Traditional measures of household spending no longer reflect the vagaries of consuming in the digital age.
Deutsche Bank AG’s Sanjeev Sanyal found that the time people spend online isn’t being captured in the consumption basket, a term for how a household divides its spending between goods such as food and services such as transportation.
“I may use Google, YouTube, Facebook and Twitter all day, but it will not show up as consumption because I have not ’spent’ any money on it in the conventional sense,” Sanyal, a Singapore-based global strategist, said in a Sept. 17 report. “However, one can hardly ignore these activities given that several large businesses derive their success directly from these new forms of consumer behavior.”
Transportation may also be affected by technological advances. In the U.K. the number of trips away from home has declined 10 percent since the late 1990s, reflecting a shift toward a “communication-based lifestyle,” Sanyal wrote. Young Americans also seem less inclined to own a car than their parents: The proportion of 17-year-olds holding a driver’s license dropped to 50 percent in 2008 from 69 percent in 1983.
Embracing technology is also not just for the young, Sanyal said. Consumers in the 35-44 age bracket were just as likely to switch to a smartphone as those 18-24. The older group accounted for 25 percent of big users of games and other apps, versus 19 percent for the younger enthusiasts.
“Consumers in their 30s and 40s can be just as enthusiastic about new technologies and it is possible that as this cohort ages, they will take their enthusiasm to ever higher age brackets,” said Sanyal. “In turn, these changing tastes and lifestyles have important implications for the producers of virtually every product ranging from cars and household gadgets to entertainment and real estate.”
* * *
Interest rates can’t go lower than zero -- or can they?
Central banks dealing with rock-bottom interest rates can still show their stance of monetary policy and its effect on bond yields, thanks to a study published this month by the Reserve Bank of New Zealand.
Using debt market data, economist Leo Krippner created a “shadow policy rate” that quantifies borrowing costs when a country’s official benchmark has dropped toward zero and a central bank is forced to adopt other measures to ease monetary policy.
“That shadow policy rate therefore provides a gauge of the monetary policy stance after the actual policy rate reaches zero,” he wrote.
In the case of the Federal Reserve, the shadow federal funds rate turned negative in late 2008 and reached almost minus 10 percent in 2011, Krippner found. While the shadow rate shows the level and change in the stance of monetary policy, economic stimulus is more powerful when the rate is being reduced from a positive level than a negative level, he said.
* * *
Latin America is well positioned to become the breadbasket of the world.
That’s the forecast of four analysts from HSBC Holdings Plc who, in a study published this month, detailed the boom in global grain consumption, especially in Asia, that’s come as incomes increase, meat consumption rises and renewable-fuels use grows. Average grain surpluses of the past 25 years were only 0.2 percent of consumption, versus 1.5 percent in the previous quarter-century. The average price of a ton of grains jumped to $250 in the past decade from about $100-$150 in the prior 30 years, they said.
That’s positive news for Latin America, which has the resources to meet the growing need and whose role as an “agricultural powerhouse” could grow even further, the analysts said. South America already accounts for 41 percent of exports of global grains, up from 7 percent 50 years ago.
In the past half century, South America’s planted acreage had a compound annual growth rate for investment of 2.4 percent versus 0.6 percent globally, the analysts said. The region is also home to 28 percent of the world’s uncultivated land suitable for agriculture with about three-quarters of that situated within six hours of markets.
The Pampas region of Argentina is one of the most fertile agricultural areas of the world, while Brazil is the only large country with low population density and high precipitation levels, they said.
Such supply potential is needed to meet increased demand from Asia, where “economies are strong, urbanization continues and planted acreage is falling, while meat consumption is growing,” the report said.
That burgeoning relationship will speed what HSBC calls the “Southern Silk Road” in which emerging markets increasingly trade with each other, the analysts wrote. Standing to benefit from the trend are companies such as Brazilian ethanol producer Cosan SA Industria E Comercio and Adecoagro SA of Argentina, they said.
* * *
Modern investment patterns have historical echoes, according to a study published by the European Central Bank this week and co-authored by Barry Eichengreen of the University of California, Berkeley.
In an attempt to map the geography of international finance, Eichengreen, alongside Livia Chitu and Arnaud Mehl of the ECB, documented a ‘history effect” in which U.S. holdings of foreign bonds in 88 countries seven decades ago help explain today’s financial allocations.
The result is that as much as 15 percent of American holdings of foreign bonds is explained by those in the middle of the 20th century.
That possibly reflects the fixed costs of entering and exiting markets, such as due diligence and promoting the assets to investors. The effect is twice as large if the bonds aren’t denominated in dollars, implying even higher fixed costs of trading those, the authors wrote.
* * *
The euro-area’s expansion since the 2008-2009 recession has proved “exceptionally slow and bumpy’ when compared with five historical financial crises, thanks to the region’s debt crisis.
Marco Valli, chief euro-region economist at UniCredit Global Research in Milan, used International Monetary Fund data to suggest five slumps linked to financial crises were particularly costly: Spain’s in the late 1970s, those of Norway, Sweden and Finland in the late 1980s and Japan’s in the early 1990s.
There are similarities with the euro area’s recent experience, Valli said in a Sept. 18 report. The decline in gross domestic product from its peak was about 5 percent in both the bloc and the “big five,” while the duration of recession was five quarters and seven quarters respectively.
The difference is that the euro countries’ recovery to date has left GDP still 2.4 percent below its pre-crisis peak. That suggests it will take to the first half of 2015, or six years, to recover all the lost output. In the past, the five countries studied recouped the GDP they had shed in six to seven quarters.
* * *
There may be a gender gap in the views of three professional economists -- two of them women.
A study by economists at the University of Nebraska-Lincoln and Wake Forest University that was based on a survey of members of the American Economic Association found women economists are more likely than men to favor government intervention over market solutions. They also are more inclined to prefer policies aimed at redistributing income. The average male economist sees government regulation as more excessive and is more likely to support cutting trade tariffs.
“We wanted to learn if it would make any difference if men or women were at the table when economic policies were debated and alternatives considered,” said Ann Mari May, professor of economics in Lincoln, Nebraska and the study’s lead author. “These results suggest that the answer to that question is a clear and definitive yes.”