Economics in the News – April 1-7, 2024
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Are you planning to watch Monday’s solar eclipse? Rural towns across the United States, Canada and Mexico have been planning for the arrival of tourists seeking to watch the eclipse. Those economies in the path of totality – a 110-mile wide belt that stretches from Mazatlán to Montreal. Airbnb has reported a 1,000 percent increase in people searching for accommodations.
Tourism in the Mexican beach town of Mazatlán typically accounts for 80 percent of its economy. However, with the town expected to experience the eclipse longer than many other cities, nearly four minutes, officials expect 120,000 visitors and an economic output of roughly $30 million. Officials in Austin, Texas, has experienced higher than normal occupancy rates in hotels, with state tourism experts projecting a $285 million economic impact for the Lonestar State. [The New York Times]
o Have you shopped for groceries at Walmart since 2018? Then you may be eligible for a payment of up to $500. A $45 million lawsuit settlement from a lawsuit filed in October 2022 claimed that Walmart overcharged shoppers for in-store purchases of certain weighted grocery items, such as poultry, pork and bagged citrus. Some of the bagged citrus included navel oranges, organic oranges, organic grapefruit, and tangerines.
While Walmart has denied the allegations, it has agreed to the settlement. Any customer who shopped at a Walmart retail location in the United States and Puerto Rico between Oct. 19, 2018 and Jan. 19, 2024 and purchased the included weighted goods or bagged citrus can apply for a settlement payment. [The New York Times]
o While suppliers have had to divert container ships from their usual routes in the Red Sea due to Houthi rebels based in Yemen attacking ships via helicopter, missiles, and drones; retailers and manufacturers are opting to fly more goods which has aided international airfreight operators. Routes linking the Middle East and South Asia to Europe have seen a 71 percent increase in the spot rate from last year to this year. Meanwhile, the global average spot rate climbed seven percent in March from a month earlier.
Airfreight is more expensive than ocean freight transport but companies opt to use it due to its speed of delivery. The ships that have been diverted around the Cape of Good Hope in South Africa can take up to 10 additional days to reach their destination. Some manufacturers are opting to shift high-priority goods from ship to air to meet production schedules. [The Wall Street Journal]
o America’s power grid is being tested to its limits and utilities and regulators are stressed to come up with a plan to expand the power grid. The innovation of artificial intelligence is a major contributor to skyrocketing demand while the construction of large warehouses of computing infrastructure require more power than traditional data centers.
The proliferation of crypto-mining is also driving data center growth. Data centers accounted for four percent of the country’s total electricity in 2022, with projections showing that they will account for six percent by 2026. The situation is sparking debates and battles across the country over who will pay for new power supplies. Regulators worry that the bill will be passed to residential taxpayers. [The Washington Post]
o Modern payment systems allow customers to pay with just a scan of their phone, or if shopping online, credit card number stored conveniently on a computer. However, it may be a little too easy to pay. A research paper based on research done at a Chinese bank found that customers charge 9.4 percent more on average on their credit cards through online and mobile payment transactions.
The paper’s lead author is Yuqian Xu, a professor at University of North Carolina’s Kenan-Flagler Business School. Xu estimates that approximately 4.5 percent of total credit card usage in the United States is due to frictionless payments, accounting for $50 billion of the $1.13 trillion in consumer credit card debt. [NPR]
