Bloomberg Daybreak Weekend: Eco Data, Budgets, Elections

in India. I'm Joe Matthew in Washington. We'll look ahead of the first Republican primary on the calendar. That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three, on New York, Bloomberg ninety nine one, Washington, DC, Bloomberg one oh six one, Boston, Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius XM one nineteen and around the world on Bloomberg Radio dot Com and via the

Bloomberg Business App. Good day to you. I'm Tom Busby, and we've got February jobs report on Friday, and this week the economic data does not slow down. We'll get CPI, PPI and retail sales for February. For more, I'm joined by Ira Jersey, Bloomberg Intelligence senior rate strategists, and Jess Menton, she's deputy team leader for US Equities for Bloomberg News. Ira, We're going to start with that February jobs report that we got on Friday. Another strong headline number, three hundred

eleven thousand jobs added, more than forecast. The news, though, was mixed, the unemployment rate moving two notches higher, and although wage growth did slow, it still moved up, ramping up inflationary pressures. Let's hear what President Biden had to say about the report. This may be the part of pleased me the most about the report of jobs reports. People who've been staying out of the job market are moving back in, beginning to move back in. Jobs are available, Okay, Ira.

The Federal Reserve says it all the time. The decision policymakers will come to on interest rates will be data driven. What does this data mean for the Federal Reserve. Yeah, it means a little bit more of the same. I think that the fear that they Fed was going to hike fifty basis points is still on the table, but not not because of just this number, but because of

how strong the January data was. I think that the Fed is going to be a little bit happier with some of the some of the numbers within the payrolls report that we received on Friday. But but I think importantly this week's data, as you mentioned at the top of the at the top of the show, it's going to it's going to matter way more so the CPI data on Tuesday, as well as the PPI data later in the week, and then retail sales of course is

going to be huge as well. And keep in mind, we get this data right when the Federal Reserve goes into their quiet period, so we're not going to hear a lot of reaction from members of the Federal Reserve by the time we get the numbers until that we actually get the release of the meeting minutes, meeting statement on March twenty second. All right, the FED meets. It's less than two weeks away, the twenty first, the twenty second.

Already after that February jobs report, swaps are talking about the chance of a fifty basis point hike now only at fifty percent, so a lot of people counting on a smaller one. Is anybody counting on a supersized one

even bigger than fifty basis points? Yeah? I think that given the volatility and some of the issues that we're having in the financial sector right now that really affected rates late in the week last week, you know, moving two year yield to twenty five basis points because of what went on with SVB and some of the other financial institutions in the equity market. That seventy five is at you know, almost a zero percent probability at this point,

I think. But so the question still remains fifty or

twenty five. You know, you get somewhat slower PPI data, somewhat slower retail sales data, and then you know, fifty five probably becomes more likely, you know, the probability that that chance that you mentioned of a fifty or twenty five that keeps bouncing around massively, so that the market is still very skittish as and and really uncertain about what the Fed's move is going to be, just because this coming week's data is so incredibly important to that decision.

And Jay Powell made that exceptionally clear over during his testimony last week before the House Financial Services Committee and the Senate Banking Committee. And about that data good news. We have Jess right here, and Jess, why don't we talk about Well, first we're going to get CPI right Tuesday, then PPI, and then we'll get to retail sales. But let's talk about those two and the difference and what

you're looking forward to seeing. Well, the big thing, and as you know, the big focus is always on consumer prices, but producer prices might arguably just be as important. And the reason is when I'm talking with my sources, they like to look toward that as far as what do you input costs look like? And they look to that as far as maybe we'll see the signs of relief

there before they start filtering into consumer prices. So I've been tracking the CPI PPI spread, and this is something Gina Martin Adams of Bloomberg Intelligen her team crunch the numbers very frequently on in the spread actually turned positive

for the first time in December in two years. And the reason that matters is that bodes well for corporate margins and then in turn eventually also for stock prices, so you are seeing those glimmers of hope there on the producer prices side, even though in January is data we saw a tick up a bit, but if we can see that trend continue. When I'm speaking with my sources, they feel like that will eventually filter even more so

