The pandemic has thrust the global economy into a crippling recession. It could take several years for the world to return to either its long-term linear or exponential growth trends, resulting in diminishing demand for certain commodities.
According to research firm Czarnikow Group, the virus-induced economic downturn has led to the first year-on-year decline in global sugar consumption since 1980, when sugar prices hit a high of 45c/lb.
The global closure of the travel and tourism industries has been one of the most significant contributing factors behind sliding demand for sugary food products. Czarnikow wrote lockdowns have led to reduced consumption out-of-home and at-home:
"There has been a reversal of this recent trend of 1% growth each year. Due to this fall, we have reduced our consumption estimates for locations that are still under lockdown by 5%. Under lockdown, there are associated reductions in at-home-consumption due to shortages in stockists, supply chain delays, and the closure of the entertainment industry.
"This final factor is particularly important when estimating consumption patterns. This is because we believe that out-of-home sugar consumption is likely to be even more reduced than in-home sugar consumption. When people can't go to the shops, cinema, sports events, and bars, the amount of sugar – mostly in the form of sugary drinks, fast food, and treat foods – is also reduced. We can verify this by looking at soft drinks sales, which have been particularly affected by lockdowns and the reduction of social gatherings." - Czarnikow
"Consumption out of home is normally more than what you would now substitute and have at home," Ben Seed, an analyst at Czarnikow in London, told Bloomberg.
"If you go to the cinema, you would probably quite happily have a liter or maybe more of soda while you watch the film, whereas we just don't think people would drink a whole liter of soda while watching Netflix," Seed said.
Coca-Cola's sales volumes were down 25% during the month of April, and the company warned the economic downturn will weigh heavily in the second quarter. PepsiCo Inc was another that expects second-quarter revenue to slide.
Czarnikow said global sugar consumption will decline 1.2% to 169.9 million tons this year.
ICE-US Sugar July contracts plunged from $15.9 to $9.05, or about 43% decline in 52 sessions, bottoming out in late April. Since the bottom, contracts have soared 35% into mid-June -- have hit resistance just shy of the 50% Fibonacci retracement level ($12.47).
John Stansfield, an analyst at trader Group Sopex, told Bloomberg that falling demand could result in large sugar surpluses this year and next.
"The bigger picture of falling sugar consumption comes from sales data of Coke and Pepsi, which is terrible," Stansfield said, adding that, "but what I fear more is falling global GDP. Unemployed people won't be going to restaurants and bars. As GDP stalls, so will sugar consumption."
To sum up, with no V-shaped recovery in the global economy this year -- the road to recovery will be slow and long -- suggesting the sugar industry is about to go bust.
If you're wondering about the latest data on the type of recovery ahead, read our latest piece titled "OECD Warns Of Deepest Global Downturn In Century, Second Virus Wave."
Revenge travel is coming to an end, says industry CEO — a recession will replace it
The CEO of Intercontinental Hotels Group says that the world has moved beyond revenge travel–even China.
'Last stage of pent-up demand'The Summer of '23 was also pretty strong, according to a survey by the Federal Reserve Bank of New York, which found that almost a third, or 32.8%, of all U.S. households took a vacation between May and August, up from 28.5% in August 2022 and a record high in data going back to 2015. However, it looks like the revenge travel upswing is coming to an end. The Federal Reserve's Beige Book said in September that consumer spending on tourism was stronger than expected, "surging during what most contacts considered the last stage of pent-up demand for leisure travel from the pandemic era." Elie Maalouf also thinks that the revenge travel dish has gone cold. The CEO of Intercontinental Hotels Group (IHG) - Get Free Report said in an interview with CNBC that he believes pent-up demand is over. "People started traveling really by the end of 2020 as restrictions started to lift,” he said. “So we’re really past revenge travel — even in China.” Intercontinental Hotel Group operates hotels under several brand names, including Regent, Crowne Plaza, Holiday Inn Club Vacations, and Candlewood Suites. The company’s latest quarterly update showed travel demand remained strong during the close of the summer travel season. “We think we’re in a sustainable place,” Maalouf said. “Our bookings for groups and meetings going into 2024 and beyond are the strongest we’ve seen in a very long time.”
