Daybreak Weekend: US Jobs, UK Food and Culture, China Economy
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This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our daybreak anchors all around the world. Straight ahead on the program, a look ahead to the December jobs report in the U.S., what it could mean for Fed policy moving forward. I'm Tom Busby in New York. I'm Stephen Carroll in London. We're digging into some of the food and culture trends to watch in Europe in 2025. I'm Doug Krisner looking at what's in store for the world's second largest economy.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App.

Good day to you. I'm Tom Busby, and we begin today's program with the December jobs report. We get non-farm payrolls data on Friday, 8.30 a.m. Wall Street time. And for more on that data and what it could mean for Fed policy, we're joined by Stuart Paul, U.S. economist with Bloomberg Economics. Well, Stuart, let's start with November.

Job growth really rebounded, 227,000 jobs added. Thanks to retailer staffing for the holidays, no major storms, no big strikes.

What do you expect to see in December's number? And will this give us kind of a clear picture of where the U.S. labor market is right now? Good day to you, Tom, and Happy New Year. You're absolutely right that hiring did rebound in November. That's after hurricane season came to an end and the effects of Hurricane Beryl and Milton really came to an end. And the Boeing strike was resolved early in the month in November.

But we're not going to have some of those same favorable tailwinds for hiring in the December jobs report. It's just about 155,000 jobs that were likely added during the month. And that's, again, far slower than even the average pace that we saw over the year, which has been running at about 180,000 jobs per month.

The hiring rate, Tom, has been declining and quite rapidly in the last couple of months, which suggests that the expansion of the labor pool is really slowing down. And more importantly, I think, Tom, is that the establishment survey has been overstating the pace of hiring in 2024 by an average about 90,000 to 100,000 jobs per month. And

after we factor that in the average pace of hiring over the last year was likely just about 75 to 80 000 jobs per month and that's really inconsistent with a steady unemployment rate that's not enough hiring uh given population growth to keep the unemployment rate steady so we are expecting to see the unemployment rate rise in that december payroll report now in november it went from 4.1 to 4.2

Are you thinking just one notch, 4.3, or are you looking at something maybe a little more troubling? This is a little bit of a frustrating knife edge estimate. When we really sharpen our pencils and get right down to it, we're estimating a 4.36% unemployment rate. And that could, of course, round up. If we're off by just a smidge, that is just one notch higher at 4.3%.

But again, it's undoubtedly a cooling labor market. And even with about 155,000 jobs added during the month, it's not enough to keep the unemployment rate steady. We are seeing that unemployment rate rise. And we do expect to see the unemployment rate continue rising to about four and a half percent as we get closer to mid-year 2025.

Now, does that mean do you see it as more Americans looking for work, unable to get one? Does that mean more people reentering the workforce, more college graduates coming out? I mean, what's the reason that you see?

There are a couple of factors at play, but I think the most pressing is that the duration of unemployment is rising as employers become a little bit more discerning. Employers are slowing again the the increase in headcount. Workers who are in the labor force who have been having trouble finding new employment are

They're stagnating among the ranks of the unemployed and the duration of unemployment, the median duration of unemployment has been steadily climbing throughout the previous year. It now stands at about 10 and a half weeks.

which is, again, getting rather long. So you have that stagnating pool of workers who are in the labor force looking for work, slower increase in headcount and just general population growth, all creating a confluence of factors that are creating tailwinds for the unemployment rate.

But you're not alarmed by this. I mean, even if it goes up to 4.3, 4.4, it's kind of what the Fed expected to see right in their their last dot plot from last year. We are expecting that four and a half percent increase around midyear. The Fed has been noting that there is cooling in the labor market. This is a dynamic that's not really a shock to anyone. And if you really hold monetary policymakers feet to the fire, then.

even a four and a half percent unemployment rate isn't the sort of thing that's going to make them lose too much sleep. The real problem is what ends up being the policy outcome that comes from a rising unemployment rate

amid a stagnating or elevated but steady level of inflation. We still have 2.7% headline inflation, so we have a long last mile to the 2% average inflation target.

at a moment when unemployment is starting to rise. That makes it pretty difficult for the Fed to have a clear cut decision, whether it should continue cutting rates to address the cooling labor market or slow its pace of rate cuts to continue putting pressure on inflation. Ultimately, we think that this shakes out to a slower pace of rate cuts, something like a quarterly cadence of quarter point cuts by the Fed.

