Bloomberg Daybreak Weekend: Retail, Energy and Inflation (Podcast)

than expected economy. What are we talking about Indonesia? I'm Amy Morris in Washington. We're gauging the impact of the investigations in the President Trump's dealings on downballot races. That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg Elibam Free O, New York, Bloomberg one, Washington, d C, Bloomberg one oh six one, Boston, Bloomberg nine sixties, San Francisco, d AB, Digital Radio London, Sirius XM one nineteen and around the world on Bloomberg Radio dot Com and via

the Bloomberg Business App. Hi, everybody, I'm John Tucker, and let's start today's program with retail and Bloomberg's retail reporter Brandon Case joining us from Dallas. We have a bunch of retailers opening their books in the coming week home Dee Paul, Walmart, parent of t J Banks and Marshall's Target calls Macy's Ross Stars. So, before we get to some of the specifics, Brendan, how is the American consumer holding up? I think the after that is so so.

What you've seen so far is you've seen pretty steady, even sometimes robust, overall spending. But if you break that down, what you're seeing is a consumer that is increasingly under a lot of stress. And what that is causing is a situation where people are being forced to spend a lot more on essentials, food, fuel, things like that, and that's leaving a lot less money left over for discretionary goods.

UM and us emerged as a big problem for Walmart, Target, pretty much all retailers, UM and I think that with the earnings reports coming out the next week and and and also after that, we should get a lot more insight into how these companies think the consumer will hold up the rest of the year. We'll get more about the back to school shopping season and probably get there. They're kind of the retailer's first predictions about the holiday rush at the end of the year. We're already up

to that. Yeah, we're already there. I mean, of course, for a lot of these retailers, they've been planning for that since February literally. Um, but it's it's it's it's increasingly upon us. You know, last year that holiday season started pretty early because of all the supply changes, ruptions, people who are out shopping, you know, earlier than usual. Um.

And we'll see what happens this year. I think the question boils down to whether retail spending is going to end up being a lot weaker after two very strong years during the pandemic. Okay, Um, we're still buying stuff, but it's just the stuff that's lower margin. I mean, I have to buy groceries. I gotta eat, but maybe I'm not going to spend you buy a TV or

something like that. Yeah, that's exactly right. So if you look at that through the prism of of Walmart Target, what that means is that people are spending a lot more on groceries, which those companies make less money off of. Um, they make more money from general merchandise sales, you know, like clothing, electronics, home goods, um. And they're selling a lot less of those more profitable items and a lot

more of the low margin items. And so if you take a company like Walmart, they actually, you know, they're actually doing fine from a revenue perspective. They actually raised their revenue forecast a little bit less month. But since they're selling more of their less profitable you know stuff their their their groceries, UM, it's really hurting profit. And it's also causing them to mark down a lot of items, which further erode their profit margins. And that's not to

say that they're cutting all prices. I think what they're doing is basically boosting the price any any place they can, but in some categories the sales just aren't there and so they're having to cut prices. Okay, Well that leads me to the next question, as far as the inventories. Are the inventories of these places bloated, yes, very much. So okay, so why wouldn't they automatically have to discount then? Right, Well,

that's what they're doing to a certain extent. And the mystery is that we don't know exactly what their inventories are made up of. But if you imagine the inventories as being a little bit overweighted towards discretionary goods they thought they could sell earlier this year, that's what they're having to mark down more and more aggressively. And we're talking about clothing, We're talking about kitchen appliances, we're talking about patio furniture, all that stuff that people are stocking

up on during the pandemic. You know, the retailers knew that spending was going to tail off on those categories, but what they misjudged is just how fast that would happen. Um. But what they're not doing is they're not discounting the central goods that people are increasingly, you know, using their paychecks to to to die. Do these places they have their own credit cards? And the reason I answered do they?

Does that tell us much about how much debt is being racked up by their customers, whether those they're paying off those credit card balances? Yeah, a lot of them do. Targets got its own credit card. A lot of the department stores have their own credit cards, the Hume Gold stores, UM.

