This is Bloomberg day Break Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world, and straight ahead on the program, a huge week on the economic front. I'll have that story.
I'm callin Hetcke here in London, where we're looking ahead to the Dubai Air Show and why airlines have a fear of missing out when it comes to plane orders.
I'm deg Krisner. We preview the meeting of Presidents Biden and She on the sidelines of the APEC summit in San Francisco.
I'm Keiley Lines in Washington, where Congress is racing to avert a government shutdown with just days until funding runs out.
That's all straight ahead on Bloomberg Daybreak Weekend, the business news you need to wrap up your week in just one fifteen minute podcast available on Apple, Spotify, The Bloomberg Business Appen everywhere you get your podcasts.
Good day to you. I'm Tom Busby. We begin today's program with a focus on the US economy and specifically inflation. Investor and the Fed will be scrutinizing two big readings on inflation. On Tuesday, we get the Consumer Price Index for October on Wednesday, the Producer Price Index and for more, we're pleased to welcome Anna Wong, chief US economist with Bloomberg Economics, and Michael McKee, Bloomberg International Economics and Policy correspondent. Well,
let's start with Anna and that read on consumer inflation. Anna, what are you expecting to see this week?
We are expecting the headline CPI to be very soft because seasonally adjusted gasoline prices actually came down over five percent in October, so a monthly reading of a monthly increase of zero point one percent on the headline CPI. And we are also expecting core CPI to come in, you know, in the zero two five range, so it could easily round to either point three or point two. But nonetheless, it is a reading that won't sound of alarm bells among the Fed officials.
Well, and Michael, this sounds pretty good, not just won't set off alarm bells.
Well, we are still almost six weeks away from the next FED meeting, and there will be another CPI report and a PCEE inflation report before we get to that, so they'll focus on the more recent data. But yes, this would if we get the scenario that Anna is talking about, and that's pretty much the consensus.
It will tell the.
FED that they are still on the right track, and it will suggest to them that they are in restrictive enough territory because they're pushing down on inflation, and so it won't change anyone's call to a higher rate or something like that.
Well, month over month, Anna is zero point one percent. What is it? Year over year October to October?
The year over year for core inflation is looking to be below three point six percent, and that means that at the end of this year, the fourth quarter year over year would be likely be undershooting the fed's own forecast of three point seven percent. So this, as Mike McKee was saying, this is the reason why the FED does not feel the urgency to do that extra realize.
That extra twenty five basis point hike they had in the September dot plot is just because inflation is now on track to undershoot their forecast.
But their long term forecasts two percent were still a ways away from there. Is there a dot plot for when we could reach that? Will we ever reach that?
Mike? That's the question I asked JPU at the last FED news conference the FED in September said on the blot that there was an extra twenty five basis points priced in in their forecast before the end of the year. But as Powell answered me, those forecasts decay over time and just the data comes in market adjusts every day, minute by minute, the Fed once every three months. So he suggested that perhaps nobody would be putting that into not nobody, but almost nobody would be putting that into
a dot plot today. The question is do we leave out the rate increase or do we leave out the time frame. If you leave out the idea that it had to be by the end of the year, that's probably more likely, but it doesn't mean that they're done. And if inflation should start to go back up again, that rate increase is still on the table, and then
they could add more. So you have to look at every meeting December and then January and going forward as a potential rate increase until they tell us differently.
There's always that doubt always. And let's switch now to the producer price index, because you brought up a big factor there and that is a decline in energy prices and how will that impact your forecast there?
Yeah, I think the important of the PPI is what it implies for the FEDS preferred inflation metric, which is the PCE deflator. So the things in the PPI report that's very important for the FEDS preferred metric is airfares and also healthcare prices. So healthcare prices account for you know,
over ten percent of the PCE basket. And we have seen over the last couple of years that there's still significant labor shortages in healthcare services sector, and also that a lot of the you know, wage increase is still
coming from the healthcare sector. So it could be that through twenty twenty four, the remaining the lingering inflation impulse could be coming from sectors like healthcare wages, where you know, we still saw this year that there were a lot of labor strikes in you know, in UAW and Hollywood screen but you know, the healthcare workers still are the ones who who have been burned, who have been overworking during the pandemic, and their wage increase have not been
catching up to inflation. So I think a risk is that next year we'll see more of the strikes coming from the healthcare sector and eventually those would be passed onto PC prices, so I would be paying attention to airfares and healthcare prices in the PPI.
