August 14, 2025 • 13 mins
John Stepek, Bloomberg senior reporter and author of the Money Distilled newsletter is joined by Opinion columnist Marcus Ashworth to discuss the unexpected good news about the UK economy, why we’re currently in a buyers market when it comes to housing and why the Bank of England needs to continue to hold its nerve.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Welcome to the Mernon Talks Money Market Wrap, where we
talk about the biggest moves in the markets this week
and wat's driving them. I'm joined Steppeck, Senior report and
author of the Money Distilled newsletter. And unbelievably Marnon is
still off on holiday, so we managed to twist Marcus
Ashworth's arm to come back. Marcus is a Bloomberg opinion
column is a very good friend of the show and
(00:40):
all doing Marcus guru, So welcome back, Marcus, Thank you
for doing it.
Speaker 1 (00:44):
Again, pleasure. What's the holiday?
Speaker 2 (00:46):
Exactly exactly right? So this week this week today, today
is Thursday, and UK GDP figures have just come out
and they were surprisingly good.
Speaker 1 (00:59):
Yes, our quan statistic stuck out for me was that
on a per capita as in per head basis, since
Labor's been in power, we are all richer by the
tune of zero point seven percent. And don't we just
feel it time, We just feel it. So that's not
a lot, but it's a lot better than it could
have been. And perhaps what we may feel it was
(01:20):
is so the only thing I was says is that
all these backward data, which GDP by definition is and
oneted subject to heavier revision, is not what's going to
happen as we head up to the long, very very
unpleasant road up to the budget probably the end of
October and November. But I do think there was more
momentum in the economy than we may have feared. However,
(01:41):
if you look at the data of the zero point
three rise in quarter two, zero point twenty seven, of
it is the government, which was all about our budget
last year, and the punk priming which is coming through
is that it is starting to work. That's the good news.
The bad news is that consumption and investment in the
private sector is flatlining and down. So in that sense,
we have in this tectonic shift where more money has
(02:04):
been thrown at the public sector at the cost of
taxpayers and the private sector. I don't think that's very
healthy long term, but it just leads to the point
that you know, growth is going to stay above one
percent just probably for the rest of this year. We
will nominally probably be the second best performing nation in
the G seven after the States, but by a fraction
(02:26):
and look at it could have even been zero point
four this last quarter. Quarter two, So you know, after
zero point seven quarter one, you know that the start
of twenty twenty five has been better than people expected.
The tariff thing was initial boosts and inventory builds and
things like that. That's carried through into quarter two. It's
not all bad news. We should probably be a little
bit more optimistic. The only thing I would say from
(02:47):
that is the Bank of England probably should look through
these numbers and not get worried about the economy. Maybe,
but equally it's all about the labor market and it's
all about inflation, and those things are saiparated. I don't
think this GDP data alters of you that it's a
fifty to fifty coin toss whether they cut again in
November to three and three quarters. But we will see that.
(03:07):
You know, they've got plenty of time to do that,
So I don't think this number changes the dial for
the Bank of England.
Speaker 2 (03:12):
Yeah, I mean it's interesting. One thing that I keep
heeding about the hostsold seed is the hostal balances are
pretty healthy, and the question is why is the savingsury.
It's all high To me, thus fairly obvious reasons for
that if we're all paranoid about how much money is
going to get taken out of our pensions on whatever
(03:33):
come the next budget, and that's going to make people
see if harder. But is that a compositionion effect here?
What is the food?
Speaker 1 (03:42):
Food? I think is what people see the most quickly,
and that they change the consumer sentiment sort of because
of that. So you know, we've had pretty low food
price up to failurey seeing that they've definitely bounced back,
and that's quite a noticeable effect on people. I think
underlying exactly what you're saying is just that the sort
of negative meat and people like you and I, which
(04:02):
is yes, exactly, it's causing people to be perhaps much
more reticent and therefore that's all the savings break and
then you get the paradox of thrift where it just
is people saved money. It just does not the economy,
and we will get misery and terror.
Speaker 2 (04:16):
I was fining the paradox are thrift a little bit.
It's a fair point in the short term, but it's
this whole idea that saving is, you know, I mean
we can have the the economy also needs capital and
needs saving that investment.
Speaker 1 (04:30):
That's where perhaps breakdown. But then we can all go
into the laughter curve and real time they had experiences
of how the works and why we're spending less.
Speaker 2 (04:39):
Anyway, the other thing that came out to do was
the latest REX survey. I don't know how much of
attention you pay the REX Survey the canal. This is
where they ask all the estate agents and the surveyors
what they think of what's going on in the housing market.
