Lower those expectations

The episode opens with the economic calendar: the Federal Reserve is due to conclude its two-day interest-rate meeting, while Thursday will bring inflation data based on the personal consumption expenditures price index and an initial estimate of third-quarter GDP. Business investment in equipment is one component of GDP, making the Commerce Department’s September durable-goods report especially relevant. Core durable-goods orders—excluding volatile defense and aircraft orders—increased 0.5% from August and have risen in 10 of the past 12 months. Marketplace host Justin Ho reports that computers and electronics are clearly benefiting from AI spending, but Megan Schoenberger of KPMG says machinery orders were up more than 16% from a year earlier, reflecting demand across manufacturing and other forms of production. Transportation equipment, plastics and miscellaneous manufacturing also expanded. Scott Paul of the Alliance for American Manufacturing attributes the broader strength to private companies responding to policies from the past two administrations and deciding that investing in U.S. production makes sense as long as consumers keep spending. Wells Fargo economist Shannon Grein offers another explanation: businesses delayed equipment purchases during years of uncertainty and now may be buying because interest rates are unlikely to fall soon. If borrowing costs are going to remain high—or rise—purchasing equipment today can look preferable to waiting.

Newly built single-family home sales fell more than 5% from a year earlier, according to the Census Bureau, while the median price of new homes dropped nearly 4%. Builders are cutting prices to attract buyers. At the same time, the August Case-Shiller data showed prices for existing homes rising about 2% nationally, creating a disconnect between new construction and the resale market. The main reason is that many would-be buyers are holding off while mortgage rates remain above 7%. Jake Krimmel of Realtor.com says one in five sellers cut their asking price in September, and he expects a similar share in October. The market is therefore no longer the recent seller’s paradise in which homes routinely drew multiple offers above asking. Ali Wolf of Zonda says the situation is frustrating but not broadly comparable to the Great Recession: most homeowners have jobs, good credit, meaningful down payments and substantial equity. Harvard housing researcher Chris Herbert says that equity makes many owners financially secure, but it also leaves them psychologically anchored to the much higher prices of a few years ago. Owners who must sell because of a job change, a new child or retirement may need to lower their expectations and accept a price cut. Herbert’s conclusion is that sellers can still find buyers, but they may have to be patient and willing to move on price.

Scott Miller, director of the University of Virginia’s Democracy and Capitalism Lab and a professor at the Darden School of Business, discusses the school’s Global Capitalism Index. The index evaluates economies using eight elements, including how freely goods and capital move, how strong property rights are and how competitive markets are. Switzerland ranks first; the United States is not at the top and has slipped in recent years. Miller says the United States scores particularly poorly on the property-rights and private-ownership portion of the index. He also expects the country’s position on the free flow of goods and capital to deteriorate because of the expanding tariff debate, which could pull down its overall score in future editions. The larger purpose of the project came from Miller’s conversations with business executives. They told him democracy mattered to them and their employees, but that their job was to maximize shareholder value. Miller’s response was that shareholder value depends on a free, well-functioning democratic system in which businesses can operate. The lab’s research, he says, found unequivocally that when democracy declines, capitalism declines as well. For ordinary people, Miller connects this relationship to 401(k)s, public pensions, public-sector employment, grocery prices and the broader performance of the stock market and economy. Democracy may seem abstract, he argues, but its health affects household finances.

The Conference Board’s October consumer-confidence index rose to its highest level since June. Still, Conference Board CEO Steve Odland calls the increase a temporary blip rather than a reversal of the broader decline that has continued since 2022. Confidence tends to move with consumers’ immediate impressions of gas and food prices, and average gas prices fell somewhat in October. The survey also shows a generational divide. Odland says Gen Z and millennials are substantially more confident than Gen X and baby boomers, whose fixed incomes do not stretch as far when food and gasoline become more expensive. Confidence is divided politically as well: Republicans saw a much larger improvement than other groups. Ted Rossman of Money Management International says that could give Republican candidates a small measure of hope, although he views the economy as a weakness for Republicans overall. Consumers told the survey that they expect to spend less on services and durable goods over the next six months. Chip Lupo of WalletHub says consumers have been making that prediction for some time, yet they continue to spend; the difference is that their money buys less. He expects holiday sales to rise, but mainly because prices are higher, not because shoppers will purchase more goods.

Marketplace visits Brownsville and South Padre Island, where SpaceX’s launch facility has become part of the local economy. Brandy Button of SBI Excursions has added boat trips for roughly 50 people to watch launches about seven miles away. He says the launch excursions are not the company’s bread and butter, but they add revenue to a business that already offers parasailing, jet skiing, sunset cruises, dolphin watches and fishing. Gilberto Salinas, CEO of the Greater Brownsville Economic Development Corporation, recalls visiting SpaceX in California about 15 years ago and hearing Elon Musk explain why South Texas could work as a launch site. Salinas saw the facility as a way to change Brownsville’s image and make it “the next space city,” at a time when insecurity across the Mexican border was shaping perceptions of the region. SpaceX says it employs more than 4,000 people, most of them local, and Salinas credits its billions of dollars in investment with helping attract additional industrial projects, including two liquefied-natural-gas plants. Students at Texas State Technical College see new opportunities in electrical construction and pipefitting; one student’s cousin recently got a job at SpaceX. But Adolfo Sandoval says industrial growth is inevitable rather than something ordinary residents can control. He worries about lost habitats, beaches and animals, even while acknowledging that local workers might as well earn money from the transformation.

Margaret Reynolds, owner of Chicago’s Dizzy Cow Candy Store, opened the shop in 2015 across from two large schools and near several others. She wanted to give neighborhood children a fun experience, combining her antiques with the inexpensive candy she loved as a child to create an old-fashioned general store. The store’s hours are built around the after-school rush. The typical transaction is only 50 cents to a dollar. Reynolds says many children do not understand dollars, quarters or making change, so she counts the change back to them. Some hand over a pile of coins and say “keep the change,” prompting her to joke, “Thanks, big spender.” Her economics became harder during the pandemic, when candy prices roughly doubled because of sugar costs and supply-chain problems. Prices never returned to their former levels, and Reynolds says some items leave her with only three, five or 10 cents of profit. If a candy bar would cost four or five dollars wholesale, she simply does not stock it. Her goal is for children to spend a dollar and leave with enough candy “to make them sick,” rather than forcing them to spend more. For Reynolds, understanding her young customers means prioritizing an affordable, memorable experience over higher margins.