Consider This from NPR - Inflation Is Not Getting Better. Why Some CEOs Are Predicting Recession

Episode Date: June 13, 2022

Prices rose more than expected in May. Gas is averaging $5 a gallon. Food, rent, and housing all cost more, too. NPR's Scott Horsley spoke to consumers trying to cope. Some CEOs are predicting a recession — but not all. NPR's David Gura reports. Additional reporting in this episode from NPR's Chris Arnold on the growing cost of housing. Transportation company owner Dennis Briggs spoke to NPR's Ayesha Rascoe on Weekend Edition Sunday. Help NPR improve podcasts by completing a short, anonymous survey at npr.org/podcastsurvey. In participating regions, you'll also hear a local news segment to help you make sense of what's going on in your community.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Hey, before we start the show, a quick favor to ask. NPR is doing an annual survey to get a better sense of how listeners like you spend time with podcasts. So if you have a few minutes and you want to help us do that, you can complete a short, we promise, anonymous survey at npr.org slash podcast survey. That's all one word. We could really use your input. And if you have already done the survey, thank you. It is a big help. Again, that's npr.org slash podcast survey. That link is in our episode notes. And thanks. A new milestone with no signs of slowing down. The national average price for a gallon of regular topped $5 for the first time over the weekend. The average price of gas climbing to $5.01 overnight. And a lot of places are seeing the prices even higher, according to AAA. I didn't quite anticipate that large of a jump that fast, but here it is. It's here. Dennis Briggs owns D. Briggs Transportation in Pittsburgh. Gas averaging five bucks a gallon, even higher in some places, means to fill up his fleet of about 40 vehicles, vans,

a party bus, a limo, and a few others. In the past, it was $12,000. Now it's $20,000. Inflation is reaching into every corner of the economy. New data from the Labor Department this past week revealed prices in May rose 8.6% from a year ago. That is higher than expected and the sharpest increase in more than 40 years, with food and rent and housing and gas all costing more. Dennis Briggs told NPR it all adds up to some hard decisions. I either have to raise the price on the customer or take it on the chin and take the loss myself. So there's some trips that we just we couldn't afford to do it for the price. So as a result, we wound up not being able to service that customer, not getting that business.

And that's been happening more frequently within the last month and a half. Consider this. Inflation is not getting any better. All Americans can do is brace and cope, while economists and business leaders debate just how bad things will get. From NPR, I'm Mary Louise Kelly. It's Monday This from NPR. Look, inflation is the bane of our existence. Inflation is mostly in food and in gasoline at the pump. Inflation, the bane of our existence. That was President Biden on Late Night with Jimmy Kimmel this past week, with gas leading the way.

That's what kills you, because it's a little billboard telling everyone how expensive everything is. If Donald Trump leaves one of those Sharpies over for you, you could maybe change the price on that, you know. We could. In reality, there's not a ton a president can do about gas prices. Gas is a global commodity. The price is set on the global market.

That market saw refineries shut down during the pandemic. Then Russia's invasion of Ukraine upended things further. And now it's summer, peak driving season. Then there's the cost of housing. Housing is getting less affordable for everyone at every level. Daryl Fairweather is the chief economist for Redfin. First, there was a long-standing shortage of new homes being built, then low interest rates and the wild pandemic housing market. Then the Fed began raising rates, and now in some places it has gotten nearly twice as expensive to buy the same house in just two years.

We hit the open house circuit every weekend, every other weekend, going to these open houses where there's 30 other families on a Saturday afternoon looking at something that's half a million dollars and that needs a full gut renovation. Nick Sanchez, a steam fitter from Tuckahoe, New York, told NPR he and his wife have been looking at houses for a year. They have a two-year-old. Both of them work. His wife is a lawyer. They've just about given up being able to afford a house right now. It's not something that either of us like to like harp on or complain about, but it does make you feel down after a while and not be able to make that next step. It's scary for the future. I want to be more stable for my family. This past week, we learned the number of people trying to get a mortgage to buy a home has fallen 21% from a year ago. That means more of those people will stay renters,

and still their costs are going up. Here's economist Daryl Fairweather again. I'm not just concerned about homeownership becoming less attainable because rents are going up just as fast. Government data shows that rents are rising faster than normal. And according to Redfin, last month for the first time, the median listed rent for an apartment rose above $2,000 a month. So when housing costs more and gas costs more, something's got to give. NPR's Scott Horsley has been talking with consumers who are trying to cope with inflation by cutting back wherever they can. For Clay Watkins, sparkling water was the breaking point. I really enjoy LaCroix. It's my carbonated beverage of choice. Watkins especially likes the watermelon flavor, so he was excited when he saw it on sale

at his local supermarket, two packages for $8. So I went to grab the package and I was like, wait a second. The package that used to hold 12 cans of sparkling water had been downsized to just eight, but the price was unchanged. I'm not a mathematician. I teach science, but I think that's a 33 percent price increase. Watkins, who lives outside Chicago, says his price antenna was already on high alert since he just paid $5.50 a gallon for gasoline. So he decided to skip the costly LaCroix water. I went to Trader Joe's and got their liter carbonated beverages for 79 cents a liter. Many people are facing much more painful decisions as inflation hovers near a 40-year high. For much of the pandemic, retailers and manufacturers have been able to raise prices without suffering any big drop in sales. But

ever since Russia's invasion of Ukraine sent gasoline prices through the roof, even middle-income shoppers have become more sensitive. They're increasingly turning to discount stores and opting for cheaper store brands. Joanne Lee buys regular eggs now, not the more expensive free-range kind she prefers. She's traded down on her salad toppings as well. There's like a certain crouton I like, but that is like $1.50 more than the generic Kroger brand. So I've switched over. They're not bad, but you know, they're just not like the quality that I usually like. But Leigh, who lives in West Lafayette, Indiana, does not cut corners when it comes to her dog, Potato. The golden doodle still gets name-brand pet food. She's still spoiled.