Ain't there. But one thing that surprised me slightly is
they go a little bit gloomier this month and they
(05:03):
kind of the bits and pieces of anecdotal data at
the end were all about, oh, you know, yeah, the
cells have to be very realistic on price, and somebody
was saying this it was very funly a buyer's market.
Someone was even saying prices have probablydropped about ten percent
in the last twelve months. And I was quite surprised
by just how how gloomy they were. And I also
(05:23):
noticed that repossessions of load they're still very low, in
the second quarter ticked up and they're now on a
kind of rising trajectory there still likes it from a
very very low base, we're only back to where we
were on a monthly.
Speaker 1 (05:38):
On that because it's just infintestical compared to what it
perhaps was in the light I es or something. But
I definitely feel that, for instance, the lost interest right
cuff of man coming and is almost as it didn't
happen because it was so hokeish about what happens next.
I think that's taken what little momentum was potentially coming
from that out. So now I definitely since I do
(06:00):
quite a lot of sort of anecdotal stuff talking to
various people in the property market, and they're all pretty despondent,
and definitely I think it's it's ten percent or something
off prices. Is certainly, you know, there's always a ten
percent bid off of spread between what sellers expect they
can get on buyers are prepared to sort of pay
it in one stage, and very much it's the buyers
are waiting ahead of the budget. There's no incentive for
(06:21):
them to get moving. We've still got quite a sort
of slow Perhaps everyone rushed to get everything completed at
the end of March and since then, everyone's you know,
doesn't seem to be moving far as completing things with
councils and searches and theirs and all that sort of stuff,
which is there's no momentum coming back through that. If
you look at the mortgage approvals that seems to be
(06:41):
okay ish house prices which are I think the Halifax
the nationwide surveys are very misleading. Where we look at
them a monthly, we really should. We should the Rich survey,
which is more backward looking than those, take a little
bit more prest view on it. But there's been nothing
particularly optimistic on the consumer side to make the housing
market do anything other than what we've been seeing throughout
(07:02):
the course of this year, which is it's definitely taken
quite a sizable knock, and I think we can put
a lot of that blame on Rachel Ruves is handling
in the economy and the whole lead up to the
October budget and the fallout from it and now exact
same rints repeat, which is economic and political madness as
far as concerned, to make the same mistake twice. But
(07:22):
she is not giving any form of incentive to anyone.
You know, if they're talking about taking away gift taxes
and inheritance taxes and more pensions, and we know at
the FINT that the whole thing is depressing you know,
you look at the data on concrete, you know, the
lowest since nineteen sixty three. There are no house building
plans going through. To look at what Decarn's done in London,
(07:44):
you know on an affordable homes something like three hundred
and fifty. That's it. The entire year. Nothing is getting
built and nothing is clearly going through as far as
the big developers. A concern lot of landfill, tax problems,
a lot of other knock on effects from you know,
stamp duty and what have you, is creating this complete
lack of rationale for property developers and builders to actually
(08:06):
commit to new projects. The banking isn't helping on that
front either. But you know this is this is the
only thing which gives me long term conference pats house
prices is that we're going to get a huge drop
in activity, which isn't great for anyone, particularly the ancilliary
things like you know, plumbers, Yeah, whereas all the different
carpets as what have you. But prices at some point
(08:26):
will have to correct or go back up again because
there's nothing been built, no supply supply and demand demand.
The economy is still there, but we may get a
long protracted period of statis, which I think we're already
into where activity is very very low. Volumes don't just
there's nothing there, and that creates a very poor market
and house prices I think will continue to drop for
for a while, but there is an underlying flow there
(08:48):
in supply isn't going to happen.
Speaker 2 (08:50):
And just before we wrap up, you wrote an interest
in peace recently, and this sort of ties back to
the way that question of tax and government and who
we sort of and this was about the credit spreads,
So the gap between the yield or the interest rate
that companies need to pay and the yield or the
(09:11):
interest rate the government needs to pay on bordings, and
that has noted And usually that is the saying, if
I'm not in connective, possibly a rational exuberance when people
won't lend money to companies for the same amount as
that won't lend to governments as that.
Speaker 1 (09:25):
Well, yeah, maybe back in the dark I used the dinosaurs.