toward consumer prices. So that's going to be a big focus next week as well, in addition to just the headline number on CPI. And the headline number is we're looking at a four tenth of one percent increase, correct, and that is lower than January it is exactly, and then year over year that would be at six percent. I know we focus more on month over month to

see that trend. But something that also is important if you look at the past eight hiking cycles of the Federal Reserve, they didn't stop until the terminal rate was above CPI, So we still have a bit of a gap there, but it's beginning to narrow more. So the question is how much further, obviously would the Federals or

have to go. If you even just look at the bank side of things, Citigroup and Goldman sacks they had actually lifted their forecast recently that they're expecting fifty basis points at this next meeting, But JP Morgan and Bank of America are still holding that view of twenty five basis points. But a lot of that does hinge on what that CPI data is going to look like next week.

So that's going to be really key to see how do these banks views change potentially on what that number does look like and IRA, how does that factor in with your thinking on what the FED is thinking? Yeah, so I think it's important to note that you know that the FED has tended to hike until quote unquote the federal funds rate has been positive. But keep in mind that the indicator that they look at form for

the inflation gates, their preferred measure is the PC to Flater. So, and the gap between CPI and PC has widened quite a lot. You used to be around forty five fifty

basis points. Now it's over one hundred basis points. So so, so the fact that you have this this big divide between those two inflation measures UM you know, you know, I think is important because if if UM, if PC, the PC deflator remains around five point four percent, then if the Federal Reserve hikes another seventy five basis points.

They're there, whereas if if the Federal Reserve were to only UM were to look at CPI, they might have to actually hike much higher, because you're talking about, you know, six percent, a six percent CPI number this week, assuming that we get it now. Importantly, a lot of the inflation data that we look at, and if you look at CPI on that three month rolling basis, cpis come off quite a lot. And when you look at and when you look at core goods in particular, they're actually

growing at a negative rate. So so the good sector inflation is over, it's really going to be you know, where is how does the services sector inflation really ramp up? Particularly the what j Powell has said is kind of the Fed's new UM measure that they really look at, which is core services excuting housing. So around forty percent of CPI is this core services, that services excluding energy services.

So if those data come out very strong, then the Fed reserved while they might only go twenty five basis points. Remember we also get the Summary of Economic Projections, which includes that dot plot. So it's possible that if inflation seems to be stickier than the FED is hoping, then those dots could go higher and we could see a

higher terminal rate being priced in. So again, like instead of five and a half percent, maybe it's five and three quarters or six percent winds up getting placed in those dot plots, and I think that the market will react to any significant uptick in the dots this month.

I'm glad you brought up the dot plots because on the equity side of things, when I've been speaking with my sources, they feel like, especially portfolio managers, they feel like the equity market can withstand a potential peak terminal rate of around five and a half percent, maybe even a little bit higher. But something that spooks them is more or when it gets potentially closer if it were to happen at six percent or higher. But they feel like when you're looking at where the market is trying

to figure that out. At the end of January it was just below five percent. Now it's those projections trying to figure out maybe that's around five and a half percent.

Barclays was actually thinking that the median dot plot could potentially rise from five point one percent, which it was in December, to potentially five point four percent so even if we do see that happen with the Federal Reserve, when it comes to the equity markets, they're arguing that if that is where the Fed does go, you might not necessarily see some sort of sell off in the broader equity markets because that's kind of what they've been

pricing in. But if you see sort of a dramatic change there where maybe it's above five and a half percent, that's where potentially we could see some bigger movements and bigger swings to the downside in stock prices. One other big data point coming out this week retail sales. Retail sales, the survey says point one percent month over month increase. At least it's an increase nothing like what we saw

in ja January. Well, especially because that number in January came in a lot stronger than expected than even in December.

