Bloomberg Audio Studios, Podcasts, radio news.
This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis along with Doug Krisner. Join us each day for the stories making news and moving markets in the Asia Pacific. You can subscribe to the show anywhere you get your podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.
Well, we've been talking about today's PCEE inflation data right on target with estimates and man where markets relieved since the recent readings on both consumer and producer prices were above forecast. I think we can agree that the cooling of inflation is a little slower now. Growth, though, is holding up. So the question how is the White House viewing today's news. Earlier I spoke with Gene Sperling, senior advisor to President Biden. I began by asking for his takeaway on the data.
I think what we're seeing is a recovery that has shown significant resilience.
Obviously, as we all know, it was only.
A year ago where people were predicting, you know, with tremendous uncertainty, that the only way inflation was going to come down was by crushing demand, risking potential.
Recession. But I think what we've seen is more and.
More evidence that the global inflation we saw was primarily driven by things related to the global economy being shut down starting back up, the supply chain snarls, the supply shortages, and that actually we're seeing, you know, something even better than a soft landing, because we've been able to see growth stay fairly strong, unemployment state under four percent. That's much better than the kind of just soft landing that just misses a recession.
This is solid.
So you know, for us, I think that this just confirmed what we think is an overall, you know, very positive trend to Whether you want to call it a soft landing or no landing, I guess I would say a resilient recovery where the fact that people have spending power, with such a large percentage of people are working, where you actually have prime age labor participation actually stronger than pre pandemic.
Looks positive.
The fact that you know, incomes are up, spendings down a little in a month in January, you know, I think we'll all kind of wait to see, you know, what the next couple of months are, and look over look at what the trend is.
You know, again, consumer confidence that looks strong.
You had one month where you know, it didn't improve, but you still have the Michigan consumer confidence twenty five percent stronger than October. So I think what people were probably feeling positive about today was the sense that the trend is still over all your friend.
But we are in an election year and one of the things that I think we can agree on, Yes, the data have been positive, whether you're looking at overall economic growth, the strength of the labor market, or inflation, but the president doesn't seem to be getting any credit for it today. Bloomberg News and Morning Consult released a poll conducted in February, and I'm going to highlight one swing state, Pennsylvania. Only forty three percent of voters believe
the economy is headed in the right direction. So I'm trying to understand why the messaging on success has not penetrated and what needs to change.
Well, look, you know, I always say that every family is the world's greatest expert on how they're doing. On the other hand, what people are hearing, what they see the direction at that can be something that is affected by what people are hearing. And also what they've experienced.
So I'm such an old man that I started in the White House in nineteen ninety three with President Clinton, and I think that we found in ninety four and nineteen ninety five that even though the deaths it was down, even though unemployment was down, you weren't seeing the pickup
and consumer confidence. There can be a lag, particularly if people have been worried for a while, and it's been a pretty tough few years for people going through the pandemic two variants twenty twenty two, where we saw global prices go high, we saw a war in Ukraine, you know, royal energy and food markets. So people don't always react on a dime with the you know, with the news. They can want greater reassurance. It can take a while to change people's attitudes.
Jane. Before I let you go, I want to talk about trade relations, particularly US China, certainly to become a hot topic as we move closer to the election. How should we be thinking about the way in which the administration wants to deal with China, whether it's export controls or what we learned today where the President is taking steps to block Internet connected Chinese cars and trucks, from entering the American market.
Look overall putting China to the side.
This is a president who has done so much with the Chips Act, with the infrastructure built with the Inflation Reduction Act to attract hundreds of billions of dollars of investment here. We want people to move factories here, We want them to create jobs here. We want American companies and American jobs to do well, and we want people to uh who might be in another country to decide to build their future here. But the President is very
clear when it comes to both security and economic fairness. Uh, he's going to insist on both from China, and you know, to the degree that there is uh government led over capacity that that uh put our workers at a disadvantage in you know, important manufacturing areas or as you've seen things that we do not have the confidence in that would not be a threat to not just national security,
but but the data and privacy of Americans. As you saw today, We're going to be clear, uh, clear as a bell, and we're going to be you know, tough when necessary.
Jane Sperling, Senior advisor to President Biden, Thanks so much for joining us.
Thanks and May appreciate it.
The US is not yet calling for a ban on Chinese evs, but could impose some limitations on imports of the vehicles or parts joining US. Now for some discussion of this year is Ed Ludlow, Bloomberg Technology Show host. So, Ed, we understand that there are some risks here, data and cybersecurity risks. I want to say this in a flippant way to get people's attention, but there's a there's a serious question embedded. Is Gina Romando seeing a Chinese ghost around every corner?
Yeah, there's a close look at it. I mean you have to remember that the barrier to entry for Chinese cause in America is literally high because of the Trump Are are tariffs right, there's a twenty seven point five percent tariff on any Chinese built ev that that wants to be sold here. So they've not become pervasive. But
this is really interesting. You have to compare what the US is doing versus Europe, because the US is saying we're looking at this through the lens of national security, not economics, whereas you look at Europe, they're saying we're going to take a real look at Chinese evs because we're super worried economically that they'll out compete our industry.
