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Well, here's where we are. A check on the nuts and bolts of this economy, oil and gas, because the news, and bicycles in Los Angeles. From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Rizdahl. It is Tuesday, today, the 26th of May. Good as it always is to have you along, everybody. The big economic day to owe the week comes Thursday. The Personal Consumption Expenditures Price Index, courtesy of the Commerce Department. The Federal Reserve's preferred measure of inflation, as you know, unless and until Chair Warsh decides otherwise. The 12 regional Federal Reserve banks put out reports too, you know, which today comes from the Chicago Fed with its National Activity Index. National activity, it seems, is mixed. Manufacturing looks not bad. Personal consumption, though, not great. Marketplace's Justin Ho gets us going with what the heck the Chicago Fed's National Activity Index is and how the heck to read it.

The Chicago Fed's National Activity Index sums up a bunch of indicators covering different slices of the economy, including manufacturing activity, which picked up in April.

That's not surprising to us.

Nancy Vandenhouten is lead economist at Oxford Economics. She says there are a number of factors that are boosting manufacturing right now. One of them is last year's big tax and spending law.

Another big factor is the AI build-out, which, you know, has created demand for lots of inputs such as computers and electronics.

Manufacturing is also being propped up by businesses boosting their inventory levels. Vanden Houten says a lot of businesses' inventories are too low right now.

If inventories get too low, you're going to see some increases in manufacturing output to restore inventories on the part of businesses.

On the negative side of the ledger, the Chicago Fed Index also found that consumer spending has been slowing down. Menzi Chen is an economics professor at the University of Wisconsin. He says consumer spending had been boosted by last year's tax cuts, but then consumers got slapped by the side effects of the Mideast War.

So higher gasoline prices for sure, sort of the uncertainty associated with the war. What that's done is that it's offset what we would have gotten from the tax cuts.

The Chicago Fed Index also found that employment slowed in April. Peter Orozum at the University of Iowa says that's not necessarily a bad sign yet, considering that the labor market overall is in pretty good shape. Put another way,

There's plenty of consumer demand to justify the number of jobs that are currently in the U.S. economy.

But that also means the health of the labor market depends on consumer demand.

So signals that the consumer demand might be weakening is a little bit concerning.

Especially since consumer demand has been keeping the U.S. economy strong. over the last couple of years. I'm Justin Howe for Marketplace.

Wall Street on this Tuesday that feels like a Monday. Stop me if you've heard this one before. Tech stocks, baby. We'll have the details when we do the numbers. I'll tell you what. For all else that ails this economy, and it is not a short list, as you know, this is a good time to be a wholesale club. BJ's reported last week that quarterly revenue was up nearly 10% from a year ago. Sam's Club beat expectations, helped by strong gas sales. This week, Thursday, we'll get the biggest of...

all, Costco, it of the more than 80 million paid memberships worldwide, a number that keeps on growing, thanks in part, as Daniel Ackerman is about to explain, to the higher-income customers who are still driving so very much of consumer spending right now.

Michael Baker is a retail analyst with D.A. Davidson and a member of both Costco and BJ's.

I do try to spread it out a little bit and go to both, both for personal and professional reasons.

Though if he finds himself heading out to shop while hungry...

Huge fan of the $1.50 hot dog at Costco, so that's a draw for lunch every so often.

Baker says the wholesale clubs, especially Costco, have long appealed to higher-income consumers, because to get those bulk deals, you need to be able to spend in bulk.

You do end up walking out of the clubs having spent a lot of your budget.

Recently, more and more higher-income customers are opting to do that, says Brian Eshelman of Alex Partners.

It's been an ongoing trend, but I think it has been kind of heightened of late because of everything that's going on in the economy writ large.

Put another way, says Neil Saunders of Global Data.

Inflation has been a recruiting sergeant for the wholesale clubs. Costco has seen its market share grow enormously over the past five years or so, partly because they are attracting more affluent consumers into their mix.

To compete with the growing wholesalers, Saunders says retail brands like Walmart are also trying to appeal to those higher-income shoppers.

They are making the experience a bit more bougie. They've got some higher-end brands, more interesting products.

Because at the end of the day, Saunders says,

it doesn't matter whether you have a lot of money or a little money, most Americans love a bargain.

