Marketplace - A modest wish for the Year of the Dragon

Episode Date: February 9, 2024

China celebrates the Lunar New Year tomorrow. With many in the country struggling financially, they’re hoping the Year of the Dragon brings a healthier economy. Also: Foreign investors are cooling on U.S. commercial real estate, Americans are looking for snack food bargains and volunteers are repairing broken appliances at pop-up Fixit Clinics.

One ignores this economy at one's peril. That is all I'm saying. From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Rizdahl. Friday today, I do believe the 9th of February. Good as always to have you along, everybody. We have come to that point on the calendar. It happens every four years where politics takes over the news cycle, which, fine, I get it. But let me remind you once again that the economy waits for no one. Here to help me make that point are Lynette Lopez.

They don't know they're going to help me make that point. Lynette Lopez is at Business Insider. Kate Davidson is at Bloomberg. Hey, you two. Hey, guys. Hi, Kai. Kate, let me start with you. I would like to discuss and then dispose of as rapidly as possible the Federal Reserve.

Lots of speakers this week following up on the meeting last week saying we need more good data. And my, I think it's an unanswerable question to you really, is how much longer are they going to keep saying that? Because the data has been good for a long time. Yeah, it's like that skit, more cowbell. I keep thinking about that every time they say more data, more data. What does it really mean? We don't really know. We're trying to figure it out. So they have a meeting coming up in March, near the end of March, and they've kind of made clear we're not going to have enough good data by then. That's not going to be enough. So when's the next meeting? When could they possibly be confident enough to

lower interest rates? The meeting after March is May 1st. That's the decision. So that will have given them at that point, like nine months of pretty good inflation data. So I think that us Fed watchers are trying to parse, like, is that what they're saying? Are they saying May is nine months enough? But the reason this conversation is weird is because they haven't been very specific. They don't want to be specific. They want to keep us guessing a little bit. Yeah. So look, Lynette, just super quickly on that point. And I know I said I wanted to get rid of the Fed early, but but this does bear some analysis here. The Fed saying the same thing for a long time does not do much to, in my humble opinion,

boost their credibility and and the idea that they say what they mean. Right. So if they keep saying we need more data and then don't cut, what happens? Well, you're seeing what we're seeing on Wall Street, which is, you know, the market kind of saying, well, you know, is there a chance? So you mean more data. So next time, it's almost like that gif of Jim Carrey from Dumber, Dumb, Dumb and Dumber, where he's like, so you're saying there's a chance? And the Fed is like, no, no, next time. And the market rallies because their credibility is kind of shot. But, you know, we've never been in a situation like this. So maybe the Fed wants to see that we're not moving toward our target. We're just steadily sitting in our target, kind of like eat like a cowboy in the saddle.

I don't know. Cowboys, cowbells, we got it all today. All right. Enough with the Federal Reserve. Kate, I want to talk briefly about consumers in this economy. Catherine Rampell and I had a conversation earlier this week about household debt and how the delinquencies, especially at the lower and younger end of the income spectrum, are rising. And when people have problems with debt, they get more stressed. And the last thing we need in this economy is more consumer stress. Does that concern you? Well, I think it's certainly a risk, right? It's the Fed officials have been waiting.

We're going to keep talking about the Fed, Kai, sorry. They are, you know, they're waiting and they're watching. And when is this consumer, when is this resilience going to fade, right? I think that's one thing that has been very, very surprising to them is that people have continued to spend money, especially against the backdrop, as we've discussed many times, of these really kind of lousy consumer sentiment surveys. Everyone says the economy is really bad, but they've just kept spending money. And then we are seeing a New York Fed survey earlier this week showing, as you pointed out, American households taking on more debt at the end of the year. Loans are increasingly going bad. So I think it's kind of like every quarter we think, OK, well, this is going to be the quarter where things really start to weaken.