And I think what you're see being there is that you know, spending um has been very strong, and savings had been going up a lot during the pandemic, in large part because of the government stimulus programs and also because people were not going out as much. I think what you're seeing now is that people are increasingly kind of blowing through those savings. They've got um less of a cushion, and you know, that's really starting to eat into what they're able to actually spend its stores and

sort of causing this overhang on retail sales. Brendon will leave it there. Thanks very much for joining us. We appreciate it. Bloomberg's retail reporter, Brendan Case. And just ahead on Bloomberg Daybreak weekend, look at Germany's Uniper and the Russian energy crunch on. John Tucker. This is Bloomberg. This is Bloomberg Daybreak weekend, our global look ahead of the top stories for investors in the coming week. I'm John Tucker in New York. Up leader in the program. Indonesia's

economy has been homming along. Can it continue? But first, the German energy giant Uniper will report results that will be closely scrutinized this week. That firm has been at the center of Europe's energy crisis since it was forced to seek a government bail out last month. And for more, let's into London now and bring in Bloomberg Daybreak Europe

anchor Stephen Carroll. Stephen thanks a lot. John. Uniper is Germany's biggest buyer of Russian gas and was pushed to the brink because Vladimir Putin squeeze supplies and retaliation for European sanctions against Russia's invasion of Ukraine. Germany's economy Minister Robert Habeck has warned that Russia's gas squeeze posed the risk of a Lehman Brothers like contagion with universe failure potentially spilling over to the wider economy. So these are

a set of results very keenly watched. For more, I'm joined by Bloomberg's Rachel Morrison, who leads our team of energy reporters here in London. Rachel, what exactly is it about these results that we're looking out for most importantly, Yes, you're right, it's going to be super interesting because a lot of what these results will cover will be the

period before the government bailout. So Uniper has been quite upfront with updates to the market on how much money they were losing, so a lot of that was in the lead up to the bailout. But we expect to see a bit more on the losses they're making on having to buy gas to replace the gas and not getting from Russia and those contracts that you know they have to pass onto customers. So we'll see, you know, maybe an update on losses and really what their balance

sheet is looking like. So we don't know how they will factor in the government bailout, but we'll get an idea of just how quickly they're burning through money, and it will be interesting to see how much of a problem the gas supply situation is still causing them. It's because this is a company that's at the point to end, if I can put it that way, of this crisis and the supply issues coming from Russian gas as well.

We are seeing governments across Europe trying to address these issues with big state owned energy companies when they're dealing with different supply issues. Another case of that z d F and France, where the French government, which already owned the vast majority of that company, has now stepped in to try and buy more of it. Is this a big challenge facing governments in Europe to try and manage crises and energy giants. Yes, we're really seeing a time

when energy companies are just too big to fail. So the chaos that would ensue from the downfall of one of these big companies. So on the kind of industrial side, these companies by wholesale gas and sell it to industry, and also they both have customer facing parts to the business, not just at home but in other countries too, and the disruption that that would cause if they were to

fail just wouldn't be fathomable at this time. You know, in the past, perhaps another company could step in UM and so there wouldn't be the same kind of impetus

from governments to bail out companies. But at the moment, the same pressures face most of the other companies and it would be difficult to find anyone else to step in, particularly with some of the bills we've seen that UM governments have picked up with the likes of Uniper and e d F. You know, that's not going to be something that another company can easily provide, which is really

why it has to be government intervention. And does that mean for governments essentially, no prices too high to pay to save these companies In a way, that is what we were trying to What we were seeing with Uniper was the kind of discussion with Finland trying to get them to help out as well, and the pushback sort of saying, you know, we don't because the cost obviously

gets passed on two people. So the government, the German government, will pass those costs on eventually to German consumers, and so they wanted to try to spread some of that burden because you know it it fixes things today. But in a way, a lot of the costs get kicked down the road, and it means the crisis could last longer and longer as those costs continue to feed for two bills. Indeed, there's an element of this that's quite reminiscent of the Eurozone crisis as well, where we were

talking about big government intervention. At the time, it was more related to banks and how and exactly who pays for that. Further down the line as well, how much of a challenge is this for governments to manage these sorts of unruly issues around how predictable I suppose is that these problems would arise for governments. Yes, I think