And he says that is what the wholesale clubs offer, at least for shoppers who can afford an 80-pound wheel of Parmesan. That's a real Costco product, by the way. I'm Daniel Ackerman for Marketplace.

there's plain old inflation too much money chasing too few goods you're all familiar with that i'll assume there's shrinkflation companies trying to get one over on consumers by putting less in a package but keeping prices steady now meet climate flation and don't take it from me take it from science and data emma court wrote about it the other day from bloomberg emma welcome to the program. It's good to have you on. Thanks so much for having me. Take me back, would you, as you start this piece, to the summer of 2022 in Europe, the weather and then the climate flation

that happened. Your listeners may remember there was a really bad heat wave that year, and it led to kind of all kinds of issues sort of throughout the European food supply. So, So, you know, we saw olive harvests getting damaged in Spain. We saw chickens getting really hot in the heat and chicken production sort of taking a hit in the UK. And they estimated for European food prices, it raised those prices by about 0.7%. And then for overall inflation, it was about 0.3% increase. Now, there's a lot going on that year. There were a lot of other sources of inflation. People may remember, you know, Russia invasion of Ukraine, lots of other sources of inflation. But this was kind of a pretty substantive, you know, effect to see from just a sort of a single summer heat wave.

Can we talk actually more about that messiness? Because climate deniers will certainly look at, you know, this article and listen to this interview and say, no, no, no, you can't actually do it. And the fact is now that economists are really working diligently and in some cases can actually make those connections.

Yeah, it's a really important field of study, and it's emerging because central banks are concerned about what the implications of climate change have for sort of their core mandate of price stability, right? They want to keep prices stable, and it is a challenging thing to do because there are so many different sort of inputs into prices. And there's a lot of differences, especially when you look at a global level, when you're trying to really get your arms around this problem, how do you kind of tease out some of the differences between countries, right? Each country has its own kind of CPI basket. And in some countries, food is a much bigger portion of that basket. For instance, you have things like recessions. There's a lot of things that can influence these numbers.

Right. The other thing, since you mentioned central banks, the other thing central banks worry a lot about is keeping inflation expectations anchored. And as you point out in this piece, people who are more attuned to climate change may be anticipating. higher prices because of climate change. And as we know, inflation expectations can actually affect

what prices do. Yeah, I'm really glad you raised this because, you know, as one, you know, economist at a central bank I spoke to pointed out, you know, it almost may not matter if you have extreme weather events, you know, prices rise, but then they, you know, the inflation cools down, things kind of settle down. It may not almost matter if people think climate change is going to cause price inflation. And then they start acting like that and they start asking for raises at work and things like that. And then you get kind of the effect of climate inflation, even if initially the initial event was not, you know, super substantive.

And also, not for nothing, as inflation goes up, so too do interest rates because central banks around the world try to control it. And so we all wind up paying more for money as it is.

Right. We're talking about central banks being worried about this. What are the tools they have at their disposal? interest rates, right? And when you start raising interest rates as a tool, then do you start harming the economic activity as well? If the economy is suffering already, you don't want to add on top of that and make things worse. So there are some limits to what central banks may even be able to do with their existing tools. There's also a lot of other tools that not just central banks can think about. For instance, policymakers can think about what are ways to protect society more from climate change. And then there's adaptation. We know people are able to adjust to climate change and find ways to protect crops from the most extreme weather, let's say. But we don't know the total extent of how much adaptation is possible. We don't know, can we protect ourselves from all of the climate inflation by taking all possible steps available to us?

And the answer is we just don't know, right? We just don't know.

We just don't know.

We just don't know. Emma Kort, she's a reporter, covers climate and Bloomberg. Fascinating piece. Emma, thanks so much for your time. I appreciate it.

Thank you.

California and Texas are one, two on the list of the biggest state economies. And they're really the similarities and one need not digress. I think energy is our focus today, though, in California, refineries are closing after years of slowing investment and tougher regulations and state goals for decarbonization. In Texas, meanwhile, oil and gas are stronger than ever. Marketplace's Elizabeth Troval does the compare and contrast during this historic energy shock.

I'm in Blue Coverall's touring Chevron's refinery in Pasadena, Texas. Facility manager Alan Phillips points to a massive gray box and silverish tower.

Well, we've got a large furnace here.

He's showing me the heart of this refinery, the crude unit.

You can definitely hear steam. What steam does, we inject it to help separate the molecules out more cleanly.

Here, crude oil from West Texas is heated to 600 degrees and scented to a tower that looks like a rocket ship.

