“An incomplete picture of the economy”

Summary

Marketplace Morning Report – Episode Summary: “An Incomplete Picture of the Economy”

Release Date: March 3, 2025
Host: David Brancaccio
Produced by: Marketplace

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Introduction

In the March 3, 2025 episode of Marketplace Morning Report titled “An Incomplete Picture of the Economy,” host David Brancaccio delves into critical economic issues affecting the United States. The episode explores the implications of altering GDP calculations by excluding government spending, the potential ramifications of newly imposed tariffs on the auto industry, and an unexpected surge in adult toy purchases. Through expert interviews and on-the-ground reports, the episode provides listeners with a comprehensive understanding of these multifaceted economic dynamics.

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Government Spending and GDP

Segment Overview:
The episode opens with Sabri Ben discussing a controversial proposal by U.S. Commerce Secretary Howard Lutnick to exclude government spending from GDP calculations. This segment features economist Julia Coronado, founder of Macro Policy Perspectives, who provides expert insights into the potential consequences of such a move.

Key Points:

• Definition and Importance of GDP:

  • Sabri Ben (00:01): Introduces GDP as the “mother of all economic numbers,” highlighting its role in measuring the growth and size of the U.S. economy.

• Proposal to Exclude Government Spending:

  • Howard Lutnick's Proposal: Aims to remove government spending from official GDP statistics.
  • Julia Coronado (00:41): Emphasizes that excluding government spending, which constitutes nearly 20% of the economy, would result in an incomplete and misleading portrayal of the economic landscape. She states, “the calculation of GDP follows an international standard that the US helped set” (00:41), warning that altering this metric would disrupt both national and global economic understanding.

• Implications for Economic Transparency:

  • Julia Coronado (01:16): Highlights that removing government spending could obscure the true impact of budget cuts, particularly on GDP. “This might be an attempt to downplay the importance of that” (01:25), referring to federal spending cuts that could negatively affect GDP figures.

• Market Impact:

  • Julia Coronado (01:44): Warns that distorting GDP information can lead to market instability. “If there is an interruption in or a distortion in the information that we receive on the economy, that could disrupt the ability of markets to assign appropriate prices to stocks and bonds” (01:44), suggesting that accurate GDP data is crucial for fair market pricing and investor confidence.

Conclusion of Segment:
Julia Coronado underscores the critical role of consistent and transparent GDP reporting in maintaining economic stability and market confidence. Altering GDP calculations by excluding government spending could have far-reaching negative effects on economic analysis and financial markets.

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Tariffs and the Auto Industry

Segment Overview:
Sabri Ben transitions to discussing impending tariffs announced by President Trump, focusing on their potential impact on the U.S. auto industry. This segment includes a report from Henry Epp, who analyzes how these tariffs might slow economic growth and elevate inflation.

Key Points:

• Announcement of New Tariffs:

  • Sabri Ben (02:08): Announces that President Trump will impose import taxes (tariffs) on goods from Canada and Mexico, with an initial proposal of 25% that might change by the next day.

• Economic Forecast:

  • Survey Insights (02:08): A survey of business economists indicates a consensus that the tariffs are expected to “slow growth and raise inflation” (02:08), signaling broad concern within the economic community.

• Impact on the Auto Industry:

  • Henry Epp (02:31): Explains that the auto industry relies heavily on cross-border supply chains involving Mexico, the U.S., and Canada. “Vehicles built in North America are made up of thousands of components, many of which cross between Mexico, the US and Canada” (02:31). Tariffs could significantly increase costs for both parts and finished vehicles.
  • Retaliatory Tariffs: Mexico and Canada may respond with their own tariffs, exacerbating cost increases.
  • Future Manufacturing Shifts: Cites Honda’s decision to move Civic hybrid production to Indiana as a response to tariffs, although changes in manufacturing are not immediate due to long-term planning and investments (02:54).

• Industry Response:

  • Henry Epp (03:51): Notes that automakers are “bracing for impact,” with Ford CEO Jim Farley stating that tariffs “will blow a hole in the US industry” (03:51). This sentiment reflects widespread anxiety among automakers about the sustainability of current supply chains under new tax burdens.

Conclusion of Segment:
The introduction of tariffs on Canadian and Mexican goods poses significant challenges for the U.S. auto industry, potentially leading to higher production costs, supply chain disruptions, and a ripple effect on the broader economy through slowed growth and increased inflation.

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Surge in Adult Toy Purchases

Segment Overview:
The focus shifts to an unexpected trend in the toy market, where adult consumers are increasingly driving sales. Sabri Ben introduces a report by BBC’s Sam Gruy, highlighting data from market research firm Circana.