it's exactly that. It's a sort of short term sigh of relief from everybody, But then later, you know, there needs it needs to be worked out, what happens and how to how to pay for it, because a lot of what's happening in the energy markets has not gone away. You know, high prices haven't changed, the Russian situation is still going. Gas supply is still being curbed, so those

factors that were causing big problems are still there. So you know, it may become to a point where the government's tested on how deep their pockets are if if Uniper continues to need cash, what they can cut back on what they can do with passing on the cost to customers, which has been a big issue in Germany that they can't pass a lot of those extra costs onto their industrial customers. We're in the summer in Europe now, so this is the period where normally we'd see demand

for these sort of energy companies being lower. That's not been the case due to some of the heat waves involved. But how much worse could this problem get later in the year when we head into winter. Yes, that's right. It's that's really the most surprising thing about some of the sort of supply issues that we've seen from um the warm rivers in particular in Germany and in France, we've seen some output cuts at power plants. And this

is summer. As you said, demand is low, so we're really seeing a kind of fear about what will happen if demand continues to rise, as we know that it will a winter. What happens when the weather gets cold, and if you cannot find any more supply for the market, then the only thing you can do is cut demand.

And we're seeing government starting to draw up their emergency plans figure out which industries they'll cut, who who can who can give back some of the demand that they usually need, because we're not going to be able to supply power and gas to everybody in the same way as we did last winter. And of course that's not just a continental European problem. We're seeing the UK government

also prepare for that problem leading up to blackouts. Were told yes, it's looking like there's a four day period in January that they're particularly worried about, where if the weather gets cold, if supply on interconnectors, both power coming from the continent and gas is limited that there wouldn't be enough gas perhaps for power generation, and at that point they may need to take action to cut industry

and also households. So that's sort of likely to be in a sort of rolling way where they may say to one region at a time that you know, you have to have no electricity for an hour or so, and then swap between the different regions. But I mean, that's really quite shocking to think that, you know, a G seven economy can can be facing that in just a few months time. Are there any other i'll turnative

options for energy sources? So gases has been traditionally been the filler to pick up where other energy sources can't compete either any other choices that governments have. That's really the reason why Europe is rushing to fill gas storage. So that's the best way that you know, we can keep those reserves. We know how much we have, we

can use it. However, the problem is is that even if we get those levels full, if Russia cuts off the gas, you know, just quite soon into the winter, say October November, then analysts do think that we will run out of gas in storage. Okay, Rachel Morrison leading our team of energy reporters here in London. Thank you very much for your time. I'm Stephen Caroline, 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. John Justly Hill on Bloomberg Daybreak Weekend. Name one country where the economy has been coming along and inflation isn't a problem yet. We'll take a look at Indonesia and John Tucker broadcasting live from the Bloomberg Interactive

Broker Studio in New York. Bloomberg Trio to Washington, d C, Bloomberg to Boston, Bloomberg one oh six one to San Francisco, Bloomberg nine sixty to the country, Sirius XM Channel one nineteen to London, d A B digital radio, and around the globe the Bloomberg Business app and Bloomberg Radio dot Com. This is Bloomberg day Break Weekend. I'm John Zuckery in New York with your global looking ahead of the top

stories for investors in the coming week. You know, we talked a lot about how inflation is slamming Asian countries and growth has been slow, but you know that's not true everywhere in Asia for more. Let's go to Hong Kong and Bloomberg day Break Asia hosts Brian Curtis and his colleague Doun Krisner, John Doug and I thought it would be a good time to talk about Indonesia. Indonesia's

annual budget comes out on August. The economy has been humming along very nicely this year, even with some of the extraordinary challenges of supply chain disruptions and inflation around the world. The Jakarta Composite Index is one of the few global stock benchmarks to actually be in the green for the year, and unlike many countries, inflation in Indonesia is not being viewed as a major issue. Bank Indonesia's core inflation measure is near the midpoint of its goal