And there are certainly signs pointing toward that. I think the question is how quickly that happens, right? Some economists said it's just really unlikely. You don't really have this Wile E. Coyote effect where it just drops off a cliff. It's just not going to happen like that. But are we finally going to see we've been at least waiting for some kind of weakening to show that higher rates are really slowing things down. So it seems like maybe it's kind of starting to happen. But as you pointed out, on the lower and lower income households. Right. All right. Well, Lynette, since you brought it up, I want to talk about the markets for a minute. The S&P today over 5,000, 5,026, I think, which means the S&P is over 5,000. But there is confidence among investors, and I want you to help me understand why, because there are layoffs happening all over the place. Consumers are still okay, but maybe not really.

Discuss. Well, our layoffs, they're a little concentrated in the tech sector, trimming some of the fat that was taken on during the pandemic when a lot of these tech companies started hiring gangbusters. So that's why Wall Street's not particularly worried about that.

In fact, Meta, which cut 22% of its jobs over the last year, has been completely rewarded by Wall Street for it. They just love this stuff. So I like the Wile E. Coyote reference because the stock market and the economy, they're going Looney Tunes. And this is one of those situations. I know I can't help myself. This is one of those situations where I wonder, is the stock market the economy or is it not the economy?

Because if the stock market is the economy and the economy is doing really well and data is really strong, then, yes, it makes sense that the stock market is rallying. But if the stock market is a function of, you know, financial flows and interest rates are going up, then the economy should be going down. So maybe we're just seeing this push and pull of these two different, because you know, we had a rough start to the year for the stock market. It's just now turning around. So perhaps this is kind of, we're watching that argument in real time where the stock market can't figure out what it is. But I, I know a lot of people who are professionals at this and have been for decades, and they don't know what's going on either. So I don't know, I don't. All right, fair, fair enough. Kate, last question to you. You got 45 ish seconds,

maybe a minute to answer this one on that topic of the economy doing really well, which it is. Let us stipulate that the economy is very, very strong. President Biden is trying to capitalize on that. And I guess my question is, do you think it's going to work and does he have enough time? going to work and does he have enough time? Well, I think the second part of that question is the most interesting, right? I think that the research sort of suggests that voters tend to kind of make up their minds by around May ahead of a November election. So is that going to happen this time? I mean, I think it's important that the direction of things, when talking about inflation in particular, right, prices are definitely still high. They're higher than they were pre-pandemic. That's not going to change. The overall price level is not coming down. But the direction of inflation is going, it's going in a good place. So we're also seeing consumers' paychecks are growing, right? Wages are finally catching up to that inflation. And that's a good thing. So they don't have, I think the administration, they don't have a choice. They

have to lean into this argument. And the argument is, is that Americans, despite this terrible bout of inflation, they are better off. They are the median household. They're making more money. But but is that going to connect right in the psyche of Americans? Right. The big question. Yeah. Is it going to land? Is it going to land? All right. Kate Davidson at Bloomberg and Lynette Lopez, a business insider on a Friday afternoon. Yeah. Is it going to land? Is it going to land? All right. Kate Davidson at Bloomberg and Lynette Lopez at Business Insider on a Friday afternoon. Thanks, you two. Thanks, Kyle. Wall Street on this Friday during the day.

And, you know, traders seem pretty happy. We'll have the details when we do the numbers. Commercial real estate has been an economic undercurrent the past couple of weeks. What all those empty offices might mean for the financial sector and then more broadly as well. There are, of course, still a whole lot of unknowns. You don't know who's swimming naked till the tide goes out, if I might quote Warren Buffett for you. One thing we do know is that foreign investment in commercial real estate in this country has dropped significantly. There are some exceptions to that, but there is also some light to be shed on how domestic commercial real estate might be doing. Marketplaces of Rebentishore has that one. The height of foreign purchases of U.S. real estate was in 2017. Economist Jessica Louts

is VP of Research with the National Association of Realtors. And that was representing on the residential side $153 billion. It is now just $53 billion. It really has come down. But the percentage of homes in the U.S. owned by non-Americans is usually pretty small, between 2 and 3 percent. The percentage of commercial real estate owned by foreign investors is a lot higher, or at least it has been. Riaz Kasim is global head of international capital for real estate services

company JLL. Historically, the average is around 10 or 11 percent, and last year it was six percent. That drop, Stephen Bethel saw it firsthand. He's national director of Fraser Capital Brokerage and Valuation. My Taiwanese banking clients, they're not making any commercial real estate loans in the United States right now. And home offices are afraid of U.S. commercial real estate. And we've heard that also from some of our Canadian clients as well. On the one hand, interest rates are still high, and there's uncertainty about when they'll come down.

