What indicators will 2025 bring?

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0:11This is the indicator for Planet Money. I'm Adrian Ma, and joining me today in some end-of-the-year cleaning is Planet Money's co-host, Kenny Malone. Hi-ho, hi-ho. It's off to cleaning work we go. Let's do it. With a Disney-themed, very own brand, Kenny. And Jeff Kuo. Hey, guys. Okay, guys. I think we've got pretty much all of 2024's indicators cleaned up and cleared out of the closet. There is one more mysteriously unmarked box here, though. So just if I can take this out here and let's see what's inside this thing anyway. Adrian, is that is that a glowing orb? Oh, my God. I think we should touch it.

0:57Sure. Why not? All at the same time. Ready? Let's say three, two, one.

1:09I feel like I can see it all. The future, the present, the past. I've been blessed with the knowledge. Time is a flat circle. Are you seeing it too? Oh, yeah. I'm seeing indicators of the year ahead. Oh, my gosh. After the break. After the break. See, I saw that you were going to say that.

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2:17The University of Michigan has their own version. And basically what they do is they conduct a survey of consumers and ask, where do you think prices will be one year from now or two or three years from now, etc.? Oh, ask the people, the wisdom of the crowds. This is good. And Adrian, you trust the wisdom of the crowds is what you're saying. Yes, of course. Implicitly, no PhDs allowed in this space, okay? So the reason I think this is going to be an important indicator in general is that it gives us a hint about how consumers will behave in the future, right? If consumers believe that inflation will increase in coming months, they'll be more likely to want to spend their money now before it loses value.

2:58But also, if these consumers are spending money like there's no tomorrow, that can actually contribute to inflation and make inflation a self-fulfilling prophecy and at worse become an inflationary spiral. But I think that this indicator inflation expectations is going to be pretty important in 2025 because even though inflation has come down, we got president-elect Donald Trump who will be taking office soon. And his economic proposals have a lot of economists worried about possibly a new round of inflation, right? He's proposed tariffs, which, as we've talked about on the show, could make foreign products more expensive.

3:36he's pledged to carry out mass deportations of unauthorized immigrants which could be a double whammy for businesses that employ those immigrants right because they could incur costs from losing employees who work for them and may have to raise wages to attract new workers and all that could also contribute to rising prices all right so inflation expectations adrian uh that's pretty pretty good. Pretty good. Jeff Cole, what is the glowing orb foretell in your eyes? I think, you know, we can all agree that 2024 was a big year. And the big question going into 2025 is just how much has that world changed?

4:19And that is why my indicator for 2025 is the indicator of all indicators, our star. Longtime Planet Money listeners may know that our star is something we are kind of obsessed with. It's arguably a mythical number, really. Yes. And so just to give like a brief explanation, you know how like the Fed sets interest rates, right? Interest rates are like a thermostat for the economy, basically. If the economy's running too hot, the Fed will raise interest rates to try to cool it down. And if the economy is running too cold, then the Fed will lower interest rates to try to stimulate it. Well, R star is supposed to be that ideal interest rate for the economy in the long term.

5:02So it's like when you finally find the perfect temperature on the thermostat where your room is not too hot and not too cold. Yeah. It's like a reflection of just your natural metabolism. And nobody actually knows what R star is for the economy. It's not something you can measure. It's more of something you predict. It's based on what you think the future economy will look like, whether you think it'll run hot because of a lot of government spending, or if you think it'll run cold because of, you know, lack of opportunities for growth. All right. So these are huge, important predictors of where the economy is going and sort of how much the engine should get revved up.

5:46Yeah. Yeah. Why do you think it's important now? Well, because something really interesting is happening to our star right now. You know, before the pandemic, a lot of people thought that our star was around like one to two percent. But after the chaos of the past year, the past couple of years, really, people right now, they're really not sure what the future holds. They're arguing is our star maybe like three percent. Maybe it's going to go up to four percent. And I suppose it depends to some extent on what you think about the long term consequences of, I don't know, AI and productivity, unrest in the Middle East, of various Trump presidency policies.

6:29That's a big one. Yes. Yes. Our star is basically everything. And right now we are at this kind of weird inflection point, I feel like, for the whole world. So in 2025, I think the big story is going to be what is our star? Let us turn to Kenny. Okay. What is your indicator to watch this year? Yes. It is my prediction, gentlemen, that 2025 will be the year of global trade, baby, or lack of global trade. Depends. Depends. We're going to see because that is my indicator of next year. It's going to be global trade or the opposite. Yeah, just stuff moving around the world. And of course, at the heart of watching this next year is anyone, anyone rhymes with sans serif.

7:23Tariffs. Tariffs. Yes, tariffs. President-elect Donald Trump has floated at various times, like a lot of different potential tariffs. So there was at some time floated a baseline tariff of 20 % on all imports, 25 % on goods from Mexico and Canada, and as much as 60 % on goods from China. Those are likely the extreme ends. We don't know for sure where the tariff numbers will land. And of course, that has me thinking a lot about anyone, anyone rhymes with cute folly, anyone. uh smooth holly smooth holly of course yes these are the infamously big and broad tariffs passed in 1930 uh which are then featured in a boring lecture in the movie ferris bueller's day off where the teacher keeps saying anyone anyone which is why i keep doing it but the thing is following those enormous tariffs, global trade dropped by about 26%.

8:30It was a lot. And so for my money now, global trade is what we should be watching next year. We are nearly a hundred years post Smoot Hawley. The world is more globally connected than ever. And what happens when you drop gigantic tariffs into that world? And I think it is worth watching next year. well we have peered into the glowing orb and we have somehow survived with all our digits intact speak for yourself oh no kenny my very long toes are gone i don't want to show you but they are very long uh i hope it was worth it jeff kenny thanks again for coming on the show absolutely our pleasure and uh next time i'm gonna bring sunglasses i gotta you gotta tell us ahead of time there's going to be glowing anything.

9:21Thanks for sharing the curse of knowledge with us. I will share the curse of knowledge with you anytime.

9:33Before we wrap up, we did want to take a moment as the year comes to a close to say thank you to each other, but to you, listener, for your support. It is what keeps NPR going. It's a nonprofit news organization, and it keeps the indicator and planet money going. An easy way to support our work is through NPR+. If you've already joined, we appreciate it. But if you've never given to public media or haven't given in a while, consider it now. A small recurring donation gets you perks for more than 25 NPR podcasts, like sponsor-free listening and bonus episodes. Go to plus.npr.org for details. Thank you again for being a part of the public media community.

10:18Indicator listeners, thank you so, so, so much for letting us inside of your ears and your hearts. 2024 has been a good year. Such a good year, in fact, that for the next few days, we'll be running some of our favorite episodes from 2024. Happy holidays, happy new year to you and yours. We'll be back on January 2nd, 2025. This episode was produced by Angel Carreras and engineered by Neil T. Vault. It was fact-checked by Sierra Juarez. Cake and Cannon edits the show and the indicators of production of NPR.