A scorecard for the U.S. economy

Transcript

NIALA: Good morning! Welcome to Axios Today!

It’s Friday, April 28.

I’m Niala Boodhoo.

Here’s what you need to know today: why gamers keep leaking sensitive military info online. Plus, the surprising run for the Miami Heat. But first, a scorecard for the U.S. economy now. That’s today’s One Big Thing.

A scorecard for the U.S. economy

NIALA: Usually on Friday we have a political state of play conversation, but today we're gonna focus on the economy. That's because there's another big meeting of the Fed coming up next week. And this week we got more data about where the economy is headed. That's why I asked Axios’ Economic Reporter Courtenay Brown to join me in studio.

Hey Courtenay.

COURTENAY BROWN: Hi, Niala.

NIALA: So Courtenay, the U.S. economy grew at a 1.1% annual rate in the first quarter. That's according to a Commerce Department report that came out yesterday. First, can you just give us a refresher on why GDP is an important economic indicator?

COURTENAY: Well, it's really the best scorecard we have on the economy. Basically, the report adds up everything that's produced across the economy. And that's really the best gauge we have of economic activity.

NIALA: And what about this report under the surface is important for us to be paying attention to?

COURTENAY: So the big thing to know about this report is a number like, the economy growing at a 1.1% annualized pace. That doesn't sound great, especially because the economy was growing at a much faster rate in the second half of 2022. But you know, when you dig into the details, some of them are actually pretty reassuring. The most reassuring thing is that the consumer, at least as of last quarter, was still going really strong. You know, they upped purchases of cars and auto parts and they dined out more. And so that's a really good sign that consumers are still feeling really good about the economy, um, good enough to keep spending.

On the flip side though, you saw businesses pulling back on their investment. They spent less money, on, uh, new equipment, on new buildings, and that's really where you can see the Fed's interest rate hikes. They've been hiking rates really aggressively over the past year or so, that's really where you see those interest rate hike effects taking hold. Businesses, when borrowing costs go up, businesses tend to pull back on investment activity.

NIALA: So the big question, of course, is whether or not the Fed will continue to raise interest rates next week. Where are Fed Watchers thinking about where we're at with that?

COURTENAY: I think it's too early to say inflation has come down from its peak levels last year, but inflation is still way too high for the Fed's liking and for the Fed's comfort. So, as a result, a lot of economic forecasters expect that the Fed will do one more interest rate hike next week. And that's looking like that might be the last one. They might pause and just see how things are developing for a little while after that.

But there's a really big question mark over the economy right now, and that is the events of early March when Silicon Valley Bank failed and Signature Bank failed. You know what impact is that going to have on the economy? Does it mean that banks are gonna pull back on lending and that in turn will slow economic activity and that in turn will maybe put downward pressure on inflation? That's a huge question right now, but it's an important one. Especially this week we saw, um, renewed fears about the health of the banking sector with First Republic really struggling, it looks like.

NIALA: And Courtenay, there were a lot of questions about how Silicon Valley Bank ended up in this situation, it did. There are some answers you're expecting to hear from that today.

COURTENAY: Maybe, today is a really, um, exciting day for some because the Federal Reserve and the Federal Deposit Insurance Corporation, the FDIC. Both agencies are releasing self-examination of what could have been done on their part to perhaps prevent the collapses of Silicon Valley Bank and another bank, a Signature Bank. And these agencies are essentially investigating themselves. They're not totally independent, but I do think it will offer the most comprehensive look yet at the events that led up to the two bank collapses and what really could have been done to prevent them in the first place, maybe.

NIALA: With everything that we've talked about, what are you gonna be watching for Jay Powell to say next week?

COURTENAY: Okay. I think Fed Chair Powell's just general evaluation of how the economy is doing right now. Is the economy progressing in a way that the Fed would like? I mean, how are they interpreting the GDP report and the retail sales report and the inflation report? What does that ultimately mean for where they see interest rates leveling out this year? Those are the big questions.

And then maybe one more is, last time the Fed gathered we were right in the thick of the bank collapses. A little bit more time has passed, but there are still fears about the health of the banking system. So what's his evaluation of how the banking system is doing? And he does expect lingering effects from those fallouts to further hurt the economy?

NIALA: Courtenay Brown is an economic reporter with Axios and you can read her work every day in the Macro newsletter. Thanks, Couretnay.