Average room rates increaseIHG’s third quarter trading update showed the company’s revenue per available room — or “revpar” — was up 10.5% compared to third quarter 2022, and nearly 13% higher compared with the third quarter of 2019, which was before the pandemic. This is despite a 3% drop in revpar, compared to 2019, in large cities in Greater China, which are more dependent on international travelers. Maalouf said that lack of “airlift,” or flight capacity, into China is below 50% of prepandemic levels, which is affecting travel recovery in cities like Beijing, Shanghai, Guangzhou and Shenzhen. “But if you look at the country as a whole, travel — which is mostly domestic in China — it’s recovered well above 2019,” he said, adding that more than 80% of IHG’s business in China is in mid-sized to smaller cities. Occupancy levels in the third quarter at IHG hotels was 72% — just 1% shy of pre-pandemic levels, according to the quarterly update. But average room rates have jumped well above 2019 levels — up nearly 6% in Greater China, 15% in the Americas, and 24% in Europe, Middle East, and Africa (EMEA) and Asia. But rising rates are barely keeping up with inflation, said Maalouf. “Room rates have not really exceeded inflation in any of our markets,” he said. “I think people’s willingness to travel is exhibited by the fact they’re willing to pay.” Get investment guidance from trusted portfolio managers without the management fees. Sign up for Action Alerts PLUS now. fed federal reserve lockdown pandemic covid-19 recovery consumer spending africa europe china
Las Vegas Strip faces growing bed bug problem
With huge events including Formula 1, CES, and the Super Bowl looming, the Las Vegas Strip faces an issue that could be a major cause for concern.
Las Vegas beat the covid pandemic.
It wasn't that long ago when the Las Vegas Strip went dark and people questioned whether Caesars Entertainment, MGM Resorts International, Wynn Resorts, and other Strip players would emerge from the crisis intact.
In the darkest days, the entire Las Vegas Strip was closed down and when it reopened, it was not business as usual. Caesars Entertainment (CZR) - Get Free Report and MGM reopened slowly with all sorts of government-mandated restrictions in place.
The first months of the Strip's comeback featured temperature checks, a lot of plexiglass, gaming tables with limited numbers of players, masks, and social distancing. It was an odd mix of celebration and restraint as people were happy to be in Las Vegas, but the Strip was oddly empty, some casinos remained closed, and gaming floors were sparsely filled.
When vaccines became available, the Las Vegas Strip benefitted quickly. Business and international travelers were slow to return, but leisure travelers began bringing crowds back to pre-pandemic levels.
The comeback, however, was very fragile. CES 2022 was supposed to be Las Vegas's return to normal, the first major convention since covid. In reality, surging cases of the covid omicron variant caused most major companies to pull out.
Even with vaccines and covid tests required, an event that was supposed to be close to normal, ended up with 25% of 2020's pre-covid attendance. That CES showed just how quickly public sentiment — not actual danger — can ruin an event in Las Vegas.
Now, with November's Formula 1 Race, CES in January, and the Super Bowl in February all slated for Las Vegas, a rising health crisis threatens all of those events.
The Arena Media Brands, LLC and respective content providers to this website may receive compensation for some links to products and services on this website.
The Las Vegas Strip has a bed bug problem
While bed bugs may not be as dangerous as covid, Respiratory Syncytial Virus (RSV), Legionnaires’ disease, and some of the other infectious diseases that the Las Vegas Strip has faced over the past few years, they're still problematic. Bed bugs spread easily and a small infestation can become a large one quickly.
The sores caused by bed bugs are also a social media nightmare for the Las Vegas Strip. If even a few Las Vegas Strip visitors wake up covered in bed bug bites, that could become a viral nightmare for the entire city.
In late-August, reports came out the bed bugs had been at seven Las Vegas hotel, mostly on the Strip over the past two years. The impacted properties includes Caesars Planet Hollywood and Caesars Palace as well as MGM Resort International's (MGM) - Get Free Report MGM Grand, and others including Circus Circus, The Palazzo, Tropicana, and Sahara.
"Now, that number is nine with the addition of The Venetian and Park MGM. According to the health department report, a Venetian guest reported seeing the bloodsuckers on July 29 and was moved to another room. An inspection three days later confirmed their presence," Casino.org reported.
The Park MGM bed bug incident took place on Aug. 14.
Bed bugs remain a Las Vegas Strip problem
Only Tropicana, which is soon going to be demolished, and Sahara, responded to Casino.org about their bed bug issues. Caesars and MGM have not commented publicly or responded to requests from KLAS or Casino.org.
That makes sense because the resorts do not want news to spread about potential bed bug problems when the actual incidents have so far been minimal. The problem is that unreported bed bug issues can rapidly snowball.
The Environmental Protection Agency (EPA) shares some guidelines on bed bug bites on its website that hint at the depth of the problem facing Las Vegas Strip resorts.
"Regularly wash and heat-dry your bed sheets, blankets, bedspreads and any clothing that touches the floor. This reduces the number of bed bugs. Bed bugs and their eggs can hide in laundry containers/hampers. Remember to clean them when you do the laundry," the agency shared.
Normally, that would not be an issue in Las Vegas as rooms are cleaned daily. Since the covid pandemic, however, some people have opted out of daily cleaning and some resorts have encouraged that.