I used to it now look joking apart that I've
written quite a lot on this as far as reason why,
I mean, look at guilt yields. They're now the wildest
they've been to the United States for for a long
while looking them up at thirty five bits away. It's
just like we are creating our own problems, particularly longer
(09:46):
end government yields, because no one really trusts this government
expects I'm going to borrow more in the economy not
being great and the interest rates clearly from Bank of
England being so high. So but the basic point is
that the corporate world is you know, if you look
at the probably the best corporate earning season in the
States for well since COVID, certainly for a very long period,
(10:08):
we've got you know, eighty eighty five percent of companies
are beaten what the analysts expect him to do. It's
not just tech stocks that's dragging. Everything with the US
economy is going fine, And why would you want to
lend to the United States? You know, we're know thirty
seven trillion in counting. That's why they's lost its last
of its triple a's. Then why would you want to
lend a Microsoft or Apple or something like that. So
(10:31):
I think that's you know, the reason why corporate debt
is doing well is because underlying profits are very strong,
the economy is holding up, and the credit world and them,
so of course they're buying back they stocks obviously, but
you know buybacks are still very very strong. But the
point here is is that the corporate worlds and pretty
good rules rude health. Whereas always seeing its governments around
(10:51):
the world, UK, US in particular now Germany interestingly having
to borrow more and having a real problems with the
budget deficits, can't control fiscal spending as we've seen in
the UK. And that's that's you're just getting a dynamic.
Why would you look to the risk free rate and
government yields as being sort of the load star when
you could lend to a corporate Anything I would say
(11:12):
is we do have one very interesting thing in the UK,
and just in the UK, is that if you buy
a UK guilt, particularly on they load coupon, you don't
pay any capital gains tax on it. Remember capital gains tax,
because I think great roofs certainly capical games tax and
should be coming back on that one. But at the moment,
for buying a guilt and particularly not paying on one
(11:34):
of the very low coupons that you'll pay to get
mostly money from the game, you're buying something at say
ninety pence on the pound, and insures in a few
years time. At one hundred, you know you're not going
to pay any tax on that game. You will pay
just a very modest thing on a very only for
the very looky points.
Speaker 2 (11:55):
Actually, this is a really useful tip to remember because
you rate all this that is efficient, and also from
from an individual's point of view, if we're going to
get hammered and everything else, the one thing that she
won't touch is something that creates extra demand for guilt.
At this point you would have thought, yes, okay, well,
(12:20):
on that optimistic note, Mark is I think we'll wrap
up for the time being. Thanks for listening to this
week's Man Talks Money Debrief. If you like our show,
(12:41):
rate review, and subscribe wherever you listen to podcasts. This
episode was produced by Moses and and Summer Sadie Special
thanks to Marcus Ashworth. As always, in questions and comments
on this show and all our shows are always welcome.
Our show email was Mere and Money at bloomber dot net.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Welcome to the Mernon Talks Money Market Wrap, where we
talk about the biggest moves in the markets this week
and wat's driving them. I'm joined Steppeck, Senior report and
author of the Money Distilled newsletter. And unbelievably Marnon is
still off on holiday, so we managed to twist Marcus
Ashworth's arm to come back. Marcus is a Bloomberg opinion
column is a very good friend of the show and
(00:40):
all doing Marcus guru, So welcome back, Marcus, Thank you
for doing it.
Speaker 1 (00:44):
Again, pleasure. What's the holiday?
Speaker 2 (00:46):
Exactly exactly right? So this week this week today, today
is Thursday, and UK GDP figures have just come out
and they were surprisingly good.
Speaker 1 (00:59):
Yes, our quan statistic stuck out for me was that
on a per capita as in per head basis, since
Labor's been in power, we are all richer by the
tune of zero point seven percent. And don't we just
feel it time, We just feel it. So that's not
a lot, but it's a lot better than it could
have been. And perhaps what we may feel it was
(01:20):
is so the only thing I was says is that
all these backward data, which GDP by definition is and
oneted subject to heavier revision, is not what's going to
happen as we head up to the long, very very
unpleasant road up to the budget probably the end of
October and November. But I do think there was more
momentum in the economy than we may have feared. However,
(01:41):
if you look at the data of the zero point
three rise in quarter two, zero point twenty seven, of
it is the government, which was all about our budget
last year, and the punk priming which is coming through
is that it is starting to work. That's the good news.
The bad news is that consumption and investment in the
private sector is flatlining and down. So in that sense,
we have in this tectonic shift where more money has
(02:04):
been thrown at the public sector at the cost of
taxpayers and the private sector. I don't think that's very
healthy long term, but it just leads to the point
that you know, growth is going to stay above one
percent just probably for the rest of this year. We
will nominally probably be the second best performing nation in
the G seven after the States, but by a fraction
(02:26):
and look at it could have even been zero point
four this last quarter. Quarter two, So you know, after
zero point seven quarter one, you know that the start
of twenty twenty five has been better than people expected.