Exactly, why not call a spade is spae That's the thrust of the question.
So I think, you know, we've actually seen this as a kind of tip for tat. There was a very similar story with Tesla last year and the year before, where the Chinese government looked at teslas that were owned by Chinese government employees and officials as a security concern because of the data that runs through the car. Right think about the just the miles of telematics and personal
or consumer data that a modern day vehicle has. The US is doing something similar, you know, like each computer is based at each computer, Each car is basically a computer on wheels these days. And so what the US is doing, according to the official that Bloomberg spoke to, is looking at those vulnerability as a precursor to making a firm policy decision on Chinese made evs in this country.
So Brian and I were talking earlier ed about the change that may occur when Chinese manufacturers begin setting up production facilities in Mexico with the idea of moving those vehicles into the American market. Does any of this kind of run up against a massive change as a result of what the administration is trying to achieve.
I think that's a really smart question, and you have to go back to the stipulations of the Inflation Reduction Act and the Treasury and IRS guidelines, which is it's not just where the vehicle is made, but it is every single component where the component is made, but also the ownership of the company that made that component. So let's just take like, I don't know, let me think of something equally as flippant. Let's take a nut and bolt,
you know, on the axle of the car. If that nut or bolt comes from a supplier that is owned by twenty five percent Chinese ownership or higher, it's not eligible for the federal tax credit or any other access to public funds. So there's a disincentive there. But again go back to the Bloomberg reporting. Right now, this is not about economics, it's about national security, and so the supply chain issue at this time is not what's the under the microscope.
Is it possible that the European Union, even though you mentioned it's a different approach, they're challenging on economic rather than national security concerns, But Is it possible that they too have these concerns about security risks?
Yes, certainly, I think, you know, we look at the European Union as not just a governmental body but a regulator, right and certainly in my coverage of broadly of the technology sector, the European Commission, you know, if you think is a parallel example social media and TikTok, they have the same debates in that jurisdiction as we have here with the safety of TikTok and whether it provides a vulnerability to their citizens because downchain, the Chinese government may
or may not have access to data, and so there's some evidence that the European Union looks at Chinese vehicles in the same lens. But I would underscore that europe came out early and said, look, this is just an issue of competition. We don't want to get outdone or undercut by the Chinese suppliers.
In the bigger picture, though, I'm trying to understand the supply demand imbalance. I'm looking at your story now on Fisker, the company. You're raising substantial doubt about its ability to be basically an ongoing operation. Fifteen percent of the workforce gets cut, right, are we living in an era where there's simply too much capacity.
Fisker is a wild story that has its own unique problems. But what the CEO told me an interview earlier is that there is a demand problem. You know, Fiska has a unique business model where it has a contract manufacturer, Magna International, and they build Fisker's EV's on their behalf at a plant in Austria, and they can build as many or as few as they want. So what Fisker said is, we're going to make twenty to twenty two in twenty twenty four, but if demand improves, we can
just dial up because of our unique business model. This is a company that's seriously and financially shaky, right, seriously in trouble. And what they've told investors this evening is there is one unnamed automaker waiting in the wings who is agreed to partner with Fisker and give them a cash injection. The deal's not done yet and it will happen soon, is what the CEO told me. But here
goes back to the root of your question. EV demand is down right now, everyone is pulling back, So why would an automaker make an investment in another EV name like Fiska in that environment, and you guys probably see the stock down thirty seven percent in after ours.
If prices continue to get cut, because even BYD has struggled, even though it has it's out selling Tesla, but it has struggled because having to lower prices in the margins are really cut. It starts to become I mean, does that bring the other automakers, more automakers into the picture, or does it just mean that it's going to you know, it's going to undercut the overall thrust of the industry over the next couple of years.
I mean, what's unique about China's EV market is there are many more individual players, right the consumer has more choice. But we've learned pretty quickly that the Chinese economy is not immune to what's happening around the world, so there's some pressure there. You know. The overall picture is we live in a really high interest rate environment around the world. The financing of your car is probably your second biggest
expense after your mortgage or your rent. And the first so called first adopters have been and gone in North American Europe. So what's left is a price conscious consumer and the EV price premium is still so great even after price cuts that they're still going for cheaper combustion engine models. In China that's less so the case, but because there are so many players, you've got to cut prices to be competitive.
Yeah, but we also have the issue of tax cuts to consider it, right. And then there's the charging infrastructure story and whether or not that's not only reliable, widespread enough so that consumers feel comfortable in making the investment.
Yeah, And today's a big milestone in North America on that front, right, because Tesla has opened up its charging network to other companies. So today Ford customers could start charging their Ford evs using a Tesla charger with an adapter. But that answers your question, right, that Ford had to make the painful reputational decision to ask Tesla for help because the infrastructure broadly wasn't there beyond what Tesla offers. And that is true of many jurisdictions around the world.
