What's in YOUR wallet?

0:28A quick note before we start today's show. And if you already support us via NPR Plus or other means, thank you. Your support means so much to us now more than ever. NPR.

0:50This is The Indicator from Planet Money. I'm Waylon Wong. And I'm Adrienne Ma. And today we are so hashtag blessed to be joined by Keith Romer from Planet Money. I'm even wearing my Indigator t-shirt today. I'm ready. Holy moly. I don't even have an Indigator t-shirt. Where did you get that? Neither do I. Merch is available at NPR slash Planet Money slash Indigator slash merch or something. I don't know. Good plug. No, I really don't have one though. I have the tote bag but not the t-shirt. Merch at NPR dot org. This is a good question. Merch. I should really know the answer to this. Okay, well, anyway, thank you for coming from Planet Money to Rep Team Indicator.

1:26It's great to have you, Keith. Nice to be here. It is that time of the week we all know and love. It is Indicators of the Week. This is our weekly look at the most illuminating numbers from the news. And today we're looking at... How China is balking up for a financial chill. How much we should be saving for a rainy day. And how much the price of used cars is going up. That's after the break. Shop NPR.org slash indicator. Okay. Surprised you didn't remember that. I... Rolls off the tongue.

2:07Support for this podcast and the following message come from Ameriprise Financial. Chief Economist Russell Price shares how market research can help investors. Our research is focused on explaining economic or financial market behavior. so that the investor feels more confident with the well-designed investment portfolio and personalized financial advice. For more information and important disclosures, visit Ameriprise.com slash advice. Ameriprise Financial cannot guarantee future financial results. Securities offered by Ameriprise Financial Services, LLC, member FINRA, and SIPC. This message comes from NPR sponsor, Capella University.

2:47Learning doesn't have to get in the way of life. With Capella's game-changing FlexPath learning format, you can set your own deadlines and learn on your own schedule. That means you don't have to put your life on hold to earn your degree. Instead, enjoy learning your way and pursue your educational and career goals without missing a beat. A different future is closer than you think with Capella University. Learn more at capella.edu.

3:18It is Indicators of the Week. Adrian, what's your indicator? My indicator this week is 1.4%. That is the new lower benchmark interest rate set by China's central bank. It's part of a whole bundle of economic stimulus measures that the government has announced this week. 1.4%. That is a lot lower than the benchmark rate here in the U.S., right? This week, Federal Reserve Chair Jerome Powell, he said the Fed is going to keep its benchmark interest rate between four and a quarter and four and a half percent. That's right. So it's already a lot lower than the U.S. rate. So why is China cutting interest rates now, you ask or you don't ask, but I will tell you anyway.

3:57I'm curious. So some analysts see this as a tactical move to bolster China's economy before it starts trade talks with the U.S. this weekend, because the U.S. has had at least 145 percent tariff on imported Chinese goods. And on top of affecting U.S. businesses and consumers, this also hurts Chinese businesses. You know, they're taking pain because manufacturers there are having to slow down or pause shipments to the U.S., and that's not good for China's economy. So lowering interest rates is one way China can try and counteract this. With lower interest rates, that helps encourage banks to lend and consumers to spend.

4:36And the thinking is with a more robust economy, China has a little more leverage in its negotiations with the U.S. So the idea is that if China is more comfortable, it can hold out at the negotiation table for longer, like wait for a better deal. Absolutely. Yeah. I think it's also worth noting that President Trump really wants lower interest rates here in the U.S. He has been blasting Jerome Powell, telling him to lower rates. And it's like Trump kind of wants him a loser. Yes, he's called Powell a loser. And just yesterday he called him a fool who doesn't have a clue. Now, Trump wants lower interest rates to stimulate the economy, which is similar to China's rationale, right?

5:16Absolutely, yeah. And, you know, I think the metaphor that comes to mind for me of what China's doing right now, it reminds me of this— you ever see this survival competition show called Alone? Absolutely. And so, you know, it's where people compete to survive to see who can stay in the wilderness the longest. And all they get to start with is, like, a tarp and some fishing line. And they either, like, kill a musk ox or they eat moss for three weeks. Exactly, yeah. And or, you know, one thing a lot of contestants do before they go into the wild is they put on a lot of weight. And because they know they'll be roughing it and they could go days on end with, like, very little food, the extra fat on their bodies actually helps them survive the leaner times.

