Connect with us

America

Quo Vadis World Economy-II: Uneven blows of inflation and slowing operations

Published

on

US Treasury Secretary Janet Yellen first paid homage to a slave memorial in Senegal, then spoke to farmers in a remote village in Zambia, and eventually visited a job retraining facility in South Africa’s coal region on tour to convince the locals of the good intentions of her country.

“We’ve seen inflation come down substantially,” Yellen said about the American economy in South Africa, although “there can be hiccups” and she “wouldn’t predict month-to-month-type changes.”

Despite her belief that rental prices substantially contribute to inflation, Yellen expects that it would come out over the next five or six months, and this cooldown would deaccelerate the price rise. She also said that goods prices have actually been falling, but service prices are rising more rapidly.

Considering the 2.9 percent growth in the fourth quarter is “solid,” Yellen emphasized that slower growth is desirable in this high-inflation environment.

Interim balance sheet in inflation

The New York Fed has published a study that explores which income groups are more affected by inflation. The findings show that inflation had varying effects on different groups in 2021 and 2022.

Middle-income households are hit worst by inflation in 2021. Those with an annual earning between $50,000 and $150,000 are considered middle-incomed.

This income group was most suffered from the rocketed prices of used cars and motor fuel. The lower-income group is more likely to rely on public transportation, while the wealthy are more likely to purchase brand-new cars, and their spendings on gas constitute a much less portion of their income. These made middle-income households the main target of inflation. This outcome is partially attributable to differences in consumption patterns between the well-off and the poor, between peasants and urbanites.

Fuel and used car costs have fallen in recent months. Meanwhile, the rising rental and goods prices are hurting. Inflation now primarily affects the lower-income population since these two are among the necessary expenditures.

For this reason, the poorest 40 percent of the population bears an extra 0.3% inflation.

For example, rural residents experienced 2 percent higher inflation than the national average in the year leading up to February 2022. The same regions are now living below-average inflation.

In early 2022, black and Hispanic households experienced a 1 percent extra inflation rate than white households. As it turns out, the inflation for non-college-educated people is also more severe. These groups are shown to be getting closer to the average inflation rate.

Food and rental prices rise faster than the inflation average (10.6 percent, 7.9 percent, and 7.1 percent, respectively). Therefore, what Nobel Prize-winning economist Paul Krugman argued in New York Times last November, “inflation does not hurt the poor disproportionately,” is not true. Krugman bases his argument on the fact that the proportion of pay increases for low-income employees is higher than that for high-wage ones.

The poorest quarter of Americans spends more than half of their income on housing, food, and healthcare, according to statistics from the Bureau of Labor Statistics in the United States. The high-income group disposes of a far more significant percentage of their money to dining out, self-entertainment, vacation, and brand-new and used cars than the low-income group.

Prices of basic needs have risen more rapidly than non-essential goods, as the general and historical tendency suggests.

Decline in consumer spending

It is generally agreed that falling consumer spending is a significant contributor to the recent decline in the inflation rate.

According to statistics released last week, consumer demand fell in December by 0.2% compared to the previous month. This rate rises to 0.3% after adjusting for inflation.

Although December is the Christmas season, consumer demand fell by 1.1% from November, according to data on retail sales.

Perhaps one of the most important indicators of the decline in American consumption is the considerable drop in the trade deficit in November. This month’s greatest monthly loss in a 14-year period highlighted falling consumer demand and increased importing-associated financing costs.

The US trade deficit narrowed by 21% in November, falling to $61.5 billion. While overall imports dropped by 6.4%, imports of products decreased by 7.5%. In November, exports fell 2% as well.

While the dollar’s relative strength lowers the worldwide competitiveness of American manufactured products, the high-interest rate policy of the FED has an impact on reducing demand.

Another issue is that households whose savings seemed to grow thanks to the state’s monetary subsidies during the pandemic are being enticed back to levels in 2005.

Furthermore, consumer loaning is getting dangerously close to its limits. In the third quarter of 2022, payments for credit cards, vehicles, and student loans have peaked since 2008.

Manufacturing industry is alarming

More importantly, a possible “factory recession” in the manufacturing sector in the United States may be the direst of these developments.

