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00:00 Let's crunch the numbers now with Mark Osphile, Chief Economist and Global Strategist with ADM
00:04 Investor Services International. Always good to see you Mark. Now that eurozone GDP up 0.3%,
00:10 how much can we read into these numbers? Well I think what needs to break it is break it down.
00:18 The encouraging part was outside of France there was a nice pickup and a positive contribution
00:24 from exports. What is universally true however, household expenditure in Germany was down,
00:31 domestic consumption in France was down, domestic demand in Italy was also negative. But
00:38 there was a strong contribution in Germany from construction after a long period of being a real
00:47 drag on the German economy. So there are encouraging signs in here but the worrying part
00:54 is that household consumption, probably still very much beleaguered by the cost of living pressures
01:00 that there are despite the fall in inflation, are definitely acting as a drag. But the offset from
01:09 the increase in exports is encouraging. I would imagine the bulk of that went to the US because
01:14 US imports during the quarter were also very very strong. So you talk about some green shoots there
01:21 from construction in particular but you mention those concerns, particularly around the cost of
01:27 living crisis. Is that the key concern remaining for European economies? What are the headwinds?
01:32 I mean well I think the headwinds are basically wages are increasing and gradually catching up
01:39 with inflation. But there is a general feeling that the economy doesn't have that much momentum.
01:46 So you know it's how Q2 looks after this. You know is this a one-off after a period of
01:55 very lacklustre performance? Is it really very export dependent? I think that's really the key
02:02 worry in a world of a lot of geopolitical tensions where export demand might suddenly tail off.
02:09 Mark thank you for all of that. Stay with us because we've got more to quiz you on in just a
02:15 moment. Yes absolutely. China's Politburo says it will step up support for the economy which saw a
02:22 slow rate of growth in April after a strong performance the previous month. The top decision
02:27 making body says it may use monetary and fiscal policies to boost capital markets and the property
02:33 sector. It's also announced that the third plenary session of the 20th CPC Central Committee will
02:40 take place in Beijing in July. China's manufacturing and services sectors both grew this month but more
02:47 slowly than in March. Latest figures show that the manufacturing purchasing managers index or PMI
02:53 fell from 50.8 to 50.4. The economy's returned to growth after months of contraction although
03:01 there was a brief boost after the pandemic. All right let's go back to Mark Otterbald who is still
03:07 with us. Hello again Mark. So manufacturing activity grew slightly more than expected in
03:13 April. What's behind that growth? I think it's still the main drivers are very much the tech
03:20 industry and anything to do with the energy transition. Those are definitely driving things.
03:26 The loss of momentum is worrying and particularly the setback in the services PMI down to 51.2 from
03:37 53.1 that had been boosted by some post lunar new year activity. It shows that the momentum isn't
03:45 that strong and if in effect the message from the Politburo today is there needs to be more done.
03:52 I think more encouragingly on that front they seem to sound a note where they were saying we're going
03:58 to need to be even more proactive in shoring up the housing market sorting out the problems with
04:04 the bad debts and also ensuring that new construction gets a bit of a boost. And that to me
04:10 is a positive sign above all for because the property sector remains the key drag on the
04:17 Chinese economy. As I've said many a time before if one looked at it ex-property sector which one
04:23 can't really do but you're actually growth hasn't been that bad but because the property sector has
04:29 been such a millstone you know it's been unimpressive. So is China out of the woods
04:37 or is there still some instability to come in your view? I think there's instability because
04:44 of the geopolitical tensions. You know they're always there as a threat in the background
04:49 but I think you this note on the whole housing property sector is an important one because that
04:56 really does need to be dealt with even more proactively and it's you know interest rates
05:02 aren't going to make a difference to this. It's about the bad debts for the developers getting
05:07 those off their balance sheets so that they can you know actually act in an unencumbered way
05:13 and then also putting some you know ring fencing new construction so that it doesn't become beleaguered
05:20 by the old bad debts in the property sector and that is a good way of going about it. It's not
05:25 unlike the RTC resolution in the US. All right thank you very much for chatting to us that's
05:31 Mark Ostwald and he is Chief Economist with ADM Investor Services International.