September 5, 2017 Weekly News
CANADIAN MACRO
The Canadian economy showed powerful growth in the second quarter of 2017 boasting an annualized growth rate of 4.5%. GDP growth posted a significant positive surprise as analyst estimates expected growth in the 3.7% range. Consumer spending and exports were largely to thank for the great quarter, as household consumption rose 4.6% and exports rose 9.6%. As expected, the housing market showed further signs of cooling as residential investment slumped -4.7%. However, the economy’s resilience in a cooling housing market is an extremely positive sign, as tightened housing market regulations and continued Bank of Canada rate hikes will further put pressure on the sector.
Wednesday morning will be an important day for the Canadian economy as Bank of Canada Governor Stephen Poloz will make the decision whether or not to hike interest rates 25 basis points to 1%. While the economy is showing robust strength with the latest growth numbers, it is important to also consider the inflationary outlook for the economy, which has struggled to reach targets of 2% core inflation.
Source:
https://www.bloomberg.com/news/articles/2017-08-31/canada-s-economy-surges-4-5-on-consumer-spending-key-takeaways
CRYPTO REGULATION
Bitcoin and it’s cryptocurrency counterparts face a new headwind as China’s PBOC declared Initial Coin Offerings illegal, forcing all fundraising activity to be halted, and refunds provided to investors. This is likely just the beginning of increased focus over the regulation of cryptocurrencies in the fiat economy, something that poses a significant risk to the value that Bitcoin offers to its users. Bitcoin’s competitive advantage is largely its lack of government regulation and decentralization. However, as governments such as China’s begin to take action against the cryptocurrency explosion, concerns arise as to how much government intervention will play a factor on consumer’s use of these currencies down the road. While the Chinese government did not make any specific mentions regarding more legitimate cryptocurrencies such as Bitcoin, speculators were still concerned as Bitcoin showed losses as large as 16% following the announcement before slightly rebounding.
Source:
https://www.bloomberg.com/news/articles/2017-09-04/china-central-bank-says-initial-coin-offerings-are-illegal
AMAZON AND WHOLE FOODS
As of Monday, August 28th, Whole Foods is officially owned by Amazon thanks to a $13.7 billion acquisition deal. A number of changes have already begun taking place, as plenty varieties of food can now be purchased on Amazon.ca and Amazon’s Echo devices are now being stocked on shelves at Whole Foods stores. As promised, the company has cut prices on more than 300 products including bananas, chicken, eggs, and more. Greg Fleishman, co-founder of baking mix brand Foodstirs, told CNBC in an interview: "[Amazon is] making organic foods accessible to all walks of life in this country. It's amazing." He went on to say: "The whole intent of this [merger] is to retain loyalists, but also to attract an entirely new consumer who was held back because of price. Whole Foods' mission is to not be exclusionary," he said. "A partnership with Amazon has exploded Whole Foods' mission."
However, the lower prices have not benefited everyone. Amazon has been likened to Walmart in that the new prices could be too low for smaller businesses to compete. Walmart has gained a negative reputation with respect to damaging small American businesses, and Amazon could potentially be moving in the same direction. The image of both Amazon and Whole Foods appears to be shifting. As Whole Foods was previously seen as a natural foods store with a down-to-earth atmosphere, its connection to Amazon takes away from that significantly. According to Kate Taylor, retail reporter for Business Insider, “It's quite the pivot for the grocery chain that has long refused to sell brands that don't meet its standards for quality. Things like Doritos, Oreos, and Gatorade are nowhere to be seen on Whole Foods' shelves. But, all these things are certainly available on Amazon.”
This week, Amazon also launched its Prime Now service in Canada, which aims to deliver groceries and other products to consumers within a short two-hour period. It is expected to begin in Vancouver and Toronto by the end of 2017 and beginning of 2018, respectively.
Amazon (AMZN) closed at 946.02 on August 28th, up from 945.26 on the 25th.
Sources:
http://www.investopedia.com/news/amazon-launch-prime-now-service-canada/
http://www.businessinsider.com/whole-foods-amazon-like-walmart-2017-8
https://www.cnbc.com/2017/08/28/amazon-officially-owns-whole-foods-here-are-the-products-that-are-getting-marked-down.html