Well and Mike more on that. How are airfares looking. I mean, we've seen a demand still strong, especially in the national travel but it looks a little weakness domestically.
We are still seeing some declines in air prices overall. The question on a month over month basis is how they get accounted for, because, as anybody who's tried to buy an airline ticket knows, the prices are quite volatile. They go up and down. But this is the time of year when prices tend to decline because everybody's gone by school, it's fall, weather's not great, so the tourists
kind of stop. We'll see airfares probably go up again when we get closer, well, we're getting pretty close to Thanksgiving and then the Christmas New Year's period airfares should go up again, but the government does seasonally adjust that, so we'll have to see how it all plays out. One of the interesting areas in all of these price indexes has used cars, and they have just fallen off a cliff lately, so that could be something that puts downward pressure on these inflation measures.
Now we talked about Thanksgiving, which is coming a lot faster than I think anyone realizes. Christmas just a few weeks ahead, and that leads us to retail sales, because we get a read on retail sales for October this week, and a lot of the biggies, Walmart, Target, Amazon all had early Black Friday sales during the month of October, and what are we expecting to see for retail sales? And my I'll ask you what it tells us about the consumer?
Yeah, I think the early Black Friday sales. What it does is that it could potentially make for a retail reading that's stronger than what the consensus is penciling in. So we have been saying that the consumption should be slowing down and retail sales should be entering into negative territory in the fall. However, if it's true that there's a lot of early Black Friday sales and people took advantage of that those sales, it could mean that they
won't be they would be stronger seasonally adjusted sales. But that doesn't mean that that's permanent, because what that means is that it will just pull forward to Christmas. Spending, so that will be weaker November and December.
You think so much. You think it seems like people just spend, spend, spend, but you know, maybe they are pulling back.
Well, the question is when they spend and how it will compare. Obviously to what we saw in the last couple of year. Everything's been very distorted by the pandemic. It's been hard to know exactly what's happening with consumer spending because of the pandemic bonuses you got from the government and the fact that when everybody went back to work they got raises, so it isn't quite clear what's going to happen, and all of that sort of distorted
the timing of spending as well. But now the question is do we see a rebound because people still have money in the bank and they still they're making more money, they spend their paychecks and they're feeling good enough to go out and buy stuff, or do they pull back somewhat. Now last year we saw a rise in retail sales for October that then was eliminated in November and we went way way down. November and December were week. Do we see that same pattern again or do we get
back to what we were seeing before the pandemic. And the one thing I wonder about is going into the pandemic, the psychology for a lot of buyers was wait till the last minute and prices will go down. While in an inflationary environment like this, maybe that's what people are going to start doing again. And then we wait and see what happens in November December.
All right, well, our thanks to Annawong, Chief US Economists with Bloomberg Economics, Michael McKee, Bloomberg International Economics and Policy correspondent. Thank you both for being here and coming up on Bloomberg day Break Weekend. What to look for at this week's Dubai Air Show. I'm Tom Busby, and this is Bloomberg. This is Bloomberg day Break Weekend, our global look ahead of the top stories for investors in the coming week.
I'm Tom Busby in New York. Up later in our program we preview one of the year's most crucial and a meeting of US and Chinese leaders. But first, it's shaping up to be among the hottest years ever for large aircraft deals and the buying spree expected to continue at the Dubai Air Show. In the days ahead. This comes has production at both Airbus and Boeing are having trouble meeting demand because of a shortage of parts, and that's intensifying the race among airlines for the last remaining
production slots available this decade. And for more we head to London and Bloomberg Daybreak Europe anchor Caroline.
Hepgar Tom The Dubai Air Show is an important barometer for the health of the aviation industry, measured by the appetite for deals. The industry's last big gathering was in Paris in June. It resulted in about one three hundred aircraft sales, and the organizer of the Dubai Air Show they are hoping to see something similar. The event caters to some of the world's largest wide body operators. The local champion Emirates has already teased that it wants to
order more. Anna Edwards and I have been speaking to ours aviation reporters, Saidel Philip about what to expect from this major event, but first to get a flavor of the industry. Air Boss CEO Gillumfori says that the company expects higher output in twenty twenty four thanks to surging demand. He's been speaking to bring back to the main Bostic and Guy Johnson after Airbus's third quarter results.