Key Points:

• Growing Adult Market in Toys:

  • Sabri Ben (04:13): Highlights that toy sales surged during the pandemic and continue to grow, with adults purchasing collectibles, trading cards, and board games.
  • Sam Gruy (04:29): Observes, “For decades toys were for children, but that's changing. One in five toys and games is now bought by adults for themselves” (04:29), indicating a significant shift in consumer demographics.

• Retail Insights:

  • Laura, Store Manager (04:41): Confirms the trend, noting that about 40% of their sales are from adults purchasing for themselves. She mentions, “I do strongly feel Lego is more targeted towards adults now than it has ever been before” (04:50), emphasizing the shift towards higher-priced, collectible sets.

• Industry Analysis:

  • Melissa Simons (05:15): From Macro Policy Perspectives, explains that adults (aged 18+) are the primary drivers of this growth. She notes, “it's definitely something that the industry has wanted to jump on, particularly given in some countries declining birth rates” (05:15), pointing to demographic changes as a key factor.

• Declining Youth Toy Purchases:

  • Melissa Simons (05:26): Reports a decrease in toy purchases by children, especially girls, with parents reallocating spending towards beauty products, clothing, and fashion (05:26). This shift suggests changing consumer priorities influenced by broader social trends.

• Influence of Social Media:

  • Sam Gruy (05:44): Attributes part of the surge to social media, which has broadened the appeal of toys. With “132 million TikTok posts and counting relating to plushies or soft toys” (05:44), platforms like TikTok are driving interest and demand for various toy categories.

• Personal Accounts:

  • Raven (YouTube Creator, 05:56): Shares her personal passion for soft toys, stating, “I have so many soft toys, all kinds of different brands... I just absolutely love them” (06:00). Raven illustrates how toys provide comfort and a tactile escape from digital overload and economic stress.

• Psychological Comfort:

  • Raven (06:17): Explains the emotional appeal of toys, “We just want something tactile. We want something away from a screen... a plushie, a soft toy can offer that” (06:17), highlighting the role of toys in mental well-being during challenging times.

• Market Statistics:

  • Sam Gruy (06:17): Concludes that “a third of global toy sales are by adults buying for themselves, with over 18s driving the growth” (06:17), underscoring the significant economic impact of this demographic shift.

Conclusion of Segment:
The adult toy market is experiencing robust growth, driven by changing consumer behaviors, social media influence, and a desire for tactile comfort in an increasingly digital and stressful world. This trend presents new opportunities and challenges for the toy industry as it adapts to a more diversified customer base.

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Conclusion

In “An Incomplete Picture of the Economy,” Marketplace Morning Report provides a nuanced examination of current economic issues. By exploring the potential manipulation of GDP statistics, the looming impact of tariffs on the auto industry, and the unexpected rise in adult toy purchases, the episode paints a comprehensive picture of the multifaceted U.S. economy. Expert insights from Julia Coronado, Henry Epp, Melissa Simons, and firsthand accounts from industry stakeholders like Laura and Raven enrich the discussion, offering listeners a deep and engaging understanding of the factors shaping today’s economic landscape.

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Notable Quotes:

• Julia Coronado (00:41): “The calculation of GDP follows an international standard that the US helped set.”
• Julia Coronado (01:25): “This might be an attempt to downplay the importance of that [federal spending cuts].”
• Henry Epp (02:31): “Vehicles built in North America are made up of thousands of components, many of which cross between Mexico, the US and Canada.”
• Henry Epp (03:51): “Tariffs will blow a hole in the US industry.”
• Raven (06:00): “I just absolutely love them [soft toys].”
• Raven (06:17): “A plushie, a soft toy can offer that [tactile comfort].”

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This summary encapsulates the critical discussions and insights presented in the episode, providing a clear and detailed overview for listeners who may have missed the original broadcast.

Transcript

[Sabri Ben]

How the Government Could Mess with GDP from Marketplace I'm Sabri Ben, ashore in for David Brancaccio. Every three months, the US Government reports on the growth and size of the US Economy. It is the mother of all economic numbers, gross domestic product, GDP. U.S. commerce Secretary Howard Lutnick says he wants to take out government spending from that number in official statistics. But government spending is literally part of the definition of gdp. It's in every economics textbook. Julia Coronado is founder of Macro Policy Perspectives and joins us to talk about it. Hi, Julia. So what would the consequences be of taking out government spending from gdp?

[Julia Coronado]

Well, as you know, that would be an incomplete picture of the economy to exclude the government sector, which is just under 20% of the economy, including state and local government spending. But more broadly, the calculation of GDP follows an international standard that the US Helped set. So this would be a real disruption to our understanding of the economy and to our participation in transparent national accounting, which we insist that other countries follow.