We're expecting the Fed, for example, to skip cutting rates by a quarter point in January and to then pick up with rate cuts again at its subsequent meeting. This Friday, we get the December jobs report. Our thanks to Stuart Paul, U.S. economist with Bloomberg Economics.

Well, we move next to the airline industry, which has seen a burst of travel demand this past year. And this coming Friday, Delta Airlines becomes the first major carrier posting its fourth quarter earnings, which will likely show continued strong demand right through the holidays. And for more on what to expect from Delta, along with his outlook for the airline industry in 2025, we're joined by George Ferguson, Bloomberg Intelligence Senior Aerospace Defense and Airline Analyst. George, thank you and Happy New Year to you.

Happy New Year to you, too. Thanks for having me on. Oh, you bet. Well, let's start with Delta. Now, it posted record revenue in the spring quarter of 2024, took a bit of a hit from that worldwide IT outage in the summer, but boy, demand just keeps chugging along. What do you expect to see for the fall's fourth quarter?

Yeah, so it's definitely been a good year for Delta United. Full service carriers especially have done very, very good this year when it comes to profitability. And so like you mentioned, record revenues for most of those carriers because fares have been quite strong. The challenge really has been throughout the year that costs, especially wages, especially to the pilots,

have really taken away sort of peak profitability. We just haven't seen 2019 levels of profit. But so in 4Q, what we expect to see is that we expect to see an increase

of a little bit, 100 basis points over 2023 EBITDA levels is where we measure earnings before interest taxes, depreciation, amortization, and aircraft rentals. What's going to help drive this increase in 4Q is going to be fuel costs, actually. So

Fuel's going to be down 22%. That was at the wholesale level for 4Q. It'll be different for every airline, but it should roughly coincide with that 22% decline.

And we basically use Gulf Coast jet as our measure. And that's going to provide like a 450 basis point gain. You know, we think for Delta's earnings, pilot wages aren't going down. Right. So those wages still sort of take away a bunch of the profitability on revenue.

or the potential profitability gains, I should say, on revenue, we do expect fares to start to taper off for the big full-service carriers. Again, United, Delta, American are the ones I'm mostly talking about there. What we've seen is we've seen growth in seats

in 4Q for full service carriers up about 6.5% year over year. That beats inflation. So we think that means that there's going to be more competition for filling those premium seats. And therefore, we're going to see, again, sort of that tapering off in fares. For the broader market, for the domestic market, the most important for all the airlines is

We're seeing an increase in seats of about 2%. So that may help actually some of the low-cost carriers as we're starting to see some of the supply, demand, and seats tilt towards the low-cost carriers' favor. They've had more problems during the year. But so we expect essentially Delta's going to increase capacity

About 4%. We think that yields maybe decline about 1%. So we think there'll be like a 3% revenue growth. Again, we're kind of looking for a pickup, a slight pickup in profitability. Now, have the major carriers, have they now surpassed pre-pandemic levels for Seatsfield, for affairs? Yeah.

They have. They're all well above pre-pandemic in fair level, and they're also well above in the amount of capacity they put in the marketplace. The entire marketplace has sort of recovered back all the pre-pandemic levels. We're up, I think, in the domestic market something around 5% over pre-pandemic seat levels for domestic.

And which carriers? I know you make a difference between the full-service carriers and the low-cost carriers. Which have fared the best? We know Spirit Airlines, what happened there. But obviously, how have all the other carriers adjusted to that bankruptcy, that change? So that's part, I think, what's driving some of that improvement in what we expect to see in 4Q in 2020.

non-premium leisure seating, right? And so

Carriers like Spirit went through, it declared bankruptcy. It knocked down a bunch of their schedule. Southwest was a large adder of seats, if that's a great way to say that, during 2024. And their profitability really suffered. And so they've pulled back on their expansion. Because generally, I think those low-cost carriers just haven't done as well.

in 2024 as the full service carriers. And the poorest of the low cost carriers were the ones like Southwest and JetBlue that have been around the longest, gave their pilots maybe some of the better pilot contracts. JetBlue was also embroiled in the whole, we're going to take over Spirit Airlines, you know, sort of mess. And that I think sort of hurt their momentum.

