Retail Sales Rise 3.8% in January, Better Than Forecast

Retail sales rose by 3.8% in January, which was double that of the forecast. Retail sales were previously decreasing and decreased by 2.5% in December. The decline is estimated to be caused by consumers buying early Christmas presents in fear the products will be out of stock. There was a 33.4% yearly increase in gasoline sales and a 27% increase in sales at restaurants and other food and drink establishments. This could have been a driving factor in the 4.4% increase in overall retail sales. Another factor could have been due to inflation since retail sales are only adjusted for seasonality and not changes in price.

In January, consumer prices rose at an annual rate of 7.5%, and wages have also been rising at an annual rate of 4.7%. An increase in wage and the economy re-opening has led to consumers spending more money. Marwan Forzley, the CEO of Veem, has optimistic hopes for sales in the new year. The market interest rates are higher and have a yield of about 2% on the 10-year Treasury. The Fed is predicted to be more aggressive in the first half of the year in order to moderate inflation. 

https://www.usnews.com/news/economy/articles/2022-02-16/retail-sales-rise-3-8-in-january-better-than-forecast

How to avoid a fatal backlash against globalisation - Studying how the first era ended could help preserve the second

 In the the 19th century there was an a rapid integration of markets because of advancements in technology such as the telegraph, steamships, and railways. This made it cheaper, faster, and more efficient to move products, services, and people across boarders. Additionally this brought together Britain and the United States, who lived very different economic life styles at the time. The United States was very cheap with high wages, while Britain was the opposite and their wheat prices were 60% higher even. This integration leads to this 60% gap nearly closes as the pricing of their markets practically converged by 1890. The United States was much more expensive, while  Britain was a lot cheaper. These actions ended up changing markets forever. 

This has had an affect in recent times as the integration of markets is happening between the United States and China as a convergence is starting as well. This is narrowing the gap between white collar jobs in China and America. Furthermore, countries that have been attempting to improve education and training since the 19th as a result of migration and integration have taken a more protectionist approach as a cause of this. Things such as tariffs and migration policy has become more strict over time across the world. The issue of protectionism was not actually caused by migration or tariffs in 1914, it was caused by war. Which only cause a short instant of backlash against globalization, but it does relate to the current events going on today. 

Article: https://www.economist.com/finance-and-economics/2022/02/26/how-to-avoid-a-fatal-backlash-against-globalisation

Inflation will go higher, but Ukraine conflict likely won’t halt economic growth in the U.S.

Food and gasoline probably will cost more and the supply chain issues that have bedeviled the economy for the past two years likely will persist or even intensify. But could the Russia-Ukraine conflict somehow tip the U.S. economy into recession? It seems unlikely at this point, though anything is possible.

“What we’ve seen is oil prices have gone up, and equity prices at least initially retreated on all of this. Together, that’s a mild — stress mild — stagflationary hit to the economy,” Wells Fargo chief economist Jay Bryson said. “It’s going to push inflation higher than it is, and it’s probably going to slow growth. But it’s probably not enough to push the economy into recession.” That view is in line with most Wall Street economists.

Nevertheless, at a time when inflation is running at its highest level since the early 1980s, the last thing consumers need is more price pressure. Grain and energy commodity prices catapulted higher in recent weeks, bringing West Texas Intermediate prices up about 22% in 2022 and wheat up by double digits, before receding sharply Friday.

The importance of the two nations as agriculture exporters and producers of elements key to semiconductor manufacturing will exact an economic toll. But the implications shouldn’t be major for a global economy that’s still in a rebound phase from the depths of the pandemic.

The tensions have roiled financial markets, coming as they do at a time when investors already were worried about tighter policy from inflation-fighting central banks including the U.S. Federal Reserve.

Goldman estimates each $10 per barrel increase in oil would raise core inflation excluding food and energy by 0.035 percentage points and headline inflation by 0.2 percentage points, but exacts just a 0.1 percentage point hit to U.S. GDP, which is coming off its fastest full-year growth since 1984. However, Goldman said it doesn’t expect the events in Ukraine to deter the Fed from hiking. Past crises sometimes have triggered the Fed to ease policy, but “inflation risk has created a stronger and more urgent reason for the Fed to tighten today than existed in past episodes,” the firm said.

https://www.cnbc.com/2022/02/25/inflation-will-go-higher-but-ukraine-conflict-likely-wont-halt-economic-growth-in-the-us.html

Gross Domestic Product rose 7% in the fourth quarter.