That's affecting investors both foreign and domestic. Sales volume in commercial real estate is down 63% in the U.S., says Bethel. But on top of that, some foreign investors have economic problems back home and need to cash out. That's particularly the case for Chinese investors. Korean investors bet heavily on office space in the past. They got burned and they're getting out. Again, JLL's Riaz Qasim. Yeah, we're seeing office building sales for 30, 40, 50, even 60 percent below what the values were at the top of the market. But there are areas of commercial real estate where foreign interest is strong.

I was just in the Middle East two weeks ago meeting with a lot of the large sovereign wealth funds and big investors. They continue to be interested in U.S. real estate, but they are more focused on things like data centers, life science, student housing. Things that are not office buildings. That foreign interest is helping prop those sectors up, while office buildings continue what Kasim called a slow burn. In New York, I'm Sabri Beneshour for Marketplace. Slow Burn is actually a pretty good podcast.

You should check it out. You know what other podcasts you ought to check out? Ours. You can get it at marketplace.org or on the platform of your choice. Music So Brie talked about Chinese investors and U.S. commercial real estate a little bit and some of the challenges those investors are having back home as the Chinese economy struggles. Yes, officially Beijing says GDP growth was 5.2% last year, but A, grain of salt always with Chinese economic data, and also B, wage growth there is slow. Unemployment, especially for young Chinese, has been so high they stopped publishing the data for most of last year. So as Lunar New Year starts tomorrow, there is likely

to be some reflection on the shaky Chinese economy. Marketplace's Jennifer Pak is in Shanghai. The Lunar New Year used to be a time when taxi driver Cao Changyu could binge on food. He grew up when China's economy was planned and food supplies were limited. I used to look forward to eating sweet dumplings, chicken and fish. We could only buy those supplies in the 1980s and 90s if we had money and ration coupons. Today, China's economy is more open, and food restrictions are a thing of the past. Cao Tangyu says he can mostly eat whatever he wants at any time. So his wish for the year of the dragon? To retire early. Driving taxis is hard work.

It's super competitive because China's job market is a mess and a lot of people have been laid off. The laid off workers, he says, have flooded into Shanghai to become rideshare drivers, competing directly with cabs like his. He drops me off near a Ming Dynasty garden

called Yu Yuan, where there's a shopping center selling New Year's decorations. One of the vendors is Wang Meichun. He says his business has really picked up since the height of the pandemic. His wish, he tells me, is for his life and business to get even better. One of his customers, Xu Xiaoxiao, works in investment. She says she's bracing for a tough year ahead, but she remains optimistic.

She tells me the economy is sluggish, but thinks there are still opportunities for people who seek them out. She says she's going to focus on learning more about her field and working harder to succeed. And today, on the eve of the Lunar New Year, she will have a family meal full of dishes with auspicious meanings. Eating fish is a must, she tells me, because fish sounds similar to a Chinese word for surplus. And she'll have a dish called rice with eight treasures, plus rice cakes. The Chinese word for them sounds the same as the phrase

may you get promoted every year. Another decoration seller, Sun Ziyuan, is short on staff. So as she talks to me, she's helping a customer at the same time. Business isn't as good as last year, she says, because overall China's economy isn't strong. How bad is business? She's not sure. But nearby, decoration seller Li Guinan has kept tabs. My business has dropped by more than 50% from pre-pandemic levels. 2018, 2019, we could sell up to $3,000 a day, but now we're talking just a few hundred dollars.

He says many of his corporate clients are struggling, so they're buying less. And individuals? They're buying online, he says. Toy seller Chen Yongman says he just can't compete with online retailers. He says some clients ask why he charges more than online shops, but he tells them he's got to pay shop rent, storage fees and rent for his apartment. Just then, a toy beside him catches my eye. It's a plastic doll of former President Barack Obama with a cigar pipe in his mouth and two fingers in the air in the shape of a V.

