Midwest state economic review: North Dakota fares well in 2024 trade. Oil news: Geopolitics vs Economics: The forces shaping next week's crude oil futures. Population growth 'masked' Canada's 'recession-like economic backdrop': RBC. The invisible hand: A concept that explains hidden economic forces in the market.
Sources:
https://www.kfyrtv.com/2024/07/19/midwest-state-economic-review-north-dakota-fares-well-2024-trade/
https://www.fxempire.com/forecasts/article/oil-news-geopolitics-vs-economics-the-forces-shaping-next-weeks-crude-oil-futures-1447459
https://www.bnnbloomberg.ca/business/economics/2024/07/19/population-growth-masked-canadas-recession-like-economic-backdrop-rbc/
https://www.businessinsider.com/personal-finance/investing/invisible-hand
Outline:
(00:00:00) Introduction
(00:00:48) Midwest state economic review: North Dakota fares well in 2024 trade
(00:02:56) Oil News: Geopolitics vs Economics: The Forces Shaping Next Week’s Crude Oil Futures
(00:05:55) Population growth ‘masked’ Canada’s ‘recession-like economic backdrop’: RBC
(00:09:36) The invisible hand: A concept that explains hidden economic forces in the market
Simply Economics
North Dakota’s Economic Resilience, Oil Market Rollercoaster, and Canada’s Population Growth
Midwest state economic review: North Dakota fares well in 2024 trade. Oil news: Geopolitics vs Economics: The forces shaping next week's crude oil futures. Population growth 'masked' Canada's 'recession-like economic backdrop': RBC. The invisible hand: A concept that explains hidden economic forces in the market.Sources:https://www.kfyrtv.com/2024/07/19/midwest-state-economic-review-north-dakota-fares-well-2024-trade/https://www.fxempire.com/forecasts/article/oil-news-geopolitics-vs-economics-the-forces-shaping-next-weeks-crude-oil-futures-1447459https://www.bnnbloomberg.ca/business/economics/2024/07/19/population-growth-masked-canadas-recession-like-economic-backdrop-rbc/https://www.businessinsider.com/personal-finance/investing/invisible-handOutline:(00:00:00) Introduction(00:00:48) Midwest state economic review: North Dakota fares well in 2024 trade(00:02:56) Oil News: Geopolitics vs Economics: The Forces Shaping Next Week’s Crude Oil Futures(00:05:55) Population growth ‘masked’ Canada’s ‘recession-like economic backdrop’: RBC(00:09:36) The invisible hand: A concept that explains hidden economic forces in the market
- Duration:
- 12m
- Broadcast on:
- 20 Jul 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Saturday, July 20th. On today's show, we review the economic performance of Midwest States with North Dakota fairing well in 2024 trade. We also delve into the complex relationship between geopolitics and economics in the oil industry, shaping next week's crude oil futures. Plus, RBC reveals how population growth has masked Canada's recession like economic backdrop. This coverage and more up next. I'm David and you're listening to Simply Economics. We start off with a new report from Creighton University that sheds light on the economic performance of rural communities across 10 Midwest states. While the combined rural economies have been declining for the past 11 months, North Dakota seems to be faring better than its neighbors. For more insight, we turn to our correspondent at Simply Economics. So what factors are contributing to North Dakota's relative economic strength? The report found that North Dakota's economy performed above average for the month of July, despite the overall downward trend in the Midwest. While the state's farmland prices dropped from June to July, North Dakota showed improvement in hiring compared to the previous month. Most notably, the state's agriculture and livestock exports for 2024 increased by $22 million or 5.9% compared to the same period in 2023. That's an interesting point about the export growth. Did the report provide any insights into why North Dakota outperformed nearby states in this regard? According to Eugene Graener, president of Heartland Investor Services, Inc., North Dakota's geographic location and transportation infrastructure play a role in its export advantage. Graener explained that North Dakota's soybeans are shipped to the Pacific Northwest via rail, providing quick access to the Chinese market. Additionally, barge traffic issues on the Mississippi River last year made it more expensive for other Midwest states to export soybeans, giving North Dakota an edge. A $22 million increase in trade sounds significant. How does this compare to North Dakota's typical export volumes? While the $22 million increase is a positive sign, Graener pointed out that North Dakota typically deals in billions when it comes to exports. So while the increase is welcome news, it's relatively small compared to the state's overall export figures. Nonetheless, the report suggests that North Dakota's economy is showing some resilience in the face of the broader Midwest rural economic decline. It will be interesting to see if North Dakota can maintain this relative economic strength in the coming months. Thank you for your insights on this report and what it means for the Midwest rural economy. Now shifting our focus to the energy sector, this week saw a roller coaster ride for oil prices with bullish and bearish factors battling for dominance. Here to break down the key events and what they mean for the market going forward is our correspondent. So what drove this week's contrasting price movements? The week started on a bearish note with concerns about China's economic growth weighing on prices. China's Q2 GDP growth came in at 4.7%, falling short of expectations and sparking worries about demand from the world's top oil importer. However, midweek brought a significant bullish factor. US crude oil inventories dropped by a substantial 4.9 million barrels, far exceeding analyst predictions. This robust demand picture in the US temporarily lifted prices. But the bullish sentiment didn't last long, did it? What factors emerged to drive prices lower as the week progressed? That's right, two key factors came into play. First, optimism grew around a potential ceasefire in Gaza, with US Secretary of State Antony Blinken suggesting negotiations were close to completion. This development threatened to erode the geopolitical risk premium that had been supporting oil prices. At the same time, the US dollar strengthened on the back of robust economic data, making dollar-denominated oil more expensive for foreign buyers and further pressuring prices. Looking ahead to next week, what are the main factors traders should be watching? The potential for a Gaza ceasefire remains a central focus, with any progress likely to exert downward pressure on prices. However, recent events like the Tanker Collision near Singapore serve as a reminder of the ever-present risk of supply disruptions. Public indicators will also be crucial, particularly those from China and the US, as they shape expectations for global oil demand. The strength of the US dollar will continue to play a significant role, with its movements closely tied to oil price changes. Traders should also pay attention to signals from OPEC+ members. While no immediate policy changes are expected, any hints of future adjustments could sway market sentiment. So it sounds like we're in for more volatility in the oil market next week. What's your overall take on the current trend and what traders should be prepared for? Given this mix of factors, the oil market is set for continued volatility in the coming week, while the current trend leans bearish, unexpected geopolitical developments or supply shocks could rapidly shift the balance. As always in the oil markets, staying informed and adaptable will be essential for traders navigating these uncertain conditions. Great insights, as always. Thank you for breaking down this week's oil market developments and what to watch in the week ahead. Shifting gears to the Canadian economy, it may not technically be in a recession, but according to economists, it certainly feels like one. Despite high population growth preventing an outright economic contraction, Canadians are experiencing declining per-person output and rising unemployment rates typically seen during recessions. For more on this, we turn to our simply economics correspondent James. Can you explain why Canada's economic situation feels so dire even without meeting the technical definition of a recession? That's right, David. Even though Canada has not seen consecutive quarters of negative GDP growth, which is the typical definition of a recession, several key economic indicators are flashing warning signs. Real per capita output has fallen for six of the past seven quarters and is now 3.1% below 2019 levels. At the same time, the unemployment rate has risen 1.6 percentage points. Historically, Canada has never seen an increase in unemployment of that magnitude without the economy being in a recession. The only reason overall GDP has not declined is because of record high population growth with 2.1 million new consumers added since mid-2022. So what factors have contributed to these recession-like conditions in Canada's economy over the past year? It really comes down to high inflation and rising interest rates. Decades high inflation in 2022 and 2023 eroded household purchasing power. The Bank of Canada responded with an aggressive series of interest rate hikes to try to tame inflation. Higher borrowing costs further dampened consumer demand and business investment. This one-two punch of inflation and rate hikes is what has made the economic environment feel so challenging, left even without a technical recession. Canada has seen very strong population growth recently, with a 6% increase from the second quarter of 2022 through the first quarter of this year. How has that impacted the economic picture? Population growth has really been a double-edged sword in this situation. On one hand, the influx of new consumers, many of whom are also workers, has boosted overall economic output and prevented consecutive quarters of negative GDP growth. Consumer spending accounts for more than half of GDP after all. But on a per capita basis, the economy is still struggling, per-person output continues to decline as the economic pie is divided among a larger number of people. So while high population growth is masking some of the underlying economic weakness, it doesn't change the fact that many Canadians are feeling the pinch of a tough economic environment. Looking ahead, what is the outlook for Canada's economy? When might we see some relief from these recession-like conditions? Students at RBC predict that interest rate cuts by the Bank of Canada will eventually help ease the pressures facing households and businesses. As inflation comes down and purchasing power starts to recover, they expect per capita economic growth to turn positive in the second half of 2025. So while there are some green shoots on the horizon, Canadians may have to weather recession-like conditions for a while longer. The strong population growth may continue to prevent an outright recession, but it will take time for per-person output and the job market to fully bounce back. Thank you, James, for breaking this down for us. It's a complex economic picture in Canada with cross-currents of high inflation, rising interest rates, and strong population growth. While a technical recession may have been avoided for now, many Canadians are still feeling the pain of a tough economic environment. Speaking of economic concepts, let's shift gears and discuss the invisible hand, a term coined by economist Adam Smith to illustrate hidden economic forces. It's a metaphor that describes the unseen forces of self-interest that impact the free market. In theory, consumers' basing decisions on self-interest creates a positive outcome for the economy. Here to discuss this further is our simply economics correspondent. So how does the invisible hand work in practice? Well, David, the best example of how it works was given by Smith himself. He said, "It is not from the benevolence of the butcher, the brewer, or the baker that we can expect our dinner but from their regard to their own interest." Essentially Smith was saying that by solely pursuing their own self-interest, and not any conscious intention to be of help to others, and by trading with each other, the butcher, the brewer, and baker all help each other to provide the goods they need. People act with their own interests in mind, but this can have positive and unexpected repercussions for the broader economy. And how does this invisible hand concept relate to the idea of free markets and minimal government intervention in the economy? The invisible hand is closely related to laissez-faire economics, which proposes that government interference in the economy should be minimal. Based on these ideas, as people act based on their own self-interest, it creates a need for supply and demand and can foster a competitive and robust marketplace. Smith's theory shows that an optimal distribution of goods and services among producers and consumers can be achieved without a visible hand directing them. In fact, a visible hand that does things like dictating prices can cause the end result to be suboptimal, as was made clear in the Communist-era Soviet Union. So in theory, the invisible hand should benefit consumers and the economy as a whole by people pursuing their own rational self-interests. But there are some potential issues with that assumption, right? That's right. The invisible hand theory assumes that consumers are always rational when making economic decisions. But as humans, people don't always behave logically. Emotions and needs can drive irrational choices. Think of any time you've gone to the grocery store hungry or sleep deprived and ended up overspending. So while the invisible hand is a useful framework for understanding economic forces, it has limitations. Human behavior is complex and not always in line with the theory's core assumption of rational self-interest consistently leading to positive market outcomes. Thanks for breaking down that foundational economic concept and its real world implications. And with those insights, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]