All eyes on the inflation data

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Speaker 4 Hey, has anything been happening the past five days in this economy? From American Public Media, this is Marketplace.

Speaker 4 In Los Angeles, I'm Kai Risdall. It is Friday today.
This one is the last one in June. Good as always to have you along, everybody.
Way too much to talk about, way not enough time.

Speaker 4 So we are just going to start. Greg Ipp is at the Wall wall street journal kate davidson is at bloomberg hey you two

Speaker 4 hello kate we're gonna start with you uh and we're gonna start with data there was a plethora of it this week we got pce this morning we got gdp earlier we got retail sales we got consumer sentiment i would like you to pick one and tell me why you picked it

Speaker 5 oh guess tough i mean yes a lot of important important reports but i think that at this point it's all eyes really on the inflation data um right so you know and sentiment data is important of course tracking the mood of consumers, Americans, how they're feeling about the tariffs.

Speaker 5 It's obviously very up and down because we're getting a lot of different signals and swings and pronouncements from the White House, different deals.

Speaker 5 But really what it comes down to, what's going to matter for the economy and for really the Federal Reserve as they're trying to steer the economy, is what's happening with inflation and in particular, how much are tariffs feeding into prices.

Speaker 5 And so far, the story continued to be today that not a whole lot.

Speaker 5 You know, we're starting to see some of what economists call pass-through. So the importers are passing along the prices, the price increases from the tariffs.

Speaker 5 But we're seeing that show up in categories that are more exposed to tariffs, which makes sense, right? Goods like household appliances, toys, things like that.

Speaker 5 But when we look at services categories, things like hospital stays or hotels, airfares, things like that,

Speaker 5 there's not signs of any price pressures. In fact, things are looking like pretty what we would consider good.
It's kind of keeping the lid on the overall number.

Speaker 5 But I think that the worry is that that also could be a sign of weaker demand, that companies don't feel they can raise prices on certain things because consumers are not eating out as much.

Speaker 5 They're not traveling as much. That's the big question is,

Speaker 5 should the Fed be more worried about inflation or more worried about a slowing economy?

Speaker 4 Well, Greg, I'm going to throw that exact question to you. Is it inflation or is it growth? And also, if you have a favorite piece of data that was out this week, discuss that as well.

Speaker 6 Well, I think the bit of data I'm most focused on is mostly about the growth story, and that's the gross domestic product figures for the first quarter, which were revised, and the more recent numbers for consumption spending in April and May.

Speaker 6 And why are these important? Well, we learned that GDP growth was revised to slightly more negative, 0.5% in the first quarter than originally.

Speaker 6 Now, let's not get all worked up about the fact that the number was negative, which reflects some weird statistical stuff with the way imports and front-running of tariffs happen.

Speaker 6 Looking beneath the surface, what we see is that the consumer, which is roughly two-thirds of GDP, was a lot weaker in that first quarter than originally thought.

Speaker 6 Basically, spending growing at a snail's pace. Moreover, after the first quarter ended, we see that that weakening trend continued into April and May, where spending actually declined.

Speaker 6 In fact, the overall level of the amount of goods and services that consumers are buying in May was the same as it was five months earlier.

Speaker 6 And what this tells you is that we've known for some time anecdotally that consumers, especially on the lower end, are feeling squeezed.

Speaker 6 Inflation has pressured their spending power. They've been eating into their savings and so forth.

Speaker 6 It finally looks with the value of this data, with the benefit of this data, that that's showing up in overall growth. And I think that's kind of a warning flag over the economy.

Speaker 6 Not necessarily recession, but slower growth.

Speaker 4 Slower growth, yeah. Kate, you mentioned the Federal Reserve.
I do want to touch on, and the caveat here has to be one,

Speaker 4 one tries to guess what President Trump is going to do day to day at one's own peril.

Speaker 4 But there is this chatter this week, again and continuing, about him maybe appointing somebody to replace Jay Powell early. Powell's term is up in May, and

Speaker 4 the gossip is

Speaker 4 maybe... President's going to come out and say, listen, I'm going to name somebody in September-ish or whatever.

Speaker 4 With the caveat that whoever gets that job next time is probably going to be inclined to be less worried about inflation, that is to say, dovish and more likely to keep interest rates lower.

Speaker 4 Why would it matter if he appoints somebody to be the shadow Fed chair?

Speaker 5 It's a great question, right? Does it matter? Is it really a big deal? I mean, I think that it does raise all sorts of questions about, I mean,

Speaker 5 it would raise questions for markets, right? I mean, who is the guy or a girl or who is the woman? Who is the person we should be listening to here?