[Sabri Ben]

Do you think that this could or would conceal the impacts of DOGE cuts on gdp?

[Julia Coronado]

Potentially, certainly. If we are seeing cuts in spending, cuts in employment at the federal level, that would reflect as a negative in gdp, and this might be an attempt to downplay the importance of that.

[Sabri Ben]

What would this change mean for markets?

[Julia Coronado]

So if there is a interruption in or a distortion in the information that we receive on the economy, that could disrupt the ability of markets to assign appropriate prices to stocks and bonds and all kinds of financial assets.

[Sabri Ben]

Julia Coronado, founder of Macro Policy Perspectives, thank you so much.

[Julia Coronado]

My pleasure.

[Sabri Ben]

Tomorrow is the day President Trump has said import taxes, AKA tariffs, will go into effect on goods from Canada and Mexico. 25% was the original number, but that may change by tomorrow. A survey of business economists out this morning finds that the vast majority of them expect tariffs will slow growth and raise inflation. Tomorrow's tariffs could be particularly punishing for the auto industry marketplaces.

[Henry Epp]

Henry up reports vehicles built in North America are made up of thousands of components, many of which cross between Mexico, the US And Canada, in some cases multiple times, which means those parts and the cars and trucks they go into could get a lot more expensive. Mexico and Canada may impose retaliatory tariffs. And the Trump administration plans to put import taxes on steel and aluminum this month, too, which could further drive up costs. The auto industry has spent decades and billions of dollars integrating their supply chains across the continent. And because auto companies plan their vehicles years in advance, they can't just change those plans and their manufacturing investments on a dime. Though some firms may eventually bring more manufacturing into the U.S. reuters reports this morning that Honda plans to make its next Civic hybrid in Indiana instead of Mexico. Production on that car is expected to begin in May of 2028. For now, many car companies are bracing for impact. Last month, Ford CEO Jim Farley said tariffs, quote, will blow a hole in the US Industry. I'm Henry Epp for Marketplace.

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[Sabri Ben]

During the pandemic, when so many people were stuck inside, toy sales surged. New data from market research firm Circana shows this tre has continued and that it is increasingly adults and not just children, buying up things like collectibles, trading cards and board games. The BBC's Sam Gruy filed this report.

[Sam Gruy]

For decades toys were for children, but that's changing. One in five toys and games is now bought by adults for themselves. It's reflected in toy stores like this one in Western Canada.

[Laura]

We're definitely known for things like having a really large selection of Lego, which is kind of more targeted towards adults nowadays.

[Sam Gruy]

Laura is the manager here and says around 40% of their sales are bought by adults for themselves.

[Laura]

I do strongly feel Lego is more targeted towards adults now than it has ever been before and right now targeting the adults who have the money, who can spend $500 on a collector set, it saves them.

[Sam Gruy]

Last year Kidalts, an industry term for those aged over 12, spent $1.5 billion on toys.

[Melissa Simons]

It's actually the 18 plus the adults that are really driving that and it's definitely something that the industry has wanted to jump on, particularly given in some countries declining birth rates.

[Sam Gruy]

Melissa Simons led Sukana's report, which suggests that kids are buying fewer toys than ever before.

[Melissa Simons]

There are a lot of parents who have told us that they've reduced their spending on toys for their younger children, particularly girls. They're actually increasing their spend on beauty products, on clothing and on fashion at the same.

[Sam Gruy]

But while social media has pushed skincare to children, it's introduced toys to new markets too. With 132 million TikTok posts and counting relating to plushies or soft toys.

[Raven]

Jumbo snuggle dragons have arrived for pre order.

[Laura]

I have finally bought the Breathing Otter plushie which I've been seeing all over.

[Raven]

My TikTok I have so many soft toys, all kinds of different brands. I have ones that you can find in stores. I have ones that are like made in limited numbers by individual artists. I just absolutely love them.

[Sam Gruy]

For Raven, a 25 year old YouTube creator known as FroggyCrossing to her over a million YouTube subscribers. In an era of economic stress, political upheaval and digital overload, toys offer comfort.

[Raven]

I definitely think there's aspects, whether it's conscious or unconscious, where we just want something tactile. We want something away from a screen. And even something as simple as a plushie, a soft toy can offer that.

[Sam Gruy]

From plushies to Lego, it's estimated a third of global toy sales are by kid ults buying for themselves. With over 18s driving the growth. From Vancouver, I'm the BBC Sam Drouet for Marketplace.

[Sabri Ben]

And in New York, I'm Sabri Benishour with the Marketplace morning report from apm, American Public Media.