirely out of the question.
(31:01):
Is that an impossibility.
Speaker 10 (31:03):
It's very tough. It's very tough for the government to
purely by stimulating the domestic econometer off sets the shock
from the external demands. It certainly in the short term
that's even tougher. Right, You have to think of different ways.
The firms are trying different ways. Certainly they are diverting
(31:27):
some of the were intended to be exports to divert
some of that products domestically, and as you alluded to,
they may think of rerouting the exports, but they offsets
will not come that quickly. I think the government has
(31:48):
certainly realized the importance of domestic demands and it has
been doing something over the past a few months, and
that's showing.
Speaker 6 (31:58):
Uh.
Speaker 10 (31:59):
Some improvement we do see in the first quarter in
China's GDP growth was stronger than expected, and if we're
looking to the March data, this improvement certainly on the
production sites, but also on the demand side, as we
saw quite noticeable improvement in consumption in retail cells. So
(32:25):
we can see some positivity there. But I think it's
too big a ask for domestic amount to immediately offset
the external shock.
Speaker 4 (32:37):
So I mentioned that the IMF revised down its annual
forecast for Chinese growth this year to around four percent annualized,
And in the last week, your colleagues at Bloomberg Economics
found that, based on a review of previous IMF forecast,
the Fund tends to underestimate the depth of these economic downturns.
(32:58):
So are you beginning to model a growth rate that
is below four percent for twenty twenty five? I mean,
clearly that's below what the government is shooting for. Is
China really at risk of seeing something that is sub
four percent growth?
Speaker 10 (33:13):
We have already downgraded our China forecast from four point
five percent we projected at the beginning of the year
from zero point two percent. The reason for the relatively
modest downgrades of the forecast reflects a couple of considerations.
(33:35):
First of all, as I already mentioned, in the first quarter,
the growth was decent, was above a slighter above our projection,
so that provides a bit of a cushion for the
year as a whole. And secondly, we do see the
government to strengthen its supports for the economy and that
(33:59):
should help. But as we again discuss earlier, we don't
think the supports come fully off set the dunting in
excellental demands. So taking account in all those consituations, we
have a modest downngrad of the projection. But we can
(34:23):
come to the discussion clearly what the government is going
to do, how they are going to support the economy,
and how effective those policies stimulus will be will be
very critical for China's growth trajectory going forward.
Speaker 4 (34:42):
It seems as though China is in a very vulnerable
position right now, given the fact that these tariffs are
so biting. Is there anything that could come out of
this upcoming pollut Bureau meeting that would give the markets
a sign that Beijing is willing to indu a long
period of negotiation or is this something that is out
(35:05):
of the question, and it's more likely that China over
a short period of time will capitulate and kind of
give in a little bit to what the US is
demanding of it.
Speaker 10 (35:16):
Yeah, it's a very tough question. I think the Chinese
side certainly is willing to talk, and it has and
various signals, but it also laid down the conditions for
discussions respect and I think the government it's something we
(35:39):
have written in reports. There are various considerations why it's
taking on these very tough stance, and it can be
a simple sort of face issue you come back down
and one thing you could be that China doesn't know
at this point what's the US ones. So those are
(36:02):
the domestic issues considerations. In the meantime, there's also the
international dimension to it in this particular case, unlike in
the First Street War, in China was the only one
more or less the only one affected by tariff, but
this time it's a wide range of countries, or indeed
(36:27):
all the countries are facing tariffs, and all the countries
except China are trying to talk to trying to talk
to the US. So from again theory perspective, there's a
risk when everybody tries, every country tries to talk to
the US, China will end up having a worse deal,
(36:52):
which is why China kind of takes this particular stance
to push back strongly. So for various reasons, China is
holding holding strong stands at this point, but I think
it's still hoping to to at some point to be
able to see them to talk to the US and
(37:13):
get a trade deal to cut down the tariffs. But
in the meantime, the Chinese economy certainly will suffer. There's costs,
certainly from the U s side, but on the China side,
the hit can be quite immediate on the export sector,
(37:34):
which could spread to the rest of the economy. I
think the government certainly is prepared for that, and in
terms of the prelicted Bureau meeting, we think you will
have to send quite strong signal that it's going to
support the economy. And I think possibly, like you alluded
(37:58):
to suggest, this is going to be a long enduring
standoff with the US, and the government is prepared to
support the economy.
Speaker 4 (38:11):
Chog thank you so much for joining us and helping
us understand more of what's going on in the Chinese
economy these days. Chang Chu is Chief Asia Economist at
Bloomberg Economics. She was joining us from our studios in
Hong Kong. I'm Deug Prisner. You can catch us weekdays
for the Daybreak Asia podcast. It's available wherever you get
your podcast. Tom, thank you, Doug.
Speaker 2 (38:32):
And that does it for this edition of Bloomberg day
Break Weekend. Join us again Monday morning at five am
Wall Street Time for the latest on markets overseas and
the news you need to start your day. I'm Tom Buzby.
Stay with us. Top stories and global business headlines are
coming up right now.
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