America
Quo Vadis World Economy-II: Uneven blows of inflation and slowing operations
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
Israel looks to Latin America as Isaac Accords seek to expand regional partnerships
As ties between Israel and Latin American countries continue to deepen, the newly launched Isaac Accords are emerging as a framework for expanding cooperation across the region.
The initiative formed the backdrop to a panel discussion on opportunities for Israel in the Western Hemisphere at the 2026 JNS International Policy Summit in Jerusalem on Monday.
The panel, titled “The Coming Isaac Accords: Israel and Latin America,” brought together diplomats and regional experts to discuss developments that could encourage participation in the Isaac Accords, the strategic framework announced in April by Argentine President Javier Milei and Israeli Prime Minister Benjamin Netanyahu during Milei’s visit to Israel.
Moderated by JNS correspondent Etgar Lefkovits, the discussion featured Panama’s Ambassador to Israel Ezra Cohen, former US Ambassador to Costa Rica Fitzgerald Haney, and Leah Soibel, founder and CEO of Fuente Latina, which provides Middle East news coverage to Spanish-language media outlets.
Soibel said:
“What we need to understand is that the Isaac Accords have an impact that extends far beyond diplomacy. Twenty percent of the US population is Hispanic. By 2050, that figure is expected to reach 30% of the population. This is the demographic group with the lowest levels of antisemitic sentiment.”
The panel also celebrated the victory of pro-US and pro-Israel candidate Abelardo De La Espriella, who defeated his left-wing rival in Colombia’s presidential election on Sunday.
De La Espriella had made the restoration of relations with Israel and the relocation of his country’s embassy to Jerusalem central elements of his campaign platform.
Cohen said that when he looks at a map of Latin America, only four countries are currently governed by left-wing, anti-Israel administrations.
Referring to an earlier panel discussing what participants described as a bleak future for Jews in Europe, Cohen remarked: “When one window closes, another opens. Come to Latin America.”
Haney argued that “Israel’s friends keep winning” and predicted that “we are going to see a lot more positive developments coming out of Latin America.”
He said a colleague in Colombia had sent him a text message promising: “On August 7 at 5 p.m., we will restore relations with Israel.”
Haney noted that this was the date and time when Colombia’s new president is scheduled to take office and predicted that another announcement regarding the relocation of Colombia’s embassy to Jerusalem would follow.
He described Colombia as the latest in a series of Latin American countries turning toward Israel in pursuit of “shared values, shared prosperity and shared security.”
Haney also said that the Israel Allies Foundation, a pro-Israel advocacy group that works with lawmakers, would bring together representatives from 11 legislative bodies across Latin America in Buenos Aires over the weekend to sign a joint declaration of principles.
He noted that the organisation had successfully worked with Brazil’s legislature despite the position of President Luiz Inácio Lula da Silva, whom he described as anti-Israel.
According to Haney, Brazil’s legislature has developed a plan to deepen relations with Israel over the next nine months.
Soibel said that 12 Latin American countries had renewed or strengthened their friendships with Israel and that interest in Israel among Spanish-language content creators, influencers and journalists continues to grow. Her organisation has brought 300 non-Jewish Hispanic journalists to Israel.
The panel also highlighted the launch of a Panama-based Spanish-language edition of JNS. Soibel said the work of pro-Israel organisations remains vital because so few such groups operate in the region, while, in her words, “Iran, Qatar and Hezbollah are conducting propaganda campaigns in Spanish throughout Latin America.”
She continued:
“You could probably count on one hand, perhaps two, the number of organisations and leaders operating across the Spanish-speaking world. That makes this work extraordinarily strategic. Its impact is enormous. Israel and the Jewish people should invest more. There is a large Hispanic-Israeli population in Israel, and many of them were victims of the October 7 attacks. We have stories to tell. What we need now is investment and distribution channels to spread those messages and information.”
The panel concluded on an optimistic note, with participants expressing confidence that Latin America will become an increasingly important pillar of Israel’s global diplomatic strategy in the years ahead.
Milei and Netanyahu launch new accord
Argentine President Javier Milei and Israeli Prime Minister Benjamin Netanyahu announced the launch of the Isaac Accords last Saturday.
The initiative establishes a new strategic framework aimed at strengthening cooperation among Argentina, Israel and like-minded partners across the Western Hemisphere, described as “the descendants of Isaac and nations rooted in the Judeo-Christian tradition,” in defence of freedom and democracy and in the fight against terrorism, antisemitism and drug trafficking.
Participating countries will seek to strengthen coordination against what the agreement describes as terrorist organisations, with particular emphasis on “Iran’s efforts to expand terrorist networks and operational presence throughout the Western Hemisphere.”