that between two to four percent. Even so, the central bank is expected to raise infest rates this month. Joining us is Claire Jao, who reports on the Indonesian economy for Bloomberg News. So a lot, Claire is going right in Indonesia. It's been helped a lot, I guess by high commodity prices for a big part of the first half of the year. But they're also getting policy right. In Indonesia, what would you say is the sweet spot at the moment. Yeah, Indonesia has really been one of

the few lucky countries of twenty two. As you've said, well, the rest of the world has been worried about inflation. Indonesia has had manageable inflation. The budget is in surplus, and record low interest rates until now, well everyone is hiking. So it's curious because if you look at the latest reading on consumer confidence for the month of July, I think the index was down a little bit more than what we saw in June. How is the Indonesian consumer faring?

If you look at inflation in Indonesia, the headline inflation has been a pretty good number. We're still at five percent uh, it's breached the central banks target of two to four percent. However, if you strip out all of the volatile items and look at just core inflation, which is what the central bank is looking at, it's still at three percent, which is still at the midpoint of its target. That's really what's helped it keep interest rates

at record lows. However, as you mentioned, consumer sentiment is going down, and the reason for that is because volatile food items are surging, the prices are searching for that. That's for important foods like so if for example, and um crops like chili, garlic that have been affected by

bad weather. So there is there does seem to be a bit of a divide between what the central bank is tracking, which is core inflation, and what consumers really feel on the ground based on what everyday items they buy and what every day items they have to consume. What happens when commodity prices really turn. We've seen some easing of commodity prices, generally a big drop in oil prices. In such if there's a bigger fall off, how does that affect the country? I guess that's the mystery that

that Indonesia has to face next year. The government is well aware that the commodity we've has to turn at some point UM and that much of what's driving price pressures up to day is what's happening in supply chains and the war in Ukraine UM. And that's really given

them a lot of leeway this year. That's given them record high exports, that's given them government revenues, that's allowed them to pour in as much as thirty four billion dollars in subsidies and compensation to keep energy costs low for ordinary Indonesians. That same situation may not happen in once these coal and oil prices fall. So what they're hoping for is to start to taper off UM some

of their unnecessary spending UM. President Joco Weddo has told his ministers, don't start new projects, Let's focus on just finishing the existing ones. So it's very interesting that you bring up the president because in the coming week, the editor in chief of Bloomberg News, John mickel Thwaite, will be sitting down in conversation with President Joco Weddo. Recently, Joco,

we ordered the cabinet to keep using the budget. Fore is I think the way the Finance minister described it as a shock absorber keeping that budget deficit below three percent of total GDP. So talk to us a little bit about the importance of government subsidies in keeping the Indonesian economy in this current sweet spot. I think that's how Brian described it. Yeah. So, and as we've seen with many countries, inflation can be a very political issue,

and Ko we saw that earlier this year. When cocaing oil prices surged and his popularity ratings fell. So this is something that's very very close to his heart. Um. He was a very firm advocate in streamlining fuel subsidies, energy subsidies, but that's something that they've really stepped back on this year, and instead they've said, whatever money that we're earning from our record high exports, let's pour it

back into the economy through these subsidies instead. Clara, thanks so much for joining us and for sharing your insights on Indonesia. Claire Joe, who reports on the Indonesian economy for Bloomberg News, Brian Curtis along with Doug Krisner. You can catch us every weekday here for Bloomberg Daybreak Asia, beginning at six am in Hong Kong and six pm

on morste John, Brian, and Duck. Thanks a lot. Just to Hill of Bloomberg day Break Weekend, former President Trump and the g This is Bloomberg Daybreak Weekend, our global look ahead of the top stories for investors in the coming week. I'm John Tucker in New York. Watch for Republicans to either continue to try to capitalize on former President Trump's recent headlines or try to distance themselves from them for more or let's head to our bloombergroom in