She eats the most expensive food out of all of us. And Lee's not the only one who's scrimping in some areas while splurging in others. People may be watching their pennies at the gas station and grocery store, but they're still opening their wallets for pricey restaurant meals, airline tickets, and hotel rooms. Overall, consumer spending has grown faster than inflation every month this year. Economist Tim Quinlan of Wells Fargo says when it comes to travel and entertainment, people are eager to

make up for lost time. For this summer, there is a mindset of we're going on vacation and we're not putting it off. While consumers aren't happy about prices, they're sort of willing to pay it to have those experiences for a while. But with inflation outpacing income, many people are financing that spending by dipping into savings or putting it on the credit card. Quinlan says that can prop up spending for a time, but not indefinitely. Come Labor Day, when all these credit card bills come due, everybody will be back on a budget again, and that's why we expect growth to slow as we head into the end of the year. Ultimately, Quinlan says, it's likely to take a slowdown in consumer spending to bring prices back under control. The Federal Reserve is working to accelerate that by raising interest rates, though some worry that could trigger a recession. Clay Watkins, the teacher who switched from

LaCroix to Trader Joe's brand water, knows not everyone can adjust his spending so easily. Watkins volunteers at a Chicago-area food pantry, where he's seen a huge spike in traffic over the last six months. The people who are really being hurt by gas prices and food prices are the people who don't have a lot of margin. They don't know where to cut. And so long as prices keep climbing, more people may find themselves having to make difficult choices about what they can live without. NPR's Scott Horsley. So what, if anything, can be done about inflation? The Fed can raise interest rates, try to cool the economy down.

It's likely to do that this month, and more rate hikes seem sure to follow this year. But higher-than-expected inflation means the Fed may have to be even more aggressive, which triggered a stock market slump on Monday. The question now is, will these moves by the Fed prove so aggressive they tip the economy into recession? As NPR's David Gurra reports, some of America's top CEOs say yes, but not all of them. In the world of business, Jamie Dimon has a lot of clout. He's the CEO of JPMorgan Chase, one of the largest banks in the world, and that gives him unique insight. So it caused a stir when Dimon said recently the U.S.

economy is about to get hit by a hurricane. That hurricane is right out there down the road coming our way. We just don't know if it's a minor one or Superstorm Sandy or Andrew or something like that. And you better brace yourself. Elon Musk, the CEO of Tesla, is also worried. He's announced plans to reduce the number of salaried workers at the carmaker by 10%. Predictions by chief executives carry a lot of weight. They're trying to figure out what the future holds for their businesses. And right now, a growing number of them worry this period of high inflation and higher interest rates could have disastrous consequences. The CEO of Wells Fargo, Charles Scharf, told the Wall Street Journal there's

no question there's going to be a downturn. I think it's going to be hard to avoid some kind of recession, just given the magnitude of the slum that has to take place. What makes forecasting so tricky right now is how much the U.S. economy has going for it. Yes, inflation remains a big problem, but people are spending freely on travel and dinners out. And most importantly, the unemployment rate is at 3.6%, near the pre-pandemic low. That's something Fed policymakers point to when they argue they'll be able to do a very delicate dance that won't end in a deep downturn.

Bank of America CEO Brian Moynihan addressed this last month during an interview in Davos, Switzerland. The question is, can they slow it down without tipping it over? And that's what the debate's about. People get up in the morning on one side of bed and say it's going to tip over. People on the other side of bed said, we'll be fine. Our team believes we'll grow this year and next year. Airline CEOs are also optimistic. They're seeing strong ticket sales even with higher prices as the cost of fuel continues to go up. The CEO of Uber also doesn't seem worried. Dara Khosh-Rashahi told Bloomberg News he's not seeing warning signs in the company's data. You know, we get a pretty

live pulse of what's happening on the streets every day, right, and in the cities in which we live. And at this point, we don't see any signal of a recession coming. Cisco CEO Chuck Robbins told CNBC his clients are not slowing down or ordering less. And he argues all this talk about a recession could be dangerously self-fulfilling. In general, I think there's a wait-and-see attitude. And, you know, I have this fear that we talk so much about recession, we may actually create one on our own. It may lead CEOs to cut back on spending preemptively, Robbins said, or cut staff. And people could scale back on their spending, and that could lead to a downturn. Overall, a recent poll from the conference board shows most CEOs only see the risk of a mild recession,

and most Wall Street economists don't expect one at all. In fact, J.P. Morgan's chief economist disagrees with his boss's hurricane forecast. He doesn't see a storm coming. NPR's David Gurra. You also heard reporting in this episode from NPR's Chris Arnold on the rising costs of housing. More about that at the links in our episode notes. It's Consider This from NPR. I'm Mary Louise Kelly.