Good morning. It's Wednesday, the thirteenth of September here in London. This is the Bloomberg Day Bacurate podcast. I'm Caroline Hepka.
And I'm Tom McKenzie. Coming up today, the UK economy reverses recent gains, shrinking at the quickest pace in seven months.
Bp CEO Bernard Looney quits over failing to fully disclose past relationships with colleagues.
Plus, Apple unveils its latest iPhone and hikes top end prices everywhere except the UK.
Let's start with a round up of our top stories.
The UK economy has shrunk at the quickest pace in seven months, as dull weather held back spending and strikes hit the public sector, unwinding the strength of the previous month. GDP fell by zero point five percent half a percent in July after a zero point five percent gain the month before. Are UK Chris One and Lizzie Burdens says the reversal will give the Bank of England pause for thought ahead of next week's rate decision.
This day to suggests that there is a bit more weakness in the economy, perhaps than was thought. We're going to get more inflation data from the Eve of the decision. That's expected to show that the headline rate actually increases because of contributions from petrol and diesel prices, So you might see another hike yet, but maybe we get to that peak sooner than perhaps thought.
Lizzie Burden also says that the latest estimate may well be revised later this month based on recent changes the way the data is calculated.
Now, Apple has launched a range of upgraded iPhones, also raise the price of its top end handset by almost ten percent in the US. But as Bloomberg's chief correspondent Mark German points out, there's one place where prices won't be rising.
The UK is unique today for a very key reason. There was actually no price increase in the UK. In fact, the new iPhones are cheaper in the UK than they were previously, coming down by about one hundred pounds, which response to about one hundred and twenty eight dollars US, So if you're in the UK, you might be getting a better deal than you did last year.
Mark German says that the new iPhone models, which include a USB C connector, represent the first significant iPhone overhaul since the five G phones came out three years ago. Apple CEO Tim Cook will be hoping that the updates will pull the company out of a sales slump and fears of a consumer backlash in China.
That's another major corporate story. BP's CEO, Bernard Looney has resigned over failing to fully disclose past relationships with colleagues. Ludy's exit leaves the Island gas giant looking for a new CEO as the company pushes ahead with a costly transition to low carbon energy. Bloomberg's Managing editor for Energy and Commodity Simon Casey says the decision is part of a wider trend at corporations.
The CEO big corporate of failing to be honest with the board. Fundamentally, That's what this is hardly about. It's got a lot tougher in recent years, its boards to feel much more empowered to fort fedules of the whole, even the CEO to account.
Simon Casey says that while BP hasn't named a long term successor, it typically depicts its CEOs from among the ranks of its own top executives.
Storms and flooding in eastern Libya are thought to have claimed more than twoy three hundred lives, with thousands more people missing. A search for survivors is underway after a Mediterranean storm hit the city of Dierna, with dams collapsing, triggering flooding. High water levels, but also tumultuous politics are hindering rescue efforts. Rami El Shahabi, who is from the World Health Organization in Libya, says it's a disaster zone.
The situation is more disasters than we expected, and the numbers that keep builing up, so those who have not been reported as found are considered very likely to be dead or under the rubbles of those Bill think that collapsed after the flood.
Meanwhile, rescue teams have recovered over two thousand bodies in eastern Libya. Today, officials fear that the death told they could exceed five thousand.
Okay, Double Line Capital CEO Jeffrey Gunlack well he's fine back at retired bond king Bill Gross, saying he hopes he feels better about himself. The ongoing feud in the world of finance returned after Gross criticized Gunlac saying he wasn't anywhere near being crowned a bond king.
To be a bond king or a Quinn. You need a kingdom, You need a kingdom. Okay. BNKO had two trillion dollars. Okay, double line's got like fifty five billion. That's no kingdom. That's like Latvia for her Estonia. Then look at his record for the last five six seven years, had a sixtieth percentile smack of a bond king. That doesn't.
Poor old Latvia gross there. In a live recording Applom Hot Lots Podcasts, in response, gone Like says quote, it is sad for somebody that's been out of the business for so long ten years and is still trying to exercise the demons. But I hope he's doing fine.
This caught my attention though the policies around families have come to the four in the UK, but also specifically around birds. This issue is one that is significant for the UK. You know, worries around demographics, not just in the UK, Germany, Italy, Japan also but David Miles, who's the Chief forecaster at the UK's Office for Budget Responsibilities,
are well known economists in the UK. He actually says that lower birth rates are set to help household living standards, that long term they might not be quite so bad as we think he's done some new analysis.
Well, he points as well to the fact that if you have an increase in population, you have to match that with the build out of infrastructure, and the UK has clearly failed to do that. Many other countries have as well. But then he points as a slightly different case or or case of example of shrinking ooperlation in Japan that has actually managed to continue to increase per capita GDP even as that population has of course famously shrunk,
and they've struggled with that declining population. So it's a kind of counterintuitive. Look. I remember we spoke to Grace Peter's JP Morgan just a week ago or so, and she said one of the key reasons she was negative on the UK was because of the population constraints, particularly post Brexit.