The initiative also seeks to promote coordination and alignment in international forums while creating a framework for expanded cooperation in innovation, technology, trade and economic openness.
Speaking alongside Netanyahu at a joint press conference, Milei said:
“We expressed our unwavering support for the United States and Israel in their struggle against terrorism and the Iranian regime, not only because it is the right thing to do, but also because our countries are united through shared suffering.”
Milei referred to the 1992 bombing of the Israeli embassy in Buenos Aires and the 1994 attack on the AMIA Jewish community centre.
Although Argentine courts have attributed both attacks to Iran, Tehran has consistently denied any involvement.
Netanyahu praised the Argentine leader for demonstrating what he called “moral clarity” by standing with Israel and said he hoped other Latin American governments would join the Isaac Accords, which both leaders described as being inspired by the Abraham Accords.
The Abraham Accords, brokered by Washington in 2020, triggered a wave of normalisation in Arab-Israeli diplomatic relations.
US Ambassador to Israel Mike Huckabee attended the signing ceremony and described Milei and Netanyahu as “President Trump’s two closest friends.”
Huckabee added: “I do not think there are two other world leaders whom our president respects as much and with whom he has such a personal relationship.”
During the visit, the two sides also announced the launch of the first direct commercial flights between Buenos Aires and Tel Aviv, scheduled to begin in November.
Milei said the new route would create an “unbreakable bond” between the two countries and reiterated his intention to relocate Argentina’s embassy from Tel Aviv to Jerusalem.
“As soon as circumstances permit, we once again reaffirm our commitment to moving the Argentine embassy to Jerusalem,” he said.
America
Iran team leaves thank-you message in Los Angeles locker room after World Cup draw
Iran’s national football team left a message in its locker room at SoFi Stadium, thanking Los Angeles for its hospitality during the World Cup.
The players said they were leaving the city with honor after keeping their hopes of reaching the knockout stage alive with a 0-0 draw against Belgium.
In the handwritten note, published by the Iran Football Federation, the team wrote:
“From the ancient land of Persia thousands of years ago to the civilized Iran of today, the spirit of Iran remains alive and unshaken. Los Angeles, thank you for your hospitality. We arrived in Los Angeles with pride, competed with honor and leave with dignity.”
The note also thanked Iranian supporters who gave their “hearts, voices and souls” to the team throughout its two matches and concluded with a call for peace, respect and friendship among all nations.
Los Angeles hosted both of Iran’s Group G matches, while the team returned to its training base in Tijuana between games.
Iran has been based in Tijuana throughout the tournament and has had to travel back and forth to the United States for matches because of restrictions related to its stay in the country. Entry bans were also imposed on some members of the national team’s coaching staff and officials.
US authorities said the team’s travel arrangements remain under review, while discussions continue over the possible easing of some restrictions.
Iran head coach Emir Ghalenoei has repeatedly criticized the travel restrictions, saying his squad has faced challenges that no other team in the tournament has been required to endure.
After drawing 2-2 with New Zealand in its opening match at SoFi Stadium, Iran will play its final Group G match against Egypt in Seattle.
America
Colombia’s de la Espriella claims narrow presidential victory in runoff election
The first results from Colombia’s presidential runoff election showed that right-wing candidate Abelardo de la Espriella, backed by Donald Trump, had narrowly won the vote.
The victory of de la Espriella, who has no prior political experience, signals a fundamental shift in the government’s approach to tackling the country’s long-running internal armed conflict and rising violence.
Throughout the campaign, de la Espriella pledged to intensify military pressure on illegal armed groups, drug trafficking networks and criminal organizations. He succeeded in defeating left-wing candidate Iván Cepeda, a close ally of incumbent President Gustavo Petro.
Speaking after the initial results were released, de la Espriella said: “Today marks the beginning of a new era for our country. This era is built on the free and democratic will of millions of citizens who chose to believe in a great, secure, prosperous Colombia full of opportunities.”
Cepeda says he will await official results
According to the preliminary count, with more than 99% of ballots tallied in the runoff election, de la Espriella secured approximately 49.7% of the vote, while Cepeda received 48.7%.
Cepeda, who has not yet conceded defeat, said the preliminary results were neither official nor binding.
“When the official count is completed, the final results are known and the necessary verification procedures are finished, we will recognize the official outcome produced by that process,” Cepeda said.
Reuters reported that the verification process showed very little variation from the preliminary counts recorded during the first round of voting on May 31.
De la Espriella, who grew up in Colombia’s Caribbean region, drew particularly strong support from that part of the country. Addressing a large crowd gathered in the coastal city of Barranquilla after the first results emerged, de la Espriella, who has adopted the nickname “El Tigre” (The Tiger), declared: “Tonight is the beginning of a new story for the nation. Tonight a new era begins, a change of order begins.”
