Economy Watch: Cypriot Bailout Done (Probably)
- Mar 25, 2013
Over the weekend, the Cypriot parliament worked on a plan to confiscate a percentage of deposits over 100,000 euros in the most troubled of the country’s banks to raise the money demanded by lenders, so that the 10 billion-euro bailout may proceed. On Tuesday, banks are scheduled to reopen on Cyprus, and the worry was that without a deal, there would be classic runs on the banks.
By Sunday, it seemed that euro-zone finance ministers had agreed to the new plan, though the final say is with the International Monetary Fund, the European Commission and the European Central Bank. Without the bailout, it isn’t clear what Cyprus will do about its use of the euro, or what it would mean if the country left the euro zone, since no one has ever done that (not even a small country like Cyprus).
Meanwhile, back in the United States, the Senate passed a budget bill by a wafer-thin majority of 50-49, with no Republicans voting for it, and four red state-Democrats likewise voting against it. The plan sets up a $3.7 trillion budget for the fiscal year of 2014, and it provides for tax increases and modest cuts in spending. The contrast with the austerity-oriented House version of the budget, which was passed by the Republicans of that chamber with virtually no Democratic support, was stark. Though a recently passed continuing resolution funds the government through September, the divide in Congress doesn’t bode well for an actual budget being in place after that.
Americans drove more in January
The U.S. Department of Transportation reported on Friday that travel during January 2013 on all roads and streets nationwide was up 0.5 percent (1.2 billion vehicle miles), meaning that estimated travel for the month was 226.9 billion vehicle-miles (or over 1,200 round trips to the sun). That includes 71.6 billion vehicle-miles on rural roads and 155.3 billion vehicle-miles on urban roads and streets.
Since this was a report about January, it doesn’t reflect the impact of the February spike in the price of gasoline on driving. Gas prices were actually a little lower in January 2013 than the same month a year earlier ($3.39 a gallon on average, vs. $3.44 last year). By February 2013, according to the Energy Information Agency, the monthly average for a gallon of gas was $3.74.
Vehicle miles are an indirect economic indicator, since more miles generally correlates with economic activity (commuting, the shipment of goods and so forth), though driving isn’t the only way people or goods get around. In the 35 years before the Great Recession, vehicle miles driven have consistently grown, pausing for milder recessions and for the energy shocks of the 1970s. But since the onset of the most recent recession, the average has been stagnant.
Hotel industry back to pre-recession numbers
The U.S. hotel industry, so hard hit by the Great Recession, is very nearly back to a “normal” level of business (that is, pre-recessionary), at least as measured by recent industry metrics. According to hotel research specialist STR, for the week of March 10-16, 2013, occupancy was up 1.4 percent to 66.6 percent, the average daily rate rose 4.5 percent to $112.05 and revenue per available room (RevPAR) increased 5.9 percent to $74.66, all compared with the same period last year. All of these are roughly where the industry was before the Panic of 2008.
For the important metric RevPAR, some markets have bounded past their recessionary woes completely. For the same mid-March week, four markets enjoyed year-over-year RevPAR growth of more than 15 percent: Dallas (up 25.3 percent), Miami-Hialeah (up 21.6 percent), New York (up 19.7 percent) and Houston (up 15.6 percent).
Wall Street bounced back on Friday, clearly not worried about the crisis du jour in Europe, with the Dow Jones Industrial Average up 90.54 points, or 0.63 percent. The S&P 500 gained 0.72 percent and the Nasdaq advanced 0.7 percent.