Even if it doesn't feel good, consumers are still spending

Summary

Marketplace Morning Report: "Even if it doesn't feel good, consumers are still spending"
Release Date: May 13, 2025
Host: David Brancaccio

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1. Inflation and the Economic Outlook

Timestamp: 01:31 - 03:55

David Brancaccio opens the episode by discussing the latest inflation data, highlighting that inflation remained relatively stable in April despite the anticipated impact of tariffs. He notes that the Consumer Price Index (CPI) increased by 2.3% year-over-year, signaling a slight moderation in inflation rates.

Key Insights:

• Inflation Dynamics: The moderation in CPI suggests that tariffs have not yet significantly affected consumer prices, but this impact is expected to unfold over time.
• Economic Sentiment: While some Wall Street banks are becoming more optimistic about avoiding a recession, there remains uncertainty regarding future economic policies.

Notable Quotes:

• David Brancaccio [02:11]: "Inflation remained quite tame in April despite the tariff shock."
• Lauren Seidel Baker [02:33]: "Wages are still rising at a faster pace than inflation. That means we still have the ability to go out and spend money to purchase things."

Economist Lauren Seidel Baker from ITR Economics provides her perspective, emphasizing that traditional recession indicators are not prominently present. She asserts that consumer spending remains robust due to rising wages outpacing inflation, which supports continued economic activity despite higher prices.

Notable Quotes:

• Lauren Seidel Baker [02:33]: "We still do not expect a recession this year."
• David Brancaccio [03:16]: "I don't prefer to follow the crowd in my life, but you know you are outside the consensus on the idea that you weren't predicting recession even before the tariff turnaround yesterday."

Baker also addresses the potential for delayed consumer and business purchases due to uncertainty, which could eventually slow the economy. However, she maintains that the current consumer resilience mitigates immediate recession risks.

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2. Tariffs, Import Taxes, and Government Revenue

Timestamp: 03:55 - 05:17

Transitioning from the inflation discussion, Brancaccio delves into the impact of tariffs on government revenue. Nova Safo from Marketplace Foreign reports that the U.S. collected a record $16 billion in customs duties in April, marking an increase of approximately $9 billion from the previous year.

Key Insights:

• Tariff Revenue Surge: The effective tariff rate averaged 23% in April, driven by increased import volumes as businesses attempted to preempt higher tariffs.
• Trade War Dynamics: With the current pause in the U.S.-China trade war, Fitch Ratings projects a reduction in the effective tariff rate to 13%.
• Future Projections: A significant drop in import volumes is anticipated as businesses adjust to the new tariff rates, potentially leading to decreased import tax income in subsequent reports.

Notable Quotes:

• Nova Safo [04:08]: "April also brought an increase in import volumes as businesses raced to get ahead of tariffs."
• Nova Safo [04:17]: "Now we have a pause in the U.S.-China Trade war and Fitch says the effect of tariff rate is down to 13%."

Safo underscores the temporary nature of the tariff spike and its direct correlation with import activities. The resulting increase in government revenue presents a complex scenario amid ongoing trade negotiations and shifting economic policies.

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3. The Future of the Energy Star Program

Timestamp: 05:48 - 08:22

David Brancaccio shifts focus to environmental and economic implications surrounding the potential termination of the Energy Star program. Elizabeth Trovall reports on the discussions involving experts from the American Council for an Energy Efficient Economy and the University of Texas at Austin.

Key Insights:

• Energy Star's Legacy: Since its inception in the early 1990s, the Energy Star program has significantly influenced consumer behavior and appliance sales by certifying products for energy efficiency with a recognizable blue label.
• Economic Benefits: The program has saved households and businesses approximately half a trillion dollars by reducing energy consumption and lowering electricity bills.
• Potential Consequences of Termination:
  • Reduced Consumer Awareness: Without Energy Star certifications, consumers may find it more challenging to identify energy-efficient appliances, potentially slowing the adoption of such products.
  • Impact on Energy Demand: The decline in energy-efficient product sales could lead to increased electricity demand, necessitating the construction of additional power plants and infrastructure.
  • Long-Term Efficiency Goals: Experts stress the importance of maintaining energy efficiency standards to manage growing electricity needs driven by new industries like AI and data centers.

Notable Quotes:

• Steve Nadel [06:17]: "Consumers who buy Energy Star products save money by reducing their electricity bill and consumption."
• Joshua Rhodes [06:56]: "So it really is helping to reduce the demand for electricity and the need for power plants."
• Ramtin Si Ashansi [07:35]: "Because this is the time we need all the energy we can get."

Joshua Rhodes and Ramtin Si Ashansi elaborate on how the Energy Star program has contributed to flattening electricity demand over the past two decades. They caution that discontinuing the program could hinder efforts to manage energy consumption amidst burgeoning technological advancements.

Notable Quotes:

• Joshua Rhodes [07:47]: "Energy efficiency programs can help to reduce the rate at which electricity demand is growing."
• Ramtin Si Ashansi [07:35]: "So it would be good to continue to be efficient in places where we can, like with the Energy Star program."

Elizabeth Trovall concludes the segment by noting the EPA's lack of direct comment on the program's status, leaving the future of Energy Star uncertain. The discussion highlights the intricate balance between regulatory changes and their broader economic and environmental impacts.

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Conclusion

In this episode of the Marketplace Morning Report, David Brancaccio navigates through pressing economic topics, including stable inflation rates amidst tariff impacts, record import tax revenues, and the potential discontinuation of the Energy Star program. Expert insights from economists and industry specialists provide a comprehensive understanding of how these factors interplay to shape the current and future economic landscape. Notably, despite economic uncertainties, consumer spending remains resilient, and policy decisions continue to influence both market dynamics and environmental initiatives.