And again, the outperformers during the year really were airlines that had premium seating capability. Wow. Our thanks to George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense, and Airlines Analyst. And coming up on Bloomberg Daybreak Weekend, we'll dig into some of the food and culture trends to watch in Europe in 2025. I'm Tom Busby, and this is Bloomberg. ♪

Join Bloomberg in Atlanta or via live stream on February 11th for The Future Investor, Finding the Opportunities. This 2025 event series will examine how companies are investing in their businesses to create efficiencies, innovate their products and services, and improve the customer experience. This series is proudly sponsored by Invesco QQQ. Register at BloombergLive.com slash Future Investor Atlanta.

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. Up later in our program, we'll look at what's in store for the world's second largest economy in 2025. But first, the picture for the UK economy right now, significantly better than it was a year ago. Inflation has come down dramatically. The Bank of England has begun its easing cycle. Also,

There are some bright spots in the vibrant UK food and culture scenes to look forward to. For more, let's go to London and Bloomberg Daybreak Europe anchor Stephen Carroll. Tom, after what feels like years of gloom over the UK economy, there are hopefully some things to be optimistic about heading into 2025. Even though the picture hasn't been great in recent months, Bloomberg Economics is expecting moderate growth,

in 2025 and they say a recovery in consumer spending has further to run, supported by higher real incomes and falling interest rates. So that's the backdrop, but given the time of year, we've decided to lean into the optimism and talk about some of the highlights and trends to watch in the dining, hotel and cultural scenes in the UK and maybe beyond as well. For that, I'm joined by our food editor, Kate Crader, and our Bloomberg Pursuits UK correspondent, Sarah Rappaport. Great to have you both with us.

Sarah, you have done and seen so much in 2024, and I mean that in a positive way. Talk us through some of your cultural highlights of the year. Yeah, well, it's been a really fun year for London Theatre. My actual favourite show this year was The Picture of Dorian Gray, with Sarah Snook from Succession, you know, Shiv, who was incredible, playing all the roles, all 26. Yes.

Incredible. And she was captivating on stage. She used a lot of live and pre-rec camera work, but it was just like, she controlled the whole stage for a good two hours. I was tired just watching her. Like, it was exhausting. It was amazing. So, and that's transferring to Broadway next year, and I think it's going to do great there. She won the Olivier for her performance in that. And next week, I'm actually seeing The Tempest.

The Sigourney Weaver in the Andrew Lloyd Webber Theatre. I'm very excited about that. So that might be my new favourite next week. You'll have to see. But before that, picture Dorian Gray. Okay. God, a good place to start anyway. Let's talk food though, Kate. I mean, how has your year been for food in London? Has this been a good year? Is it a good vintage? The year has been delicious and an excellent vintage. What a good thing to say.

I think London's come on really strong and it's come on really strong, especially like in an accessible, affordable way. There are a ton of wine bars that also happen to serve wine.

that serve wonderful food, wonderful, compelling food. And, you know, London, it's sometimes so hard to get into restaurants. They get jammed. They get booked up early. You have to be a major planner. And wine bars, a lot of these wine bars, like there's one I love called Cadet up in Newington Green. And you just, you walk in. I mean, they do take reservations now, but

guaranteed there's a counter with a seat that you can find and sit down and eat at and it's marvelous Mountain which is in Soho on Beak Street I'm in love with that place it helps to book but they also have just like dozens and dozens of cool counter seats you can sit there with a

delicious glass of wine because it's true that country seats aren't that big a thing here in general so it's always great to know especially places in central London that you can go and you don't have a booking which can often be the situation that I find myself in do you have a best meal of the year I mean you have to eat out a lot professionally so I have to yes it's a job um

I will say I just came back from Kyoto, from Japan. And that was... You have to fly... That's a trip. You have to travel, traveling for food. But I had...

a sensational mind blowing meal at a place called Koke, which is Spanish Japanese, which sounds really unpromising. I was wondering if it would actually be one of the worst meals I had this year. And instead it really was transformative. The chef and he's never been to Spain, so I don't quite know how he does it, but he does these like genius forms of tapas using, um,

using local ingredients and I have a best dishes story about to come out and one of them one of the dishes which was like a sort of charred winter melon which is a boring fruit but he caramelizes it and serves it with like a smoking a smoking buttermilk soup and fermented cream it's crazy

It's so good. That sounds incredible. Okay, so I'm glad you've given us a global flavour to the conversation as well. Sarah, if we're thinking globally, the strength of the dollar has been a really big theme for tourism spending. I mean, everywhere in the world, but the UK has benefited quite a lot. Oh yeah, the rich Americans are here. They're here and they're spending their money. We talked a lot last year about the big hotel openings in London. I wonder, because this is a big part of your job as well, is looking at the best places to stay. So what stood out for you of what's happened in 2024?

