Ukraine Preparing for a Long Winter of Continued Airstrikes

 Although not much talk is happening any longer of the Russian and Ukranian war, tensions continue to tighten as the winter approaches. 

Ukranies allies met on October 11th to discuss what their plan of action is as the winter approaches. Ukraine's power grid has been a continued place in which enemies are targeting. Ukraine has spent money to build concrete defenses around their most important power grids, as well as invested in backup generators, to try and prevent future total blackouts. 

However, Ukrainian forces and allies are discussing whether or not Ukraine will be able to last through the harsh winter approaching. Ukrainian expert, Nico Lange, stated that he worries that Ukraine does not have enough sufficient supplies to stand off their attackers. However, Ukraine has become almost entirely dependent upon Western Systems for their war technology. 

Therefore, as the winter approaches it is important to stay connected to what is occurring in Ukraine as it seems that Ukraine has reached its final breaking point in the war. Therefore, only time will be able to tell what will occur through the winter and if Ukraine can last the continued airstrikes from enemies. 

Link to article: https://www.economist.com/europe/2023/10/24/ukraines-allies-are-scrambling-to-bolster-its-air-defences

Cited: “Ukraine’s Allies Are Scrambling to Bolster Its Air Defences.” The Economist, The Economist Newspaper, www.economist.com/europe/2023/10/24/ukraines-allies-are-scrambling-to-bolster-its-air-defences. Accessed 30 Oct. 2023.

Ghana Plunged into Darkness

Over the past couple of years, Ghana has been facing difficult economic times that are started to affect a wide range of its citizens outside of the monetary sense. Ghana's residences are facing constant and unannounced power outages as the country is facing a worsening power shortage. The shortage is stemming from the country not being able to supply their generators with enough natural gas to fuel the country's supply. For the affected residents in Ghana, there is currently no timeline to when their power will be restored as there seems to be little to no communication from the government. However, Residents are starting to rise up against the government as inflation rises and their local currency continues to plummet in value. Residents have also seen a substantial hike in energy rates, making the situation all the worse for them. While Ghana is not currently in a major energy crisis, experts are saying that they are certainly heading towards that direction.  

Source: 

https://www.cnn.com/2023/10/27/africa/ghana-plunged-into-darkness-amid-country-economic-woes/index.html

Where will the 30-year fixed mortgage rate be at years end and onward?

 Currently, the 30-year fixed mortgage rate as at an astonishing 8%. This is the highest it has been since the 1980s when the rate was over 15%. In the past few years, it has been shifting between 4-6%. Why is the rate so high? There are a few different reasons for this. 1. The rise in inflation. 2. The uncertainty about what the Federal Reserve's next move will be. As a result, home buying demand has dropped significantly to low levels that have not been touched since the mid 1990s. According to MBA loan applications, mortgage applications have been at a record low based on the past 2 decades. 

According to the NAR, the predicted average 2023 fixed rate will be 6.9% and in 2024 will shrink to 6.3%. Unemployment will rise in 2024 as there is potential for an economic recession. With a recession, comes a compression of the job market. There is a lot of uncertainty for those who want to buy homes as their purchasing power is much lower than it typically is. Only time will tell to see whether mortgage rates recover or not.

The Impact of Inflation on Consumers

 We notice prices rising constantly in our everyday lives, from gas to groceries. We have no control over our grocery prices besides to substitute but what if prices are raising all around? We may notice that prices seem higher but we are not sure how much they actually increased or how much more they will increase. In this post we will be exploring the Consumer Price Index and the actual effects of inflation on consumers. 

There is not a set way of measuring inflation but a good measure to use is the Consumer Price Index which measures the cost of a market basket of consumer goods and services. The latest CPI numbers released from September show a 3.7% increase in all items (U.S. city average). The CPI shows medical care becoming lower in price, but rising prices everywhere else across the board. The decrease in medical expenses is great for people who need a fair amount of medical care; but for many families the rise in energy, food, and all other prices is detrimental. One issue with inflation is it declines living standards because the cost of living is rising while wages are sticky. This causes people to virtually become poorer. There has also been an extraordinary increase in housing prices from even a year ago. This is becoming a huge worry for young adults and college graduates looking into buying their first home. With the strain inflation has on consumers, economists are hoping the Fed's policies will combat inflation leading to less strain on consumers. 

GregIacurci. (2022, July 15). Inflation poses a “clear and present danger,” says Manchin: Economists weigh in on how it can hurt and help consumers. CNBC. https://www.cnbc.com/2022/07/14/how-inflation-can-hurt-and-help-consumers.html 

U.S. Bureau of Labor Statistics. (n.d.). Latest numbers. U.S. Bureau of Labor Statistics. https://www.bls.gov/cpi/latest-numbers.htm 

The 3-Year Economic Rollercoaster

 The 3-Year Economic Rollercoaster

We know that economists are always wrong, but the last three years predictions have been heavily miscalculated. They first underestimated inflation, then the labor market and consumer behavior. They also predicted the interest rate increases by the Federal Reserve, supposed to slow down the economy and bring inflation down, would put the economy into a recession. 