Washington and Amy Morris Amy. All right, thank you, John, And we do have more primaries underway in the coming week, more investigations unfolding as well. Joining me now to talk about this and to connect some dots. Bloomberg National political reporter barn Naquette, Mark, thank you so much for taking the time with us. Good to be with you. Now, let's start with the GOP and former President Trump and um, some Republicans you've seen casting Trump as a victim in

all of this these investigations. How has this galvanized them? Well, particularly the search warrant that the FBI executed at Trump's Morilago resort this week. Um. The Republicans have really sought to capitalize, I think on that rate in in a couple of ways. One by firing up the Republican base for the mid term elections where in control of Congress will be determined. Uh. And also President Trump, I think is going to try to use it to solidify support

around him. Um. You know we've seen you know, Trump and prominent Republicans for a long time. Um, try and undermine UH credibility and and and trust in major institutions, essentially saying these institutions are broken and are after Trump in particular and Republicans in general, whether it's the Justice Department and the FBI and the media and fake news

and big tech which censors conservatives. So this rate in Florida, UM, you know, sort of being used to reinforce that idea that UM, you know, the Democrats in particular and UH control of the machinery of government are are out to get Trump and Republicans. This could fire up the base. But also I think that Trump's the hoping and it's can sort of bolster his grip on the GOP. And we had seen signs that it was slipping with the

January six investigations. UH. And you know, some things like his endorsed candidates not winning in some high profile races like in Georgia, UM and Poles were showing that, you know, Republicans were starting to feel like even if they loved Trump, they loved his policies, they loved his first term. You know, they might be opened to somebody like Governor PA Governor Ron de Santis, who supports saw the Trump policies, but doesn't have the same political baggage you know, for potential run.

So again, the rates sort of I think you've seen you know, Republicans rallying around Trump and you know, in in some ways could actually boost his support within the party. I wondered about that. You mentioned that this would fire up the base but couldn't move the needle or changed minds. And what I mean is those who are really entrenched with Donald Trump tend to be unflinchingly rigid. They're not going to sway. Will this make them maybe have a

second thought? Or on the flip side of that, those quote never trumpers that we've heard about, would this move the needle for them? Would they start thinking, Wow, they really are treating him unfairly, Like does the needle move either way depending on which side of the coin you're looking at. Yeah, that's a good question. I think the answer is we don't know. I mean, you're right, I think sort of the first impression or first instinct is that this, this rate in particular, is not going to

really change any minds. If you you know, before the rate, you know hated Donald Trump and think, you know, he should be in jail. This you know, this rate will just reinforce it that he's you know, um deserved ing of being rated. Um. But if you were, like you said, a Trump supporter, Um, you know, the ray will just reinforce the idea that the Democrats are out to get him. I think the question is does it does it motivate anybody to vote who otherwise might not be inspired to

vote in the mid terms, particularly Republicans? You know, does this sort of get you know, a Republican voter off the couch he thinks, well, yeah, you know, it really is important that I vote in this selection because again, the Democrats are out to get the Republicans and Donald Trump.

So it's not a matter of winning hearts and minds as it is just getting people out to the polls, increasing that that appearance of the polls right in particular in some of these key midterm races, um, you know, where you know, swing voters could could matter and in determining the outcome of who wins and you know, ultimately who controls you know, Congress. Looking ahead though, could this possibly motivate Donald Trump to announce a run for president

sooner rather than later? I know there was a debate amongst some of his supporters saying, no, no, no, you want to wait because of the financial implications and the the debts that you might have to pay off. What would be the advantage of announcing sooner because of the search by the FBI. Yeah, you're right, there's there's some in his world that are calling for him to announce immediately.

Steve Bannon, for for one, UM, he's saying, you know, President should fly down to Marrow Largo today and and announced he's running. Um. There's some thought that you know, this would help him, UM by sort of capitalizing on on the raid and say well, hey, I'm fighting back. And and also you know, there's there's some thought that you know, if he's a an announced candidate for president, it makes it harder for um, these various investigations to

to touch him. You know, that the idea that it would be harder to prosecute a you know, uh, an actual federal candidate rather than somebody who just talked about running for office. But there's still you know, a big push against Trump doing that. A lot of Republicans feel like if if Donald Trump announced that he's running in today that this would actually hurt Republicans efforts to retake control of the House and the Senate in the midterm elections.