Well, London's five-star hospitality gold rush is continuing on. I really liked the Emery, which is a new hotel from the Claridge's group.

And it's an all-sweet hotel in Knightsbridge. And there's a Jean-Georges restaurant. It's very fun. It's good. Huge rooms. But next year, what I'm excited about is the Transfere Rosewood. And it's in the old U.S. Embassy in Mayfair. The last time I was there, it was a 2016 election night party, actually. Different times. Different times. It's going to be a Rosewood Hotel. And they're going to have a carbone, as Kate's aware. They're going to bring sort of American-Italian flavors into central London. And there's going to have the...

the eagle from the embassy is going to be at the bar at the top of the hotel so look out for that next year okay interesting features to watch now why does it feel like that all of a sudden everyone has just discovered the English countryside I feel like I've seen so many pieces not just from you but but everywhere about the number of people that are coming to stay in the beautiful parts of this country especially the Cotswolds everyone's in the Cotswolds now I mean me too Taylor Swift stayed there this summer when she was um in the UK for her heiress tour Ellen DeGeneres just bought a house in the Cotswolds I don't

know why it's so trending so much. There's been a lot of cool new hotels, like Estelle Manor is quite trending, a lot of members clubs, places from London coming up to the Cotswolds. It's getting kind of more scenic and exclusive there. There's always been the cozy country pubs and nice walks and cozy feeling, but now it's kind of gotten the London vibe as well. It's becoming quite hip.

Kate, look into your dining crystal ball. Is that a crystal plate? I'm not quite sure I'll work on that metaphor. What are you excited about the food scene in 2025? Are there openings we should be looking forward to? As Sarah was saying, at the Rosewood, besides Carbone, which is this big deal Italian-American restaurant, Ben Richard Caring, who is quite famous, is bringing back Le Caprice.

You know, the seminal restaurant. So that hotel is going to have two really important dining rooms. It's going to be a destination. But even bigger, I would say Gordon Ramsay, who hasn't opened a place in years and years, is coming to the city, actually. And he's opening up five food and drink concepts, including one bar that's going to be the highest bar. I think it's on the 62nd floor. Okay. Place with the best view, probably, in London.

He's opening up a dining room on the 61st floor, and that is coming in February, so sooner than you think. And there's also a fun trend. Jamie Alvarez opening up a cooking school in John Lewis in the spring, and Gordon Ramsay's going to have some kind of a culinary school or culinary program at his new restaurant complex. So, yeah.

Wow. And interesting to see those names that are stalwarts of the British restaurant scene, I suppose, having a 2025 renaissance. What's old is new, right? Exactly. They're coming back. Not to bring down our conversation, but there's a lot of talk about how there are tax changes that were announced in the budget in October. They're coming into force in April, particularly going to affect...

employers and the tax they have to pay for their employees and part-time workers are key. So there's a lot of hospitality businesses say they're worried about it. You know, in conversations, because you speak to restauranteurs all the time, are they worried about this? Yeah, you know what? In fact, Jason Atherton, who just did a terrific Bloomberg TV interview, and he has a really cool new restaurant called Row on 5, a very ambitious restaurant on Savile Row, said that something interesting

everyone is worried about. He said specifically he's worried that entrepreneurs are going to leave the UK and go to other places where there's more chance of where the playing field looks easier to navigate on. We've heard from some of the big, particularly pub groups have been talking about in their results as well, the impact in terms of millions of pounds on their wage bills for that as well.

Now, Kate, you do travel as well. You mentioned your trip to Kyoto there as well. I wonder if you're thinking about Europe more broadly. Is there a foodie destination? If people are thinking about a break in 2025 and they love food, where would you send them? That's such a good question. Because you can almost make a case for anywhere. I do think, you know, France, it's such a boring answer.