The single ale business, so the short and mid range activity will continue to dominate a number of planes. We've seen the activity on the single isle recovering much faster after COVID than it was for white bodies for long range, but we think long range will follow up, will also
recover first and probably even stronger moving forward. And when we look at the long term perspectives for the market, we expect both single lile and white bodies to significantly grow, to the extent that we believe there will be around forty thousand plans to be delivered in the next twenty years.
You're ramping up, as you just confirmed to me the three fifty program. You're going to go to ten a month twenty twenty six. That's not a big push higher. You're basically going from eight to nine to ten by twenty twenty six. Picking up on Romain's point is that you talk you signaling caution that you actually think the big push we're saying for long haul demand at the moment is not sustainable. Could you take that program higher by that point? If demand remains as robust as it is now.
Actually, we see the demand growing, we see a recovery in the demand, and we will at a low point of a rate four on the every fifty during COVID. So we went from four and we keep growing and we are now targeting ten. It's slightly or it's very comparable to what we had recovered, and we had said that the traffic itself would be recovering back to pre COVID levels between twenty three to twenty five, twenty twenty
three to twenty twenty five. So I think we are consistent with the evaluation, the assessment we made of the recovery of the market going just out of COVID. Do we have the potential for more Yes, the three fifty has the potential to go up to rate thirteen based on the existing production system, and we will continue to monitor the demand, the recovery of the demand with a big replacement cycle for white bodies that is just starting,
and also some expectations for growth. So the market has the potential to go higher, and we have the potential to continue to serve that market by further ramping up.
But I'd like to.
Just confirm that rate ten on the three fifty is already a very big number.
So that was the airbus CI high hypes. Then airlines will continue expanding, but there are plenty of headwinds for the industry, including obviously the disruption in the Middle East, the war in Ukraine, high all prices and why do economic uncertainty, So I asked our own said Oar Philip ahead of the Dubai Air Show, what he thinks the mood in the industry is going into the event.
In terms of the mood for the industry at the moment, the industry is sort of struggling to get any aircraft. So everyone's sort of trying to order as many aircraft as they can as they look to tap into growth and demand over the next coming years. Remember that during the pandemic everything really slowed down and so now airlines are sort of ramped up again and they're trying to get as much demand de indicter to as much demand as they can, and that involves by new aircraft.
Yes, it does involves by new aircraft. Hello, good to speak to you. So what are the orders that we're expecting to get in Dubai.
So, yeah, we're expecting to we're expecting Emerits, which is the local carrier of the UAE of Dubai, is basically expected to make a massive splash. And Tim Clark has been saying that he's in the market for more white body jets. In June he talked about how he might order as many as one hundred, two hundred and fifty eCraft and he said he was looking at both Boeing
and Airbas's largest models. So it's really a question of seeing how much Emeritz actually does sort of manage to succeed in terms of trying to get those orders across the line. We're also going to see some action possibly from Ria. There they're a brand new airline that Saudi Arabia is building from scratch and that's run by the former Etihad CEO Tony Douglas, and they've said that they're putting the final touches on what's going to be a
sizeable order involving narrowbody plane. And we understand that RIA they're likely to order the Boeing seven thry seven Max jets and that's still not finalized but and talks ongoing, but we should be able to see how that plays out in the next couple of days.
Okay, But with so many orders, what about the squeeze consumer? Are they pulling back on travel? What an airline's saying about demand?
It seems to be a mixed picture at the moment. Some airlines are talking about how demand is slowing in terms of growth, So demand hasn't actually fallen down, but the growth percentages is slowing, especially in the US. We've
seen some carriers talking about slowing demand growth. And also, I mean there's been some experienced industry watchers, including Steven Udvarhazi who's the chairman of Allies, and he's been talking about how there's a concern that airlines are over ordering aircraft, especially because of the fact that they've gone from virtually no traffic to one hundred percent and now everyone's sort of binging on aircraft.
That was a feature of the of the airline industry decades ago, wasn't it said they're sort of overordering in good times and then paying the price sending all the planes to the desert in the bad times. How are the big planemakers then coping with this surge in demand? Are there are there still supply issues or are they able to deliver.