Price levels have been rising for the past 30 months and even with rates going up significantly, the economy still remains strong. More Americans are working than predicted, and consumers are spending more than expected. Right now, we do not see any sign of an economic downturn. But why did economists forecasted the pandemic and the economy after it so wrong?

Economists usually expect that economic growth slows down by the end of the year until early of the following year, which would cause unemployment to rise and inflation to go down. However, they are now expressing low confidence in their predictions due to the post-pandemic's economic unpredictability.

There were two main factors that contributed to the forecasting difficulties. First, the challenge to predict how the pandemic would affect consumer and business behavior because the world had not experienced a pandemic of this magnitude since the Spanish flu in 1918. Secondly, in response to the pandemic, broad fiscal policies were implemented, resulting in the infusion of over $4 trillion into the economy by the Trump and Biden administrations. 

Initially, economic models failed to consider the impact of pandemic-related savings on consumer behavior, resulting in an unexpected increase in inflation in 2021. Although unemployment rates were high, Americans' accumulated savings and increased demand for used cars and home exercise equipment contributed to price increases. In addition to the situation getting worse, the Russian invasion of Ukraine resulted in an increase in oil prices. However, as the labor market improved and wages grew, the predicted recession did not materialize.

The expected recession has not occurred yet, and economic growth continues to be strong. Consumers keep spending, and the fiscal stimulus keeps going for longer than anticipated. Economists now question if inflation can slow down without affecting growth. Despite falling to 3.7 percent in September, inflation remains higher than pre-pandemic levels of 2 percent. In view of inflation's persistence and the economy's resilience, some on Wall Street have suggested maintaining high interest rates to control it fully, a concept they call "Higher for longer." It has also been suggested that the low-rate, low-inflation environment of 2009 to 2020 may never be seen again.

Reference:

https://www.nytimes.com/2023/10/24/business/economy/economy-interest-rates-inflation.html

U.A.W. Expands Strike to General Motors' Biggest U.S. Based Plant

    

    After six weeks of striking U.A.W. has gained another important piece in its cause. On Tuesday the United Automobile Workers union stopped production at G.M.'s largest factory in the country. This step substantially increases their strength and puts even more pressure on America's largest automakers. 

    On the same day that General Motors announced it had a drop in third quarter profits, the union organized and told the Arlington, Texas based plant to halt working. The work stoppages so far, which have also hit Ford Motor and Stellantis, have reportedly lost the automakers around $800million dollars thus far. Arlington was selected as a part of U.A.W.'s ongoing strategy of targeting automakers' most profitable models and vehicles. This particular Texas plant is responsible for manufacturing large sport utility vehicles including the Cadillac Escalade, Chevrolet Tahoe, and G.M.C. Yukon. 

    Executives for General Motors had announced prior to the walkout on Tuesday that they had hope for a temporary agreement with U.A.W. in the near future. However, this strike through a wrecking ball into those hopes and leaves the future dim and uncertain. If these strikes continue to drag on they could leave a mark on the U.S. economy, making it more difficult for consumers to purchase automobiles of their choice. 

    These automakers are using these detrimental side effects to hopefully negotiate terms with the union. Stellantis reported to the union that as a result of the strikes they had to lay off 525 workers at factories in Michigan. All together, Stellantis has had to lay off over 2,000 employees, Ford has laid off 3,000, and G.M. a reported 3,000. 

    In terms of negotiations, G.M. has offered U.A.W. affiliated workers a 23% increase in pay over a four year term. This would lift the standard wage for experienced workers from $32 to $40 an hour, and lower rates for newer workers. This would in turn have employees working 40 hours per week at a top rate earning $84,000 a year. The union has initially demanded raises of around 40%, claiming that lower increases could not account for the living standards workers have suffered through due to inflation and past concessions in contracts.

    An agreement seems lost in the horizons as U.A.W. president Sean Fain has his eyes set on a broader movement that would extend to workers at Toyota, Honda, and Tesla. However, negotiations could be hurried by the oncoming pains of winter, with union members not keen on facing its harshness on $500 a week provided by the union.       

Source: https://www.nytimes.com/2023/10/24/business/economy/uaw-general-motors-strike.html 

Is the Housing Market Going to Crash?

It is very difficult to purchase a house in 2023. Alongside prices constantly rising, mortgage rates have been the highest we have seen in the past 23 years. Prices continued their increasing trend in the month of July, promoting the latest release from the S&P CoreLogic Case-Shiller home price index to conclude that 19 out of the 20 markets measured month over month gains. The National Association of Realtors (NAR) also reported that the median home price as of September, 2023 had increased by 3% over the past year, making it the third month in a row to display year over year jumps.

