We're stocking up

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Kai Ryssdal (0:32)

Trade is the economic currency of the day.

From American Public Media, this is Marketplace.

In Los Angeles, I'm Kyle Rizdal. It is Tuesday. Today, this one is the 6th of October. Good as it always is to have you along, everybody. The trade beat is where we are going to begin today, about which we got a couple of new interesting pieces of data. Item number one, the trade deficit, which got a whole lot bigger in August, thanks in part to us importing more goods and services that month than we did in July. 4.3% more, to be precise. That came from the Bureau of Economic Analysis this morning. Item number two, inventory levels rose in September. More quickly than they did in August, so says the Logistics Manager's Index. Now, yes, trade data can be, I mean, I get it. At least we didn't start with the bond market again, right? But the reality is that any kind of pickup in imports or inventory levels can be a sign that demand in this economy is strong. But as Marketplace's Justin Ho reports to get us going, who and what are fueling that demand? Well, that matters too.

Justin Ho (1:57)

One big category of goods where imports are rising is the kind of stuff that goes into building data centers. Ben Ayers is Senior Economist at Nationwide.

Ben Ayers (2:05)

There's a lot of extra materials, technology and other electronics that need to be imported, particularly semiconductor chips from abroad.

Justin Ho (2:14)

That list also includes telecommunications gear, metals, machinery. But Ayers says it's not just AI that's fueling demand for imports.

Ben Ayers (2:21)

Underneath that, we are still seeing a solid level of consumer demand. The main message around consumer demand is resiliency.

Justin Ho (2:30)

That resiliency is also one of the reasons why inventories rose in September, says Zach Rogers. He's a professor of supply chain management at Colorado State University, and he puts together the Logistics Managers Index. Rogers says this is happening despite the fact that interest rates and tariffs are making inventories more expensive.

Zach Rogers (2:48)

Costs are high, but demand is high too. And so high demand is allowing those high costs to continue.

Justin Ho (2:56)

But Rogers says he's also seeing signs that companies are uncomfortable making long-term bets on consumer demand.

Zach Rogers (3:02)

Warehousing and transportation capacity is not growing to keep up with inventory.

Justin Ho (3:08)

In other words, companies aren't investing as much in new warehouses or buying new trucks because they're worried consumer demand might taper off.

Zach Rogers (3:15)

And so it doesn't really then make sense to put a big investment in something like warehousing if it might only just come online after the party is over.

Justin Ho (3:23)

That said, Rogers also surveys companies that sell to other businesses, think manufacturers and wholesalers. And he says many of them say they're planning to keep investing in inventories, likely because of strong data center demand. Megan Schoenberger, senior economist with KPMG, says AI investment is already starting to outshine consumer spending.

Megan Schoenberger (3:43)

GDP is increasingly driven by a narrow set of drivers. Data centers are a very small portion of GDP.

Justin Ho (3:52)

Schoenberger says that's not necessarily a bad sign for the overall economy.

Megan Schoenberger (3:56)

It is good for the economy to see this large investment. The fact that it is a very narrow base for the economy is more of a risk.

Justin Ho (4:04)

Because that investment could always slow down. I'm Justin Ho for Marketplace.

Kai Ryssdal (4:09)

Wall Street today, there is a new ticker on the block. Out is WBD. In is SKYD. That's Skydance, David Ellison's company that has closed its purchase of Warner Brothers Discovery. There is still, it seems, a little price discovery to be done on Skydance. Stock shares down 2.5% in the first day of trading. None of that, however, stopped traders from sending two of the major indices to fresh all-time highs. What, me worry? We'll have the details when we do the numbers.

I'm going to go out on a limb here and posit that apart from oil, probably and possibly the most in-demand commodity in the entire global economy right now is the humble semiconductor. AI, if I have to say it. And in fact, if you dig down into that trade data we got this morning from the Commerce Department, you will see one of the top categories of US goods exports in August was indeed semiconductors, and those exports have been rising steadily all year. At the same time, we imported more semiconductors too, both for the month and year to date.