Typically you would you would see that in December because that ties into holiday sales, but that also carried over into January, so some of that potentially has arguably been maybe it's due to seasonality factors, But if we do begin to see that pull back, that could actually potentially bode well for equity prices because they kind of want to see this sweet spot where obviously you want the consumer spending because that's more than two thirds of what's

pushing the economy and growing the economy, but not spending so much to where this is keeping the inflation equation a problem for the Federal Reserve. So it's pulling it back enough to where you feel like what the Federal Reserve has been doing is beginning to filter into the economy, but not so much to where you are starting to worry about the economy going into a recession. I re jest. Thanks so much for joining us. Coming up on Bloomberg Daybreak weekend, we had to London to preview the UK

Chancellor's upcoming budget proposal. I'm Tom Busby and this this is Bloomberg Daybreak Weekend, our global look at the top stories for investors in the coming week. I'm Tom Busby in New York. Up later in our program, Apple's partner Fox con plans to invest about seven hundred million dollars on a new plant in India, but first in the UK. The Chancellor, Jeremy Hunt will unveil his tax and spending plans in the coming days, with the business community calling

on him to incentivize investment and tackle skills shortages. This is the UK economy narrowly avoided recession last year. For more, let's head to London and bring in Bloomberg Daybreak Europe anchor Stephen Carroll to Jeremy Hunt's downplayed hopes of any major large ast from the UK government in this budget, but an improvement in the economic situation is giving him

a bit more room to maneuver. He faces calls for giveaways, including freezing fuel jusy improving public sector pay, something he's considering, according to Bloomberg, reporting tax breaks to boost business investment on Bloomberg Radio, We've been discussing this with Tina Lee, Deutsche Banks UK and Ireland chief executive. For me, it's really around how do you create an environment that attracts investment whilst at the same time dealing with some very

real issues that are not yet resolved. And we've seen the news around the FED and making sure that inflation is something which needs to be overcome and that's true

here in the UK as well. So more broadly, I think what I'll be looking for is what happens around public sector pay, because again that will feed through into the inflationary numbers and ultimately set the tone I think for the latter half of the year because remember I mean we do have a backdrop of the Northern Ireland Protocol, yes, and whilst that not has yet been signed, I think

we're all optimistic that will happen. So that's Tina Lee from Deutsche Bank Bloomberg's New UK kind of as Danhanson with being now from more on this down looking ahead then to the budgers, what source of fiscal headroom? How much money does Jeremy Hunt have to play with? Yeah, so I think it's the way to think about it is sort of through two lenses. One is in the short term, So in the short term he's got a lot.

So borrowing has come in significantly under what the OBR was expecting, somewhere in the region of thirty to forty billion pounds. So this fiscal year and next fiscal year we think borrowing will be around that much lower. So that's a lot. But what's important for his fiscal rule, So the Chancellor wants debt to be falling as a share of GDP in the final year of the forecast period, which is twenty twenty seven twenty eight against that target.

In November he had nine billion pounds. We think he might have about double that this time, so an extra eight nine billion pounds. And I think what's really important. So the point is that the good news this year will dissipate over the course of the forecast period and there will be there'll be a little pot of money

at the end. What I would say is that in the contexts of a three trillion pound economy, which is how big the UK will be, nine million pounds is peanuts, So there isn't there is some months there might be a bit of money there, but to really go ahead, and we've been hearing about potential for tax cuts, but to really go ahead and do something meaningful, he hasn't

really got the headroom to do that just yet. So I think, I mean, we'll talk about the policy he might focus on, but I think, you know, I think it's going to be a lot of it's going to be around near term temporary measures that he's going to use. He's going to use that near term headroom and probably bank that money just and use it closer to the election. What's the broader economic backdrop here? We had been told them in the Bank of England gave us dire forecast

for a session in the UK. Things are looking a little bit better now, how are they looking for this year? So I think they're looking they're looking a lot better. I mean, I think we've spoken this year and the key thing that's happened, well, there are two key things that have and first is the data is just show

more momentum, more resilience. And the second thing, as we all know, we've had this big fall in gas prices and those two things combined I think will mean that the OBR will predict it probably will still predict a recession, but a very very shallow one and probably only lasting in the first half of this year, with growth or some very very minimal growth returning in the second half