Yeah, and that seemed to me more of a migration argument than one of birds.
Yeah.
The other thing that I pull out of what David Marles was saying is that the reason that sort of on a household, on a more individual basis, that it might be helpful for people's finances is simply the cost of having children, you know, the cost of raising kids, of childcare, is so astronomic in the UK that actually
households might kind of reconsider it on that basis effectively. Look, I think it's a really interesting bit of analysis, you know, demographics being destiny, that older economics catchphrase.
Really interesting and really important to us when you think about the productivity challenges of many countries as well. And we're going to focus on the.
UK now absolutely well. Speaking of the UK economic picture, So we had the latest monthly GDP figures out this morning disappointing the UK economy shrank at the fastest pace in seven months in July and zero point five percent. It comes though after the ONS reviewed UK growth post pandemic and actually upgraded economic output significantly for Britain. Johnny is now to discuss this and much more. I'm delighted to say, is the UK's Checkers Secretary to the Treasury,
Gareth Davies. Good morning, lovely to have you back on Bloomberg Radio. That it's a pleasure, great reaction to the UK GDP figures. Then the monthly data was much worse than expected, rapid Bank of England rate rises of biting plus the bad weather and strikes your view.
So I think you know, the data out today has been explained by the owns, has been as a result of two one off factors. One is the wet weather in that particular month that's hurt retail sales by about one point two percent, which is down, and also construction, So that is one factor, and as you allude to, the other factor is industrial action, particularly in the healthcare sector, and we've seen a drag on growth as a result
of health sector output. So I think it's important to one identify what has caused today's figures, but two put it in the context of the overall picture, which is that the end of Q two growth was up unexpectedly by some estimates. But also the IMF as you alluded to, as well as upgraded significantly their growth forecast for the UK. The Bank of England have said that we're going to avoid a recession, and the Ons revise their previous analysis to say that we were one of the fastest growing
economies out of the pandemic. So it is important to put this data out today in the context of the overall picture.
Yeah, context is obviously important and the forecasts are accurate, but Gareth, what is your level what is your level of confidence? That we are not in the foothills of a recession right now here in the UK.
Well, I remember not so long ago a lot of the forecasters were saying that we'd be in a recession by now, and that hasn't happened. As I say, I think the IMF, the Banking and the OBR have all upgraded their forecasts for growth. For the Treasury, for the government, what we are doing is, you know, seeking to ensure that we stimulate growth through our active policies. So whether it's workforce participation, as you saw at the budget with the chartcare reforms.
Still two point six million people who have healthcare issues who have not returned two point six million people, Gareth, and that's linked to the NHS and the failures in NHS. You have to fix the NHS to get some of those people back at two point six million people.
So what I was going to say is we are taking decisive action to incre grease workforce participation but also trying to unblock some of the issues for those who want to work to be able to work. So we're piloting various schemes, for example, to help the disabled, them those with long term health issues by providing extra support to them to get them into the workforce because we recognize that we want to you know, there's more work
to do to get people back into the workforce. We clearly have post pandemic pandemic situation in the NHS where we need to clear the backlog of appointments. The industrial action is not helping that, and we've been very clear. You know, the industrial action has caused I think nearly nine hundred thousand appointments to be canceled and so we are very clear about that. That is not something that we agree with and is clearly having an impact. But overall, overall,
I think the employment record is strong. Unemployment is still lower than most of our international competitors, and payroll employment is still at record high. So again, contacts is important.
Yeah, I mean, but that's part of the problem for the UK, isn't it. It's that that is fueling inflation. The Bank of England, though, expects Britain to stagnate basically for much of the next two years. So maybe you know, we aren't in recession, but we're certainly bumping along the bottom and that is the fundamental issue for Britain. It's
actually raising long term economic growth. It's not much to celebrate if the next two years are going to be stagnant and living standards are under continued enormous pressure.
Well, the thing that we've got to do is, as I've said many times before, the top priority. The thing we've got to do is cut inflation. We got to get inflation down because that acts as a drag on growth, and Prime Minister the Chancellor I have been very clear that is our number one priority. We've got to make sure that what we do in the treasury fiscal policy is aligned with monetary policy, that we support the Independent Bank of England to tame inflation and get it down.
Do you have to start cutting though? Is the triple lock on UK pensions going? I mean it looks like William Hague has basically taken the heat from the Prime Minister by calling for the pensions guarantee to be ditched the ifs that we were speaking to and yesterday saying that it's going to cost an extra two billion pounds more than budgeted two billion. That's not insignificant given how little headroom the Treasury has. Is the pension's triple lock just toast?
Well, we're committed to the Triple Lock. Since we introduced it, I think two hundred thousand pensioners have been brought out of absolute poverty. About twelve and a half million people in this United Kingdom rely on it and use it as a foundation for their retirement. What we want to do is ensure that we provide security and dignity in retirement while also ensuring that the system that we put in place is fair and sustainable. And we're very clear that we're committed to the Triple Lock.