Speaker 5 and how much influence does that person have I mean let's remember interest rates are not determined by one individual you know that the fed chair is a powerful person but there's a committee of 11 other people who vote on interest rates so they'd have to get all those people to come along but right I mean it it would essentially

Speaker 5 I would think to some extent could undercut that person I mean that's the idea I think right that's that is I think in part what what Trump or what Powell would like now you could view this and we've you know have heard that some of the idea behind this could have been, well, this is a reason Trump's advisors maybe could present to him as a reason not to fire Powell.

Speaker 5 Look, leave him in the job. Don't create a legal showdown,

Speaker 5 but just say who you're going to appoint. So that person can go out and could give some sort of forward signal about what's going to happen.

Speaker 5 But I do think that just, as you said,

Speaker 5 there already is an expectation if you look at

Speaker 5 futures markets and trading around the Fed funds rate. You look at next year and the meeting after Powell's term is set to expire.

Speaker 5 There is like, you know, there are some bets being made on rates coming down then. I think there is certainly an expectation that the next person who's nominated would be there to,

Speaker 5 you know, to certainly would be more open to what Trump wants, which is lower borrowing costs.

Speaker 3 Right.

Speaker 4 Greg, I want to talk trade here for a second. So first of all, today, President Trump said on his socials

Speaker 4 he's angry with Canada, and so he's going to stop all trade negotiations with Canada, and he's going to tell us in a week what the tariff rate on everything from Canada is going to be.

Speaker 4 So there's that.

Speaker 4 Also, the 90-day pause is set to expire in about two weeks. But the Treasury Secretary said this today.
I think it was Fox News. Here you go.

Speaker 8 You know, if we can ink 10 or 12 of the important 18, you know, there are another important 20 relationships,

Speaker 8 then

Speaker 8 I think we could have trade wrapped up by Labor Day.

Speaker 4 So Labor Day is not next week, number one. And number two, we were promised 90 deals in 90 days during this pause.
What are we even supposed to do with this?

Speaker 6 I think we've learned that things like deadlines tend to be very flexible concepts in the world of Trump. And, you know,

Speaker 6 we shouldn't be surprised. That's kind of how negotiations go.
You ask for the earth and you settle for the topsoil.

Speaker 6 So we shouldn't be terribly shocked that, you know, the July 9th deadline has turned out to be somewhat porous. And what I think it tells you is that

Speaker 6 the administration, as long as they think they're making progress, they're not going to create like an artificial cliff if they think there's still prospects of getting something good.

Speaker 4 Sorry, but the uncertainty thing here, right? That's what I want to get at.

Speaker 6 Yeah, there is an uncertainty thing, but I think that the way the Trump folks think about uncertainty is, well, is the stock market falling out of bed?

Speaker 3 No.

Speaker 6 Let's just keep going, right?

Speaker 6 So on Friday, as you mentioned today, at some point in the afternoon, the president said, well, we're going to stop negotiating with Canada and we'll tell them what their tariffs will be.

Speaker 6 And the market sold off.

Speaker 6 But then, after thinking about it, it kind of came back, which is either because they don't really think that Canada is that big a deal, or they're saying, well, we've seen this movie before.

Speaker 6 He issues a threat. You know, the counterparts call it up and say, Mr.
President, let's work this out. And then he walks it back.
Anything, either of those things could be true.

Speaker 4 Either of those things or none of those things. We just don't know.
Greg Ipp at the Wall Street Journal, Kate Davidson at Bloomberg on this Friday afternoon. Thanks, you two.

Speaker 3 Thank you. Thanks, Paul.

Speaker 4 Wall Street today, it turns out everything is mostly fine. Record highs in equities.
Details numbers when we get there.

Speaker 4 Another one of the key line items in that PCE data today, that's the Fed's measure of inflation, was that disposable income was down in May, almost a half a percent from April.

Speaker 4 In fact, income growth has been weak for a while now. Marketplace Justin Ho explains why and why that trend might continue.

Speaker 9 Households get their income from a variety of sources. Some of the less common ones include things like financial assets, think stocks, also rental income.

Speaker 9 Sarah House, senior economist at Wells Fargo, says that kind of income has not been growing that quickly this year.

Speaker 10 We're not seeing financial assets go up with abandon anymore. We've also seen the rental market soften as well.

Speaker 9 But House says overall, 60% of people's incomes are from their jobs, and that income has been growing more slowly too. House says that's because employers aren't quite as desperate for workers.