of the year. And that's obviously a very different pictures what they were talking about in November, which was a peach trough fall in GDP of a little over two percent. You know, if it wouldn't surprise me if the peach troth fall in GDP was less than one percent now, so cutting the side of the recession in half. So the news has been good on the economy, particularly in the near term I think the question for the public

finances though, isn't just about the near term picture. It's about the medium term picture as well, and that feeds into the questions around productivity growth, around labor force participation, and actually there which goes back to why we don't think good news on the public finances will last. We think the OBI will probably take a slightly dimer view

of the UK's medium term prospects. And what that does, how that interacts with the fiscal picture is that it means that tax receipts don't grow as fast, and it means the fiscal picture isn't quite as rosy looking when you look at the medium term, which is where his fiscal target sits. So that's something to watch out when we get the Office for Budget Responsibilities report as well,

which is of course the government's fiscal watch dog. Is there anything then, given that context, is there I think the Chancellor can do to try and booth growth at this stage or is it really just only the short term prospects that he can look at. He goes to again, I was split into two buckets. One is the near term picture. We know he wants to haver inflation. We know that's one of the government's goals, So that means you want to you don't want to do anything that's

going to put that at risk. I think as things stand, the inflation picture has probably improved a little bit as well. In the UK, we've had data out that suggests it's it's a little bit. The underlying picture is a little bit weaker than most to commonistferre expecting. Obviously, the falling gas prices has a big effect as well going through the course of this year, and one thing I think he'll do is keep the cap on the unit cost of energy prices at two and a half thousand pounds

rather than really important for household exactly. So that's that's one thing. That's that's But he's he's he's definitely going to be focused, I think, at least at least at this point. And taking into account the fact he doesn't have a huge amount of headroom to play with for sort of medium term tax cuts that affect the medium term picture, I think he's just going to very much be focused on shorter term if there are giveaways, ones that affect the public finances in the near term but

don't affect the medium term picture. So as I say that the price cap on household energy bills, we might see something around capital allowances, but again I think that will likely be a temporary thing rather than a permanent thing. And the whole point here is, and the whole sort of bigger political backdrop, is that you have an election probably next year, and it's the point at which essentially he uses up all his firepower to say to the electorate, look,

this is our offering. And I think probably now is a little bit early, and the fiscal picture doesn't quite allow for it as well, But I think now it's just a bit early for him to go ahead and do that. Yeah, I mean it's interesting that you talk about some of those allowances because we have been reporting

that he's considering doing something around incentivizing investment. This is sort of a long running problem within the UK economy, particularly since Bragnics are trying to get businesses to invest more. How how can you put that in context for us? How big a problem is that? And so yeah, I mean it's a huge it's a huge problem. I mean, I think I think the level of business investment now was only just about got back to its pretty pandemic level.

So it's it's it's really struggled to recover from the pandemic. And if you look at it in the context of what's happened, as you say, since the Brexit referendum, we're well beneath the performance of other G seven economies the UK economy, so I think there's something there is definitely something to be done. The context again here though, is that the government has put in place a massive rising corporation tax that's going to take effects from April. Yeah, exactly.

So you've got a six percentage point rise in the CT rate. That's obviously a massive disincentive for investment at a time when interest rates are going through the roof. So what the government is going to try and do is sweeten that that hit, essentially by introducing tax allowances. And this is something that Richie soon Act toyed with

when he was chancellor. He introduced this temporary superdeduction and this is something that's actually expiring at the end of at the end of March, and I think that the government will want to or Hunt will want to put something in place to at least temporarily replace that. Bloomberg Senior UK economist Dan Hansen thank you very much for your insights. I'm Stephen Carroll in London. You can catch us every weekday morning here for Bloomberg Daybreak Europe, beginning

at six am in London and one am on Wall Street. Tom. Thanks Stephen. Coming up on Bloomberg Daybreak weekend, we had to DC and get a look at the week ahead in the nation's capital. I'm Tom Busby, and this is Bloomberg broadcasting live from the Bloomberg Interactive Broker Studio in