The tariff thing was initial boosts and inventory builds and
things like that. That's carried through into quarter two. It's
not all bad news. We should probably be a little
bit more optimistic. The only thing I would say from
(02:47):
that is the Bank of England probably should look through
these numbers and not get worried about the economy. Maybe,
but equally it's all about the labor market and it's
all about inflation, and those things are saiparated. I don't
think this GDP data alters of you that it's a
fifty to fifty coin toss whether they cut again in
November to three and three quarters. But we will see that.
(03:07):
You know, they've got plenty of time to do that,
So I don't think this number changes the dial for
the Bank of England.
Speaker 2 (03:12):
Yeah, I mean it's interesting. One thing that I keep
heeding about the hostsold seed is the hostal balances are
pretty healthy, and the question is why is the savingsury.
It's all high To me, thus fairly obvious reasons for
that if we're all paranoid about how much money is
going to get taken out of our pensions on whatever
(03:33):
come the next budget, and that's going to make people
see if harder. But is that a compositionion effect here?
What is the food?
Speaker 1 (03:42):
Food? I think is what people see the most quickly,
and that they change the consumer sentiment sort of because
of that. So you know, we've had pretty low food
price up to failurey seeing that they've definitely bounced back,
and that's quite a noticeable effect on people. I think
underlying exactly what you're saying is just that the sort
of negative meat and people like you and I, which
(04:02):
is yes, exactly, it's causing people to be perhaps much
more reticent and therefore that's all the savings break and
then you get the paradox of thrift where it just
is people saved money. It just does not the economy,
and we will get misery and terror.
Speaker 2 (04:16):
I was fining the paradox are thrift a little bit.
It's a fair point in the short term, but it's
this whole idea that saving is, you know, I mean
we can have the the economy also needs capital and
needs saving that investment.
Speaker 1 (04:30):
That's where perhaps breakdown. But then we can all go
into the laughter curve and real time they had experiences
of how the works and why we're spending less.
Speaker 2 (04:39):
Anyway, the other thing that came out to do was
the latest REX survey. I don't know how much of
attention you pay the REX Survey the canal. This is
where they ask all the estate agents and the surveyors
what they think of what's going on in the housing market.
Ain't there. But one thing that surprised me slightly is
they go a little bit gloomier this month and they
(05:03):
kind of the bits and pieces of anecdotal data at
the end were all about, oh, you know, yeah, the
cells have to be very realistic on price, and somebody
was saying this it was very funly a buyer's market.
Someone was even saying prices have probablydropped about ten percent
in the last twelve months. And I was quite surprised
by just how how gloomy they were. And I also
(05:23):
noticed that repossessions of load they're still very low, in
the second quarter ticked up and they're now on a
kind of rising trajectory there still likes it from a
very very low base, we're only back to where we
were on a monthly.
Speaker 1 (05:38):
On that because it's just infintestical compared to what it
perhaps was in the light I es or something. But
I definitely feel that, for instance, the lost interest right
cuff of man coming and is almost as it didn't
happen because it was so hokeish about what happens next.
I think that's taken what little momentum was potentially coming
from that out. So now I definitely since I do
(06:00):
quite a lot of sort of anecdotal stuff talking to
various people in the property market, and they're all pretty despondent,
and definitely I think it's it's ten percent or something
off prices. Is certainly, you know, there's always a ten
percent bid off of spread between what sellers expect they
can get on buyers are prepared to sort of pay
it in one stage, and very much it's the buyers
are waiting ahead of the budget. There's no incentive for
(06:21):
them to get moving. We've still got quite a sort
of slow Perhaps everyone rushed to get everything completed at
the end of March and since then, everyone's you know,
doesn't seem to be moving far as completing things with
councils and searches and theirs and all that sort of stuff,
which is there's no momentum coming back through that. If
you look at the mortgage approvals that seems to be
(06:41):
okay ish house prices which are I think the Halifax
the nationwide surveys are very misleading. Where we look at
them a monthly, we really should. We should the Rich survey,
which is more backward looking than those, take a little
bit more prest view on it. But there's been nothing
particularly optimistic on the consumer side to make the housing
market do anything other than what we've been seeing throughout
(07:02):
the course of this year, which is it's definitely taken
quite a sizable knock, and I think we can put
a lot of that blame on Rachel Ruves is handling
in the economy and the whole lead up to the
October budget and the fallout from it and now exact
same rints repeat, which is economic and political madness as
far as concerned, to make the same mistake twice. But
(07:22):
she is not giving any form of incentive to anyone.