NAR data shows the median sales prices of existing homes are on the verge of record highs. September 2023 saw the median rise to $394,300 which is only $19,500 off of an all time high of $413,800. It is important to note that multiple seasonal fluctuations in home prices set June to be the highest priced month of most years in the market. 

Home values have been complacent even with the soaring mortgage rates, which have climbed up to 8%. The main problem for the housing market is the lack of housing supply compared to the demand from buyers as, "You’re not going to see house prices decline,” says Rick Arvielo, head of mortgage firm New American Funding. “There’s just not enough inventory” (Skylar Olsen chief economist at Zillow). Olsen agrees with the current supply and demand imbalance and forecasts that home prices will continue to rise into 2024, which will benefit sellers and will hurt first time homebuyers. 

So is the housing market going to crash... the answer to that is no. The limited supply and increased demand is blocking a price decline as, " There are more people than housing inventory. It’s Econ 101" (Mark Fleming chief economist at title insurer First American Financial Corporation) 

Source: https://www.bankrate.com/real-estate/is-the-housing-market-about-to-crash/

Ukrainians has opened around 30,000 businesses in Poland

 During the war in Ukraine, it has caused one of the largest exodus of people in human history. Many of these immigrants have moved to places such as Romania and Poland. Poland in particular has seen a large minority of Ukrainians move over there. According to one report, over 30,000 businesses have been opened by Ukrainians in Poland.

"A fifth of the Ukrainian businesses that are sprouting up despite Poland's sluggish economy are in construction. A large number are in tech and the rest are in services like hairdressing."

Some Ukrainian services have adjusted to include parts of Poland, such as the Ukrainian Postal Service. "Nova Poshta, is also now servicing the large Ukrainian community in Poland. It opened its first outlet in Poland in October under the name Nova Post, which allows customers to quickly send and receive parcels to and from Ukraine. 'Currently, there are seven branches in Warsaw, and we have 34 branches in the whole of Poland,' said the company's head of the Polish branch, 34-year-old Yevgen Tafiychuk".

Source: https://www.dailysabah.com/business/economy/to-not-go-crazy-ukrainians-open-businesses-in-poland-en-masse

Philadelphia Federal Reserve President Patrick Harker

 The Federal Reserve President Patrick Harker spoke out about the interest rates and what he believes should happen. Harker believes that we have reached the point where we can keep the interest rates steady and let monetary policy take over. The Fed has done a good job right now with bringing inflation down while not having unemployment increase. If we push interest rates much higher and at the same aggression as the Fed has been, this could change and increase the unemployment rate. This increase in the unemployment rate could cause the economy to tank if the inflation rate does not decrease at the same rate. With making the decision to keep the interest rates steady the Fed now has to keep an eye on the incoming data that they are receiving and watch it for any signs that they need to change the interest rates. Using this data is going to be key in making sure the economy does not crash and acting fast enough to prevent any major shifts in the economy. 

Source:

https://www.cnbc.com/2023/10/13/philadelphia-fed-president-harker-advocates-holding-interest-rates-where-they-are.html 

Economic Impacts of the Israel-Hamas War

    Just over a week ago, an Islamic Resistance Movement called Hamas attacked Israelis in Gaza. Since then, the death toll has risen into the thousands, mostly civilians, with more being held hostage. As the conflict grows, concerns of increased worldwide involvement of other countries loom large. Militant groups from Lebanon and Syria may support Hamas in their fight, and sharper escalation could bring Iran into the conflict, forcing supporters of Israel into the war. While possible economic impacts take a back seat compared to the actual conflict, it is important to consider what may happen due to the war.

  In 1973, another conflict in the Middle East, the Arab-Israeli war, led to an oil embargo that lasted for years. Coming off the Russian invasion of Ukraine, the world economy may be unable to afford another major conflict in an oil-rich area. According to Bloomberg Economics, they estimate that a significant escalation in Israel could see oil prices rise to $150 per barrel and global growth drop to 1.7%. To put these numbers into perspective, a recession like this would result in $1 trillion off the world output. It is also essential to measure the possible changes to inflation that can come from changes in the oil supply. 

  To accurately forecast the world's economic state during and after the conflict in Israel, economists have to adapt their predictions based on the severity of the war. If the conflict stays within Gaza, there will be little economic impact on GDP and inflation, and oil prices will rise by $4 per barrel. Iran already supports groups there if the war breaks out and spreads to Lebanon and Syria. This expansion will double the oil price per barrel compared to a confined war and the previous inflation impact to +0.2 ppts. Finally, the worst-case scenario is a direct conflict between Israel and Iran. This regional escalation could result in a global recession as oil prices and inflation would rise tremendously. 

  To conclude, the war in Israel can become a global conflict, but it does not need to move to affect the world economically. Due to the Middle East's oil production, no matter the participants or the region in which the conflict takes place, the world will be impacted by this war. 

SOURCE : https://www.bloomberg.com/news/features/2023-10-12/israel-hamas-war-impact-could-tip-global-economy-into-recession#xj4y7vzkg