New York. Bloomberg Elomon Freo to Washington, DC, Bloomberg ninety nine one to Boston, Bloomberg one oh sixty one to San Francisco, Bloomberg nine sixty to the country, Sirius XM Channel one nineteen to London, DAB Digital Radio, and around the globe the Bloomberg Business app and Bloomberg Radio dot Com. This is Bloomberg Daybreak Weekend. I'm Tom Busby in New York with your global look ahead at the top stories

for investors in the coming week. We had to Washington, DC now for a look ahead at the week in politics. We're joined now by Bloomberg Sound On host Joe Matthew. Joe. Thanks Tom, We're gonna look ahead now to the first Republican primary on the calendar. That would be Iowa, the fifth of February twenty twenty four. The fact of the matter is the candidates are not waiting Ron de Santis in Iowa today. We are gonna go on offense. I'm gonna find issues. I'm not just gonna sit back and

waited for come to me. And I sat at my desk the first day as governor, I looked around the office and I said, you know, I don't know what soob is going to succeed me in this office, but I can tell I'll tell you this. They are not going to have very much to do because I'm taking all the meat off the bone there is and I'm gonna get all this done. You wonder why he assumes the next governor's an s ob like what if they're friends?

But I digress. On his way to Iowa for the first time since announcing next week, Donald Trump, you know, Ronda Sanctimonius head the crowd and Stadnila today, one hundred and thirty nine people in Satnay. We got a lot of people. We have one hundred and thirty nine times about thirty. We got a lot of people here, but I always say hit your enemy a little bit early.

Some people say don't, but I say do. Okay. That was back in February, almost a year to the day ahead of voting, and we're joined by Bloomberg Government Congress reporter Emily Wilkins and Bloomberg Politics reporter Ryan Teak back with as we take a peek into the landscape of twenty twenty four and look a little bit into the week ahead. Ryan, it's great to see you here. Thanks for coming along Iowa. Of course, we do need to establish this. It's a separate calendar for Republicans and Democrats

this time, but we're talking the Republican field. How important is Iowa going to be for Donald Trump? You know, he didn't win Iowa in twenty sixteen. I think that he's doing better among Iowa voters now than he did then. He sort of established that beachhead, So I don't think losing there is killer for him. I think he could he could withstand that if he's on the ropes against a guy named DeSantis, though, Could it be more imperative

to start winning early? Yeah, I think that there, it's definitely the field is going to narrow much faster than in twenty sixteen when he last based a competitive one and it was sort of dragging on about who was going to be the mysterious candidate X to find to be in the final two, and I think that ultimately

divided the competition. So I think that there's going to be a push among everyone if someone shows themselves strong in an early state like Iowa, to among Republicans to sort of annoint that person as that's it, this is the alternative to Trump and and get behind that person quickly. Are we assuming Ronda Santis is running here? Ryan? Yeah? I mean I this. You know, I almost corrected you they there when you called him in Candida because technically he is not yet running, But I mean, you know,

he's running. So that's where we're at. Emily Wilkins, what do you think Donald Trump's acting like Ronda Santis is running? Rhonda Santis is acting like Ronda Santis is running, but he's in no hurry to win outs, right. I don't think one just goes to Iowa casually and speech, especially when one is the governor of the state of Florida. Yeah, and to be to you know, to the to your question, which is a great one of when he's actually going

to get in the race. I mean what he has said and what sort of those near to him have have implied that he's going to wait until the Florida State Legislature session is over, which makes sense in a way. I mean, he's he's already kind of a known quantity out there. He's not someone who could kind of benefit from getting into a race like this being one of the first couple to really get in and get his

name out there. Um. At the same point, it kind of makes sense for him to, you know, be able to focus on finishing up what's what's going on in the Florida State Legislature because certainly some of those things will be things that he will run on when he does launch his campaign. Yeah, that's right. And he's getting a lot of publicity from stuff he's doing as governor.