There are still Supply issues have been We heard from Elbas and Eirbus was talking about how the supply chain continues to be constrained, and everyone's been trying to ramp up production ever since the lows of COVID, and they haven't yet been able to. That's partly because they're sort of cut back, especially smaller suppliers in the supply chain, cut back on staffing, they cut back on tooling, they cut back on facilities, and so bringing all of that
back has been much harder than they anticipated. We've seen EBS talking about how they want to go to seventy five aircraft a month by twenty twenty six on the eighty twenty one wide narrowbodies, and they've talked about how they want to go to ten a month on the eight three fifty wide body, and so but at the moment they're still trying to ramp up. I mean, Boeing's
had its own issues with suppliers. It's currently trying to rework issues with its seventy seven Max jets, which because of an issue with a Spirit Aero system in terms of production, and so everyone sort of trying to bring back production, but so far it is pretty slow going.
So that was our senior aviation reporter, said our Philip speaking to me an to Bloomberg's Anna Edwards. I'm Caroline Hepkee here in London. You can catch us every weekday morning for Boomberg day Break you at beginning at six am in London. That's one am on Wall Street.
Tom.
Thank you, Caroline, And coming up on Bloomberg day Break weekend, we preview a big scheduled meeting with President Biden and Chinese President Chi Jinping. I'm Tom Busby, and this is Bloomberg. I'm Tom Busby in New York with your global look ahead, the top stories for investors in the coming week. On the sidelines of this week's Asia Pacific Economic Summit in San Francisco, a crucial meeting between the leaders of the
US and China taking place. And for more, let's check in with Bloomberg Daybreak Asia anchor Doug Krisner.
Tom. The last meeting of Presidents Biden and She was one year ago at the G twenty summit in Bali. Back then, the goal was to improve relations, but those talks were derailed when a suspected Chinese spy balloon flew over the US. Well, now both sides have reason to reset. Biden is seeking stability as he gears up for a presidential election next year, and she wants to attract more
foreign investment to help reinvigorate china slowing economy. For some help previewing this meeting, I'm joined by Bloomberg's Chill diesis, our China Economy and Government editor. She joins us from our studios in Hong Kong. What do we know about the preparations for this face to face? What type of groundwork has been laid?
Hi, Doug, Yeah, well, I think that at this point it really feels like we've been preparing for this meeting since she and Biden last met in Bali a year ago. I mean, as you mentioned, the Chinese spy balloon incident earlier this year certainly seemed to derail some of the preparation for this. But what we've seen the US in particular do over the past several months is send various high level delegations to China trying to lay the groundwork
for this meeting. We saw Secretary of State Anthony Blincoln go to China. We saw the US Secretary of Commerce Juina Ramando go to China. We saw Janet yell and go to China, the US Treasurer Secretary, and all of this prep to try to lay the groundwork for this
eventual She Biden meeting. So there's been a lot of these sort of high level talks between people who either aren't Sheer Biden or in some cases She meeting with some of the top level Biden officials to kind of pave the way for what I think both sides eventually hope is a very smooth meeting between their top leaders.
You and I were talking a short while ago about He's written by Bloomberg opinion columnist Mention Pay and he was basically taking the view that this meeting holds very little in the way.
Of upside for Biden.
The China issue on the US side has become so toxic. Minchin was saying, any diplomatic outreach can be cast as appeasement and by extension, I'm thinking weakness.
Now.
She, on the other hand, has several reasons to maybe shift this downward spiral in relations with the US. Most obviously is this problem with investor confidence and the notion that China is uninvestable. Does Minchin have an accurate read on this dynamic, do you think.
I do think he has a good point. I mean, look, I think that on the Biden side of things, it's definitely about politics here. I mean, Biden has a year to gear up for the next presidential election. Certainly Democrats were winning in some key races leading.
Up to that.
