Economics in the News – Oct. 16-22, 2023
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Global olive oil prices have more than doubled over the last year, climbing to record levels. Poor weather throughout Italy, Greece and Portugal, as well as drought in Spain has devastated olive oil harvests. Southern Europe accounts for more than half of global olive oil production. The cost of a bottle of extra virgin olive oil has increased by nearly 22 percent since last October. Because olive oil is produced in many parts of the world, sellers are less worried about a shortage but more about how much consumers are willing to pay.
The unusual and unpredictable weather patterns linked to climate change have impacted olive oil harvests, as well as French wines, Florida oranges and other crops. The result has been a rise in food prices that has been a major factor in inflation which have decimated household budgets and caused pressure on economies worldwide. [The New York Times]
o Loyalty programs for travel companies have evolved since they first began in the late 1970s. At first, travelers could earn elite status for perks such as free tickets and upgrades with a straightforward combination of money spent and time spent in the air. However, airlines are switching those perks to where dollars spent on credit cards are becoming the primary way for travelers to pile up points.
Delta Airlines has recently gone through scrutiny for announcing changes to its signature SkyMiles loyalty program, making it more expensive to attain the highest status categories while emphasizing money spent over travel. Loyalty programs through co-branded credit cards have become a big business for airlines. With its co-branded American Express credit card, Delta earned $1.7 billion in the third quarter of this year. Last year, Delta made $5.5 billion from credit card offerings. Last year, American Airlines placed greater emphasis on credit card spending while debuting its new AAdvantage loyalty program. The emphasis on spending could open the door for other loyalty program opportunities, providing customers an a la carte service that allows customers to pick their own service in the future. [The New York Times]
o Next time grocery shoppers’ shop for groceries, they may notice more deals throughout the store, as the percentage of food sold on promotion is at a level not seen since 2019. However, even with those discounts, shoppers are still paying more than one-third than they did prior to the COVID-19 pandemic. In addition, diners at restaurants are paying 40 percent higher costs on average per fast-food order than in 2019.
Consumers are being more cautious in their spending, opting to cook more meals from scratch, working down pantry inventories and eating leftovers. Industry experts say that promotions declined during the pandemic, as shortages and supply-chain problems curbed production. Now that there are fewer supply chain issues, grocery chains and restaurants have responded by offering promotions to their customers. [The Wall Street Journal]
o The nation’s largest drugstore chains are closing a large number of stores, as they restructure their operations against rising competition. In addition to Rite Aid announcing last week that they have filed for Chapter 11 bankruptcy protection, CVS and Walgreens have both signaled over the last two years plans to close 1,500 stores nationwide.
Public health experts have noted that many of the first neighborhoods to see the impact of the closing stores have been those in low-income neighborhoods. Pharmacies are often the most accessible health care professionals for these rural and low-income communities, while providing limited access to food in areas of food deserts. Increased competition, changing consumer behaviors, retail crime, and staffing shortages has been an ongoing issue for the drugstore chains over the years. Companies like Amazon and Walmart have increased their pharmacy and medical treatment offerings and typically offer more competitive pricing on household essentials. In addition, the drugstore retailers have been grappled by the fallout of the opioid epidemic, paying millions in lawsuit settlements. [The Washington Post]
o The average American family saw their net worth increase 37 percent between 2019 to 2022 – the largest three-year increase since the Fed began conducting the Survey of Consumer Finances more than three decades ago. Temporary government relief measures tied to the pandemic may have contributed to the widespread gains.
Debt levels in the 2022 survey showed little change from three years prior, but the number of family’s who filed for bankruptcy in the last five years fell to just 1.3 percent. Two of three families were homeowners in 2022, which was an increase from 2019. Rising home values contributed to the gain in household wealth during the period, but they also made home prices less affordable. [NPR]