An economic mirage of sorts?

Summary

Marketplace Morning Report - Episode: "An Economic Mirage of Sorts?"

Release Date: July 30, 2025
Host: David Brancaccio
Source: Marketplace by American Public Media

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1. U.S. GDP Growth: A Deeper Dive

Timestamp: 01:03 - 04:40

David Brancaccio opens the episode by discussing the latest Gross Domestic Product (GDP) report, which shows that the U.S. economy grew at an annual rate of 3% in the spring into summer quarter. This growth surpasses expectations following a contraction during the winter months. To unpack these numbers, Brancaccio speaks with Katherine Ann Edwards, a labor economist and Bloomberg opinion columnist.

Katherine Ann Edwards offers a nuanced perspective on the headline GDP figure:

"The headline number is very reassuring if maybe a little bit of a mirage of what's going on."
(01:39)

Edwards explains that while the GDP growth appears strong, it is heavily influenced by volatility in trade—one of the four components of GDP alongside consumer spending, business spending, and government spending. She emphasizes that underlying indicators paint a more subdued picture:

"Consumer spending, which is how much households are spending, that's down at 1.4% and it averaged double that last year."
(02:30)

She further describes the current economic state as "idling in place," suggesting that neither consumers nor businesses are significantly expanding their activities. Edwards warns that this stagnation signals an "underlying weakness" in the economy that needs to be addressed, despite the positive headline numbers.

Brancaccio adds a cautionary note about interpreting GDP:

"Gross Domestic Product measures money changing hands. It is not to be confused as a readout of well-being."
(03:57)

2. Tech Giants and the AI Investment Surge

Timestamp: 06:01 - 07:05

Transitioning to the stock market, Brancaccio highlights the significant presence of technology companies among stockholders. He introduces Samantha Fields from Marketplace to discuss the robust quarter profits reported by major tech firms like Microsoft and Meta (formerly Facebook).

Samantha Fields attributes the strong performance of these companies to their heavy investments in artificial intelligence (AI):

"Meta is investing heavily in AI, spending hundreds of billions of dollars building data centers and doing a ton of hiring."
(06:19)

She notes that Microsoft’s early investment in OpenAI, the creator of ChatGPT, has positioned the company advantageously as AI technologies gain prominence:

"Investors will be looking for continued growth in artificial intelligence and productivity and for indications that those investments are paying off."
(06:50)

Fields underscores the outsized influence of these tech giants on the broader stock market:

"Just five of them, Microsoft and Meta, along with Apple, Nvidia, and Amazon, account for a corridor of the S&P 500's performance this year."
(06:56)

This concentration means that the financial health of these companies has a disproportionate impact on market indices and, by extension, the economy.

3. Addressing Power Shortages in South Africa

Timestamp: 07:05 - 10:12

The episode shifts focus to an international story about South Africa's ongoing power crisis, reported by Pumza Fulani from the BBC World Service. South Africa, Africa's largest economy, has been grappling with frequent and severe power cuts, affecting both businesses and households.

Fulani visits Krugerstorp, near Johannesburg, where small businesses are struggling to stay operational amid power shortages:

"The fridges need to run every day. If you don't have electricity, you can't even sell the frozen."
(07:47)
— Julia Skorbeseng, owner of a small grocery shop

In response to the energy crisis, local startups like Witility are innovating solutions to make power generation more accessible and affordable for lower-income families and small businesses. Vincent Maphosa, a founder of Witility, discusses their pay-as-you-go solar systems tailored for township businesses:

"Because part of our mission is to make sure that as many homeowners and small businesses have access to power."
(08:43)
— Julia Skorbeseng

Fulani also shares a poignant story from Benoni, where Mark Moodley installed a solar system not just to support his business but to save his 81-year-old mother’s life:

"We had to look at the market across the different segments and start to create products that are fit for purpose and are affordable for that part of the market."
(09:23)
— Mark Moodley

The reliable power supply from solar installations has had life-saving impacts, as seen in the case of Sajarini, who relies on an oxygen concentrator:

"Last year, Sajarini spent three weeks in intensive care... But the steady power supply has given them more time together."
(09:34)

Fulani concludes by highlighting the broader significance of these innovations:

"People like Julius and Mark and many others like them who were left out of the solar boom are finding the more affordable pay as you go has been about taking back control of their daily lives and their future."
(09:50)

Conclusion

David Brancaccio wraps up the episode by reaffirming the need to look beyond headline numbers to understand the real economic conditions faced by individuals and businesses. The discussions with Katherine Ann Edwards and Samantha Fields highlight the complexities behind economic indicators and market performances, while the report from South Africa underscores the importance of innovative solutions in addressing systemic challenges.

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Notable Quotes:

• Katherine Ann Edwards: "The headline number is very reassuring if maybe a little bit of a mirage of what's going on." (01:39)
• Samantha Fields: "Investors will be looking for continued growth in artificial intelligence and productivity and for indications that those investments are paying off." (06:50)
• Mark Moodley: "We had to look at the market across the different segments and start to create products that are fit for purpose and are affordable for that part of the market." (09:23)

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This detailed summary encapsulates the critical discussions and insights from the episode, providing a comprehensive overview for listeners seeking to understand the nuanced state of the U.S. economy, the pivotal role of tech companies in the market, and innovative responses to energy crises in South Africa.

Transcript

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[David Brancaccio]

Do you really know when the heat is getting to you? I'm David Brancaccio in Los Angeles. The official measure of growth is in now showing the U.S. economy grew by more than expected at a 3% annual rate in the spring into summer quarter after going negative contracting over the winter. To understand this better, I want to turn to Katherine Ann Edwards in Houston. She's a labor economist and Bloomberg opinion columnist. Thank you for joining us.

[Katherine Ann Edwards]

Of course.

[David Brancaccio]

I look at this headline number for economic growth. Wowee Kazawi, Happy days are here again. It is Morning in America. Is that how you read it?

[Katherine Ann Edwards]

Not quite, although the headline number is very reassuring if maybe a little bit of a mirage of what's going on.

[David Brancaccio]

A mirage? What way?

[Katherine Ann Edwards]

The GDP report measures the size of the US Economy, which has four components, consumer spending, business spending, government spending, and trade. What's been going on over the past six months in both the negative number with got last quarter and this big positive number we got this quarter are swings in that final component, trade. That makes sense. We've had incredibly volatile trade policy since the start of the year. The numbers that we tend to care more about are ones that are either, you know, more meaningful of how the economy is actually performing for Americans and businesses on the ground. And those numbers do not look as good. In fact, they look much weaker than they did last year. Consumer spending, which is how much households are spending, that's down at 1.4% and it averaged double that last year. So the headline number is showing the volatility in trade and imports and exports, but the numbers underneath are showing very much a slow slowing of the US Economy.

[David Brancaccio]

Yeah, if you're curious how the economy is doing for real people, you can look at their spending habits. Do they feel they have the confidence and the savings and the wherewithal to go out and get a new car or a new couch or something? And when you look at that piece of what happened in the spring, it's looking tentative, careful.

[Katherine Ann Edwards]

And businesses look similarly where their spending isn't growing as much as last year. The way that I think about it is right now the economy is idling in place. We're not really moving forward or backward in any direction, but we are slowly running out of gas. We can't do this for forever. Businesses aren't hiring, but they haven't spiked layoffs. Consumers aren't pulling back on spending to a large degree, but they're also not making as many large purchases as they normally do. So it's a very kind of hold steady, hesitant period. That's not good for our economy. Even though it doesn't necessarily lead to a bad headline number, it reflects an underlying weakness which needs to be addressed.

[David Brancaccio]

Katherine Ann Edwards is a labor economist and host of the Optimist Economy Podcast. Thank you very much.

[Katherine Ann Edwards]

Thank you for having me and the.

[David Brancaccio]

Brancaccio Standard warning here. Gross Domestic Product measures Money changing hands. It is not to be confused as a readout of well being. In about four hours we'll get the bulletin likely confirming the Federal Reserve will leave interest rates where they are and bulletins will likely follow indicating the Trump people are annoyed they were not lowered. It is a committee decision and will some members dissent from the majority view? We shall see.