Speaker 10 So they're not adding as many workers. They're not having to fight as hard for workers.
And so that's tamping down pay growth.

Speaker 9 That said, income growth is still outpacing inflation, but that gap has been narrowing. And House says that's already putting pressure on consumer spending.

Speaker 10 Spending has been running ahead of income growth for more than a year now, and that can't last. And I think we're seeing some reckoning there where spending has downshifted.

Speaker 9 And this slowdown in income growth and consumer spending is only just starting, says Gregory Daco, chief economist at EY.

Speaker 9 He says that's because we have yet to see the president's tariffs push up consumer prices more broadly.

Speaker 12 And that's because businesses have been using different methods to try to buffer the initial tariff shock.

Speaker 9 But Daco says that can only last so long.

Speaker 12 With inflation about to re-accelerate as a result of the tariffs that have been imposed, we're going to see an erosion of disposable income growth.

Speaker 9 Which means people will have even less spending power. Daco says, barring a rollback of the Trump administration's tariffs.

Speaker 14 We are on a trajectory where the U.S.

Speaker 12 economy will likely be slowing to a pace of growth that's under 1% by the end of this year, coming down from 3% at the end of 2024.

Speaker 9 That's why DACO says the chances of a recession are elevated.

Speaker 15 I'm Justin Powell for Marketplace.

Speaker 4 Justin was just talking about that drop in disposable income and what it's going to mean for the macro economy.

Speaker 4 But when push comes to shove and people are in need, people do get very micro with their disposable income.

Speaker 4 According to Giving USA, charitable giving in the United States last year came in just shy of $600 billion, two-thirds of which was donations from individuals.

Speaker 4 Tim Cadogan is the CEO of the crowdfunding platform GoFundMe. Tim, welcome back to the program.

Speaker 13 Glad to be here, Kai.

Speaker 4 Here we are, six months after the California wildfires. You were affected, as were tens of thousands of other people.
Obviously, you didn't get the worst of it, neither did I.

Speaker 4 Some of our colleagues definitely did. I wonder

Speaker 4 how that affected you in what you do, because you're kind of in that line of work, you know, the making people better after things go bad.

Speaker 16 That's right.

Speaker 16 And actually, Kai, since I've been here, it's about five years. We've responded to just over 100 crises.

Speaker 16 This one, as you noted, hit home very, very close.

Speaker 16 And really what it did was just redouble my sense of empathy and intensity and therefore the teams as to what can we do to help more people in these situations. How can we be more effective?

Speaker 16 How can we reach more families? And how can we get them the help that we can provide alongside the other sources of help that they need in situations like this?

Speaker 4 What are you seeing now versus the last time we had you on, which was about six months into the pandemic? Obviously, then it was, you know, PPE and all those things. What are you seeing now?

Speaker 16 Well, the majority of what we see, Kai, is actually cycle of life, which is the normal things that happen to all of us as people, which is the beginning of life, having babies, going to school, going to college, and then the back end of the life cycle, and we're all mortal, is medical issues and potentially passing away and having and looking for help in all of those different situations.

Speaker 16 The pandemic saw an increase in the use of GoFumbi and that increase has continued and it's also continued to grow very quickly internationally. We're now in 20 countries.
We added Mexico last year.

Speaker 16 So we've seen continued growth as more people realize this is a great way to help each other through whatever situation we're dealing with.

Speaker 4 Ideally though, it ought not be this way, right? I mean in an ideal world you guys would go out of business.

Speaker 16 Well, I don't think that world exists because

Speaker 16 people all need to help each other. I had a customer tell me, for example, that my GoFundMe represents an almost unfathomable amount of love.

Speaker 16 This was a man who he and his partner had lost their apartment and their church in the Palisades. And he had about 350 people step up to help them.

Speaker 16 And this included people from from across his whole life including even his old high school teacher that's what we can enable that runs alongside what large either government or national institutions can provide

Speaker 4 let's say in five years another five years we have you back on uh where is gofund me in what's it going to be 2030 holy cow

Speaker 16 well i hope that we have made very significant strides in making asking for help easier. I will give you a parallel.

Speaker 16 When Uber first started, the idea that you would get into a stranger's car, sit on their back seat based on an app and be comfortable with that is bananas because our whole lives we were taught never ever ever get into a stranger's car.

Speaker 16 They successfully kind of flipped the script on that and now it's totally normal to do that.

