Economics in the News – Oct. 28 – Nov. 3, 2024
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Since investing heavily in electric vehicles (EVs), United States manufacturers have forged different paths to where they are today. Ford debuted its sleek Mustang Mach E, which gave it a sizeable advantage over its longtime crosstown rival, General Motors. After its initial surge, Ford’s three top-selling EV models – the Mustang, the F-150 Lightning and a Transit van – are still selling well but the losses are piling up fast. In the first nine months of the year, Ford lost $3.7 billion in the EV market.
However, GM’s EV models are gaining traction on the EV market. Like Ford, GM is losing money in the EV specific market, but its executives expect those models to start generating “variable profits” by the end of the year. Unlike Ford, GM has taken its time in getting into the EV market, choosing to focus its attention primarily on the Chevrolet Bolt compact. The company took its time to develop modular battery packs, allowing it to take advantage of economies of scale and use the same components in many vehicle models. GM has since introduced nine EV models using similar batteries and appealing to a wide customer base. [The New York Times]
o Starbucks customers are balking at the cost of $8 lattes. Other customers have switched to coffee shop competitors that are popping up across the country. The company recently announced a preliminary report that same-store sales declined seven percent in the fourth quarter and 10 percent lower from a year ago. Now, Starbucks is turning to former Chipotle CEO Brian Niccol to lead a turnaround.
Starbucks has recently announced changes in an effort to win customers back. First, is the introduction of the holiday menu in early November. The company also said that it would no longer be charging extra for nondairy milk, while also not increasing prices for the 2025 fiscal year. In a postpandemic world, Starbucks has emphasized its drive-thru and pick-up orders on its app. The company is planning to review its store design and could bring the company back to its roots of the café experience and more comfortable seating. [The New York Times]
o Does your family opt for a real or an artificial Christmas tree for the holiday season? Around 75 percent of the trees put up by families across the United States are artificial, according to the National Christmas Tree Association. It’s estimated that 20 million to 25 million Christmas trees will be sold this year, totaling roughly $2.5 billion in revenue. For those that sell real Christmas trees, what’s the economics behind it?
First Christmas tree sellers have to differentiate their product, whether they want to market towards price, convenience or the experience of cutting down the tree. Some Christmas tree farms add activities to entice families for various activities and traditions, such as sipping wine, taking a hayride or enjoying the animals in the petting zoo. The average tree buyer pays an estimated $75 for a real tree. [The Wall Street Journal]
o Rising grocery prices has been a central issue on the campaign trail. Customers are frustrated that big food companies are raising prices for everything from cereal to ketchup to potato chips. They often cite higher costs of ingredients and labor as reasons. Meanwhile, small manufacturers have reason to believe that they are being squeezed by distributors who act as the middleman for supermarkets.
Fees and other charges levied on food makers, such as a late or partial shipment, have long been standard in the grocery business. But grocers impose many of their own fees on marketing initiatives and shelf space which is passed from the distributor to the food companies. Many smaller companies are raising complaints of unfair fees that force them to raise their prices to stay in business. The situation reflects a struggle for profit in the grocery sector, which operates on razor-thin margins. [The Wall Street Journal]
o Some hotels have started to rent their amenities to the public without requirement to reserve a room. Reservations can be made to use popular spaces, such as the pool, spa, office spaces, conference rooms and more, allowing hotels an additional source of revenue. The trend is in response to hotels struggling with rising cost of labor and the pullback in travel spending.
According to the Labor of Bureau Statistics, the average hotel room price has increased 14 percent between August 2019 and August 2024. Inflation for overnight stays has slowed across the past year, but the rates at luxury hotels have remained high. Consumers have bought day passes as an alternative for a vacation if it’s available in a nearby city, or to fill the gaps between flights and hotel checkouts. [The Washington Post]
