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Sabri Benishour
Oops. We revised it again. From Marketplace, I'm Sabri Ben, ashore in for David Brancaccio. The US Economy didn't grow nearly as fast as initial estimates suggested. The Bureau of Economic Analysis revised GDP growth down dramatically. Christopher Lowe's chief economist at FHN Financial, New York. Chris, how bad was it?
Christopher Lowe
Yeah, it was already weak. Remember when GDP was reported late because of the shutdown? It was only up 1.4%. Well, half of that growth is now gone. It was revised to 0.7%. The biggest downward revision came from consumption. The other big downward revision was business investment in structures, equipment and intellectual property. The private sector does a lot of business with the public sector. That's probably weakness in sales. That would have gone to the government had it been open throughout the quarter.
Sabri Benishour
Earlier this week we got one reading of inflation, the Consumer Price Index. It was kind of stable year over year. Today we got a new reading of inflation and it looks like inflation got worse, at least in January. How significant is that?
Christopher Lowe
It's a big deal. This is the PCE deflator. That is the deflator for personal consumption expenditures. It's viewed as a more accurate inflation reading. And the reason it's a big deal that it diverged in January is because it has been divergent since November. The reading this morning, core PCE inflation was up 3.1% from a year ago. That's the highest year on year rate since January of 2024. So deteriorating inflation is the kind of thing that raises eyebrows at the Fed.
Sabri Benishour
Chris Lowe is chief economist at FHN Financial. Thank you.
Christopher Lowe
Thank you, Sabri.
Progressive Insurance Announcer
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Sabri Benishour
The Senate passed a bipartisan bill yesterday to ease the shortage of affordable housing. But it has a tough road ahead in the House and possibly the White House. Marketplace's Nancy Marshall Genzer joins us now with the details. Morning, Nancy.
Nancy Marshall Genzer
Good morning.
Sabri Benishour
So the bill focuses on increasing the housing supply. So for example, easing restrictions on manufactured housing. What does that mean exactly?
Nancy Marshall Genzer
The bill says factory built housing no longer needs a steel chassis which allows it to be moved. The legislation also tries to cut red tape. For example, it tells the Agriculture Department and Department of Housing and Urban Development to coordinate environmental reviews. And it tries to generally speed things up by encouraging pre approved housing designs. The bill was written by the Banking Committee chair, Republican Senator Tim Scott and the ranking member, Democrat Elizabeth Warren. Here's Scott.
Sabri Benishour
Today, the average age of a first time home buyer is 40, 40 years old. Before you ever experience the American dream? Yeah, but this bill still has to be approved by the House. And there are a few provisions that House members do not like. What don't they like?
Nancy Marshall Genzer
Yeah, there are some restrictions on institutional investors. So investors could build single family homes and rent them out, but they'd have to sell them after seven years and they wouldn't be allowed to own more than 350 single family homes. Some House Republicans say that would limit construction. And President Trump Sabri has said he won't sign any legislation until Congress first passes and then sends him a voter ID bill.
Sabri Benishour
All right, Marketplace's Nancy Marshall Genser, thank you so much.
Nancy Marshall Genzer
You're welcome.
Sabri Benishour
This week China released its latest economic blueprint for the next five years. And anything that China has planned for itself affects the rest of the world. So let's get into it with Logan Wright. He's a partner at the Rhodium Group. Good morning.
Logan Wright
Good morning, Sabri.
Sabri Benishour
China's five year plans, one aspect of them is to lay out the industries that China wants to dominate. What are the industries China has its eye on this time around that we should be paying attention to?
Logan Wright
I mean, I think that what China's interested in is developing industrial capabilities that can enhance the productivity of, you know, their broader manufacturing base. And they want to ensure that they remain at the center of global supply chains in what they consider sort of the new strategic industries of the future. So that includes battery technology for electric vehicles, for battery, electric storage, that includes artificial intelligence, that includes semiconductors, that includes robotics, advanced robotics for manufacturing, and there's several others as well. You know, these industries within China are not really that large as a proportion of their economy right now. So it's very aspirational.
Sabri Benishour
If China wants to grow these, these high tech sectors that are not actually a huge part of their economy yet, does that not mean it's going to have to sell more to the rest of the world? And does that not mean that U.S. attempts to advance in these sectors could be a challenge?
Logan Wright
That's correct. And that's exactly what U.S. policymakers and European policymakers and should be watching very carefully. Because if China cannot generate domestic demand in the same proportions as they are generating in domestic investment, if they remain an investment led economy that is already the world's largest exporter, then the only way they can really grow is by increasing their share of global exports, which by necessity forces disinvestment and reductions in capabilities overseas.
Sabri Benishour
One goal in this five year plan and a goal that has been in previous five year plans has been to boost domestic consumption, get China to buy more of its own stuff. That is something the US has long wanted China to do. Can you explain why we care whether China is buying more of its own products or not?
Logan Wright
Because if China's has a very large trade surplus and is continuing to grow, grow primarily through domestic investment, if there's not corresponding growth in domestic consumption, that basically guarantees that those products will be exported most likely at lower prices, which ends up undermining profit margins and employment in several industries around the world, including in the United States.
Sabri Benishour
If you're the US right now, you see China's roadmap to become more self sufficient to dominate high tech. What do you do?
Logan Wright
I think the answer to policies that drive disinvestment abroad is to invest. And the US has turned to domestic investment and alternative capabilities. And you need to protect those domestic investments through combinations of, you know, with different policy measures for, via industrial policy and to a certain level of domestic protection which includes tariffs as well as other sort of non tariff barriers.
Sabri Benishour
Logan Wright, Partner at the Rhodium Group. Thank you so much.
Logan Wright
Thank you Sabri.
Sabri Benishour
In New York, I'm Sabri Benishour with the Marketplace Morning report. From APM American Public Media.
Marima Reyes
Maybe you've had this thought before. What if I turn this hobby into a side hustle? Attempting to turn painting into income may have been the worst idea I've ever had. I'm Marima Reyes, and this week on this Is Uncomfortable. The pressure to monetize what we love. Can we turn our passion into a paycheck without killing the joy? Listen to this Is Uncomfortable. Wherever you get your podcasts,
Episode Theme:
This episode spotlights three interconnected economic stories: slowed U.S. GDP growth and stickier inflation, a bipartisan effort in Congress to boost affordable housing amid political disagreement, and implications of China’s new five-year economic plan for U.S. and global industries.
Guest: Christopher Lowe, Chief Economist at FHN Financial
Segment: [01:00–03:08]
Guest: Nancy Marshall Genzer, Marketplace Reporter
Segment: [03:55–05:45]
Guest: Logan Wright, Partner at Rhodium Group
Segment: [05:47–09:37]
This episode delivers a brisk, nuanced update on the state of the U.S. economy, legislative wrangling over affordable housing, and the high-stakes global race in technology accelerated by China’s ambitions.