Inflation around the world increased dramatically with the reopening of economies following COVID-19. After reaching a peak of 11 percent in the second quarter of 2021, world trade prices dropped by more than five percentage points by the middle of 2023. U.S. import prices followed a similar pattern, albeit with a lower peak and a deeper trough. In a new study, we investigate what drove these price movements by using information on the prices charged for products shipped from fifty-two exporters to fifty-two importers, comprising more than twenty-five million trade flows. We uncover several patterns in the data: (i) From 2021:Q1 to 2022:Q2, almost all of the growth in U.S. import prices can be attributed to global factors, that is, trends present in most countries; (ii) at the end of 2022, U.S. import price inflation started to be driven by U.S. demand factors; (iii) in 2023, foreign suppliers to the U.S. market caught up with demand and account for the decline in import price inflation, with a significant role played by China.
China’s aggressive policies to develop its battery-powered electric vehicle (BEV) industry have been successful in making the country the dominant producer of these vehicles worldwide. Going forward, BEVs will likely claim a growing share of global motor vehicle sales, helped along by subsides and mandates implemented in the United States, Europe, and elsewhere. Nevertheless, China’s success in selling BEVs may not contribute much to its GDP growth, owing both to the maturity of its motor vehicle sector and the strong tendency for countries to protect this high-profile industry.
Shortly after the recovery from the pandemic recession began, the U.S. economy entered a period of high inflation as surging demand, severe supply disruptions, and worker shortages combined to create large imbalances and inflationary pressures in the economy. More recently, however, inflationary pressures have been moderating. Indeed, the inflation rate as measured by the consumer price index (CPI) has come down from its recent peak of 9.1 percent in the summer of 2022 to 3.1 percent at the start of 2024. Have inflationary pressures also moderated for local businesses in the New York–Northern New Jersey region? The New York Fed’s February business surveys asked firms about increases in their costs and prices. Results indicate that the pace of increase in costs, wages, and prices have all slowed considerably over the past year. Moreover, firms in the region expect cost and price increases, as well as the overall inflation rate, to moderate further in the year ahead.
In a previous post, we highlighted that financially fragile households are disproportionately likely to use “buy now, pay later” (BNPL) payment plans. In this post, we shed further light on BNPL’s place in its users’ household finances, with a particular focus on how use varies by a household’s level of financial fragility. Our results reveal substantially different use patterns, as more-fragile households tend to use the service to make frequent, relatively small, purchases that they might have trouble affording otherwise. In contrast, financially stable households tend to not use BNPL as frequently and are more likely to emphasize that BNPL allows them to avoid paying interest on credit-finance purchases. We explore below what drives these differences and consider the implications for future BNPL use.
A commonly used measure of market liquidity is market depth, which refers to the quantity of securities market participants are willing to buy or sell at particular prices. The market depth of U.S. Treasury securities, in particular, is assessed in many analyses of market functioning, including this Liberty Street Economics post on liquidity in 2023, this article on market functioning in March 2020, and this paper on liquidity after the Global Financial Crisis. In this post, we review the many measurement decisions that go into depth calculations and show that inferences about the evolution of Treasury market depth, and hence liquidity, are largely invariant with respect to these decisions.
Editor’s note: Since this post was first published, percentages cited in the first paragraph have been corrected. (February 7, 1pm)
Following our post on racial and ethnic wealth gaps, here we turn to the distribution of wealth across age groups, focusing on how the picture has changed since the beginning of the pandemic. As of 2019, individuals under 40 years old held just 4.9 percent of total U.S. wealth despite comprising 37 percent of the adult population. Conversely, individuals over age 54 made up a similar share of the population and held 71.6 percent of total wealth. Since 2019, we find a slight narrowing of these wealth disparities across age groups, likely driven by expanded ownership of financial assets among younger Americans.
Editor’s note: The DFA data upon which this post was based show a decline in the aggregate real wealth of Black households after 2019, as reported here. The authors are currently reviewing the data to determine whether a similar pattern exists for the typical Black household. (March 1, 3:47 pm)
Wealth is unevenly distributed across racial and ethnic groups in the United States. In this first post in a two-part series on wealth inequality, we use the Distributional Financial Accounts (DFA) to document these disparities between Black, Hispanic, and white households from the first quarter of 2019 to the third quarter of 2023 for wealth and a variety of asset and liability categories. We find that these disparities have been exacerbated since the pandemic, likely due to rapid growth in the financial assets more often held by white individuals.
The New York Fed’s Center for Microeconomic Data released the Quarterly Report on Household Debt and Credit for the fourth quarter of 2023 this morning. Household debt balances grew by $212 billion over the last quarter. Although there was growth across most loan types, it was moderate compared to the fourth-quarter changes seen in the past few years. Mortgage balances grew by $112 billion and home equity line of credit (HELOC) balances saw an $11 billion bump as borrowers tapped home equity in lieu of refinancing first mortgages. Credit card balances, which typically see substantial increases in the fourth quarter coinciding with holiday spending, grew by $50 billion, and are now 14.5 percent higher than in the fourth quarter of 2022. Auto loan balances saw a $12 billion increase from the previous quarter, continuing the steady growth that has been in place since 2011. In this post, we revisit our analysis on credit cards and examine which groups are struggling with their auto loan payments. The Quarterly Report and this analysis are based on the New York Fed Consumer Credit Panel (CCP), a panel which is drawn from Equifax credit reports.
Firms remain divided about the value of the office for “office” workers. Some firms think that their employees are more productive when working from home. Others believe that the office is a key place for investing in workers’ skills. In this post, which is based on a recent working paper, we examine whether both sides could be right: Could working in the office facilitate investments in workers’ skills for tomorrow that diminish productivity today?
Editor’s note: Since this post was first published, the first paragraph under the “Looking Forward” subhead has been updated to clarify the expected increase in the speed of FX transaction settlements. (Jan. 25, 2:30 p.m.)
The foreign exchange market has evolved extensively over time, undergoing important shifts in the types of market participants and the mix of instruments traded, within a trading ecosystem that has become increasingly complex. In this post, we discuss fundamental changes in this market over the past twenty-five years and highlight some of the implications for its future evolution. Our analysis suggests that maintaining a healthy price discovery process and fostering a level playing field among participants are areas to watch for challenges. The consequences of the evolution of the FX market—well beyond those anticipated twenty-five years ago—remain active areas of research and policy consideration.