But is that Paris or is it outside of Paris? I was going to say Paris, actually. I think the energy in Paris is so good right now. People are doing all these compelling little things. You find these fantastic storefronts. People are doing that kind of fusion cuisine. You know, I mentioned weird Spanish-Japanese, and yet it works. You know, it's this fantastic combustible experiment. And then you taste it and you're like, wow, you know, it's like kind of little fireworks. And that's happening all across Paris, like in the 18th.

in the first. It's, I think, I don't know if it's like the effect of the Paris Olympics. You know, there was so much angst about it going into it. But I think the after effect of it, the energy that people put into it has made it

Like, don't forget about Paris, even as you're going to all these other places, you know, even as you're going to Spain. Spain was, you know, the rock star last year, I would say. Yeah. And it's going to keep going strong. It is relatively affordable, you know, especially if you're coming from a place like London or the U.S.,

But don't sleep on Paris. In terms of staying places across Europe, Sarah, I wonder as well if there are places that you've kind of got some interesting hotels on your horizon of anywhere in Europe that you've experienced or excited about. Yeah, I think Greek islands outside of Mykonos or Santorini.

Oh, yes. Go on.

Yes. You're supposed to get an international airport in 2026. So come now for all the crowds do is what I'd say next year, next summer, go before the American masses with their dollars come over. What else are you putting in your calendar for 2025, Sarah? The things that you're you're booking. So you mentioned you've got the Tempest coming up there as well. Are there cultural highlights you have on your agenda, things that you're already definitely making sure that you're going to be doing?

Jamie Lloyd is one of my favorite directors, and he's doing a big Shakespeare season that includes The Tempest, but it's also As You Like It with Tom Hiddleston and Hayley Atwell, coming next year in February and March. That should be really fun to see. And also the National Theater is doing a bunch of really cool stuff. They just announced a thing with Jane Krakowska, I believe, so click on their website and book that soon.

Very excited about that. It's always good things on at the National. At the South Bank, you can always get return tickets as well. So even if something looks booked, I would show up on the day and you can normally get returns because there's a big theatre at the Olivier and there's always returns. Such a good tip as well, because as you say, so much feels like in London, you have to plan it months in advance. So the idea of being able to do something last minute can be certainly very tempting.

Kate, I do wonder if we're thinking about trends for next year. I mean, famously, you predicted the death of small plates. I can't remember if that was a year or two years ago. And yet I still see a small plate in many places. You know, I'm sure you're 100% on the money. But is there anything that we should be excited about in terms of trends coming up? I think we're going to see more and more Japanese food here in London. It's been coming and coming. You might have seen like more sushi restaurants from high end ones to casual ones, casual places that specialize in hand rolls.

Tourism to Japan has been crazy in October. I think 3 million people went. I think it was a record-breaking number for them. And so I'm seeing and hearing more Japanese concepts that are coming. I think also there's going to be a fun, this is a bit random, but a fusion pizza thing where you'll have...

butter chicken a butter chicken topping on your Neapolitan pie I'm looking for things like that the bakery the bakery trend is just not stopping I mean that's going to keep going never mad about more baked goods that's a good thing to look forward to I love that same Stephen okay Kate Crader our food editor and our Bloomberg Pursuits UK correspondent Sarah Rappaport thank you very much for joining us I'm Stephen Carroll in London you can catch us every weekday morning here for Bloomberg Daybreak Europe beginning at 6am in London and 1am on Wall Street Tom

Thank you, Stephen. And coming up on Bloomberg Daybreak Weekend, we'll look at what's in store for China's economy in 2025. I'm Tom Busby, and this is Bloomberg.

Join Bloomberg in Atlanta or via live stream on February 11th for The Future Investor, Finding the Opportunities. This 2025 event series will examine how companies are investing in their businesses to create efficiencies, innovate their products and services, and improve the customer experience. This series is proudly sponsored by Invesco QQQ. Register at BloombergLive.com slash Future Investor Atlanta.

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. Threats of tariffs, trade curbs, and risks linked to excessive economic stimulus, just some of the challenges looming over the world's second largest economy in the new year. For more, let's get to the host of the Daybreak Asia podcast, Doug Krisner. Doug Krisner.

Tom, we know the weak state of the Chinese economy and how authorities in Beijing have pledged more stimulus to support a more robust recovery. The big question is, will those steps lead to a prosperous 2025 or will China continue its struggle? For a closer look at the road ahead, I'm joined by Bloomberg's Jenny Marsh. She is team leader for Greater China EcoGov. Jenny joins us from our studios in Hong Kong.