 

During the fourth quarter, U.S. Gross Domestic Product increased by 7%, likely due to an increase in exports, increase in personal consumption, and a slightly lower government spending budget that was offset by state and local spending. The growth is expected to cool down later in 2022 as we expect the Fed to raise the interest rate, and multiple more rounds of stimulus packages. Rising tension between Russia and Ukraine could affect the global energy market since Russia provides roughly 10% of the global demand for oil, and it provides Europe roughly half of its natural gas. The conflict will most likely lead to global uncertainty, which will cause investors to pour money into the U.S. dollars, causing the currency’s value to go up; it could possibly make United States imports cheaper.

U.S. Consumer Confidence Falls in February 2022

 The Conference Board released its consumer confidence index this week and the numbers are not looking too hot. They reported a number of 110.5, from 111.11 in January following a decline a month earlier. This comes amidst a mix of uncertainty in the world's economy as a whole. The U.S. is expecting large spikes in inflation, gas prices on the rise-scaring the pocket of the average consumer, and a general drop in the purchase of new homes, vacations, cars, and other common consumer goods. Thus, we can tell that Americans are weary about spending too much of their disposable income on items that can be considered non-essential. Major international events, such as the increasing hostilities between Russia and Ukraine may scare off the American consumer even further as the world economy at large seems to be in retreat. Some of these metrics are opposed by more optimistic numbers such as the Present Situation Index which tend to support a happier U.S. consumer. The Conference Board is somewhat hopeful that this metric will stay consistent in the coming months, however, major increases in consumer confidence will take corrections in the health of the domestic and world economies at large.

https://www.usnews.com/news/economy/articles/2022-02-22/consumer-confidence-ticks-down-in-february-on-inflation-fears

January home sales jump 6.7% despite a record low supply

 In January, the sales of previously owned homes rose 6.7% from December.  The rate of this would be 6.5 million units annually according to the National Association of Realtors.  Comparatively, the sales in January of last year were 2.3% greater than they are currently.  Despite the sales increasing, the supply of homes has hit a record low of only 860,000 homes for sale at the end of January.  This is a decrease of 16.5% from the previous January.  At the current rate, it would only take 1.6 months to exhaust the entire inventory of houses in the market.  This rate is much faster than normal with houses typically selling after around 19 days on the market.  Houses that are newly built are also being sold at a much higher rate with a 12% jump from December to January.  Unfortunately, builders cannot keep up with this demand due to supply chain and labor issues.  In the overall economy, this likely means that interest rates are decreasing due to people making investments into expensive things such as houses.

January home sales jump 6.7% despite a record low supply (cnbc.com)

Russia's Ukraine incursion could complicate the Federal Reserve's interest rate decisions

 The Federal Reserve planned rate hikes to combat inflation might need rethinking as the upcoming conflict in Eastern Europe could impact energy prices. The tensions between Russia and Ukraine have led to concerns of higher oil prices should hostilities erupt, with experts estimating a 10 to 15 dollar price increase per barrel. High oil prices will likely increase the price of petroleum based goods, reduce supply due to higher input costs, and reduce demand. All this leads to a slower economic growth and leaves the Fed with a difficult choice when it come to interests rates over the next few quarters. Higher interest rates compounded by an oil shock could negatively impact growth. On the other hand if the Fed accounts for the possible oil price hike and lowers interest rate, inflation could become a bigger problem. A rate hike is almost certain in March but perhaps global events will influence will force a rethink of the magnitude of the rate hike.

https://www.cnbc.com/2022/02/22/russias-ukraine-incursion-could-complicate-the-federal-reserves-interest-rate-decisions.html

Factbox: Ukraine Crisis - Where will Putin stop?

 Putin is effectively sending a signal to the international community that the war may escalate. The game of interests between the United States and Russia and between Russia and the West over the Ukraine crisis has further escalated, releasing a signal that the conflict has escalated, the game of interests has escalated, and it may turn into a local war. This signal needs to be released, and it needs to be released explicitly.

After the release, further observations will be made on this issue. Because Russia recognizes the legitimate independence of these two countries, this does not mean that the international community recognizes it, the United Nations does not recognize it, and the Western-dominated society does not recognize it either. Rather than saying that Putin wants to re-integrate the two Ukrainian regions into the Russian territory, it is better to say that he has issued a diplomatic strategy. Now the Ukrainian crisis is intensifying, and on this basis, the West's suppression of Russia has increased, which includes military support from the West for Ukraine. Now Ukraine claims to be ready.