This tower is about 20 stories high.

Inside that tower, as crude oil is heated, fuels rise to different heights. Lower down, there's diesel. Towards the top is gasoline.

Jet fuel is about two-thirds of the way up the tower. You can see the line that comes out and wraps around.

OK, so that tube that looks like a water slide coming off the tower, jet fuel or what will become...

Something close to jet fuel at this point. It still needs to be further refined.

That jet fuel will help planes take off in cities like Atlanta and Philadelphia. And the gasoline made here will be used to fuel cars like Debnell Chowdhury's Blue Tacoma. Chowdhury, an analyst at S&P Global Energy, is filling up at a gas station about 25 miles west of the Pasadena refinery.

The average retail price in Texas right now is $4 a gallon for regular. In California, it's $6.15, quite a bit higher.

He explains why fuel costs and refining looks different here in Texas compared to California. For one, California uses its own special gasoline.

They aren't allowed to use as much butane because of smog requirements.

They have to blend in more expensive components and use specialized refineries. And California has much higher taxes on gas. And another reason, fuel costs more.

Now with the shutdown of two of the major refineries, in California, they're more dependent on imports. Those imports come from Asia, places that rely

heavily on crude from the Strait of Hormuz. And so the distance is greater, so the logistical cost is also more expensive, right? You know, Texas, you know, the gasoline at this station probably came from 15 to 20 miles east of here at a refinery. But not all Californians are paying

more to fuel their vehicles. I asked Matthew Zaracosa-Watkins, an economist with UC Davis, to record his most recent visit to the charging station. Today, I'm filling up for free, actually. He's an EV driver, and he bought the car with a deal for free charging for life. Even so, if he had paid 34 cents a kilowatt hour to charge, it would have cost him...

Equivalent to about $2.25 a gallon.

Much cheaper than gasoline. California is a leader in EV adoption, but the state's regulatory policies and decarbonization goals and other constraints have contributed to refinery shutdowns and higher fuel costs. Sarah Gosa-Watkins and I talk more about these trade-offs on a video call.

It's not a great time. And I don't think it'll be a better time in the future.

He says in the next 10 to 15 years, after many more Californians switch over to EVs...

A smaller market is going to be one that's sort of more sensitive to price spikes and potentially more volatile.

He says people still driving gasoline-fueled vehicles will be more exposed.

Research would suggest that most likely those are going to be the people who are least able to afford the transition.

Well, pain at the pump could get worse in California and Texas. Abundant crude oil, fossil fuel-friendly policies and the strength of the state's refining industry are keeping prices more affordable. In Houston, I'm Elizabeth Trofal for Marketplace.

coming up being on a bicycle for 10 years in los angeles as my sole form of transportation

dedication am i right first though let's do the numbers down industrials down 118 today two tenths 1%, 50,461. The Nasdaq added 312 points. That's one and two-tenths percent, 26,656. The S&P 500 picked up 45 points, six-tenths percent, 75.19. Chipmaker Micron became the newest member of an exclusive club when its market value, market capitalization, you might say, crossed the trillion-dollar mark. Micron technology up 19 and three-tenths of one percent. Why, you ask? AI, yo, come on. NVIDIA, which joined the Trillion Dollar Club in 2023, gave up two-tenths of 1%. AMD not yet in the club, but closer. AMD up seven and eight-tenths of 1% today. Dan Ackerman reported on wholesale clubs for us. Investors saw things a bit differently than a lot of that reporting did. BJ's Wholesale Club Holdings, that's a mouthful, lost 2%. Walmart dipped about one and four-tenths percent. Bonds up, yielded on the 10-year Tino down 4.49%. You're listening to Market Pass.

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This is Marketplace. I'm Kai Rizdahl. Here's one from the, huh, that's interesting, file. Sheehan, the fastest of fast fashion companies, is going to buy Everlane, which for a decade or more has been kind of a feel-good fashion brand. Everlane's millennial customers are having a hard time coming to terms with the deal, but as Marketplace's Kristen Schwab explains, it's just business.

The Everlane side of this deal, it's pretty easy to explain. The brand's popularity has been declining, and Suturita Kadali, a retail analyst at Forrester, says it needed cash.

They must have been really desperate to sell. They must have been shopping themselves around, and this may have been the best offer they received. The deal is reported to be worth $100 million. You know, they say politics makes strange bedfellows. I think that desperate retailers make strange bedfellows.