A Wall Street Journal survey predicted a 0.1 percent decline in industrial output in December 2022 before the numbers were released. The official statistics revealed a shrinkage of 0.7%, failing all expectations.

Capacity utilization was anticipated at 79.6 percent. The numbers showed a decline, down 78.8 percent compared to November.

Manufacturing continued the downward slide. The manufacturing sector lost another 1.3% in December after shrinking by 1.1% in November.

The industry experienced a 1.8% drop in new orders in November.

The increase in capital expenditures (equipment, buildings, intellectual property) was a modest 0.7 percent. In the third quarter, these rates were 6.3%. Therefore, it stands to reason that investment has slowed down as well.

It is often believed that the manufacturing sector of the American economy is the most vulnerable to a recession. In Q2, a technical recession is likely to occur, but economists expect it to be ‘mild.’

Teeny-weeny recessions

The overall tendency of recent estimates for the American economy is the assumption of a modest recession.

The US economy will be cooled down by the FED’s decision to keep raising interest rates at a slower pace, increasing loaning costs and declining consumer demand.

However, even the “pessimistic” FED believed there was a light at the end of the tunnel. Almost everyone anticipates a quarter-point increase in interest rates at this week’s meeting. A ‘soft landing’ is possible for the American economy, FED Governor Christopher Waller noted in his ‘Cautious Optimism’ address.

In the Bloomberg survey, economists predicted GDP would begin to decline in the second quarter, albeit a modest drop.

On the other hand, the technical definition of a recession is a decline in economic activity that lasts for two consecutive quarters in many countries. However, as Bloomberg points out, this is not the situation in the United States. In private meetings, ‘elite’ scholars of the National Bureau of Economic Research (NBER), a “non-profit” institution, are responsible for making the “official” declaration of a recession in the United States. Their deliberations often take place for a full year. The common definition of a recession is that the consensus essentially drives Wall Street that a recession is being experienced.

Is the labor market ‘tight’?

All US officials and corporate economists agree that the labor market is ‘tight.’

Unemployment rates are at historic lows, while corporations continue hiring despite the massive layoffs at tech giants.

However, the dismissals by major corporations do not directly indicate that the economy is currently in recession. Since many businesses anticipate a slowdown in 2023, they may now be adopting preventative measures to reduce labor expenses.

As a matter of fact, the formerly ‘tight’ labor market began showing signs of relaxation in December. The ever-increasing new employment after the pandemic has started to cool down. Companies created two hundred thirty thousand new positions in December. Compared to the previous two years, this is the lowest increase.

New jobs opened in 2022 were 4.5 million, clearly lower than the 6.7 million expected in 2021.

The figures may seem optimistic, but more nuanced data is concealed beneath them. The labor force participation rate, which measures the percentage of adults in the United States who are either employed or actively seeking jobs, increased to 62.3% in December; nonetheless, this is still lower than the pre-pandemic levels.

In addition, the average weekly working hours have been falling in the last two years, and in December, it marked 34.3 hours.

Employment with temporary aid services has dropped by 110.000 in the previous five months. Coupled with the data shown above, it means that employers are abandoning temporary aid programs and cutting down on employee hours in response to falling demand from customers.

Wage growth slows down

Several experts, like American Center Vice President Lael Brainard, have pointed out that low-income workers have had less wage increases than high-income workers. It is evident that employees in non-administrative positions have witnessed a lesser salary gain.

However, we have already covered above that the basic expenses of low-wage workers are concentrated in a few key areas and that inflation in these areas is greater than in others. To all this, additional details, including: Prices increased by 14% from early 2021 to late 2022, but low-income employees saw a rise of just 11.5% in their average annual salary.

Similarly, the pace of salary increase has slowed. The average hourly pay in the United States rose 4.6% in December over the previous year. It should be emphasized that inflation in the same period was 7.1 percent.

Despite all this, it is worth noting that consumer optimism is rising in OECD countries. The industrial sector, which was projected to be impacted severely by the rise in energy costs, was spared from collapsing by the mild winter, especially in Europe. In the following article, our focus will be on Europe.

America

Trump administration targets 60 nations with new tariff draft under Section 301

Published

on

The US administration is proposing new tariffs of at least 10% on imports from 60 trading partners, following an investigation into goods allegedly produced using forced labor.