Republicans very much want to run on um skyrocketing inflation and crime and issues they think and they could really use against Democrats and make the midterm races about that. And if Donald Trump is running for president, the fear is that could just energize Democrats, you know, particularly some of these swinging independent voters who don't like Trump, to get out and vote UM and distract from the attempts

by Republicans to use inflation in the economy against Democrats. So, you know, the Democrats would very much like the races to be about Donald Trump and not you know, some of the issues they're fighting. And we are talking with Bloomberg National political reporter Mark Niquet about former President Trump's legal problems and how that could impact voters. Now, Mark,

you are in Ohio. You've covered presidential campaigns, including the Trump campaign in twenties six, and you've been tracking these investigations. I'm curious about what it looks like inside the GOP right now. Is there more of a split than we're

seeing publicly? Are those are those who may be laying the groundwork for a post Trump GOP Actually was kind of seeing the opposite where you know, we had, um, some uncertainty before the the FBI raid about you know, who would actually be willing to challenge Donald Trump in

if you ran on the Republican side. UM. You know, we had potential Canadas like former Secretary of State Mike Pompeo, UM, UH, Senator Tom Cotton, UM, former UN Ambassador UH, Nikki Hayley, you know, all out there sort of laying the groundwork for a potential run, but unclear if they would actually challenge Trump if he ran. UM. And with this this raid, I think you've seen sort of a rallying around Donald Trump.

You know, immediately after the raid, UM, you saw virtually all of the potential Republican presidential candidates, including Ronda Santis UM putting out tweets and statements supporting Trump and calling this raid you know, politically motivated and and and the like, UM sort of suggesting that they feel like Trump still is the king of the GOP and you know they needed to be out front, you know, supporting him on this raid. So I think it raises the question does

this make it more difficult? UM? For any of these candidates to actually challenge Trump. If Trump announces for again, I think part of what happens when we have a big news event like this is a goal. We want to analyze it and you know, decide determinatively what what what it means and what the impact is going to be.

But I think we really have to wait to see what the gist of the investigation is and what evidence actually does come out of this again, so they will determine what the public perception of whether the UH search of a former president's home was justified. And looking forward, there are more primaries ahead marked including in Wyoming. Everybody's watching that one rep. Senaitive, Liz Cheney is expected to lose her seat, But I don't know that it is

a foregone conclusion. Let's just do a what if? What if Cheney does lose? What comes next for her? Well, there's some thought that she might use this as a springboard to to run for president that um, you know, she's committed, if nothing else, to seeing that Donald Trump does not get re elected president or even win the

Republican nomination. Um. So you know, there's some thinking that you know, even a loss in in this Wyoming race could sort of make her a martyr for the cause that she's defending truth and um, you know, pursuing a righteous path. Um. You know, the big question I think we have about that race is, you know, how many

Democrats and Independence cross over to to vote for Cheney. Um. I mean the polls suggests that, you know, she's gonna lose, and she's gonna lose big, and that Republicans overwhelmingly do not support her and support her opponent, Harriet Hagman. But Wyoming is one of these states where it's a sort of open primary where anybody can go in and ask

for the Republican ballot. And you know, there's signs that you know a lot of Democrats and Independence are interested in supporting Hamen like that she's taking on Donald Trump, and could um, you know, pull the Republican ballot and I could sort of skew the the outcome. And if there's enough of these um folks who are crossing over, it could make the race a lot closer than we think or that the polls right now are suggesting. All right, Mark, I want to thank you for taking the time with us.

We're going to be watching those results with you, Thanks so much. Thank you. Mark Niquette covers Congress for Bloomberg News, and that is what is going on in the nation's capital. For more of our political news coverage, tune into Balance of Power with David Weston weekdays at noon Wall Street Time, and Sound On with Joe Matthew weekdays at five pm Wall Street Time. Right here on Bloomberg Radio, I'm Amy Morris. This is Bloomberg John, Amy Morris for hoarding from our

Bloomberg room in Washington. Thanks a lot, Amy, and that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at five am All Street Time for the latest on markets overseas and the news you need to start your today. I'm John Tucker and this is Bloomberg