Chapter 1: What economic factors are influencing the U.S. and Vietnam's relationship?
It's a petroleum-based economy, gang. We just live in it. Also, what the labor force in Vietnam has to do with the economy here. From American Public Media, this is Market Class. In Los Angeles, I'm Kai Risdahl. It is Tuesday. Today, this one is the 14th of April. Good as always to have you along, everybody. Another story from our series, The Age of Work, coming up later on in the program.
But we are going to start today with the economic reality of our geopolitics. It comes in the form of the producer price index. Prices at the wholesale level, which we learned this morning from the Bureau of Labor Statistics, rose five-tenths of one percent month to month. That is the headline number.
The core rate, which takes out food and energy prices because they bounce around a lot, that was basically flat. And that's going to make more sense when I tell you that gas prices were up 14 percent in March. That's wholesale again, not pump prices. And diesel was up more than 40 percent, 4-0 percent. Now, me mentioning diesel should get you thinking about what diesel is used for.
And if you said trucks, we'll go straight to the head of the class. Marketplace's Justin Ho is on trucks, transportation, and what the price of diesel is going to cost consumers for us today.
Over the last few weeks, Catherine Reynolds, who handles imports for Palmetto Tile Distributors in South Carolina, has been getting a lot of emails about fuel surcharges from shipping companies.
So whatever, like, the gross bill is, they'll add 15 to 25 percent to that.
Reynolds says she's been through this before, when energy prices spiked after Russia invaded Ukraine. But Zach Rogers, a professor at Colorado State University, says back then companies were holding on to excess inventory they built up during the pandemic. And that helped them to rely less on transportation.
This year, we've been running inventories very lean. And so even if transportation is very expensive, there will really still have to be some replenishment.
Companies could build up their inventories again to avoid having to constantly replenish items. But Rogers says doing so comes with its own costs, since companies still have to pay tariffs on imported goods.
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Chapter 2: How are rising transportation costs affecting businesses?
And so if you have this serious risk of rising prices and falling output, we kind of supply shock ourselves into stagflation, which is the hardest problem for the Fed to solve. One part of the stagflation problem, the flation thing, the inflation piece would imply that the Fed should raise interest rates.
The other part of stagflation, the stag stagnation piece of things would suggest that they should cut interest rates. And either way, whatever they do to solve one problem will make the other problem worse. And all of this really depends on how long things drag on with the war, with the supply chain disruptions and how expectations react and we don't know really any of that yet.
Right. That's a whole series of unknown unknowns. Last thing, and I'm going to venture into the political side of this grand thing we call the political economy. Were you as surprised as I was to hear Secretary Besson today, the Secretary of the Treasury, say, you know what, maybe the Fed should just wait and see what happens?
I wish I were surprised. Really? Well, I wish I were surprised that somebody from the administration were weighing in at all on monetary policy. I guess that's where my starting point is. In a different administration, I would have been surprised that the treasury secretary would say anything about interest rates.
So that's like, you know, the thing that we've become inured to that we should be shocked by, but we're not. Then the second piece of this is, yeah, it is a little bit unexpected, I guess, that if they are going to weigh in on interest rates, which they should not, that the way that they weigh in is by saying do nothing or they, Besant in this case, as opposed to saying,
Just cut rates as far as you can, which is what we've been hearing from Donald Trump, but also pretty much everyone else in the administration. So they are all pointing in one direction. Besant, I guess, is maybe pushing back a little bit on that. And we'll see where things go.
I love the implied question mark on the end of that sentence. Catherine Pell, you can get her MS now. You can get her on The Bulwark as well. Catherine, thank you.
Thanks, Scott.
I was in Vietnam a couple of three weeks ago for our series, The Age of Work, how changing demographics are changing the way the global economy works. I was there with Nila Richardson. She is the chief economist at ADP, our partner on this series. And you're going to hear a lot of stories from Vietnam over the next couple of days.
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