According to a Bloomberg report citing sources within the Office of the US Trade Representative (USTR), the specific tariff rates will vary based on individual countries’ legislative frameworks regarding forced labor and their capacity to enforce those laws.

Under the drafted regulations, a 10% tariff rate will apply to imports from the European Union, Mexico, Canada, the United Kingdom, Taiwan, and several other nations. Conversely, goods arriving from China, India, Japan, South Korea, Switzerland, and Brazil will be subject to a 12,5% tariff.

The USTR stated that the lower tariff rate will apply to products from nations that prohibit forced labor or have committed to doing so. The agency emphasized that states failing to establish such prohibitions or lacking the capacity to effectively enforce them will face the higher tariff rate.

Bloomberg reported that this step represents a continuation of President Donald Trump’s policy to reinstate across-the-board tariffs on all countries, which had previously been ruled unconstitutional.

The proposed tariffs are the result of investigations initiated under Section 301 of the Trade Act of 1974.

Commenting on the development, Deborah Elms, Head of the Trade Policy Group at the Hinrich Foundation in Singapore, said, “This is highly significant because Section 301 is an extremely powerful tool and is highly unlikely to be overturned. This opens the door to a range of new tariff and non-tariff measures.”

The report noted that the tariffs are being introduced at what could be a turning point for the global economy.

Financial markets are already navigating a sensitive period due to rising gas and oil prices driven by conflict in Iran.

The new tariffs will not take effect immediately. Before implementation, a review and evaluation period will be conducted, which may lead to modifications in the draft proposal.

According to the timeline reported by Bloomberg, written comments on the tariffs must be submitted by July 6. Additionally, the Section 301 Committee is scheduled to hold a public hearing on July 7.

US Trade Representative Jamieson Greer argued that forced labor practices in partner nations force American workers to compete on an unequal playing field. “We will no longer tolerate this unfairness,” Greer said.

On the other hand, the USTR proposed certain tariff exemptions that could affect apparel and textile imports. While these goods could enter the US at reduced tariff rates, quotas would be determined based on the respective countries’ existing textile exports to the US.

Beef, tomatoes, bananas, coffee, orange juice, and several other food products will be entirely exempt from the tariffs. Furthermore, double taxation will not be imposed on metals, specific fuel types, and chemicals that are already subject to other duties.

In May, the US Court of International Trade ruled that the 10% tariff on foreign imports promoted by President Donald Trump was unlawful. Defending the White House’s objectives following the court ruling, Trump characterized the judges as “radical left-wing” and remarked, “Nothing surprises me. We always find different ways. We make a decision and act in another way.”

In February, the US Supreme Court also ruled that tariffs established by Trump were contrary to the law. The court concluded that the president had exceeded his authority in imposing those duties. Trump, however, claimed that the court was under foreign influence.

Continue Reading

America

Google seeks approval to release 32 million mosquitoes in US disease-control project

Published

on

Google is seeking federal approval to release nearly 32 million mosquitoes in California and Florida as part of a biological pest-control initiative known as the Debug project.

The little-known program aims to combat disease-carrying mosquitoes by releasing millions of sterile male mosquitoes into the environment, an approach designed to stop “bad bugs with good bugs.”

According to the US Centers for Disease Control and Prevention (CDC), mosquitoes are classified as the world’s deadliest animals. Of the more than 3,500 mosquito species that exist globally, only Aedes aegypti is responsible for transmitting dengue fever, Zika virus and chikungunya, diseases that sicken hundreds of millions of people each year.

In a statement published on the official website of the Debug project, Google described the issue as a difficult problem to solve, noting that many mosquito-borne diseases lack effective vaccines or treatments.

The statement argued that relying on pesticides is not a sustainable solution because such chemicals become less effective over time and can be toxic. It also said that eliminating standing water alone is insufficient because it is impossible to identify every breeding site used by mosquitoes.

For those reasons, Google said a new approach is required and that it found a solution in what it describes as “good” mosquitoes of the same species.