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[David Brancaccio]

A lot of people who own stocks own a lot of technology companies. Some say too many and too much. But it is a big week for quarterly profits, including later today Microsoft and Facebook. Meta Marketplace's Samantha Fields has more on what has been a strong season for profits.

[Samantha Fields]

It's all about artificial intelligence right now for big tech companies. Meta is investing heavily in AI, spending hundreds of billions of dollars building data centers and doing a ton of hiring. Microsoft is also putting a lot into AI. It was an early investor in OpenAI, the creator of ChatGPT, which for now runs on Microsoft. Investors will be looking for continued growth in artificial intelligence and productivity and for indications that those investments are paying off. How tech companies are doing matters a lot to markets and the economy. According to Bloomberg, just five of them, Microsoft and Meta, along with Apple, Nvidia and Amazon, account for a corridor of the S&P 500's performance this year. I'm Samantha Fields for Marketplace.

[David Brancaccio]

Now to innovations to address power problems endemic in South Africa, the largest economy on that continent. With its aging power plants, wealthier South Africans can pay to go off the grid with solar, wind and other infrastructure of their own. But now entrepreneurs are bringing power generation within reach of lower income families and small businesses. The BBC's Pumza Fulani filed this report for us.

[Pumza Fulani]

We're in Krugerstorp, west of Johannesburg. Power cuts have badly affected small businesses. Many of the shops in this area have shut down. I counted three on the drive into this township. We're here to meet with Julia Skorbeseng, who runs a small grocery shop.

[Julia Skorbeseng]

It was affecting us directly. The fridges need to run every day. If you don't have electricity, you can't even sell the frozen.

[Pumza Fulani]

With stage six load shedding announced, South Africa's power crisis grew so severe that in 2023 President Cyril Ramaphosa appointed the country's first electricity minister to try and end the blackouts. And while some progress has been made, poor communities still face what Eskom now calls load reduction. It's essentially the same cuts with a different name. Julius Solar System is from Witility, a local startup offering pay as you go plans and solar systems built specifically for township businesses and also accessible to lower income households. Vincent Maphosa, a former energy analyst, is one of the founders of this six year old business.

[Julia Skorbeseng]

We had to look at the market across the different segments and start to create products that are fit for purpose and are affordable for that part of the market. Because part of our mission is to make sure that as many homeowners and small businesses have access to power.

[Pumza Fulani]

Back in Julia's shop, the fridge hums steadily. Now customers drop by for sweets, cold drinks, and even to charge their phones when the power is out. In another part of town east of Johannesburg, we visit Benoni to meet Mark Moodley. He made the switch to solar not to save a business, but to save a life. His 81 year old mother, Sarjarini, relies on an oxygen machine to breathe.

[Julia Skorbeseng]

What was happening is that we're having power cuts and my mom is on an oxygen concentrator and we couldn't do anything else because it was going off for sometimes six hours.

[Pumza Fulani]

Last year, Sajarini spent three weeks in intensive care. Back then, doctors said she might not survive the year. But the steady power supply has given them more time together.

[Julia Skorbeseng]

It's been a lifesaver. And even now with the solar, it adds its value.

[Pumza Fulani]

As South Africa's energy crisis drags on in a country drenched with sunshine, people like Julius and Mark and many others like them who were left out of the solar boom are finding the more affordable pay as you go has been about taking back control of their daily lives and their future.

[David Brancaccio]

Pumza Fulani reporting from South Africa. There in Los Angeles, I'm David Brancaccio. It's the Marketplace morning report from apm American Public Media.

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Hey everyone, I'm Rima Reyes and I'm excited to join Kimberly Adams on Make Me Smart. Together we'll unpack the day's news, whether it's a tariff switch up, the latest on Trump's immigration policy, or the future of clean energy. Join us each weekday so we can make sense of it all together. Because none of us is as smart as all of us. Listen to Make Me Smart. Wherever you get your podcasts.