He said he would govern for all Colombians, including those who voted for his opponent, and pledged loyalty to and protection of Colombia’s 1991 constitution.
At celebrations in Barranquilla, supporters wore Colombia’s yellow national football jersey and waved Colombian flags.
With images of de la Espriella projected behind the stage, supporters chanted “Stand firm for the homeland” and “Petro out!” as fireworks lit the sky. Some supporters wore hats bearing the slogan “Make Colombia Great Again,” echoing those worn by supporters of US President Donald Trump.
Trump reacted to the results in a Truth Social post, writing: “BIG won!”
One supporter, Patricia, told reporters: “We are tired of the murders in this country and of this government’s bureaucracy. Now we finally have a president from the coastal region.”
Another supporter said: “We are proud of the Tiger. We hope he transforms the country and, above all, creates a new nation where we will have jobs and greater security.”
Supporters of Cepeda, who narrowly lost the election, also voiced concerns on the streets of Barranquilla.
Catalina La Grande, a student and activist who supports Cepeda, told the BBC: “There is a visible sense of unease in the air. Such a narrow margin worries us because it reflects how divided the country is and the enormous challenges we face in defending democracy, peace and human rights.”
Another young voter backing Cepeda, Maria, said the results showed a divided country but noted that the public had remained peaceful.
“Given the level of polarization we are experiencing, the absence of violence in the streets is a positive development,” she said.
The sharp divisions between the candidates have fueled concerns that unrest could emerge if some opposition groups refuse to accept the outcome.
Late on Sunday night, clashes were reported between protesters and police in Cali, Colombia’s third-largest city. Demonstrators reportedly burned US flags, while police used tear gas to disperse large crowds angered by de la Espriella’s victory.
President Gustavo Petro is also reported to be considering challenging the result. In a post on X, Petro said that based on the preliminary count, “no one can be declared president” and alleged that the security of some polling stations had been compromised. He called for an audit of the voting software but provided no evidence to support the claims.
Who is Abelardo de la Espriella?
De la Espriella, who has no political background, is a lawyer and businessman. During his legal career, he represented clients including Alex Saab, an ally of former Venezuelan President Nicolás Maduro who has faced money laundering charges in the US, and David Murcia Guzman, one of Colombia’s most notorious fraudsters.
De la Espriella says he handled those cases in his capacity as a defense attorney.
Often compared to El Salvador’s President Nayib Bukele because of his security policies and distinctive beard, de la Espriella and his supporters frequently wear Colombia’s national football jersey at rallies and on social media. Critics accuse him of politicizing the national team shirt.
He is also known for regularly addressing campaign crowds from behind bulletproof glass panels.
Colombia’s internal armed conflict has persisted for decades, but violence has intensified in recent years. Armed groups and criminal organizations, including dissident factions of the FARC, the ELN and the Clan del Golfo, have doubled their membership over the past five years.
Competition for control of lucrative cocaine trafficking routes and illegal mining operations has further escalated the violence. Fighting along the Colombia-Venezuela border last year displaced tens of thousands of people. Cocaine production in the world’s largest cocaine-producing country has reached record levels.
Critics of President Petro argue that his “total peace” strategy, which prioritizes negotiations with armed groups, has failed, claiming that such groups have used ceasefire arrangements to expand their territorial control and influence.
De la Espriella has pledged to cancel all negotiations with illegal armed groups and increase military pressure to restore order.
As part of that agenda, he has promised closer cooperation with the US, the construction of massive prisons in Colombia’s forests, a smaller state apparatus and reforms to the healthcare system.
Having lived and worked in Miami for many years, de la Espriella has held US citizenship since 2023. During the election campaign, he received support from Donald Trump, who said de la Espriella would “stop illegal migration, fight crime and drugs, and restore law and order.”
Before the election, Trump also said de la Espriella would feel “the full support and strength of the United States” behind him.
Although Colombia has historically been one of Washington’s closest allies in the region, relations have become strained in recent years due to sharp disagreements between President Trump and President Petro over migration policy, tariffs and military intervention in Latin America.
De la Espriella’s election also aligns with a broader trend across Latin America, where security concerns have pushed politics to the right. His victory was welcomed by other conservative leaders across the region.
Argentine President Javier Milei said Colombians had “chosen the path of economic freedom, prosperity and uncompromising security” and had declared that enough was enough to transnational organized crime and drug trafficking.
Chile’s José Antonio Kast said: “A new era of freedom is beginning for Colombia, one that will allow the country to regain security and prosperity.”
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