Flick the switch behind and he dances to the music. Chen Yongman says it's proving hard to sell, and he tries to give it to me. I pay for it anyway. A few doors down is jewelry seller Kang Xiuhua. She tells me her sales revenue is less than 10% of what it was before the pandemic. At Lunar New Year, many of the greetings and blessings revolve around having the best of

health and the best of luck. But for this coming Lunar Year, many people have more modest wishes. Again, taxi driver Cao Changyu. Every year, things seem to be getting worse in China. What I'm wishing for is for this year to be about the same as last year. People will still celebrate the Lunar New Year, he says, as best they can. In Shanghai, I'm Jennifer Pak for Marketplace. Coming up. I think a lot of people are fed up with disposable culture. They're fed up with the idea that you have to buy a new phone every year.

Fix it. Don't chuck it. But first, let's do the numbers. Dow Industrials off 54 points today. That is about a tenth percent. Closed at 38,671. NASDAQ up 196 points, one and a quarter percent. Finished at 15,990. S&P 500 up 28.6 tenths percent. As I said, 5,026. For the week, the five days gone by, Dow up less than a tenth percent. NASDAQ added two and three tenths percent. The S&P 500 improved 1.4%. Drugmaker Moderna weakened six and two thirds percent the day after analysts raised concerns

its experimental RSV vaccine was less effective than those of other vaccine makers. Rival Pfizer slipped just a tad. GSK moved up about a half percent. Pinterest snapped down nine and a half percent. Today, the online image sharing service posted worse than expected fourth quarter revenue. And that's what happens. Bond prices went down. The yield on the 10-year D-note went up 4.17 percent.

You're listening to Marketplace. This is Marketplace. I'm Kai Risdahl. True story. Somebody sent me beer-flavored potato chips the other day. Haven't tried them. I'm a little scared, actually. Maybe Sunday with some actual beer while watching a certain football game.

Snack food sales typically do get a bump this week heading into the Super Bowl. Long term, though, the snack food sales outlook is a bit more complex. The snack and beverage conglomerate PepsiCo announced quarterly earnings this morning. Higher prices contributed to higher profits. But those higher prices did also hit sales. It's Frito-Lay's division, for instance, which makes, of course, its eponymous chips, as well as Doritos and Sun Chips and Funyuns and those beer flavored chips by its Chinese venture. Should you be interested? Sales there fell 2 percent. Marketplace's Kimberly Adams is on the snack foods as economic bellwether desk today. About 27 percent of all food and beverage sales in the U.S. are snacks, according to the industry group Snack International.

There is core snacking, which I think all of us can agree would be your traditional chips, pretzels, crackers space. Christine Cochran is president and CEO of the organization. And then you have snacking adjacent categories, and that's an area that continues to grow and evolve. Some people would include in that beverages like a yogurt drink or maybe a string cheese, those sorts of things. Cochran says about 72 percent of consumers look at prices before they grab that bag of chips or packet of string cheese, and maybe they're going for a cheaper option these days. Despite PepsiCo's mixed results, many Americans are eating more snacks year over year, especially as they return to the office, says Becca Jablonski, who co-directs the Food Systems Institute at Colorado State University.

People are eating more snack foods in some ways to be more productive at work. So they're taking less breaks and they're trying to keep up and maintain energy. Research from Nielsen IQ found that while consumers still want to satisfy their snacking urges, they are looking for deals on their favorite treats. Carmen Allison is vice president of thought leadership for the company's North American division. Overall, we've seen promotions jump. About 27 percent of all the dollars that we spend in a grocery store is on sale. Snacking foods is a little bit higher. It's about 37 percent of everything we buy on snack foods is on promotion. Allison says even when people are trying to buckle down and save, snacks can be small luxuries they can