They just had a slew of victories and various US states that seemed very promising for the Democratic Party. But I think that as Biden gears up to challenge whoever his kind of part is going to be in the next presidential election, it looks most likely to be Trump. He's really got to project this idea that he's going to be very tough on China, and I think that the risk with any kind of meeting with she is that he comes across as a concessionary depending on what
exactly he says. That though, I think really pales in comparison to some of the big problems that are facing presidents chijin Ping and China. As you mentioned, I think foreign investments in particular is a pretty significant issue for China right now. The most recent information on foreign direct investment into China, this came from the country's balance of payments data that was just released recently showed falling into the negative for the first time since records were kept
since nineteen ninety eight. And we've seen all year long this big push by China, by Xijin Ping to try to lure foreign investment back. It's just really not taken hold that's obviously due to a number of reasons, whether it's holdover from COVID zero and all of the different restrictions that were placed on China over the last several years, whether it's regulatory issues, whether it's lack of clarity over how exactly the government is handling a lot of those
regulatatory issues. That's all really led to this level of lack of confidence and mistrust in China from foreign investors. And I think that she is really on a mission here to try to bring that back.
Yeah, maybe we can also talk about the role that geopolitics plays in that level of unease. Taiwan, we know, gets a lot of attention when it comes to flashpoints, but increasingly the Philippines has become a little bit of a concern. The US recently renewing a warning that it would defend the Philippines in case of an armed attack under a nineteen fifty one treaty that was after some
Chinese ships blocked and collided with two Filipino vessels. Do you think this is a hot topic right now for the relationship between Biden and She.
Yes.
I mean, I think that anything involving the South China Sea is certainly going to some particular issues. This issue with the Philippines has been kind of unfolding for many many months now, leading to obviously some of these military
confrontations there. I think that Biden's willingness to kind of come out in the US's willingness to kind of come up publicly and you know, issue that support for the Philippines does obviously signify that any kind of relationships military, geopolitical relationships that the US has in the South China see with any of its allies there or any other nations there are really particularly you know, important, strategically important for the US to you know, kind of protect you know,
I don't know one hundred percent whether this is going to come up at the She Biden meeting, but certainly you would think that it's probably pretty top of mind for Biden to you know kind of you know, bring up the fact that this is a geopolitical flashpoints, as is Taiwan, as as many other issues here.
Yeah, and I think that geopolitics extends to the Mid East. A but we were told there was a story on the Bloomberg Terminal highlight lighting the fact that President Biden had been briefed recently on what his invisors see as a Chinese plan to build a military facility in Oman. I mean that seems to probably be very concerning, I would imagine to the Biden administration.
Yes, I think that's particularly concerning in light of how China has really stepped up its diplomatic involvement in that region. I mean that, you know, sort of predates the Hamas attack in Israel we've saw earlier this year. Obviously, she has really kind of played this role or tried to play this role as a peacemaker in the region. He helped broker a tentative to tent between Iran and Saudi Arabia.
He's also held joint naval drills not just with Iran but with Russia in the Gulf of Oman just around that time. So I think that the Biden administration is likely keen to you know, look to see what China is doing in the Middle East as the conflict between Israel and Hamas continues to unfold. Obviously, whatever role China plays with you know, broker, any other relationships in that region, particularly with Iran, I think is going to be top of mind for the Biden administration.
Well, you mentioned Russia there, and I'm curious about the recent comments from Vladimir Putin telling a senior Chinese military official that Moscow and Beijing should expand their cooperation on military satellites and other prospective defense technologies. And I'm wondering how China's relationship with Russia complicates anything that she is attempting to get out of the US.
Well, I think what we've seen over the past couple of years in particular, is certainly she has not been afraid to tout this diplomatic alliance with Russia in many ways. I mean, we just saw a few weeks ago at the Belton Road Conference in Beijing, Putin attended, He was there with She. They talked side by side certainly a lot. I mean, this is a particularly important relationship for she to uphold, and I think that as we were continuing
to see fallout from Russia's invasion in Ukraine. That is again I think sort of a sticking point with the Biden administration.
Does there need to be a lot more in the way of good communication happening between the US and China where the military is concerned.
Yes, I mean I think that it's certainly true. Look, Doug, over the past several years in particular, I don't think that you can discount also the relationship that COVID zero has had with you know, sort of fracturing a lot of these ties and communication between the US and China.
I mean, when it's difficult to get into the country, difficult to get diplomats into the country, you sort of lose or those lines of communication or those lines of communication between those medium level, mid level, you know, diplomats in the US and China get certainly very freed.
