Economics in the News – Oct. 14-20, 2024
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Treasury secretary Janet Yellen warned against the economic policies being proposed by former President Donald Trump would fuel inflation and harm businesses. In a speech, Yellen argued that the broad tariffs that Trump supports would damage the United States economy. Yellen is a longtime skeptic of tariffs and has argued against the tariffs passed during Trump’s previous presidency.
Trump has suggested imposing tariffs of 10 to 20 percent on most foreign items, as well as at least 60 percent on goods coming from China. The new proposed tariffs surpass those imposed during his previous presidency, although President Joe Biden’s administration has kept Trump’s previous tariffs on China in place and has increased tariffs on a variety of Chinese imports ranging from electric vehicles, solar cells, semiconductors, and advanced batteries. [The New York Times]
o The National Retail Federation anticipates that holiday sales are expected to increase 2.5 to 3.5 percent from last year to this year. That is roughly a $989 billion boost. That would be slower growth than the prior year, when holiday sales climbed 3.8 percent in 2023. However, sales growth would be in line with more normal sales growth of 3.6 percent prior to the start of the COVID-19 pandemic. E-commerce is expected to see a 8 to 9 percent growth, with forecasted sales between $295 billion and $298 billion.
The holiday season is defined as the season between Nov. 1 to Dec. 31, and does not include purchases from auto dealers, gas stations and restaurants. Experts believe that shoppers will be more price-conscious this holiday season, with higher prices causing sticker-shock. Consumers can continue to expect the early arrival of Christmas merchandise, as stores have noted that consumers are willing to spend around seasonal events. [The New York Times]
o Chinese electric automaker BYD is delivering in the race for delivering less expensive electric vehicles (EVs) to the masses. BYD is exporting cars to roughly 95 markets, including making its debut in 20 markets this year. The rapidly expanding company is planning to build plants in 10 countries on three continents, triggering protectionist tariffs in the United States and European Union.
Since 2020, BYD has gone from an after-thought in China’s crowded automaker market to top 10 in the world. It’s now larger than Volkswagen in China and briefly surpassed Tesla as the biggest seller of pure EVs globally. In the US, President Joe Biden imposed a 100 percent tariff on EV exports from China. That was expanded further in September when the Biden administration proposed a ban on sales or import of connected cars with Chinese hardware or software due to national security concerns of internet-connected cars becoming tools of Chinese surveillance or cyber warfare. [Bloomberg]
o Housing construction showed that new building permits issued nationwide fell 2.9 percent in September compared to August and have declined 5.7 percent from a year ago. In addition, the houses that were completed in September were down nearly six percent compared to last year, leaving experts to anticipate an even more difficult time in being granted permits.
Housing construction has slowed considerably since 2022, in part, due to rising interest rates make it more difficult for developers to finance new projects while higher mortgage rates cool buyer demand. Insufficient construction and a slowdown in new construction dating back to the Great Recession has led to greater demand for housing, causing prices to increase. That was spurred further by the COVID-19 pandemic when construction companies dealt with supply chain issues and a shortage of workers. [The Washington Post]
o Many expected mortgage rates to fall after the Federal Reserve cut interest rates by a half-point in September. However, the average 30-year mortgage rate increased more than a quarter-point to an average of 6.4 percent, according to data from Freddie Mac. That is more than a full point lower than they were last year, allowing people who bought in the last couple years a chance to refinance to a lower rate.
Mortgage rates mostly follow the yield on 10-year Treasury bonds, which has increased recently in part because investors are anticipating the Fed to be more cautious in cutting rates after the large cut last month. In addition, mortgage lenders must cover its costs and make a profit, adding its own percentage on top. Those factors, along with credit score and size of the loan all go into the mortgage rate offered. [NPR]
