February inflation data shows more of the same
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What does the February inflation data reveal about the economy?
On the program today, what we can learn about where this economy might be going by looking where it's been. From American Public Media, this is Marketplace.
In Los Angeles, I'm Kyle Rizdahl. It is Thursday today, April the 9th. Good as always to have you along, everybody. The news of the American economy comes to us today in the form of six simple letters, G, D, and P, and then P, C, and E. In layman's terms, that's gross domestic product and personal consumption expenditures, key measures of economic growth and price growth, inflation that is. And I'm sorry to have to tell you that the indicator arrows are kind of going the wrong way. Catherine Ann Edwards is a labor economist, also the host of the Optimist Economy podcast. Catherine Ann, welcome back to the program. It's good to have you on.
How do GDP and PCE indicators reflect economic growth?
Thank you again for having me.
All right, so let's take it in order. GDP, we learned this morning in the fourth quarter of last year, for economic growth, one half of 1% annualized. Discuss, what do you make of that?
It reflects primarily the longest government shutdown in U.S. history, which shaped a considerable amount of growth off of our economy.
Do I detect you not being as concerned, perhaps, as others might be?
It comes on the heels of a lot of bad news. There are reasons why it was bad, why it was bad that we can maybe wave away, but we can't wave away all of the other bad news in our economy. So, yes, the the shutdown was a big component of it, but we still have overall economic weakness.
What concerns arise from rising inflation and slowing growth?
We're not seeing strength in every quarter except for this one.
Okay. The next one, PCE, Personal and Consumption Expenditures Index. As I am required to say by law, it is the Fed's favorite indicator of inflation. Month on month, up four-tenths of 1% is a lot, right? The annual number, which we'll get to in a minute with Dan Ackerman, was 3%, which is okay. But monthly, the pace of increase does seem to be increasing.
Yes, it's a very worrying trend, especially considering that that report does not reflect the world since the war in Iran began. So that's a February print. The war started right at the end of February, so it's not taking into account anything that's happened to, say, oil prices since then.
How resilient are consumers amidst economic challenges?
So it's an indicator that our prices were already running a little too hot before all of this happened.
I'm going to roll out a word here, and I want your 15-second reaction. We have slowing economic growth and rising inflation. Stagflation anywhere on your radar screen?
Absolutely, and in a horrible way, right? Not in a good way. But this time around, it's worth noting that while there are echoes to the late 1970s, we have a much better Fed. Back in the 1970s, we didn't have a target inflation. They had been wish-washing on interest rates for half of a decade. And they had not signaled that they took inflation seriously, which is one of the reasons why it got out of hand.
What impact does the war in Iran have on inflation and consumer spending?
By the Fed's own historical admission, which you could read on their website, we are in a much better position this time because we have a Fed that has clearly kept its eye on the ball. You can't come under the worst political fire a Federal Reserve chairman has ever come under and not blink if you don't take inflation seriously.
Fair enough. You had a piece the other day we passed around in our production team Slack channel in which you said you're not all that worried about a recession right now because not enough bad things have happened. Right. Acknowledging that a recession is a systemic thing. But I guess how much more bad do we need, you know?
I mean, it feels like we've been through enough. I guess maybe the way that I was, what I was trying to convey was that there are bad things happening in our economy that are relatively contained to a small amount of people. The unemployment rate right now is low, but the unemployment, the share of people who have been unemployed six months or longer is rising.
How is the plastic shortage affecting U.S. manufacturers?
It's higher now than it was for many recessions in our history. This is the first time it's ever risen outside of a recession.
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Chapters
8 chapters
1
What does the February inflation data reveal about the economy?
0:02–0:58
2
How do GDP and PCE indicators reflect economic growth?
0:58–2:03
3
What concerns arise from rising inflation and slowing growth?
2:03–2:50
4
How resilient are consumers amidst economic challenges?
2:50–3:32
5
What impact does the war in Iran have on inflation and consumer spending?
3:32–4:32
6
How is the plastic shortage affecting U.S. manufacturers?
4:32–5:11
7
What are the implications of rising plastic prices for various industries?
5:11–6:24
8
How is nuclear energy positioned as a solution in the current energy landscape?
6:24–25:21