As prices rise, so too does our credit reliance

A.I. is coming for insurance from American public media. This is Marketplace. In New York, I'm Sabree Beneshour in for Kai Risdell. It is Monday, September 7th, and we are glad to have you with us. We say it all the time on this show, the engine of the U.S. economy, the force that has kept it chugging along through tariffs and wars and more wars and natural disasters is the U.S. consumer. However, the engine that's keeping a lot of the U.S. consumers chugging along is credit. Just how much are they leaning on credit? Well, we're going to find out tomorrow when the Federal Reserve reports numbers for July. We do know it has been on something of a roller coaster recently, down in May, up in June. Marketplace is stepping up. Stephanie Hughes reports. Between May and June, our use of revolving credit grew 6%. That's comprised mostly of what we spend on credit cards, which meant consumers are putting more on their credit card to pay for groceries, gasoline necessities. Ryan Sweet's chief global economist at Oxford Economics. Those necessities are getting more expensive. Our wages are rising, too, though not as fast. And consumers are using credit cards to make up the difference. Now, so far, people generally are making payments on those debts on time. Nothing screams that, in aggregate, the consumer is under a lot of pressure, but we know that this consumer is very bifurcated. That K again. Higher-income households doing well, lower-income ones really feeling stretched. And Sweet points out, earlier this year, when the war in the Middle East started, tax refunds helped a lot of people deal with the shock of higher gas prices. But Sweet says those refunds are behind us. Moving forward. People will have to increasingly rely on credit. So then what happens if something else goes wrong? And if we've learned anything over the last decade or so when it comes to U.S. economy, something else is going to go wrong. Still, the increased spending on credit cards is nowhere near the growth back in 2022. St. Olaf College economics professor Ethan Strube points out that back then, credit card usage went up around 15%. We all needed lots of little treats, right? And probably no surprise that that's when inflation was really high. So, people had to pay more to get those treats. Strube says spending on credit cards has moderated since then. What happens next will in part hinge on what the Fed does next. If the Fed raises interest rates, you know, if it raises this federal funds rate target, that does tend to spill over into the credit card rates. It's not perfect. It's not always one for one, but they move in the same direction over time, usually. And when credit card interest rates are higher, it's more expensive to carry a balance. So, some people don't use their cards as much. That's according to research from the Boston Fed. You know, maybe they'll instead borrow from a friend, or they'll do sort of a buy-now-pay-later type thing, or they'll just spend less money. And that matters, because if they spend less money, that's less demand. And less demand slows down price growth. Of course, it also slows down the economy. I'm Stephanie Hughes for Marketplace. U.S. stock markets were closed today because it's Labor Day. Oil markets, though, very open. We'll have the details when we do the numbers. I'm Stephanie Hughes. received about three back. But, and this is true for many small businesses, we are not the importer of record. For ease, what they do is they list DHL or UPS as the importer of record. So those two companies receive the refunds first from the federal government and then process them and send them back to us. So you're just sort of waiting. And we had hoped, we had considered giving refunds to people who had bought things that were increased in price due to the tariffs. But we still are waiting for about 90% of the refunds. And I don't know that we're going to get them. I don't know. That's wild. We paused that too. Yeah, it is. And I mean, it's not, you know, in post COVID, unless you're an enterprise customer, you can't really. You can't really talk to anybody about it. Like you get into, you know, their phone numbers, but it's just menu tree that goes on forever and you really never talk to a person. And I mean, I'm also running a business, so I don't have time to focus on a rebate. Sit on hold for four hours. Exactly. I'm trying to sell things that we have, that we've already paid the tariffs on. Nate Axvig is the owner of Active Style based in Denver, Colorado. Nate, thank you so much. Thank you so much for coming on. Thanks for having me. And remember that winter is coming. At least we hope it is. A prototype of the Olinia in June. A compact, almost cartoonish looking box on wheels. The Olinia's appearance is humble, but the ambition behind it is not. Shanebaum said that the Olinia shows that Mexico can be more than a recipient of investment, that it can create its own tech-driven industries from the ground up. The vehicle will cost just under $9,000 and will be chargeable through households. It's seat six, but with a maximum speed of about 30 miles an hour and a range of 90 miles per charge, it's geared for local driving, not road trips. I think Olinia is an interesting project. Thomas Karig is a former executive with Volkswagen Mexico and a consultant on the Mexican auto industry. You're aiming for a low-cost, low-technology vehicle, which is usually not in the portfolio of the automotive industry. Not even the Chinese. Many of the people that are here in Mexico are trying to offer these kinds of cars. Much of the technology under the Olinia's hood, so to speak, will come from China. This comes amid a wave of Chinese imports to Mexico in recent years, including popular electric vehicle brands like BYD. All of this has been a sore point for Mexico's largest trading partner, the United States, which has been pressuring Mexico to clamp down on its trade with China. But to keep the price of the Olinia so low, Mexico may have no choice but to rely on existing Chinese technology. The Olinia, after all. aims to be a car of the people. And history shows that Mexicans may be uniquely drawn to this concept. Volkswagen means the people's car in German. In Mexico and Brazil is where the car really was the people's car. Carlos Pinzon owns the Casa de Volks garage in Mexico City. VW bugs are veritable icons in Mexico, where they are affectionately known as vochos and where they remain fixtures in many working class neighborhoods. But Pinzon is dubious that the time is right for the Olinia in Mexico. Not least because EVs are difficult to fix. People who live in this area, they ask me, if I know where can they fix an electrical car, I don't have an answer. The first real test of the Olinia's viability will come next summer. That's when the government says the first vehicles will roll off the production line. In Mexico City, I'm Ted Seifer for