While Everlane was desperate to be saved, Shein is desperate to expand. The brand has tried to go public several times, here in the U.S., also in London and Hong Kong. But it's run into regulatory problems, questions about its supply chain and labor practices. Everlane, with its tagline, radical transparency, could help clean up Shein's image.

I think it would be marketing at this point. It's a way to cover up a lot.

Jessica Ramirez is co-founder of the retail consulting firm, The Consumer Collective.

So I think that something like this helps give them a positive light that they are trying or maybe they're taking some of those strategies.

Plus, Sheng Liu, who teaches retail merchandising strategy at the University of Delaware, says if Xi'an wants to go public, it has to go global.

Xi'an is known as a Chinese company. And under the current business or geopolitical environment, Xi'an definitely faced a lot of scrutiny.

Now, Everlane is not Xi'an's first foray into other brands. It had already bought Misguided, a UK label. It formed a partnership with Forever 21. Liu thinks for Xi'an, this is just the beginning.

It has the ambition to become bigger. Xi'an's business model is evolving.

Evolving from a single fast fashion website into a portfolio of brands. I'm Kristen Schwab for Marketplace.

We had big box retail with Dan Ackerman. We had fast fashion and big business with Kristen just now. But there are still places in this economy where you can shop local. Here's today's installment of our series, My Economy. My name is Ade.

I am the founder of Ride On Bike Shop in Leimert Park, the arts and cultural hub of Black Los Angeles. And we've been here for like a little over 10 years. The idea came from my being on a bicycle for 10 years in Los Angeles as my sole form of transportation, and I got a master's in urban sustainability.

So this shop was literally the capstone project. And one of the things that I knew was that I wanted the capstone project that I presented to live, to be alive. I didn't want it to be just, oh, this is a great idea. And then I go on doing some other thing. Back here is where the magic happens. That's where we do the repairs. I see some air man I'm not getting the coach that I need My tire is like dragging There's one that I like This is it Money's going out more than it's coming in Fortunately for us One, I don't know how to, like, give up. You know, like, when I first started, I didn't have a job or, you know, I'm couch surfing. And Uber had a program where you could rent a car for $200 a week. I did that for a very long time in order to make sure the rent was paid. That was not easy at all. COVID was devastating. Couldn't get bikes, right? Shipping had stopped. And then when shipping started, everything just, like, doubled or tripled just to shipping. So, like, anything from overseas was crazy. And now with the tariff war that, like, this president has been doing, it's just affected everything, too. So it's like, we feel it. We applied for a grant, and we got it. So we're doing a bike library program. Participants, they get a bike, they get a helmet, they get a lock, and they get training on how to ride safely in the streets. That's helped sustain the shop. When we first started the program, we had a member that didn't have a job, was looking for work, and was trying to get a job at LAX. Getting to LAX without a vehicle is no easy task. He got in the program, got an e-bike, was able to go to LAX on the bike for the interview, got the job, and was able to go to work and home because he had a bicycle. That is why we're here.

That's a good story, huh? Ade Neff, the founder of Ride On Bike Shop. He's in Leimert Park here in Los Angeles. Whether you ride or walk or bus or bike, this series, much like this economy, goes nowhere without you. So let us know what's happening. Would you? Marketplace.org slash my economy. this final note on the way out in which history continues to be cool the dow jones industrial average turned 130 years old today 1896 charles dow is the guy who started it no jones back then Just 12 companies on day one, among them American Cotton Oil, Chicago Gas, National Lead, Tennessee Coal and Iron, and General Electric. GE, by the way, the longest-lived Dow component, got the boot in 2018. We covered that when we were there. Jordan Mangies, O'Neill Maharaj, Janet Wynn, Olga Oxman, and Virginia K. Smith are the digital team. I'm Kyle Rizdahl. We will see you tomorrow, everybody. This is APM.

I'm Rima Grace, host of the weekly Marketplace podcast, This Is Uncomfortable. And this week on the show, we're talking about doom spending. You know, that impulse to spend when the future feels uncertain. Like, maybe I'll never be able to retire or buy a home anyway. So why not book that vacation or buy that fancy gadget?

When we ask ourselves, what's the point of saving? We're just going to die or whatever. I think that's the wrong question. I think the more important thing to ask is, is spending that money even actually making you feel better? Be sure to listen to This Is Uncomfortable wherever you get your podcasts.