Jill, thank you so much for helping us preview the meeting between Presidents Biden and she. Bloomberg's Jill desis our China Economy and Government editor. I'm Doug Prisner. You can catch Brian Kurta and myself weekdays here for Bloomberg Day Break Asia, beginning at seven am in Hong Kong six PM on Wall Street, Tom.
Our thanks to Bloomberg day Break Asia anchor Doug Krisner, And coming up here on Bloomberg day Break weekend, another possible government shutdown looming. We take you to Washington next for the latest. I'm Tom Busby, and this is Bloomberg. This is Bloomberg day Break Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. Could the federal government be hurtling toward a devastating shutdown? Could happen?
For more?
Let's head to our Bloomberg ninety nine to one newsroom in Washington and Bloomberg Sound On. Co host Kaylee lines.
Yeah, Tom, we're running out of sand in the hour glass here, and yes, we've been here before. Remember in government funding almost ran out at the end of September. Well, we avoided that though a continuing resolution that ultimately costs former Speaker Kevin McCarthy his job was the price, and that just kicked the can down the road, a road that ends on November seventeenth. So this coming week, it's going to be up to the new Speaker, Mike Johnson and the rest of Congress to figure out how to
extend funding again and avoid a government shutdown. So how do they get it done? Here with some insight, hopefully is Megan Scully. He leads our congressional coverage here at Bloomberg, So Megan. Obviously they're not going to be able to get all of the different appropriation bills done by the end of next week. There's no time. So it's going to have to be another CR.
It will be another continuing resolution, yes, if they can agree to one. The House is currently trying to figure out what exactly could get through that chamber. The new speaker, Speaker Mike Johnson, is finding himself in the same difficult position that his predecessor, Kevin McCarthy was in just about two months ago, and he's trying to get consensus within the Republican party in the House. But whatever they do decide on still has to pass muster with the Senate,
which is controlled by Democrats. So there's going to be a lot of maneuvering in the week ahead.
Absolutely, And of course one of the big sticking points between Republicans and Democrats, or the big policy differences, is people who want greater fiscal restraint versus maybe not so much. Right, Can something clean get through? Are we going to have to see spending cuts involved?
There's discussion about a clean cr maybe one that lasts until January. There's also been sort of this new made up concept of a laddered cr H. What is that some government agencies would close earlier than others, and the dates could be December and January or January and February. Sort of a rolling shutdown that would decrease the at
least the initial impact of a shutdown. You know, maybe the Defense Department stays open for a couple of extra weeks, but it doesn't solve the problem of we need to fund the government until the fiscal year ends on September thirtieth. So basically they are trying to negotiate exactly what to do, whether to take this laddered approach that is perhaps clean, or another clean spending bill that is very short and just buys the House sometime to figure out what to
do next. Because remember this is sort of the first time this new speaker is involved in these high stakes Washington negotiations.
Well, and it's not just a question of Senate Democrats. It feels like there's also a good deal of daylight between Republicans in the Senate and Republicans in the House.
Absolutely, especially over sort of extra issues, things that aren't necessarily directly tied to the government shut down, but are extraneous to that. And that is, of course the emergency spending on Ukraine, on Israel, on Taiwan, and along the border.
Well, on the subject of the border funding, talk to us about how that is fitting into the equation here, because obviously that's something Republicans are pushing really heavily for, and it seems like that's something the White House is willing to give, right at least in terms of monetary giving.
Yes, the devil is certainly in the details. Immigration is an issue that has long dogged lawmakers in Washington and the White House. The migrant crisis right now that is affecting not just communities along the border, but cities like New York and Chicago, really blue areas, areas that Democratic strongholds are being affected by this migrant crisis, which is making Democrats perhaps more willing to deal on border and immigration policies.
All right, Well, the clock is ticking, as it always seems to be. Megan Scully, the leader of Bloomberg's congressional coverage. Thank you so much. And Tom, you better watch that clock.
Thank you, Kaylee. That was Bloomberg's sound on co host Kaylee Lines, reporting from our Bloomberg ninety nine one newsroom in Washington. And you can hear sound on weekdays one to three pm on Bloomberg Radio. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning, five am Wall Street Time for the latest on the markets, overseas and the news you need to
start your day. I'm Tom Buzby. Stay with us. Top stories and global business headlines are coming up right now.