You know, if they're talking about taking away gift taxes
and inheritance taxes and more pensions, and we know at
the FINT that the whole thing is depressing you know,
you look at the data on concrete, you know, the
lowest since nineteen sixty three. There are no house building
plans going through. To look at what Decarn's done in London,
(07:44):
you know on an affordable homes something like three hundred
and fifty. That's it. The entire year. Nothing is getting
built and nothing is clearly going through as far as
the big developers. A concern lot of landfill, tax problems,
a lot of other knock on effects from you know,
stamp duty and what have you, is creating this complete
lack of rationale for property developers and builders to actually
(08:06):
commit to new projects. The banking isn't helping on that
front either. But you know this is this is the
only thing which gives me long term conference pats house
prices is that we're going to get a huge drop
in activity, which isn't great for anyone, particularly the ancilliary
things like you know, plumbers, Yeah, whereas all the different
carpets as what have you. But prices at some point
(08:26):
will have to correct or go back up again because
there's nothing been built, no supply supply and demand demand.
The economy is still there, but we may get a
long protracted period of statis, which I think we're already
into where activity is very very low. Volumes don't just
there's nothing there, and that creates a very poor market
and house prices I think will continue to drop for
for a while, but there is an underlying flow there
(08:48):
in supply isn't going to happen.
Speaker 2 (08:50):
And just before we wrap up, you wrote an interest
in peace recently, and this sort of ties back to
the way that question of tax and government and who
we sort of and this was about the credit spreads,
So the gap between the yield or the interest rate
that companies need to pay and the yield or the
(09:11):
interest rate the government needs to pay on bordings, and
that has noted And usually that is the saying, if
I'm not in connective, possibly a rational exuberance when people
won't lend money to companies for the same amount as
that won't lend to governments as that.
Speaker 1 (09:25):
Well, yeah, maybe back in the dark I used the dinosaurs.
I used to it now look joking apart that I've
written quite a lot on this as far as reason why,
I mean, look at guilt yields. They're now the wildest
they've been to the United States for for a long
while looking them up at thirty five bits away. It's
just like we are creating our own problems, particularly longer
(09:46):
end government yields, because no one really trusts this government
expects I'm going to borrow more in the economy not
being great and the interest rates clearly from Bank of
England being so high. So but the basic point is
that the corporate world is you know, if you look
at the probably the best corporate earning season in the
States for well since COVID, certainly for a very long period,
(10:08):
we've got you know, eighty eighty five percent of companies
are beaten what the analysts expect him to do. It's
not just tech stocks that's dragging. Everything with the US
economy is going fine, And why would you want to
lend to the United States? You know, we're know thirty
seven trillion in counting. That's why they's lost its last
of its triple a's. Then why would you want to
lend a Microsoft or Apple or something like that. So
(10:31):
I think that's you know, the reason why corporate debt
is doing well is because underlying profits are very strong,
the economy is holding up, and the credit world and them,
so of course they're buying back they stocks obviously, but
you know buybacks are still very very strong. But the
point here is is that the corporate worlds and pretty
good rules rude health. Whereas always seeing its governments around
(10:51):
the world, UK, US in particular now Germany interestingly having
to borrow more and having a real problems with the
budget deficits, can't control fiscal spending as we've seen in
the UK. And that's that's you're just getting a dynamic.
Why would you look to the risk free rate and
government yields as being sort of the load star when
you could lend to a corporate Anything I would say
(11:12):
is we do have one very interesting thing in the UK,
and just in the UK, is that if you buy
a UK guilt, particularly on they load coupon, you don't
pay any capital gains tax on it. Remember capital gains tax,
because I think great roofs certainly capical games tax and
should be coming back on that one. But at the moment,
for buying a guilt and particularly not paying on one
(11:34):
of the very low coupons that you'll pay to get
mostly money from the game, you're buying something at say
ninety pence on the pound, and insures in a few
years time. At one hundred, you know you're not going
to pay any tax on that game. You will pay
just a very modest thing on a very only for
the very looky points.
Speaker 2 (11:55):
Actually, this is a really useful tip to remember because
you rate all this that is efficient, and also from
from an individual's point of view, if we're going to
get hammered and everything else, the one thing that she
won't touch is something that creates extra demand for guilt.
At this point you would have thought, yes, okay, well,
(12:20):
on that optimistic note, Mark is I think we'll wrap
up for the time being. Thanks for listening to this
week's Man Talks Money Debrief. If you like our show,
(12:41):
rate review, and subscribe wherever you listen to podcasts. This
episode was produced by Moses and and Summer Sadie Special
thanks to Marcus Ashworth. As always, in questions and comments
on this show and all our shows are always welcome.
Our show email was Mere and Money at bloomber dot net.
Host
Merryn Somerset Webb
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