Economic trends are incredibly important for students to track, as they can impact everything from consumer confidence and retail sales to the growth of critical infrastructure. In this article, we will cover some of the most important economic trends that are impacting the global economy right now.
Domestic demand could get stronger if declines in energy prices pass through more strongly to household bills. But tighter financial conditions and rising interest rates would erode that push.
The nternational Market for Agricultural Products
In recent decades, global agricultural trade has been influenced by economic growth and declining transport costs. It has also been impacted by government policies affecting agricultural production and trade. These include the persistence of high agricultural protection in developed countries and anti-agricultural and anti-trade policies in developing countries that have contributed to exacerbating international price fluctuations and distorting market access for farmers.
For example, the NRA for developing country export-competing farmers went from -46 per cent in the second half of the 1970s to 1 per cent now, but removing remaining goods market distortions would boost their NRA by more than one-half.
In addition, governments’ responses to events like extreme weather and animal disease outbreaks can influence the landscape of market access and trade for developing country farmers. In the case of a swine flu outbreak, for example, higher demand in China led to an increase in international pigmeat prices. These prices then influenced consumer purchasing behaviour and subsequently domestic production and export trends.
The nternational Market for Food
The international market for food is a complex operation in which most countries take part. The value of the world’s food trade has increased significantly, and its growth has been fueled by innovations in food preservation, processing and packaging techniques that make foods less perishable and more attractive to consumers; rapid transport and improved handling methods that reduce the length of time and difficulties involved in moving food long distances; and changing tastes and rising purchasing power, which stimulate demand for traditional and new foods from other regions.
The growth of the global food service industry has also been boosted by a growing trend toward eating out and a greater preference for fast food, particularly from the younger generation. However, the COVID-19 pandemic had a negative impact on the industry by restricting travel and tourism, which leads to lower expenditures at restaurants. It has also impacted the industry’s ability to meet consumer demand because of government-imposed lockdowns and border closures that limit the movement of food products and personnel.
The nternational Market for Energy
Industrial sector growth is fueling global demand for energy and creating new jobs in the process. This growth requires a significant share of the world’s electricity, and consumes large amounts of primary and secondary energy. It also creates new products that improve lives, such as medical equipment and vehicles, and requires materials like aluminum, steel and plastics. Industrial efficiency improvements and shifts in product choice can lower energy use and mitigate emissions.
The world’s demand for energy is growing rapidly, led by commercial transportation and electricity demand in emerging markets. Airline fuel demand is rising because of a growing middle class and economic activity, and automobile demand is booming as households buy their first car or upgrade to electric models.
The nternational Market for Durable Goods
Consumer durable goods are items that last for more than three years, such as kitchen appliances, televisions and computers. Their consumption is closely correlated with the business cycle. When consumers and businesses are confident that the economy is improving, they tend to spend more on these goods, increasing demand for durables and signaling a rising economy.
Conversely, a contraction in durables spending typically indicates that the economy is slowing. The fall in consumer durables consumption and capital goods investment accelerated the decline in global industrial production during the COVID-19 pandemic.
Tauber and Zandweghe show that the lockdowns and social distancing measures adopted during the pandemic caused households to substitute services for durable goods. For example, people who stopped going to restaurants might have upgraded their kitchen appliances and bought a bicycle to work out at home. This shift explains why durable goods expenditures rebounded rapidly after the pandemic. It also suggests why the cyclical patterns of durable goods consumption and machinery & equipment investment tend to be more volatile than those of nondurable goods and services.