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Note: This summary excludes advertisements and non-content segments to focus solely on the informative discussions presented in the episode.

Transcript

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[David Brancaccio]

Inflation remained quite tame in April despite the tariff shock. I'm David Brancaccio in Los Angeles. There's news this morning that inflation for consumers went up just 2/10 of a percent March to April, less than expected in a year. The Consumer Price index is up 2.3%, a slight moderation using this fresh April data. Tariffs have yet to percolate into many prices we pay, but that will be a process. And while some Wall street banks are now ratcheting back chances for recession, this a sense of unpredictability for policy remains. Economist Lauren Seidel Baker is at the venerable New Hampshire based consultancy ITR Economics. Morning.

[Lauren Seidel Baker]

Good morning.

[David Brancaccio]

All right, if things are higher priced or if indeed consumers and businesses feel uncertain about, you know, which way it goes moving forward, we may delay purchases that could slow the economy. Some Brand X Wall street banks have lowered the risk for recession later this year. You do this for a living. How are you calculating it?

[Lauren Seidel Baker]

We still do not expect a recession this year. I know those 1Q GDP numbers came in negative, which they like to say puts us halfway to a recession. But really the key drivers behind that it was front loading of imports. There was a very small negative contribution from the government spending sector. These are not traditional recession drivers. We still see the consumer as being very well supported. Wages are still rising at a faster pace than inflation. That means we still have the ability to go out and spend money to purchase things. Yes, even with this slightly higher inflation. And that's not just being caused by tariffs. There are a lot of other drivers causing higher prices, but the consumer, at least thus far, has been able to handle those increases.

[David Brancaccio]

I don't prefer to follow the crowd in my life, but you know you are outside the consensus on the idea that you weren't predicting recession even before the tariff turnaround yesterday.

[Lauren Seidel Baker]

That's correct. We see the headlines as very detrimental to sentiment, but ultimately not to. At the end of the day, the consumer might not feel great about going out and spending, but at least so far they still are spending.

[David Brancaccio]

Lauren Seidel Baker, economist at the New Hampshire based consultancy firm ITR Economics, which sees itself as the oldest privately held, continuously operating economic research and consulting firm in the U.S. lauren, thanks.

[Lauren Seidel Baker]

Thanks so much.

[David Brancaccio]

Tariffs are import taxes and higher taxes put extra money into the U.S. treasury. And we now have a first look at the April windfall at a time Republicans are looking at a big tax cut. Marketplace's Nova Safo has details.

[Nova Safo]

The US collected a record $16 billion in customs duties for the month of April, according to the Treasury Department, about $9 billion more than last year. Higher taxes brought in more revenue, according to Fitch Ratings. In April, the effective tariff rate, that's an average of all tariffs, was 23%. April also brought an increase in import volumes as businesses raced to get ahead of tariffs. All of that contributed to the record amount of import taxes collected. Now we have a pause in the U.S. china Trade war and Fitch says the effect of tariff rate is down to 13%. Meanwhile, import volumes have also dropped sharply as businesses shy away from the higher tariffs. That means the government could show less import tax income in its next report. I'm novasafa for Marketplace Foreign.

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[David Brancaccio]

Ever buy a fridge or air conditioner? Those Blue Energy Star stickers may become a relic of a bygone era. Published reports say the Trump administration is set to end Energy Star program that saved households and businesses something like half a trillion dollars since the first President Bush started it in the 1990s. Marketplace's Elizabeth Trovall has that since the.

[Steve Nadel]

Early 90s, the federal government has been rating appliances by their energy efficiency, says Steve Nadel with the American Council for an Energy Efficient Economy.

[Joshua Rhodes]

Things like refrigerators, clothes washers, dishwashers, commercial.

[Steve Nadel]

Buildings, homes, air conditioners and furnaces.

[Joshua Rhodes]

And if they are certified, they can use a little blue Energy Star label, which makes it real easy for consumers to say, ah, here's a high efficiency product. And as a result, sales of these products have generally increased quite a bit.

[Steve Nadel]

Consumers who buy Energy Star products save money by reducing their electricity bill and consumption, and millions of efficient product sales later. Energy savings really add up, including at times of peak demand, says Nadella.

[Joshua Rhodes]

So it really is helping to reduce the demand for electricity and the need for power plants.

[Steve Nadel]

Over the years, those energy savings have helped electricity demand stay relatively flat for the last couple decades, but that's changing thanks to new industries, says Joshua Rhodes with the University of Texas at Austin.

[Ramtin Si Ashansi]

The electricity grid is looking to grow with new loads like AI and data centers and all these other types of things.

[Steve Nadel]

Building new natural gas power plants and transmission lines and other infrastructure takes time and money.

[Ramtin Si Ashansi]

So it would be good to continue to be efficient in places where we can, like with the Energy Star program.

[Steve Nadel]

Because this is the time we need all the energy we can get. Ramtin Si Ashansi is with Carnegie Mellon University.

[Joshua Rhodes]

Energy efficiency programs can help to reduce the rate at which electricity demand is growing.

[Steve Nadel]

Of course, losing Energy Star won't have an immediate impact, Si Ashansi says. A lot of appliances today won't need replacing for a while. But looking ahead, you might see less.

[Joshua Rhodes]

Of a drive by those appliance manufacturers to make their appliances more energy efficient.

[Steve Nadel]

And it will be harder, he says, for consumers to pick an appliance that is more energy efficient. In response to Marketplace's request, the EPA would not comment directly on the status of the Energy Star program. I'm Elizabeth Trovall for Marketplace.

[David Brancaccio]

Energy Star is the Square sticker from 1992, the year Yellow Energy Guide placards are from 1975 coming out of the first energy crisis that decade. In Los Angeles, I'm David Brancaccio. It's the Marketplace Morning Report from APM American Public Media.

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