The UK economy returns to growth in May, providing relief after last year's recession. Thai consumer confidence reaches a 9-month low amid economic and political uncertainties. JPMorgan upgrades Malaysia's economic outlook, attracting renewed investor confidence. Former New York economic development leader discusses the impact of the semiconductor boom. Stay informed about these economic developments and their implications on Simply Economics.
Sources:
https://www.theguardian.com/uk-news/article/2024/jul/11/uk-economy-returned-to-growth-in-may
https://www.kaohooninternational.com/economics/542007
https://theedgemalaysia.com/node/718568
https://spectrumlocalnews.com/nys/central-ny/news/2024/07/10/former-n-y--economic-development-leader-on-semiconductor-boom
Outline:
(00:00:00) Introduction
(00:00:43) UK economy returned to growth in May
(00:03:07) Thai Consumer Confidence Drops to 9-Month Low Amid Economic and Political Uncertainties
(00:06:15) JPMorgan upgrades Malaysia amid economic reforms, renewed investor confidence, data-centred investments
(00:08:52) Former New York economic development leader on semiconductor boom
Simply Economics
UK Economy Rebounds, Thai Consumer Confidence Drops, Malaysia’s Economic Resurgence, Semiconductor Boom’s Impact
The UK economy returns to growth in May, providing relief after last year's recession. Thai consumer confidence reaches a 9-month low amid economic and political uncertainties. JPMorgan upgrades Malaysia's economic outlook, attracting renewed investor confidence. Former New York economic development leader discusses the impact of the semiconductor boom. Stay informed about these economic developments and their implications on Simply Economics.Sources:https://www.theguardian.com/uk-news/article/2024/jul/11/uk-economy-returned-to-growth-in-mayhttps://www.kaohooninternational.com/economics/542007https://theedgemalaysia.com/node/718568https://spectrumlocalnews.com/nys/central-ny/news/2024/07/10/former-n-y--economic-development-leader-on-semiconductor-boomOutline:(00:00:00) Introduction(00:00:43) UK economy returned to growth in May(00:03:07) Thai Consumer Confidence Drops to 9-Month Low Amid Economic and Political Uncertainties(00:06:15) JPMorgan upgrades Malaysia amid economic reforms, renewed investor confidence, data-centred investments(00:08:52) Former New York economic development leader on semiconductor boom
- Duration:
- 12m
- Broadcast on:
- 11 Jul 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Thursday, July 11th. On today's show, the UK economy returned to growth in May, while Thai consumer confidence drops to a nine-month low amid economic and political uncertainties. Plus, JP Morgan upgrades Malaysia amid economic reforms, renewed investor confidence, and data-centered investments. This coverage, and more, up next. I'm David, and you're listening to Simply Economics. We start off with some positive news about the UK economy, which is showing signs of recovery after a brief recession last year. New figures from the Office for National Statistics show that gross domestic product rose by 0.4% month on month in May, following zero growth in April when wet weather impacted consumer spending. This comes as the new labor government, led by Prime Minister Keir Starmer, takes office with a promise to reboot the economy. For more on this, we turn to our economics correspondent. What can you tell us about the state of the UK economy right now? The latest GDP figures indicate that the UK economy is gradually recovering from the recession it experienced at the end of last year. That recession was triggered by households cutting back on spending amid the cost of living crisis, with inflation reaching a 41-year high of 11.1% in October 2022. Since then, inflation has come down significantly, returning to the government's 2% target. This is providing some relief to households and businesses that have been struggling with rising costs. And what about the new labor government's plans for the economy? How might they impact the recovery? Prime Minister Keir Starmer and Chancellor Rachel Reeves have made it clear that securing the highest sustained economic growth in the G7 is their top priority. They've described it as their "national mission" to reboot the economy. While the specifics of their plans are still to be unveiled, it's likely that they will focus on measures to boost productivity, investment and innovation. This could include increased spending on infrastructure, education and skills, and support for key industries. And what about monetary policy? How might that evolve in the coming months? With inflation now back at the 2% target, the Bank of England is expected to start cutting interest rates, possibly as soon as next month. This would provide some relief for households facing higher mortgage costs as well as businesses looking to borrow and invest. Lower interest rates could also help to stimulate consumer spending and support the ongoing economic recovery. However, the Bank will need to be cautious not to cut rates too quickly or aggressively, as this could risk reigniting inflationary pressures. Thank you for that analysis. It seems that while challenges remain, there are reasons for optimism about the UK economy's prospects under the new government. We'll be watching closely to see how their plans unfold in the coming months. Shifting our focus to Southeast Asia, Thailand's consumer confidence has hit a stumbling block, reaching its lowest point in nearly a year. The University of the Thai Chamber of Commerce released a survey on Thursday, showing the consumer index fell to 58.9 in June from 60.5 in May. This marks the fourth straight month of decline. For more on this, we turn to our correspondent in Bangkok. What's behind this drop in consumer confidence? The survey points to a couple key factors, David. First, there are worries about the Thai economy slowing down or stagnating. Consumers don't see clear stimulus measures from the government to boost growth. Second, there's a lot of uncertainty around the political situation. The constitutional court is set to hear a case later this month that could potentially remove Prime Minister Shretha Thavason from office. If that happens, it would mean forming a new government and Shretha's Fao Thai party having to nominate a new candidate for Prime Minister. So consumers are feeling uneasy on both the economic and political fronts. Thailand's economy did show some sluggishness in the first quarter, correct? What do the latest GDP numbers show? That's right. The Thai economy grew by 1.5 percent in the first quarter compared to a year earlier. While still in positive territory, that was a slowdown from 1.7 percent growth in the previous quarter. As the second largest economy in Southeast Asia, Thailand's economic health is important for the region. The tourism sector, a key driver, has bounced back strongly post-pandemic, but the slower than hope for overall growth underscores why