Thank you for making time. I know it's a busy end of year season for you. Where do things stand, particularly in light of what we've heard recently from the Politburo on stimulus? And what may the year ahead hold for China? I think going into next year, there are high expectations that the Communist Party now has woken up to the idea it needs to be supporting the economy forcefully. And then it's really taking the challenges ahead seriously. And I think...

the return of Donald Trump to the White House has only helped Xi Jinping and his fellow leaders arrive at that point, because, you know, we've had this two track economy this year and exports were sort of doing a lot of the heavy lifting. And I think looking into next year, there is a very sort of sobering realization that with Trump returning and this sort of tariff war looming, that isn't something anyone sensible would bank on. And so since the

we've seen this sort of change in rhetoric from the senior eco policymakers talking about bolder steps

And then I think the Politburo meeting in December, which always focuses on the economy and sort of sets up the year ahead, really made clear that they are going to sort of switch gears. You know, they talked about they changed the monetary policy stance to moderately loose, which is something they only ever, is a sort of a phase they only ever go into at times of crisis. So the last time was the great financial crisis. They went to this moderately loose sort of zone of monetary policy.

And then they named boosting consumption as the number one goal for 2025, which is something foreign governments and economists have been calling for for a long time. So I think while obviously the need for China to become sort of a self-sufficient tech superpower that can rival America, that ambition is not going anywhere. They're now much more serious about, okay, we're going to do that, but we also need our own consumers to start spending. And there's like a whole kind of

menu of reasons for that, if you like, but I think policymakers are now taking it seriously. So we can talk about the consumption story in a little more detail momentarily. For such a long time, when you and I have spoken in the past, the debt problem in China has been a hot topic. And it's curious that officials have now agreed that the government should be allowed to

have a larger budget deficit to borrow more, along with the cuts in interest rates that you just kind of suggested there. Is anyone concerned about increasing debt levels, or is that no longer a problem? You know, I think China has a lot of space to increase central debt levels, right? So the

what they're planning for next year, to be honest, is fairly modest. So an extra 1% of GDP for the government spending, the fiscal budget. That was sort of on the conservative side of estimates. It's the highest it will ever have been, but it's still not pulling out all of the big guns. So it's still sort of relatively modest, but they have ways of augmenting that, right? So there's like the official budget, and then there are all these unofficial ways they can spend.

So we saw them making this unprecedented step in recent months, singling out two big state-owned companies that could now issue what people are calling central government financial vehicle bonds. So while you had these local government companies before that were kind of issuing debt to be spent on the economy, now perhaps the central government is showing signs it might do that. So you've got this expanded government spending on the official books.

but they might place more sort of in other ways which sort of less baked in, if you like, in the actual official budget. But the task they have ahead of them is huge. You know, how are they going to get people spending? Because the things that are holding back the Chinese consumer are

it isn't just sort of an idea of like the economy is bad, it's sort of the property crash is the biggest one, right? Like everyone had their money invested in property. And while there are some signs that, you know, that is, that the crash is sort of slowing and maybe you are reaching a bottom, very, very, very tentative. You know, home prices are still declining, but the declines are easing.

So it's still not anywhere near out of the woods on that. That's one reason people in China want to put all their money, they squirrel them into sort of savings accounts. So the decline that we've been talking about in property prices kind of moves out more broadly to include consumer goods, food, electronics and the like. And this obviously is going to complicate things for Beijing because it's been mired, the economy in China has been mired in this deflationary trap for a while, particularly at the wholesale level.

Is there a way that you're familiar with where Beijing has been able to articulate first that there is a problem with deflation in a way that calls for a much greater response? And what are they suggesting those measures may look like?

So to your first point, I think, you know, no one in the Chinese system is using the word deflation still. That is still a dirty word, even though with the GDP deflator, which is the economy wide measure of prices, that will have been its longest period of deflation ever on record.

in January. It'll match the longest record and then most economists expect it in Q2 to exceed it. So this is a serious problem they do need to face. And the Politburo meeting did talk about prices. So they're not talking about deflation using that word, but they are talking about sort of prices as a problem now.

I was just in Beijing recently, you know, behind closed doors, all the economists that you talk to see deflation as sort of the biggest threat to the economy right now. And many of them make the comparison with Japan when it was going into its last decade and talk about the sort of three arrows policy that they had to sort of roll out, you know, to try and defeat deflation, which obviously in Japan wasn't necessarily particularly successful. But the way the economists see it is this is going to take

a forceful and coordinated policy approach, you would need to go all in on fiscal, all in on monetary, and then rescue the housing sector. If you really want to stop the deflationary spiral, it takes that kind of a response. It can't be sort of...

