Economics in the News – July 10-16, 2023
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o More than 30 new models of electric cars and trucks will roll out on showroom floors this year. As automakers are manufacturing more electric vehicles, dealerships face an increase in unsold inventory. According to market research firm Cox Automotive, more than 90,000 electric vehicles are sitting on dealer lots, an increase of four times last year. That is enough to last 103 days at the current sales rate, compared to about 50 days for the industry as a whole. To attract more buyers, automakers are slashing prices and offering more incentives.
The latest example is Ford, which reduced prices for the Ford Lightning electric pickup truck by $6,000 to $10,000 – as much as 17 percent. In addition to the discounts, Ford offers new buyers discounted interest rates of 1.9 percent to 3.9 percent on certain loans. Tesla, the dominant seller of electric cars, has had several rounds of price reductions. The higher prices of electric vehicles often put off car buyers, who would be more attracted if they were more comparably priced to gasoline models. The uncertainty of finding charging stations has put off other customers. [The New York Times]
o After most Americans spent their 2020 and 2021 either cooped up at home or traveling within the United States, international vacations have increased in popularity. According to AAA, international travel during 2023 is up 40 percent from 2022 through May. Air travel to Paris during July and August is five percent higher than in 2019. The international travel surge has been attributed to three factors: people missing trips after spending two years at home, the lure of social media, and the ability of people to work remotely.
Meanwhile, as tourists flock abroad, the domestic demand for hotels and some tourist attractions in the United States has not experienced the same surge. Prices for lodging climbed 4.5 percent for the year through June, far less than the 25 percent annual increase last spring. Experts anticipate a slowdown in international travel in the Fall as travelers draw from savings they accumulated during the pandemic. In addition, unemployment is expected to rise as the full effect of the Fed’s rate increases filter throughout the economy. [The New York Times]
o This summer’s July heat wave is straining power grids and impacting businesses unable to keep their workers cool. More than 100 million Americans are feeling the impact of the summer heat, with Phoenix feeling the impact of sweltering 110-degree heat and Texas feeling the effects of its heat wave.
Researchers are studying the impact of extreme heat on economic growth. Excess heat hurts labor productivity and can harm learning capabilities in school. One study concluded that a one-degree Fahrenheit increase in the average summer temperature can reduce the annual growth rate of a state’s output by 0.15 to 0.25 percentage points. The National Energy Assistance Directors Association estimates that home bills will rise 11.7 percent to an average of $578 this summer, an increase from $517 last summer. [The Wall Street Journal]
o The global economic shocks over the last three years have driven 165 million people into poverty worldwide, according to the United Nations Development Program. That equals the combined population of the nine largest US states. Some developing countries cannot afford medicines, adequate education, and other social services for citizens. The UNDP defines poverty as living on less than $3.65 per day. Some countries borrowed heavily in 2020 to survive the COVID-19 pandemic. Their efforts were made more challenging by the highest inflation in four decades, which especially hit food and fuel prices due to the war in Ukraine.
Some of the hardest-hit countries are in Africa and the Middle East. After their borrowing spree, the governments are spending more than twice their revenue repaying debt as they do on social programs. More than two dozen developing countries devote more than 20 percent of their income to debt payments, the highest number since 2000. [The Washington Post]
o Lionel Messi will make his highly anticipated MLS debut with Inter Miami FC on July 21. His new club has already capitalized on the popularity of one of soccer’s greatest icons. Many consider Messi to be the greatest soccer player of all time. His teams have won 10 La Liga titles, four Champions League titles, and one World Cup. Any club that the star player plays for is sure to be one of the most popular clubs in the world. Messi is the second-most followed individual in the world on Instagram with 478 million followers, trailing only his soccer rival Cristiano Ronaldo’s 595 million followers.
Lionel Messi will make his highly anticipated MLS debut with Inter Miami FC on July 21. His new club has already capitalized on the popularity of one of soccer’s greatest icons. Many consider Messi to be the greatest soccer player of all time. His teams have won 10 La Liga titles, four Champions League titles, and one World Cup. Any club that the star player plays for is sure to be one of the most popular clubs in the world. Messi is the second-most followed individual in the world on Instagram with 478 million followers, trailing only his soccer rival Cristiano Ronaldo’s 595 million followers. [The Athletic]