I mean, I think if you're Nicki Haley, you have to be you know, campaigning for anyone to pay attention to you, because you don't have a day job, right, But like he's Florida governor, and literally every bill he does is something that's designed to get national media right, tack all the national media, you know, and get Republican voters excited. So he doesn't really need to be officially

running to get attention. He hasn't gone after Donald Trump's certainly not in the way Trump has gone after him. But he has been asked about that, and he's he's been very careful in choosing his words to react. This is Rhonda Santis the beginning of February. I spend my time delivering results for the people of Florida and fighting against Joe Biden. That's how I spend my time. Okay,

big rout of applause on that. You know, he's not here to attack other cannabis as the other Republicans, the idea, I don't spend my time trying to smear other Republicans. There it is so emily though at a certain point he's probably gonna have to write, you can't beat Donald Trump without going up against Donald Trump without getting in

the ring. Right. Absolutely, But at the same point, I think, to a certain extent, if you are a Republican for the nomination right now, you are not trying to completely isolate Trump supporters. At this point, You're trying to figure out a way how you can appeal to those some of those supporters get them over on their side. So it's probably not a good idea of right out the

bat to slam the guy too hard. But certainly, you know, as this continues, if DeSantis and Trump both wind up continuing to be the strong nominees that they seem to be at this point in the game, yeah, eventually you're you're going to be seen a little more headbutting between the two of them. You know, Ryan, we mentioned the fact that the primaries and fib we've got debates way before that. When does this field finally come together or will we actually have some debates without a full field

this summer. I mean, you could have people filing as late as to fall if they feel like there's a weak point. You know, you've seen in the when we've had bigger fields, and I have a story about this right now. There's in some past years they were like seven, eight nine people running by this point, but there also have been years where they didn't really kick and intel may or June. So we're not we're not anywhere near the final field. We've only had one person who people

were watching, Larry Hogan, former Maryland governor bow out. So far, there's a lot of other people who are at least keeping their names alive as potential candidates, which is sometimes just a ploy to get more attention for your book

or whatever whatever you're angling for. Yeah, so you know, there's a chance that somebody might come in if they if de Santis looks like he's not as strong against Trump as some of the folks who don't want Trump are hoping, then there might be some late joining person. I mean, I think there's also a real question of the debates, I mean, whether they can pull this together. Like Trump has not said that he will support the

eventual nominee. Rona McDaniel, the RNC chair, has said that she wants to require all the candidates to agree to that before they get on stage. Of some of the anti Trump candidates have said that they wouldn't do that for if its Trump, So that's kind of messy, Um, it's it's us. So just potential that you know, if Trump decides not to show up at a debate like theyone gonna watch, if it's the Santist debating, like Nicki Haley, I mean, he could just sort of kill the whole format.

I know how how he would answer that, it's all about the ratings. And now, as as Ronda Santist, Donald Trump and others head for Iowa, Joe Biden is heading to the West coast next week. Emily Wilkins, this is all about the budget. This is the post state of the Union, post budget road show that now begins once all the bluster is out there. Though, when do actual negotiations begin between these two parties. We know the Republican budget won't be out for weeks, maybe a couple of months. Yeah,

at this point, they've got that going on. At the same point, remember that the negotiations around the budget and the debt limit are still somewhat similar from the negotiations around actually funding the government for the next year, and that's something that we expect lawmakers to really start digging in the White House. Releasing their budget is kind of the unofficial kickoff of that happening. And I think it's

going to be very interesting this year. With Republicans in the House running the floor with only a five vote margin, they have vowed to bring. You know, they've got a huge government. They break it up into twelve spending bills. It is really difficult for them to actually bring all twelve spending bills to the floor, kind of go through the regular process, if you will. But that is what

Republicans are really pushing for right now. Thanks to Ryan Teague Beckwith and Emily Wilkins and Tom is a programming note, an important one for you. Starting Monday, Balance of Power moves to five pm on Bloomberg Television, now hosted by Anne Marie Hordern and myself will be at the intersection of Washington and Wall Street every weekday bringing you the latest political news. Balance of Power at a new time, five pm Eastern on Bloomberg Television. Tom, thanks Joe, and

good luck on the new show. Be sure to tune into Bloomberg Sound on weekdays from one to three pm. Wall Street Time here on Bloomberg Radio. Coming up on Bloomberg Daybreak weekends and Apple Supplier focuses on India, will bring you the details. I'm Tom Busby, and this is Bloomberg. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm

Tom Busby in New York. We learned this week that iPhone parts maker Fox Contechnology Group plans to invest about seven hundred million dollars on a new plant in India to ramp up local production for more Now, we're joined by Bloomberg Daybreak Asia anchors Doug Chrisner and Brian Curtis Tom With US China tension simmering as they are, Apple supplier Houn High has confirmed that he will set up

a new plant in India. The confirmation caused quite a stir in China as it raises the prospect of Apple shifting its manufacturing supply chain out of China, and indeed, Bloomberg reported this week that Apple itself is expected to increase its focus on India. On High, or fox Khon as it's often called, will invest seven hundred million dollars on a new plant in India's Kannataka state. One of the big issues for the company over the past year

has been the lockdowns in China. Yes, and even though China has reopened, fox Kon said this week that sales dropped eleven point seven percent in February from a year earlier, even with the strong January, it raised a few eyebrows. Dug and I thought we would explore all the questions raised by Foxcon making this decision to do more in India. Bloomberg Tech editor lad Sevof joins us, what do we think is the prime reason, Flad that Foxcon is doing this.

It's one that Folkscon itself is not going to say, but it really is a customer demand, and Folkscon's biggest customer is Apple. We will, but it is a theme and a trend that really transcends these two titans of the industry, as we might put them. Fellow Taiwanese suppliers such as Wistron are also looking to expand in India.

We heard from a Goetech executive, a Chinese supplier that's expanding in Vietnam, and he spoke perhaps most candidly out of any of these supply chain executives, really just saying customers want this. They want us to have alternatives to China now. But he's saying, take out manufacturing out of China and put it elsewhere. But what customers are really asking for is more geographic diversification. So that diversification, I would imagine, is kind of like an insurance policy against

problems down the road with your supply chain. So in effect, it's not as much as an increase in capacity. It's more about redundancy. Am I right or wrong in that? That's right? That's right. Now. That being said, it is interesting, like one of the bits of off the cuff analysis that you could put together is to just look at iPhone production in India in recent times. Now, Fox going again is one of the leading assemblers there that doubled in the past year, and it is happening much faster

relative to production and assembly of iPhones in China. And when you look at iPhone sales on an annual basis, they kind of flat. So if iPhone sales overall flat and India production is increasing, that kind of tends to give you the suggestion that some production is moving out of China. We've long thought that American manufacturing might move to India, but one of the big problems in the

past has been infrastructure. They simply haven't had the same sort of supply chains are developing there that we've seen in China, and nor the physical attributes to get it from a facility to pour it to customer. Has that changed It should be changing over time, of course, nobody

has China's infrastructure system. The other thing we have to bear in mind is that so many of the raw materials and the basic supplies and basing components that go into devices are they're made in China, So you're covering smaller grounds, smaller distances, even if you don't have the world class infrastructure that China has. Now, the other thing to bear in mind is the seven hundred million dollar plan that Foxscon is planning is to primarily start with

iPhone components. Down the line, it may actually assemble iPhones too, but that's what we're seeing here as well. India itself, it's subsidizing companies like Foxconn set enough factories, it is providing its own investment in its own infrastructure, and then companies like Foxcon are building let's say, the peripheral ecosystem around an iPhone factory. Lad, thanks so much for joining us and shedding some light on this story, which speaks

to a much bigger story down the road. Bloomberg Tech editor Lad Savov and Brian Curtis, along with Doug Christener. You can catch us every weekday here for Bloomberg Daybreak Asia, beginning at six am in Hong Kong and six pm on Wall Street. Tom, thank you Brian and Doug. And that does it for this edition of blue Bird Daybreak 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 Husby. Stay

with us. Top stories and global business headlines are coming up right now.