Economics in the News – June 3-9, 2024
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Japan has become a popular international tourist destination in recent years in part due to a weak yen, allowing travelers to see more for their money. In March, there were more than three million international travelers – a monthly record – and 10 percent climb from March 2019. Japanese officials are raising concerns over the number of tourists flocking the country.
The majority of the tourists are coming from South Korea, Taiwan and China, but spending from international tourists made up nine percent of Japan’s gross domestic product. The influx of visitors is testing the patience of the Japanese population, with criticism over being priced out of hotels, or dealing with overcrowded buses and restaurants. Or by disrespecting traditional Japanese customs. The local Japanese municipalities have been responding to various degrees, from trying to accommodate the influx of tourism to making efforts to deter tourists from visiting. [The New York Times]
o The European Central Bank lowered interest rates for the first time in nearly five years, as inflation returned to within sight of the bank’s two percent target. The three key interest rates were cut by a quarter-point across the 20 countries that use the euro. Average inflation across the eurozone peaked above 10 percent in late 2022 after a surge in energy prices.
Europe is one of the latest to cut interest rates, as global policymakers believe that high interest rates have been effective at restraining economies to slow inflation. Other notable central banks to recently cut rates include the Bank of Canada, as well as Switzerland and Sweden. [The New York Times]
o The S&P 500 and Nasdaq Composite notched record highs last week, as millions of Americans are experiencing a boom in their investment income. In the first quarter of the year, Americans earned roughly $3.7 trillion in interest and dividends at a seasonally adjusted annual rate. That is an increase from $770 billion four years ago. In addition, wealth held in stocks, real estate and other assets were at the highest level ever observed by the Federal Reserve in the late part of 2023.
The historic gains have aided Americans to pay more for goods and services. Economists disagree over the wealth effect of rising asset prices encouraging consumers to spend more. But with higher bond yields and dividend payouts, Americans are using their cash to flow back into the economy via hotels, restaurants, and stores. [The Wall Street Journal]
o Since the United States Supreme Court struck down the law that had previously outlawed sports betting outside of the state of Nevada, 38 states have legalized sports betting. It has become the fastest-growing source of state tax revenue. But what states are generating the most revenue for sports betting, adjusted for population?
New York leads the way when it comes to revenue generated by sports gambling, but that isn’t due to New Yorkers spending the most on gambling. Instead, companies made the offer to pay 51 percent tax on gross revenue in exchange for licenses. But among the population, men are twice as likely to make a sports bet than women, while white and Hispanic people are much more likely than African Americans. [The Washington Post]
o As customers conveniently fulfill the majority of their banking needs online, physical banking locations are changing their design layouts to better serve customers for advisory services. Top banks such as Bank of America, Citibank, and JPMorgan Chase are all taking a new direction in their designs. Over the course of history, banks have altered their strategies to develop relationships with their customers and allowing those relationships to manifest into selling the broader products that are offered.
Teller transaction volume is down 40 percent since before the pandemic at Citibank, while customers are seeking more prescheduled advisory appointments. Those trends are industry wide, and Bank of America is wrapping up a three-year plan to modernize the interior of their bank branches, before moving on to improve the exterior. JPMorgan Chase has renovated 2,300 branches since 2018 and plans to redo 1,700 more by 2027. The number of physical bank branches has been shrinking over the last several decades with Bank of America closing nearly 2,300 branch locations and Citi reducing its physical location footprint as well. [Bloomberg]
