HomeLivingMarket Update April 12th: Economy Stuttering Amid Inflation Concerns

Market Update April 12th: Economy Stuttering Amid Inflation Concerns

Last week, there were quite a few signs that the economy was moving in a positive direction. But this week, both at the national and international level, a new wave of challenges is causing some investors and consumers to want to play it safe.

The good news is that unemployment is very low—in fact, last week experienced the lowest level of new unemployment filings of the past decade. However, global conflict, limited resources, and extremely high levels of inflation continue to weigh down the broader economy.

Whether you’re an investor, a consumer, or anyone else, here are the most relevant economic news stories from last week:

Inflation Hits Four-Decade High

Following the newest report from the United States Labor Department, inflation has now reached 8.5 percent—the highest it has been in the past four decades. This generally concerning figure means that, on average, something that costs $100 one year ago would currently cost about $108.50. With the average American household experiencing pay increases that are lower than the rate of inflation, this means the national spending power has decreased.

Not all components of the Consumer Price Index (a “basket of goods” used to roughly gauge consumer inflation) have changed equally. Electricity, gasoline, and both used and new cars have all increased at an even higher rate. Gas prices have dropped from their recent highwater mark of $4.32, though the current national average price of $4.09 is still creating financial challenges for many households. 

DOW Remains In 34,000 Point Range

One component of our economy that has remained (surprisingly) stable has been the stock market. Ever since the Dow Jones Industrial Average eclipsed the 34,000-point mark, which occurred on March 16th, the Index has remained within the 34,000-point range on all but two days.

This means that, over the course of the last month, the DOW has experienced only about 3 percent variation between its highest point and its lowest point. Usually, this level of index price stability only occurs when there is limited change in the broader economy—the status quo is, therefore, an anomaly. This has led some speculators to predict that a near-term price breakout is likely to occur, though it is unclear whether a bearish or bullish run will be more likely.

National Push for Unionization Continues

Amidst this wave of relatively high economic turmoil, the American Labor Movement is making a variety of unprecedented moves. Two of the nation’s large corporations that have recently experienced a push for the unionization of their workers include Amazon and Starbucks.

The National Labor Relations Board (NLRB) has reported the successful creation of several unions within Starbucks locations across the country, with many of the votes for unionizing being unanimously (or near-unanimously) in favor. Generally, those in favor of unionizing are asking for better pay, higher benefits, and increased transparency from the company’s corporate offices. The votes taking place at Amazon workplaces have typically been quite a bit closer than they were at Starbucks, though Chris Smalls—one of Amazon’s key organizers—describes the process as a “marathon, not a sprint.”

Europe Braces for Exceptionally High Prices

Inflation has recently been a global issue affecting nearly every national economy, not just the United States. In the European Union, inflation reached a recent annualized rate of 7.5 percent—the highest it has been since the introduction of the Euro as a continental currency.

Much of Europe’s economic woes are tied to the ongoing conflict between Russia and Ukraine, the two geographically largest countries in the continent that are also important resource providers. While most of Europe is unapologetically aligned with Ukraine in this conflict, the continuation of price hikes has caused quite a bit of unrest.

High prices in Europe are also beginning to be reflected at the polls, with both left-wing and right-wing populists faring better than usual in many countries. In France, the first round of presidential elections saw incumbent president Macron (center-left) narrowly outpace competitors Le Pen (right-wing) and Melenchon (left-wing). Because Macron did not secure a majority, he will face Le Pen in a runoff election at the end of the month.

New COVID Wave Stalls Production in China

With a new wave of COVID—one that has been dubbed “stealth omicron”—making its rounds in Asia, China has enacted some of the world’s strictest lockdowns to date. In Shanghai, the country’s financial capital and one of the largest cities in the world (25 million), residents have been forced to accept a near-total lockdown, with many being barred from leaving their apartments.

The lockdown in Shanghai, along with comparable lockdowns in other major Chinese cities, has stalled quite a bit of economic production. Apple is just one of many companies with significant operations in the city that has been forced to put its production on hold. This will likely cause delays in the delivery of Apple’s products, which may eventually be followed by further general price increases.

This week, we will pay close attention to how many key actors react to these developments, particularly the Federal Reserve. There will also be a new wave of mid-month economic reports released, which we can expect to be absorbed by and reflected in the stock market. We’ll be sure to keep you updated on how all of the world’s biggest economic stories continue to unfold.

Andrew is a freelance writer that primarily focuses on real estate and finance topics. He graduated from the University of Colorado with degrees in Finance and Political Science and has since worked in the real estate, life insurance, and digital marketing industries. When he is not writing, Andrew enjoys skiing, playing piano, painting, and spending time with his wife (Maggie) and cat (Crow).