What you're seeing now, which is this year, for example, they rolled out enough fiscal and enough rate cuts, enough sort of sprinkling of measures to get to the growth target. And I think for a lot of economists, both in and outside China, the growth target is one thing. Meeting that is possible if they set it at about 5% again next year.

that's possible because GDP is really a measure of sort of activity, right? So even with what we've heard from the government in terms of what stimulus may look like, the sketch that's been provided, has that been enough in and of itself to move the needle when it comes to sentiment? Have things become a little bit more optimistic or is that too much to say? I haven't sensed any increase in optimism at all. Onshore people don't feel optimistic, they feel very pessimistic.

about where things are going. And I think the return of Trump is only adding to that, right? This sort of sense of foreboding of what is to come and what is around the corner. I think there's a real sense China is facing some serious challenges. The only positive, I think, is that the government is now showing some signs of being more proactive. I think there was the sense that some

some of the stimulus that came before Trump came into office, like changing the monetary policy stance, for example, before Trump came in, not afterwards, was being more proactive than reactive to something happening in the economy. But it's still, you know, changing the stance is one thing, but sort of how deeply will they cut rates next year? You know, you have economists say maybe up to sort of 50 bips, 60 bips. So we don't know yet, right? So it still remains to be seen how forcefully they actually will roll out those particular sort of stimulus measures.

Jenny, we'll leave it there. Thank you so much for making time to chat with us at the end of the year. It's always a pleasure. Bloomberg's Jenny Marr, she is team leader for Greater China EcoGov joining us from our studios in Hong Kong. So we've taken a look at China from the 10,000 foot view, so to speak. Now we want to zero in on one particular sector.

Automobiles, especially those EVs. We know that President-elect Trump has vowed massive levies on vehicles imported from China. Joining me now for a closer look is Xiao Feng. He is co-head of China Industrial Research at CLSA.

Xiao Feng, thank you so much for making time to chat with us. I think we can agree that one cause for concern, at least from the U.S. side, is what has been called an overcapacity issue in China. And that relates to a number of industries in China, especially, as we know, electric vehicles. I'd like to get your assessment on the degree to which we're going to begin to see maybe a little bit more in the way of consolidation in the EV space in China for the new year. What do you think?

So for now, I think when most of people are talking about overcapacity or low capacity utilization for the EV industry, people refer to the whole industry data, which is right now running at around 40 to 50% of capacity utilization. It's very low. We have around 40 to 45 million units of capacities in China, while the auto sales is really 20 to 23 million a year.

But if you look at the structural issues here, EV makers in the meanwhile is running at a much higher capacity utilization, generally around 80% or above, while the ICE car makers, the traditional ICE car makers are running at below 50%.

So that's a structural difference here. So overall, I believe EV makers will continue that trend. They will be growing much more faster at the losses of the ICE makers. We are forecasting the passenger vehicle market to be at low single-digit growth next year. But in the meanwhile, EV will be growing at 25% to 30% versus 25% to 30% losses from the ICE car makers.

The second thing is really the consolidations of the industry. We believe 2025 we will start to see a materialization of the industry consolidations, which already happening this year. We've seen some joint ventures shutting down their factories in China. We've seen some exit of the brands from the new forces of the EV makers, which will going to be materialized in 2025. So I think the industry consolidations will continue to help drive up the capacity utilizations.

When I think of EVs, I think of not only domestic demand, but I think of a very strong export market as well. But when it comes to the issue of domestic demand, how much more can the government be doing? There is a lot that's already been communicated. Are you expecting a lot more in terms of fiscal policy from Beijing in the year ahead?

So I used to cover commodities. If you are talking about the large-scale stimulus like we saw in 2009 after the financial crisis, we probably will be disappointed because from my perspective, I think the Chinese government will stop doing that kind of large-scale stimulus. Instead, we are seeing a shift of the policy focus from the production side, investment side, to the consumer side.

In China, investment has to be used to be a biggest growth driver accounts for more than one-third of the fixed-ethnic investment. But for now, with the shrinking of the property space and struggling local government financials, we've seen the manufacturing industries, the value-adding industries are accounting for a larger share of the economy.

So that's why going forward, we'll see the policy will be more focusing on driving the consumption rather than pushing for the production. This is what our report has been saying, a change of the policy from push to pull. Xiao Feng, thank you so much for taking time to chat with us. Xiao Feng is co-head of China Industrial Research.

at CLSA. And I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast. It's available on Apple, Spotify, or wherever you get your podcast. Tom? Thanks, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Busby. Stay with us. Top stories and global business headlines are coming up right now.

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