Speaker 16 Asking for help is another one of those things that is very hard for most of us, but once you do it, you open open that door. So that's one big thing that I hope we've achieved.

Speaker 16 One of our goals is to increase the percent of GDP that is currently given philanthropically. It's about 2%.
It's been there for about 50 years.

Speaker 16 We would love to help increase that number so that we can get more money to non-profits and individuals.

Speaker 4 Tim Cadigan, here runs GoFundMe. Tim, thanks a lot.
Appreciate your time.

Speaker 16 Thanks so much, Guy. Great to be back.
And I'm glad that you were all okay as well. I understood that you had to evacuate.
So I'm glad that you were.

Speaker 4 yeah nothing nothing like you but we got that alert at three o'clock in the morning and we were my wife was like let's care

Speaker 3 pretty frightening wasn't it yeah well glad to hear all's okay same for you all right thanks

Speaker 3 take care bye

Speaker 17 Coming up.

Speaker 11 What used to be premium is no longer being made.

Speaker 4 Why Nike is bringing premium back. But first, let's do the numbers.

Speaker 4 Dow Industrial is on this Friday, 432 points to the good, 1%,

Speaker 4 43,819. And Nasdaq at 105 points, about 1%, 20,273.
The S ⁇ P 500 rose 32 points, 12%, 6,173, a new record high. Everything is fine.

Speaker 4 For the week, the Dow up 3.8%. The NASDAQ up 4.25%.
The S ⁇ P 500 added about 3.4%.

Speaker 4 How about some sporting goods and apparel, too? How about that? Big sporting goods jumped 3.5% today on a positive earnings report. Academy Sports and Outdoors found 1.7%.
Lululemon rose 1.5%.

Speaker 4 Golf equipment maker, Akushnet. Basically, titlist and footjoy if you're a golfer or a flat.
Yield on the ten-year T-note up 4.27%.

Speaker 4 You're listening to Marketplace.

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Speaker 4 This is Marketplace. I'm Kai Risdahl.
Biotechnology is a tricky business. The research and development costs are very, very high, and the payoff can be spotty.

Speaker 4 So big pharmaceutical multinationals are looking wherever they can to find the new new thing. And increasingly, U.S.

Speaker 4 biotech companies have been buying the rights to drugs developed in clinical trials in China. Marketplace is Sabri Benishore reports.

Speaker 13 There's a class of drugs for blood cancers that came along about a decade ago called BTK inhibitors.

Speaker 18 These drugs turned the engine of cancer cells off.

Speaker 13 Dr. Maziar Shadman is a professor at the University of Washington's Fred Hutchinson Cancer Center.
He had patients on these drugs.

Speaker 18 They were responding, but they had side effects that they had to come off treatment, you know, major joint problems and skin rash, for example.

Speaker 13 A few years ago, along came a a new version of these drugs, one called xanubrutinib, on which Dr. Shadman ended up conducting clinical trials that included some of his patients.

Speaker 18 Yes, they did really well and continue to benefit from the drug without having side effects.

Speaker 13 That newer, better, and safer drug was developed by Chinese pharma company Beijing. That was something new itself.

Speaker 14 China has historically been very backward in the pharmaceutical market.

Speaker 13 Tim Opler is a managing director at Stiefel. He travels to China a lot looking for new drugs.

Speaker 14 And what is so striking to me in my interactions is how quickly things are changing.

Speaker 13 China's government has prioritized biotech as a strategic industry. Opler estimates there are now around 5,000 therapeutic biotech companies in China compared to around three, maybe 4,000 in the U.S.

Speaker 14 The U.S. biotechs are increasingly finding that their Chinese competitors are very rapidly becoming the innovators.

Speaker 13 Take, for example, a class of drugs called bispecific antibodies. They help immune cells kill cancer cells.

Speaker 11 48%

Speaker 19 of all bispecifics in clinical trials have been developed by China-headquartered companies.

Speaker 13 Mark Lansdell is a director at pharmaceutical intelligence firm Sightline. This year, 37% of all molecules in general being licensed by Big Pharma are being licensed from Chinese companies.

Speaker 13 These aren't necessarily final drugs. They're mostly compounds in the research pipeline.
But for some U.S. drug makers, this is an opportunity.

Speaker 11 It takes less time to develop the drug and less cost.

Speaker 13 Bob Goldberg is vice president of the Center for Medicine in the Public Interest.

Speaker 13 For example, New York-based pharmaceutical company Regeneron didn't have a Wagovi or Ozempic of its own, so it's licensing one in the clinical trial pipeline in China.