Not having daily room cleaning in just a few rooms could lead to quick spread.
"Bed bugs spread so easily and so quickly, that the University of Kentucky's entomology department notes that "it often seems that bed bugs arise from nowhere."
"Once bed bugs are introduced, they can crawl from room to room, or floor to floor via cracks and openings in walls, floors and ceilings," warned the University's researchers.
spread social distancing pandemic
Americans are having a tough time repaying pandemic-era loans received with inflated credit scores
Borrowers are realizing the responsibility of new debts too late.
With the economy of the United States at a standstill during the Covid-19 pandemic, the efforts to stimulate the economy brought many opportunities to people who may have not had them otherwise.
However, the extension of these opportunities to those who took advantage of the times has had its consequences.
A report by the Financial Times states that borrowers in the United States that took advantage of lending opportunities during the Covid-19 pandemic are falling behind on actually paying back their debt.
At a time when stimulus checks were handed out and loan repayments were frozen to help those affected by the economic shock of Covid-19, many consumers in the States saw that lenders became more willing to provide consumer credit.
According to a report by credit reporting agency TransUnion, the median consumer credit score jumped 20% to a peak of 676 in the first quarter of 2021, allowing many to finally have “good” credit scores. However, their data also showed that those who took out loans and credit from 2021 to early 2023 are having an hard time managing these debts.
“Consumer finance companies used this opportunity to juice up their growth at a time when funding was ample and consumers’ finances had gotten an artificial boost,” Chief economist of Moody’s Analytics Mark Zandi told FT. “Certainly a lot of lower-income households that got caught up in all of this will feel financial pain.”
Moody’s data shows that new credit cards accounts that were opened in the first quarter of 2023 have a 4% delinquency rate, while the same rate in September 2022 was 4.5%. According to the analysts, these levels were the highest for the same point of the year since 2008.
Additionally, a study by credit scoring company VantageScore found that credit cards issued in March 2022 had higher delinquency rates than cards issued at the same time during the prior four years.
- Why the recession never really hit -- and what indicates that it still could
- Jim Cramer and Dan Ives say a powerful technology will give the markets a boost
- Here's what companies Nvidia is joining in the $1 Trillion market cap club
Credit cards were not the only debts that American consumers took on. As per S&P Global Ratings data, riskier car loans taken on during the height of the pandemic have more repayment problems than in previous years. In 2022, subprime borrowers were becoming delinquent on new cars loans at twice the rate of pre-pandemic levels.
S&P auto loan tracker Amy Martin told FT that lenders during the pandemic were “rather aggressive” in terms of signing new loans.
Bill Moreland of research group BankRegData has warned about these rising delinquencies in the past and had recently estimated that by late 2022, there were hundreds of billions of dollars in what he calls “excess lending based upon artificially inflated credit scores”.
The Government's Role
Because so many are failing to pay their bills, many are wary that the government assistance may have been a financial double-edged sword; as they were meant to alleviate financial stress during lockdown, while it led some of them to financial difficulty.
The $2.2 trillion Cares Act federal aid package passed in the early stages of the pandemic not only put cash in the American consumer’s pocket, but also protected borrowers from foreclosure, default and in some instances, lenders were barred from reporting late payments to credit bureaus.
Yeshiva University law professor Pam Foohey specializes in consumer bankruptcy and believes that the Cares Act was good policy, however she shifts the blame away from the consumers and borrowers.
“I fault lenders and the market structure for not having a longer-term perspective. That’s not something that the Cares Act should have solved and it still exists and still needs to be addressed.”
Get exclusive access to portfolio managers and their proven investing strategies with Real Money Pro. Get started now.recession economic shock bankruptcy foreclosure default stimulus trump lockdown stay-at-home orders pandemic coronavirus covid-19 recession stimulus russia
Uncategorized1 hour ago
One of Cathie Wood’s favorite industry leaders just hit a roadblock
Government4 hours ago
Peter Schiff: Jerome Powell Isn’t Qualified To Be In Any Economic Club
Uncategorized3 hours ago
MicroBT Unveils Highly Anticipated WhatsMiner M60 Series at Blockchain Life 2023 in Dubai
International4 hours ago
How eggs of the Zika-carrying mosquito survive desiccation
Uncategorized2 hours ago
Crypto advocate Tom Emmer drops out of the running for Speaker of the House
Uncategorized3 hours ago
What is the Average Net Worth by Age?
International3 hours ago
U.S. National Pension System Ranks 22nd Out Of 47 Countries; Canada Ranks 12th
Uncategorized4 hours ago
USD/JPY: Dollar unfazed by in-line two year auction