The project website explains the method as follows:

“Good bugs are the same mosquito species as the bad bugs that spread disease. Our good bugs are male mosquitoes carrying Wolbachia, a naturally occurring bacterium found in nature. This bacterium prevents them from producing offspring with wild female mosquitoes. Male mosquitoes do not bite and cannot spread disease, so the good bugs will stop the bad bugs from reproducing. Over time, fewer bad mosquitoes will remain.”

Scientists involved in the Debug project emphasized that the technique relies entirely on a naturally occurring bacterium, contains no chemicals or toxins, and does not involve genetic modification.

Researchers said similar approaches have been used safely for decades to control other pests. They added that the Debug team is combining scientific and engineering expertise with support from international partners in an effort to suppress disease-carrying mosquito populations.

Project scientists said their approach differs from previous eradication programs because it applies the Sterile Insect Technique on a larger scale through the use of data analytics, sensors and automation.

According to information published in the project’s frequently asked questions section, program officials are working closely with national and local governments, community leaders and research institutions.

Officials said they meet with residents in areas targeted for deployment before operations begin in order to better understand local concerns and priorities.

Google is therefore continuing to pursue federal authorization to implement the project in both California and Florida.

A notice published in the Federal Register shows that the US Environmental Protection Agency (EPA) is reviewing Google’s applications for an Experimental Use Permit under the Federal Insecticide, Fungicide, and Rodenticide Act.

According to details contained in the filing, nearly 16 million mosquitoes would be released in Florida during the first year of the project.

A further 16 million mosquitoes would be released in California during the second year.

Members of the public can obtain additional information and submit comments through the federal rulemaking portal by visiting regulations.gov and entering docket identification number EPA-HQ-OPP-2025-3951.

Continue Reading

America

US Marines test lower-cost counter-drone system to reduce missile dependence

Published

on

US Marine Corps personnel tested a new counter-drone defense system during military exercises held in the Philippines in April.

According to a report by The Wall Street Journal (WSJ), the system is designed to avoid the continuous use of expensive missiles and instead relies on a coordinated set of countermeasures.

The system consists of two armored vehicles known collectively as MADIS (Marine Air Defense Integrated System).

One vehicle is equipped with an advanced radar system, while the other carries the Stinger air defense missile system. Both vehicles are also fitted with a small cannon, a machine gun and electronic warfare equipment.

According to the report, MADIS is intended to provide military personnel with multiple options for engaging drones, including cannon fire, missiles and electronic warfare tools.

The objective is to reduce dependence on high-cost weapons when protecting military units and other strategic assets.

US Marine Corps officials told WSJ that one of the system’s most effective features is its ability to fire specially manufactured 30-millimeter ammunition equipped with precision fuzes that detonate as they approach a target.

Steven Sawyer, a former ammunition technician at the NATO Support and Procurement Agency, told the newspaper that 30-millimeter rounds are generally less accurate than missiles but are significantly cheaper to use.

Sawyer said that even if five such rounds were required to destroy a drone, the total cost would remain around $11,250.

By comparison, a single Stinger missile costs about $430,000, while Coyote interceptor missiles used in conflicts in the Middle East are priced between $100,000 and $125,000 each.

Sawyer added that 30-millimeter ammunition has proven effective against Shahed-family drones, which cannot be neutralized through electronic warfare methods.

At the same time, he stressed that US defense companies continue to face difficulties producing sufficient quantities of the ammunition. According to Sawyer, the precision fuzes are highly sophisticated electromechanical devices and only a limited number of manufacturers can produce them at scale.

WSJ noted that countering large numbers of inexpensive drones has become one of the most pressing challenges facing modern militaries.

The US military has encountered the problem directly during operations in the Middle East, where it has been forced to expend limited stocks of extremely costly precision-guided munitions.

Previously, the South China Morning Post (SCMP) reported that Chinese scientists had developed a combat algorithm known as HG-STR based on a “kill them all” concept.

The algorithm was said to enable swarms of fixed-wing drones to autonomously scan the battlefield and destroy enemy targets even if communications are disrupted and lines of sight are obstructed.

In April, The New York Times, citing three sources within defense and intelligence agencies, reported that the Pentagon assessed Russia’s and China’s drone development programs to be more advanced than those of the United States.

The assessment regarding China’s drone capabilities was reportedly based on analysis of a military parade held in China in September 2025.

Continue Reading

MOST READ

Turkey