Speaker 11 Then that gives you a market globally that you normally wouldn't have.

Speaker 13 But the surge in Chinese pharma is also ringing alarm bells.

Speaker 20 China's rise in biotech is a threat to the United States.

Speaker 13 Michelle Roseo is vice chair of the National Security Commission on Emerging Biotechnology.

Speaker 20 The deals signed just this year represent billions of dollars in potential payouts being directed in the Chinese ecosystem and Chinese biotech, and that is money that is not going into the U.S.

Speaker 13 A few drugs developed today are just a hint of what may come from other corners of biotech tomorrow.

Speaker 20 If you're the best in biotech and healthcare and therapeutics, you're also developing a bunch of other capabilities with biotechnology.

Speaker 20 This is, you know, experience, people, talent that can flow to other applications of biotech.

Speaker 13 Rozo sees in Chinese pharma and biotech the same playbook that China has used to become dominant in rare earths, magnets, solar panels, and electric cars.

Speaker 20 Like having more potential frontline therapeutics is not a bad thing. But the issue is the broader trend of sort of the innovation ecosystem moving to China.

Speaker 13 The National Security Commission on Emerging Biotechnology is calling for more investment in the U.S. and in allies and limits on certain investments to and from China.

Speaker 13 Ruhl van d'Acker leads pharmaceutical and life sciences deals at PwC. He sees something else the U.S.
could be doing.

Speaker 21 It's also an opportunity now to change on the regulatory domain, you know, to kind of speed up how long it takes to get products through the clinic in the U.S.

Speaker 13 That may not be enough. Sightlines Mark Lansdall says the U.S.
should focus on its strengths.

Speaker 19 The place to compete is on the biology. It's coming up with innovative mechanisms of action that have not been identified previously.

Speaker 13 Something in which U.S. biotech companies have an edge, at least for now.
In New York, I'm Sabri Benishore for Marketplace.

Speaker 4 Nike was the big winner on Wall Street today, up a bit more than 15% after the company said in its earnings announcement that it's going to move a not small chunk of its production out of China.

Speaker 4 Also, and related, Nike is going to be pulling back on discounts and leaning into being a premium brand, including what it calls strategic price increases to offset what it figures is going to be a cool billion dollars in tariffs.

Speaker 4 Interesting approach that, given what we know about consumers right now and how they are looking for value. Marketplace Megan McCarty Carino looked into that one.

Speaker 22 Jermaine LeVar King is a bona fide sneaker head. He wrote his dissertation on them and now teaches courses on sneaker culture at Virginia State University.

Speaker 22 His obsession started at age six with his first pair of Nikes, and he's now collected hundreds of pairs.

Speaker 11 This room I converted into a closet, and there are 360 degrees hangers and sneakers.

Speaker 22 But he says the brand has lost some luster over the years.

Speaker 11 What used to be premium is no longer being made and they're not innovating new product or make new designs that are invigorating.

Speaker 23 They may be a little bit tried to be all things to all people.

Speaker 22 Scott Markman heads branding agency Monogram Group.

Speaker 23 Once you make decisions to a little bit erode your brand, it's hard to get it back.

Speaker 22 In recent years, Nike has had to heavily discount and lost market share to smaller premium brands like Hoka and Awn.

Speaker 22 Regaining an edge will cost them, says marketing professor Barbara Kahn at the Warden School.

Speaker 10 In order to keep a premium product, you have to invest in product innovation, which is very expensive.

Speaker 10 But historically, even in hard economic times, some consumers have been willing to pay top dollars for the right products.

Speaker 22 This week, Nike announced a forthcoming Air Max loafer that's already listed for resale at more than 500 bucks. I'm Megan McCarty Carino for Marketplace.

Speaker 4 All right, we got to go. No time for a final today.
I guess I just talked too long with Craig and Kate. That one's on me.
Our theme music was composed by B.J.

Speaker 4 Lederman, Marketplace's executive producer is Nancy Fargali. Donna Tam is the executive editor.
Neil Scarborough is the vice president and general manager. And I'm Kai Rizdal.

Speaker 4 Have yourselves a great weekend, everybody. We will see you back here on Monday, all right?

Speaker 4 This is APM.

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Speaker 3 With the largest lineup of hybrid, plug-in hybrid, and electrified vehicles to choose from, Toyota has the one for you.

Speaker 3 Every new Toyota hybrid comes with Toyota Care, two-year complementary scheduled maintenance, an exclusive hybrid battery warranty, and Toyota's legendary quality and reliability.

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