5:58And in a sense, China has been preparing its people for leaner times for a while. Like, for years, President Xi Jinping has been trying to transition their economy to be less reliant on exports to the U.S. So you could think of this stimulus package this week as part of that larger strategy. It's the financial cushion that's going to get them to the long winter. Yeah, like a financial spare tire. Well, speaking of financial cushions, my indicator is$35 ,000. That is how much an average U.S. household should have in its emergency fund. That's according to the online reference Investopedia. It crunched the numbers for six months' worth of expenses, and it came up with$35 ,000.

6:44Waylon, I actually have that amount of money in cash on my person right now. You have 17 money belts on you. Can't be too safe. I got to say,$35 ,000. I mean, is this even close to reality? Like, who has$35 ,000 just like sitting around for a rainy day? Yeah, your instinct is correct. This is way more than what the typical household in the U.S. has in its savings and checkings accounts. So according to Federal Reserve data, the median account balance was around$8 ,000 in 2022. If you adjust for inflation, that's around$8 ,700 today, so nowhere near$35 ,000. Where is the$35 ,000 number coming from?

7:28So Investopedia breaks down its methodology like this. It focuses on four big categories of household expenses. Medical care, car payments, housing and utilities, and then food. And it drew in data from sources like the U.S. Census Bureau to calculate expenses for an average household of at least two people. The most expensive category, if you're wondering, was medical care. That accounts for almost$12 ,000. Car payments add up to almost$11 ,000. So if you don't own a car, you would only need$24 ,000 in your emergency fund? Well, it gets kind of tricky, right? Because if you don't own a car, maybe that's because you live in a big city with good public transit.

8:13And that probably means your rent's going to be higher than the national average, right? So Investopedia says six months of housing and utilities represents around$8 ,700. If you do the math, I mean, that's not going to last six months if you're paying rent in a city like New York or Chicago. We are on Segway fire today. Speaking of how expensive cars can be, Waylon, what kind of car do you drive? Oh, I have a Honda Fit. And how old is your Honda Fit? It is 13 years old. Well, for your sake, I hope it continues to go strong for at least another year and you don't have to replace it because my indicator is 4.9%.

8:52According to Cox Automotive, who puts out this thing called the Mannheim Index that tracks wholesale used car prices, they have gone up 4.9 % since this time last year. I mean, didn't we just go through this a few years ago, like during the pandemic? It is thankfully not quite pandemic bad out there for used cars right now. You may remember used car prices went way, way up during the pandemic because there were basically no cars coming into the country. And basically no cars being made here in the U.S. because of all the problems with the supply chain for all the parts that went into new cars.

9:28But now, instead of COVID, we've got tariffs. So you're saying tariffs are making my 13-year-old Honda Fit more valuable? Yes, Waylon, that is the glass 4.9 % more full way to look at it. Most of that increase, it came in just the last month since President Donald Trump's Liberation Day tariff announcement. Isn't this a knock-on effect, though? The tariffs are not on used cars. Right. The issue here is demand. People seem to be anticipating that tariffs are going to make new cars more expensive, which means more people will choose to buy used cars instead, which in turn will make used cars more expensive.

10:06And so people are trying to get ahead of those tariff price effects. It's like if we're trying to game out what the effect of tariffs are going to be and how much inflation the tariffs will cause, it's like, is this the start of some new inflation spike that will be as scary as what we saw during the early part of COVID? Or is it something else? Keith, you look like you're about to pass out. No, the answer is who knows, right? Because one, who knows where the tariff levels are ultimately going to end up? And two, there's this rush of people right now trying to get their hands on used cars. But that is going to work its way through the system.

10:40And things might actually just chill out. The report from Cox Automotive hazards the guess that the used car market might actually slow down the second half of this year. Well, I'm not selling my Honda Fit. I am trying to drive this thing until I can't drive anymore. Can't have it. No one can have it. Too fast, too whaling.

11:03This episode was produced by Angel Correras with engineering by Kweisi Lee. It was fact-checked by Sierra Juarez. Kiki Cannon edits the show and the Indicator is a production of NPR. This message comes from BetterHelp. To mark World Mental Health Day, BetterHelp is thanking the therapists who change people's lives all around the world by providing accessible mental health support. With over 12 years of experience matching clients with therapists and one of the world's largest online therapist networks, BetterHelp can help you find the right therapist. Visit BetterHelp.com slash NPR for 10 % off your first month.

11:37This message comes from Grammarly. From emails to reports and project proposals, it's hard to meet the demands of today's competing priorities without some help. Grammarly is the essential AI communication assistant that boosts your productivity at work so you can get more of what you need done faster. Just a few clicks can tailor your tone and writing so you come across exactly as you intend. Get time back to focus on your high-impact work. Download Grammarly for free at grammarly.com slash podcast. That's grammarly.com slash podcast.