So back to the original investigation that we talked about with General Mondo and Joe Biden, does that overlap with one that we saw yesterday in the executive order that was also about data security?
Yeah, I mean, what I'm learning, and actually I'm learning this in the context of AI companies as well, guys, is that you know, the Commerce Department and other government agencies are very closely aligned on the topic. You know, again, I just repeat that this is a cyber security and data security issue for the time being in the car context or EV context, and it's not billed as a
competition or economic problem. But this administration is increasingly thinking about this, and we're in an election cycle where you know, look at Bloomberg's reporting out of Washington, d C. And the relationship with China for both sides of the aisle and both eventual candidates is going to be front and center in this election. So what's analogous is, yes, it's cybersecurity, but in this case, remember that the car is a computer on wheels. That's what I'd ask your audience to
take away. What we're hearing from officials is that's the concern, so.
A Chinese price war, although I note that Lee Auto has served something like sixty seven percent in the last month with some new designs and such. Ed thanks very much for joining us out of time now Ed Ludlow Bloomberg Technology Show host with his live here on Bloomberg
at Daybreak Asia. This see is Bloomberg. Manufacturing activity in Asia slumped in February, factories wrestling with weak demand in China and supply chain disruptions in major shipping routes factories across North Asia cutting output and new orders last month. Joining us now is David Chu, Bloomberg China economist, to take a look at how China may be at the heart of this. How much is China in a sense David spreading out some of its weakness to other countries.
Well, actually, I think if you look at the PM itself, uh uh, you've got a very weak reading because of the job in the in the manufacturing p M I uh this month. But actually I want to say that it's not only this month because China is slowing. Slowdown has started uh several months ago. And we all know that China is the buyer of materials from Southeast Asia, so that the slowdown of China a definitely will well
not will It's influencing the Southeast Asia economies. And uh, previously China slowed down also influenced the South Korea as well. But this time we think we see that the South Korea export uh outer performs. Uh. We think that this was because of the export of chips, so that we can see that the electronic and the AI contributes some uh strong to South Korea. So that but anyway, in the Southeast Asia, the exporters of industrial materials, they are
you know, suffering somehow from China. Slowdown.
Yeah, I think it's important to remember sometimes I forget that PMI data is kind of soft data. It's a sentiment indicator. And when you think of sentiment, particularly given the challenges confronting China right now, it's all about sentiment or a lot of it seems to be the lack of it, a positive sentiment and the lack of confidence.
Next week we've got the NPC meeting. What do you think the government can do to begin to begin I know steps have already been taken, but what let me say it another way, what more can be done to kind of tackle this issue of just weak sentiment.
Well, it is two problems, what it should do and what it will do. Right, Yeah, let me say what they should do. In our minds, the better way for the government is to declare their eager for priority for development for growth, so that let the market know that the top leaders are still taking growth as the first priority and they are willing to do something to help the economy. So that is the concrete information they need
to convey to the market. But on the other hand, what they can do is we think if we look at the target, we think that they are going to set the target growth target at five percent, which is actually a strong target for us because although we achieved five point two percent young er GDP growth last year, it was largely because of the low base in the previous year, so that in this year, if they set the five percent as the target, that would be a
high bar. In addition, people will look at the fiscal deficit target. I think, in my mind this could be something understood market expectation. We are expecting something like three point two percent, but we think the market is expecting more.
The taishin manufacturing PMI was actually a little bit more positive, and it generally tends to be, but this reading was fifty point nine, a little up from the fifty point eight in January. And you've seen the bounce in the equity market. We've seen about ten percent gains in a couple of weeks for the CSI three hundred. I know there's been a lot of hands on measures from authorities
on that, but are there some bright spots? Can we can we think about things getting better here over the next few months.
Well, we think it's too early to say so, because the first two months in China usually we don't have we don't have concrete data expected for PMI inflation because it is the Lunar New Year holiday distorting the whole thing. So that but we can also look at the high frequency data and also the consumption during the Luna New Year holiday, and what we got was that, you know, overall, on balance it is still to the negative side. One of the key reasons is that the home sales is
still very weak. I read the data last couple of days ago at in the first of two months, the sales in value was fifty percent down from last year. So it tells us that the housing sector is still weak because of the weak confidence or sentiment in the households sector.
So we're ready to wrap up here. I can give you thirty seconds, David, to tackle the problem with deflation and trying to revitalize consumption. What's the best way for the government to do that? Handout money.
Well, I don't think there is a silver belated to solve this deflation problem. Well in the past, based on the past experience, if the PBOC opens the door for easing, it could help. But on the other hand, you know, China's trapped with high deadness, so that strong or aggressive easy for the PBOC is not so feasible.
Right, Okay, all right, David, Thank you, David Chu, Bloomberg China Economists.
This has been the Bloomberg Daybreak Asia podcast, bringing you the stories making news and moving markets in the Asia Pacific. Visit the Bloomberg Podcast channel on YouTube to get more episodes of this and other shows from Bloomberg. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and always on Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business App.