consumers are concerned. Did the university offer any thoughts on what could help turn around consumer sentiment? They did suggest a couple potential remedies. One is for the government to accelerate budget spending to inject some stimulus. The other is more economic policy measures to catalyze growth. The university seems to think steps like these could help boost consumer confidence later in the year if they materialize. Of course, getting the political situation sorted out would likely help as well. Consumers and businesses generally prefer certainty and stability. Turning to that political case, when is the constitutional court expected to rule on the Prime Minister's fate? The court has set July 24 as the date to begin hearing the case. A ruling is expected sometime before September. If the court removes Shretha as Prime Minister, it would trigger a process to form a new government, even though his Fotai party would likely remain in power. But they would need to nominate a new PM candidate that would have to be approved by parliament. So there could be several weeks of uncertainty ahead, which is weighing on consumers' minds. We'll be watching to see how this all unfolds, both with the political case and the government's economic response. Thanks for the insights from Bangkok today. Shifting our focus to another Southeast Asian nation, Malaysia is back on the radar for international investors after years of being overlooked. JP Morgan recently upgraded its stance on the country from underweight to neutral after almost six years. Here to discuss the factors behind this shift is our simply economics correspondent. So what drove JP Morgan's decision to upgrade Malaysia's rating? There were several key factors that influenced the upgrade. Malaysia has been making significant progress on policy reforms, data-centered investments, and infrastructure build-out. The country recorded a 4.2% GDP growth in the first quarter of this year, with earnings growth tracking around 10% to 11%. The Malaysian government also made bold moves like cutting subsidies, redirecting those savings towards productive uses in the economy, such as enhancing literacy, reskilling people, and implementing progressive wage policies, taking inspiration from Singapore. It sounds like Malaysia has been making strides in governance as well, especially in the wake of the 1MDB scandal. How has that impacted investor perception? Absolutely. The upgrade reflects a governance reset for Malaysia. The government has passed pivotal policies and reforms including the national energy transition and the Madani economy budget. They remain committed to fiscal consolidation without sacrificing growth, aiming for a 5% growth rate. This changing perception is evident in the return of foreign investors. After initial outflows earlier this year, Malaysia saw an influx of $200 million in the second quarter. Malaysia seems to be attracting attention as a potential technology hub as well. What sectors are drawing interest from foreign investors? Foreign money is indeed starting to flow back into Malaysia, with interest in sectors like chip packaging in Penang, data centers, electric vehicles, green energy, and solar projects. Investors are recognizing the multiple themes and sectors Malaysia has to offer. During its substantial market capitalization, comparable to Singapore, Indonesia, and Thailand, Malaysia is becoming a more attractive destination. Foreign investors are taking baby steps and putting money in, although foreign ownership levels are still around 19%, not yet peaking at the 35%, 40% levels seen previously. It certainly seems like a combination of economic growth, effective policy implementation, and improving governance is putting Malaysia back on the map for investors. Thanks for the insights from Simply Economics. Shifting our focus to the U.S., the Chips and Science Act has been a major talking point for federal leaders, including President Joe Biden, as they tout the legislation's ability to attract semiconductor development to places like Central New York. Micron's recent investment in the region is a prime example. However, a new op-ed by Lisa Yves, former Deputy Secretary for Economic Development in New York, stresses the need for the semiconductor boom to benefit all communities. Here to discuss this further is our correspondent. Can you provide some background on the Chips and Science Act and its impact on semiconductor development in the U.S.? The Chips and Science Act signed into law last year provides over $50 billion in incentives and subsidies to boost domestic semiconductor manufacturing and research in the United States. The goal is to reduce reliance on foreign chip production and strengthen the U.S. position in this critical industry. The act has already attracted significant investments from companies like Micron, which recently announced plans for a 100 billion semiconductor fabrication facility in Central New York. This project alone is expected to create nearly 50,000 jobs in the region. Lisa Yves' op-ed raises concerns about ensuring the benefits of this semiconductor boom are shared equitably. What are some of the key points she makes? Yves argues that while the Chips Act is a crucial step in bolstering the U.S. semiconductor industry, it's essential to ensure that the economic benefits are distributed fairly across communities. She emphasizes the need for targeted investments in workforce development, education, and infrastructure in underserved areas to prevent the widening of existing inequalities. Yves also calls for collaboration between the public and private sectors to create inclusive growth strategies that prioritize diversity, equity, and inclusion in the semiconductor industry. How can policymakers and industry leaders address these concerns and ensure that the semiconductor boom benefits all communities? There are several steps that can be taken. First, policymakers can prioritize funding for workforce development programs that provide training and skills development for individuals from underrepresented communities. This can help create a more diverse talent pipeline for the semiconductor industry. Second, companies can commit to hiring and promoting diverse talent, as well as partnering with local educational institutions to develop targeted curricula and apprenticeship programs. Finally, investments in infrastructure such as affordable housing and public transportation can help ensure that the economic benefits of the semiconductor boom are accessible to all residents in the surrounding communities. The insights from Lisa Yves and other experts serve as an important reminder that the success of the CHIPS Act should be measured not only by the number of jobs created or the amount of investment attracted, but also by the extent to which it benefits all segments of society as the semiconductor industry continues to grow in the U.S. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]