still enjoy, even if they are a bit pricier than they used to be. In Washington, I'm Kimberly Adams for Marketplace. You've got a thing to use every day, a coffee maker or a blender, maybe a toaster. And all of a sudden it just stops. You turn it on, you turn it off, you turn it on again, nothing. And right about then you've got a choice to make. Chuck it and buy a new one or fix it. As it happens, there is a growing community of handy in that helpful way people dedicated to getting your toaster toasting or your blender blending again. Enter now Fix-It Clinics, connecting people with broken stuff

to capable volunteers who might be able to help. From KQED, Azul Dahlstrom-Eckman has more. In the back of a library in the northern California town of Redwood City, dozens of people are bent over small appliances surrounded by tools. It's a fix-it clinic, and there's this ritual greeting as people show up. Okay, our first victim. Everyone say hi to Nancy and her bullet blender. up. Okay, our first victim. Everyone say hi to Nancy and her bullet blender. Nancy Harris drove 25 miles to get here with her magic bullet blender, which has a problem. After she plugs it in, she can't get it to turn off.

When this same thing happened with past blenders, she just threw them away. And I'm so tired of buying a new one. I would love to fix this. Volunteer Alex Schmidt works in software, but says he likes to tinker. He quickly diagnoses the problem. Mainly, it just needs to be cleaned. Okay, that's pretty stuck, but I'm guessing it doesn't spin, right? And if I do this, Right? And if I do this, it does. The pair also make a little discovery. There are actual bugs inside the motor. Little crawling bugs.

After about an hour of work and some bug removal, the blender is as good as new. Yeah, I don't have to buy a new magic bullet, you know. So that saves you, what, $100, $200 every couple of years when this happens again. I'm really, really, really happy about it. Fix-it clinics are basically classrooms where people learn critical thinking and troubleshooting skills through repair. But they're also designed to get people to think about how their buying habits affect the environment. By repairing what they have instead of buying something new, consumers can reduce waste and lower their carbon footprint. Peter Mui held the first one in 2009 and organized this clinic today.

Fix-It Clinic is a hobby of mine that's gotten way out of control. He says people have brought in broken washing machines, a dysfunctional Geiger counter, even a backpack designed to carry a parrot. It's like improv. You never know what the general public is going to present you with. Mui says around 200 fix-it clinics were held across the U.S. last year. There's also an international community on the social platform Discord. We want to propagate these skills and that ethos throughout the entire world at this point. This July, a new law goes into effect in California, making it the sixth state in the nation to put a right to repair law on the books. The California law requires manufacturers of appliances or electronics to make the tools, parts, and information necessary

to repair their products available to anyone. Companies like iFixit stand to benefit. It's an online repair community that sells parts and tools, and it co-sponsored the law. Liz Chamberlain is the director of sustainability. I think a lot of people are fed up with disposable culture. They're fed up with the idea that you have to buy a new phone every year, buy a new fridge every three years. It's a waste. Chamberlain says the California law has already had a national impact. Apple announced it would comply across the U.S., not just in California. And more recently, Samsung broadly expanded its self-repair program for its phones, tablets, and PCs.

And right-to-repair legislation is under consideration in nearly two dozen states. That's good news for places like the Fix-It Clinic here in Redwood City. Each time something is successfully repaired, everyone celebrates. Space heater fixed! And that's a feeling you can't buy. In Redwood City, I'm Azul Dahlstrom-Eckman for Marketplace. This final note on the way out today comes to us courtesy of a Bank of America research note. You have heard perhaps that 30 seconds of Super Bowl ad time went for $7 million this year. Back in 1967 for Super Bowl I, that same 30 seconds cost $37,500.

So, if everything else in this economy had inflated at a similar rate, chicken wings would cost $43 a pound, a six-pack of beer would be $340, a gallon of gasoline,

$61, and the average home price would top $4 million. Enjoy the game. Our theme music was composed by B.J. Lederman. Marketplace's executive producer is Nancy Fargali. Donna Tam is the executive editor. Neil Scarborough is the vice president and general manager.

I'm Kyle Rosdahl. Have a great weekend, everybody. We will see you again on Monday, all right? This is APM. All over the country. We need to improve reading in Wisconsin. Schools are changing the way they teach reading. I'm calling for a renewed focus on literacy.

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