Chapter 1: How do global events impact grocery prices?
Coming up on the program today, things that are happening in the economy while everybody is watching the war. And we will start the latest set of stories from our series, The Age of Work, from American Public Media. This is Marketplace. In Los Angeles, I'm Kyle Risdell. It is Monday today. This one is the 13th of April. Good as always to have you along, everybody. The global news of the day.
I'm going to guess you are up to speed on negotiations not happening. Blockade happening. Markets, having, it seems, grown accustomed to the whiplash and the misdirection, were mostly OK with it all. Even oil, without too much argument, the economic bellwether of this war, up only a couple of percent for the global benchmark.
So in an attempt to separate the signal from the noise, we're going to spend the first part of the program today on the nuts and bolts, the ways the economy keeps on grinding while geopolitics does its thing. And then, as promised, we will get to the first of our Vietnam reporting.
The big Wall Street story today is of the big banks, which are going to be reporting earnings the next couple of days. Goldman Sachs started things off this morning.
Profits were up in Q1 almost 20% compared to the same time a year ago, thanks in part to the revenue it earned advising companies on mergers and acquisitions and other kinds of corporate deals, of which one should say there have been many this year. But as Marketplace's Justin Ho reports, it is also likely we're going to see some signs this week the war is affecting bank earnings.
There are a few ways that the war can actually boost profits at big banks. For one, they do a lot of stock trading on behalf of their clients. And over the past month, stock markets have been volatile.
Increased volatility is oftentimes very favorable for trading results.
That's Gerard Cassidy with RBC Capital Markets. He says banks earn fees when they execute trades for their clients.
And because of increased volatility, clients of these companies trade more frequently.
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Chapter 2: What recent trends are affecting food inflation?
Some of these companies are going to say, hey, we finally have a need to do some of these bigger capital projects to expand, and that's going to be increased loan volume for really any banks that have that sort of energy exposure.
But Tobik says there are plenty of companies that are being harmed by this war, either because they're directly exposed to the conflict or because they're just less confident. Stephen Bigger, a bank analyst with Argus Research, says banks could see revenue slow in the near future because many companies might hold off on mergers and acquisitions or IPOs.
It's just a pause in activity until you get some clarity on the global ramifications of these conflicts.
Banks are also concerned about the effect that the war is having on the U.S. economy, says David Schiff with FTI Consulting. If prices continue to stay high and inflation stays at an elevated level, particularly around fuel and energy costs, that starts to have a ripple effect across the consumers, which then has an impact on small businesses.
And Schiff says that means banks will start to worry about their borrowers. And as a result? On the one hand, you see credit underwriting standards tighten. On the other, you see provisions start to increase for potential losses. All of that, Schiff says, will limit how much the economy can grow.
Some of that is just businesses themselves not wanting to grow, and then it gets magnified as financial institutions pull back on credit lending. So it really raises that specter the longer this goes on. If the war does drag on, Schiff says we'll likely see evidence that banks are pulling back in the next two or three quarters. I'm Justin Ho for Marketplace.
Wall Street to start the week. Traders not at all upset by the geopolitical turn of events. We will have the details...
Thank you.
Oil and energy costs, as we told you last week, drove inflation higher in March, 9 tenths percent month over month, 3.3 percent year over year. Although is not grim in the world of price levels, one category that bucked the trend and saw a little inflation slow down, not to be clear falling prices, but prices going up more slowly than expected. That category is an important one. Food at home.
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Chapter 3: How is the war in Iran influencing big banks' earnings?
And all three of those, labor, energy, and transportation, are current sort of long-term structural pain points in the food supply chain.
Transportation and energy is going to become increasingly key as diesel prices climb because of the war. David Ortega is a professor of food economics at Michigan State.
The canary and the coal mine here are really the perishable food products.
They are the least processed, require the most travel, and are time-sensitive. Ortega says any food that lives on the perimeter of the grocery store will see price hikes first. That's going to trickle down, down the supply chain here in the coming months. As of March, the USDA forecasted that in 2026, the cost of food at home will increase more than 3%. I'm Kristen Schwab for Marketplace.
Even as drivers are staring down rising prices at the pump, $4.12 a gallon today, so says AAA. The cars and trucks we are driving have, on the whole, gotten slightly more fuel efficient. The Energy Information Administration says gasoline consumption fell about 1% last year from 2024, and it was down 4%. from the pre-pandemic high in 2019.
And that is happening despite the fact that we're driving more. Vehicle miles traveled is the government's measure of our driving habits, up more than 1% last year. And as Marketplace's Henriette reports, that's in keeping with a decade-long trend of slowly rising fuel efficiency.
One thing that made the oil shocks of the 1970s especially bad was that cars back then weren't very fuel efficient. Daniel Sperling is a professor emeritus at UC Davis. When I was young, a car got 13 miles per gallon. You know, now they're getting 30 miles and some of them are up 50, 60 miles per gallon.
And that's largely thanks, Sperling says, to federal regulations that were created in response to those oil crises. The industry has been obligated to continually supply more efficient vehicles. But because we tend to drive our cars for a long time, the average vehicle on the road is nearly 13 years old. Those more efficient vehicles take a while to change our overall gas consumption.
Joshua Lynn is a professor at the University of Maryland. We still have a lot of vehicles on the road that have relatively low fuel economy. They were produced back a long time ago when those standards were weaker. The federal government started bolstering those standards about 15 years ago.
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Chapter 4: What role does fuel economy play in high gas prices?
The United States and Vietnam, of course, have a complicated history. But diplomatic relations normalized in 1995. And after 2018, when President Trump's China tariffs and companies looking elsewhere for manufacturing, the two economies have become even more closely connected. They're also connected, though, by people like many of those coming through this beauty school. Come on in.
Oh wait, is there class actually happening? I don't want to interrupt class. So no, we're not interrupting class.
They're finishing up their theory class right now. Come on in.
There were rows of salon-style chairs, there was a hair-washing station, and students with their eyes focused right up front.
This is our cosmetology class.
Hi, sorry, I don't want to interrupt. I'm really sorry.
And then we teach the students. We're approved to teach it bilingual in both Vietnamese and in English, which is amazing because we're here in Little Saigon, so they can learn different ways.
Upstairs, we saw students putting that schooling into practice. Man, waxing the eyebrows? Yes. Oh, God. And we got a whiff of the manicuring class. Oh, you can smell the nail polish, man.
That's right.
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Chapter 5: How are grocery prices changing for staples like eggs and tomatoes?
Wells Fargo hopped up 1.5%. Citigroup also expanded about 1.5%. McDonald's is planning on selling what they call craft sodas and energy drinks. That's according to the Wall Street Journal. What? They're supposed to be cheaper, I guess, than the versions of the big coffee chains. McDonald's down 0.4% today. Bonds up. Yield on the 10-year T-note down 4.29%. You're listening to Marketplace.
This is Marketplace. I'm Kai Risdahl. We're in Little Saigon in Orange County, California today, telling three stories of generational change in one neighborhood in this economy, home to the biggest Vietnamese population outside Vietnam.
Hello, how's it going?
How are you? Good to see you. I'm Kai, nice to meet you.
Tommy, pleasure, pleasure.
Tommy Nguyen there, all of 25 years old. Tell me where we are, what's going on?
Yes, so we are at Banh Mi Saigon out here in Garden Grove, California, Lo Saigon. And we've been here in Lo Saigon for over 30 years.
You, however, have not even been here for 30 years, just looking at you. You're a young guy.
No, no, this bakery is older than me. So this is my parents' first child.
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