There are various indications that behind the conflict between Russia and Ukraine is the contradiction between Western society and Russia, and Ukraine is only regarded as a frontier position for the West to fight against Russia. The Minsk agreement stipulated that the two sides abide by the ceasefire agreement and accept the monitoring of the international community, and Ukraine has also assured Russia. The current Ukrainian government calls on the entire Western society to pay attention to the Russian-Ukrainian issue under the pretext of Russia's non-compliance with the Minsk Agreement. Ukraine also has a side worthy of understanding and support, because it has become a victim of geopolitical conflicts, and the victims are the ordinary people of Ukraine.

https://www.reuters.com/world/europe/ukraine-crisis-where-will-putin-stop-2022-02-22/

What Conflict in Ukraine Means for the Global Economy

 With Putin's recognition of two separatist territories yesterday, coupled with new sanctions imposed by the United States, conflict between Russia and Ukraine seems to be inevitable at this point. This has many wondering what the effect war will have on the global economy, with a particular focus on Russia. Although Russia has vast supplies of oil, gas, and other raw materials, as a global player the Russian economy is fairly weak. As stated by the authors of the article "Italy, with half the size and fewer natural resources, has an economy that is twice the size [of Russia's economy]. Poland exports more goods to the European Union than Russia." 

However, Russia's hold on the European gas market could mean higher gas prices, not only at the pump but in houses and factories. Europe gets almost 40% of its natural gas from Russia, explaining the German hesitance earlier in the crisis to cut off access to the Nord Stream 2 pipeline, although they have since changed their position. Additionally, Russia is the world's largest exporter of wheat, much of which goes to Turkey and Egypt - countries struggling with internal problems of their own.

When taken into context with the post-pandemic recovery, which still experiences supply chain issues along with rising inflation. The price of gas rising, for example, could through another wrench into the works. Metals like palladium, nickel, and aluminum have seen their prices rise as fears of losing Russian resources increase. The U.S. is attempting to counter this by increasing natural gas deliveries, for example, but this won't be enough to fully mitigate any effects of war.

The long run effects of conflict would be the most shocking. Some economists believe that sanctions will force Russia into the open arms of China, as the two nations signed a contract to build a new pipeline. Additionally, Europe will have to look for new markets. As Russia's largest trading partner, any conflict in Ukraine will impact the EU heavily.

https://www.nytimes.com/2022/02/21/business/economy/ukraine-russia-economy.html

Annual Security Talk in Germany

 Vice President Kamala Harris and the Secretary of the State Antony Blinken are in Germany for annual security talks with US allies. Vice president sope about the situation between Russian and Ukraine crisis. She says is it important for everyone to remain united. "Our work together has been and will continue to be about strengthening the ability to deter activity in terms of aggressive activity by Russia as it relates to Ukraine. Also, about our defense and resources and the commitment that we have". Kamala Harris will meet with Volodymyr Zelenskyy, the president of Ukraine. Petitions for this conference initially were not very high due to Covid-19. It is risky for president Zelenskyy to leave the country right now because there are enormous troops next to Ukraine's border. When the leader leaves the country, bad things happen. At the same time, it is risky for Kamala Harris to visit Ukraine for the same reason. Currently, the EU and the US are making decisions about Ukraine without them. The vice president's first meeting was with the NATO secretary, General Jens Stoltenberg. It emphasizes aliens trying to put forward Russian aggression, but as with any big group of people, countries have their own domestic interests. Every country sees the issue a little bit differently. Everybody seems to agree that there should be some sanctions, some countries think that sanctions should be announced right now. Why Russia is not being represented in this meeting? Russian delegation a little while ago opted not to come. It is now a surprise that they are not there. However, they could have attended the meeting in order to de-escalate the situation. 

“The Fed's Battle to Fight Inflation Could Cause More Pain than Higher Prices”

     Even though the current inflation rate is causing higher prices in the economy, raising interest rates and reining in the prices may actually cause even more pain in the economy, including an increase in job losses. Because inflation is currently at a 40 year high, many people are calling for the Fed to raise interest rates a half percent in March, but some economists are arguing that raising interest rates that high could actually hurt the people that the battle on rising prices is supposed to be helping. 

    Raising interest rates would have the effect of slowing down a very fast economy, but this slowdown would decrease the amount of job gains, and could actually lead to job losses for the lower income segment of the labor force. The economy currently has 2.5 million less jobs than it did before the pandemic, so employers still need to keep hiring to get our labor force back to where it was prior to the pandemic. This increase in interest rates would have an opposite of desired effect and could lead to more economic hardships for the people currently making the least amount of money in our labor force.

    Although raising the interest rates would most likely lead to more unemployment, most economists realize that the Fed does have to take some action to stop inflation. So, some economists are advocating for a quarter percent increase of the interest rate, instead of a half percent, to try and get the economy in a more normal and stable position without causing as many problems for workers as raising the interest rate even higher most likely would.

https://www.cnn.com/2022/02/16/economy/inflation-fight-pain/index.html