Marketplace. We'll be right back. Most U.S. markets were closed today in observance of Labor Day. In Europe, Britain's FTSE stepped down a tenth of a percent. France's CAC 40 picked up a third of a percent. And Germany's DAX subtracted just shy of two-tenths of a percent. One market that was not closed for today's holiday, foreign exchange. The Japanese yen hit a seven-month high. Investors are betting that the Bank of Japan will pick up the pace of interest rate hikes. Oil kept right on trading, too. Brent crude bubbled up one and a tenth percent. West Texas intermediate rose one and a third. No bond trading today. The yield on the 10-year T-note is 4.78 percent. You're listening to Marketplace. This is Marketplace. I'm Sabri Beneshour. The U.S. labor force is the 170 million people who are out there working a job or looking for one, making this economy go around. But there is a whole nother group of people who are essential to this economy. Even though they do not have jobs. Here's today's installment of our series, Clocked Out. My name is Derek Tisdale. We live in Beaver Creek, Ohio. I am currently the primary caregiver of two children. I've got a four-year-old, just turned four, and I've got one about to turn one this month. My wife is doing a medical residency with the armed forces. And we are originally from Texas. And that's where I was a firefighter. And then once we got stationed up here, I decided to leave the fire service. Temporarily or permanently, we haven't really determined that yet. And that's kind of where I've been the last two years. I did look for work for a while. I mean, I looked at teaching with the fire department, but I'd have to travel to do that. I looked at, you know, other fire jobs and stuff. But again, overnight shifts and everything just didn't work with my wife. I didn't know what to do with my schedule. There's a weird thing for me, at least, and I think it happens to a lot of people, because we were so conditioned to tying your self-worth to a job or more productivity. I spent the first, like, year of my time being a stay-at-home dad as just tasking. I don't know, taking care of the house and the yard and, you know, improving things. To learn how to knit and cook every meal. I went to the grocery shopping, all that. And I still, I mean, I still do most of that anyways. I think I just put less pressure on myself to, you know, nail it every time. It's a weird disconnect between I realize what I'm doing is very important, and I'm actually quite proud of it, because, I mean, I really care about my children, and this is a great opportunity. It's a great opportunity to set them on a good course. But there's this disconnect, and I really think it's that I was taught as a child that there should be another side to that, that is an economic side. And that's been a bit of a complicated thing to sort out for me, knowing consciously that this is the most benefit I could ever give, and then at the same time not feeling like I'm doing enough. I don't know. It's a weird feeling. That was Derek Tisdale, stay-at-home dadding, sometimes knitting, in Beaver Creek, Ohio. You can hear more from this series and tell us about your own experience in the labor force or out of it at marketplace.org slash clocked out. We'll be right back. We'll be right back. in popularity. Alexis Marshall recently walked the Camino and shares how all the new foot traffic has affected the economy and the people of northwest Spain. I've been walking since before sunrise up massive hills on dirt and gravel paths through forests with little gurgling streams and past livestock just waking up for the day. I've gone several miles on an empty stomach with no caffeine and then I see it. A cafe. Outside are half a dozen other pilgrims enjoying their first food and coffee of the day. Now it's my turn. Inside Ana Maria Miras Padrella is pulling espresso shots, making Spanish omelet and toasting up crusty baguettes. Five years ago she left her career in health care to open this bar along the Camino and the pilgrims passing through fuel her business. She says the Camino is everything for the economy in her region of Galicia and without it her family probably wouldn't live here. Mari Carmen Fernandez Lopez owns a hostel along the same route. It's a less common trail known as the Camino Primitivo or the primitive way. Her family has been working in hospitality in the village of Ocadavo for decades. So she's had a front row seat to the massive increase in pilgrims. Twenty years ago pilgrims passing through her village each year numbered in the hundreds. Last year there were more than 15,000 and all of those passersby bring money. She says if somebody comes through the village you have to think they're bringing your money in their pocket even if it's just to buy a band-aid at the pharmacy. And that money helps keep jobs in the small town which has struggled with depopulation. She says the Camino gives these villages life. Not a single person I asked on the primitive way saw any downside to the popularization of the Camino. But that was before this less traveled path. Mari Carmen Fernandez And she says the Camino route is the most popular Camino route. The French way. And it was before I crossed in to the final 100-kilometer stretch to the city of Santiago. That's when things get busy. Like so busy that buskers set up spots on the trail. At around kilometer 48 I meet Lourdes Lopez Amboaje. She has been selling organic fruit to pilgrims from a roadside stand for 26 years. The French way. Mari Carmen Fernandez She says the Camino's new popularity has fundamentally changed it. Lourdes Lopez Amboaje She says the saddest thing is that the true spirit of the Camino has faded. And now it's more tourism than pilgrimage. It's also changed the way she operates her business. Mari Carmen Fernandez She used to leave out boxes of raspberries from her garden and let pilgrims pay on the honor system. She says nowadays that's not possible. Lourdes Lopez Amboaje She says there are way more people walking the trail now. And so there's more danger. Mari Carmen Fernandez And these growing pains are felt by everyday residents too. The noise of large groups early in the morning. All the shops that cater to pilgrims over neighbors. And rising housing costs. Lourdes Lopez Amboaje But those concerns aren't stemming the flow of people each year, who climb the narrow streets into Santiago and pass through a tunnel where there always seems to be a musician playing bagpipes, before entering the open plaza and staring up at the monumental church. Lourdes Lopez Amboaje Last year, more than half a million people completed the pilgrimage in Santiago. And this year is on track to eclipse that number. Lourdes Lopez Amboaje In Santiago, Spain, I'm Alexis Marshall for Marketplace. Lourdes Lopez Amboaje Lourdes Lopez Amboaje Lourdes Lopez Amboaje Lourdes Lopez Amboaje Lourdes Lopez Amboaje Lourdes Lopez Amboje Lourdes Lopez Amboje This is APM.