COURTENAY: Thanks, Niala.

NIALA: In a moment, the link between gaming…and leaking sensitive data.

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Why gamers keep leaking sensitive military info online

NIALA: Welcome back to Axios Today. I'm Niala Boodhoo.

Former Air National Guardsman Jack Teixera – who’s accused of leaking classified documents on an online gaming forum – appeared in court yesterday. He’s awaiting a judge’s ruling about his pre-trial detention, related to charges under the Espionage Act.

Prosecutors said the nature of the materials Teixera had access to could cause “exceptionally grave damage to the U.S. national security if disclosed.”But as it turns out Teixera is far from the only gamer leaking secrets online. Axios Gaming Reporter Stephen Totilo is here to explain more.

Hey Stephen.

STEPHEN TOTILO: Hi, Niala.

NIALA: Stepen. Where else have classified documents been leaked recently?

STEPHEN: Well, I'm sure that one of your favorite games to play, Niala, is War Thunder, the ultra realistic multiplayer, uh, military game. Yeah, you're on War Thunder every day, right?

NIALA: As you know, I am not a gamer.

STEPHEN: But yeah, the users of the forums online message boards were fans of War Thunder congregate, um, have been, uh, unable to stop themselves from sharing restricted military information about weapon systems, American weapon systems, Chinese, French, you name it, uh, since 2021. And, and the people running the forums, the game developers themselves have actually struggled to stop them. You play this game if you wanna feel like you're in the real tank, the real plane, you know, jet fighter or the real ship, because the developers aspire. To depict these real machines of war as realistically as possible.

And so the fans of this game, they take that very seriously. And so if they're playing the game and the shell, their tank fires doesn't penetrate the armor of this other vehicle the way they think it should. They go on the forums and they start saying, this doesn't seem accurate. And what do you know? They start producing the actual manuals, for driving the Leclerc tank, which is a French tank, or they bring up the restricted U.S. information about the capabilities of the F16. And then immediately, or at least within a couple days, the moderator say, no, no, no, you can't do that.

NIALA: So Stephen, it does sound like that's a very different motivation than what was behind the Pentagon leaks that we saw via Discord.

STEPHEN: Yes, the, the reporting as, as we know it so far, is that allegedly, Jack Teixera was in a Discord group. Think of Discord as, uh, something you can access as an app on your phone or as a website. And it is, it is like a message board in a way, it's really online communities. And allegedly, he felt the motivation to kind of prove to people that he was in the know about what was actually going on in war.

NIALA: Jack Teixera went by the handle OG, on Discord, even though he's actually 21. How does his age compare to the average age of gamers because you were just reporting on that recently as well?

STEPHEN: If you think about the hardcore stereotypical plays Call of Duty in their basement, you're gonna think of a guy, you're gonna think of a teenager, somebody in their twenties. But gamer are on average, if you count everybody playing everything from Wordle to Call of Duty to anything in between, are on average in their 30s. And in fact, one of the things that I found really interesting is that there are over 50 million Americans above the age of 50 who are playing video games at least once a month. And in fact, half of that 50 million people, they're playing games every day. We're, we're certainly seeing the, the profile of the gamer age up as, as gaming becomes more and more commonplace in people's lives, which I think is pretty cool.

NIALA: Stephen Totilo is the author of Axios Gaming. Thanks, Stephen.

STEPHEN: Thank you, Niala.

The surprising run for the Miami Heat

NIALA: One more thing before we go, the Miami Heat defeated the Milwaukee Bucks Wednesday night in the first round of the NBA playoffs. And I’m not just telling you this because it’s MY Miami Heat - it’s also just the 5th time in NBA history that an 8th seed has advanced past a 1st seed. Jimmy Butler had some remarkable play - including one career high 56-point game.

The Heat continue their unlikely run on Sunday in a second-round series against the New York Knicks.

That’s all for this week. Axios Today is produced by Fonda Mwangi and Lydia McMullen-Laird. Our sound engineer is Alex Sugiura. Alexandra Botti is our supervising producer. Aja Whitaker-Moore is Axios’ executive editor. Sara Kehaulani Goo is Axios’ editor in chief.

I’m Niala Boodhoo. Stay safe, enjoy your weekend and we’ll see you back here on Monday.