The US retail sales increased by 1.6% in September mainly due to the damages hurricanes Harvey and Irma caused. The sector that benefited the most from the natural disaster is automobile industry. Many hurricane victims are buying new cars to replace the ones that were damaged during the disaster. Another industry with the increasing demand is energy. Last month gasoline prices went up to $2.50-$2.75 a gallon, which is 14 cents higher than the regular average.
Another sector that had a significant increase with the largest one-month jump in more than two years is restaurants, retail stores and online-shopping platforms with the increase of 1.6% in September. Overall increase in retail sales excluding gas and autos is 0.5%, the largest increase since January. Inflation was o.3% under the FED’s 2% target in September. Despite the increase in the retail sales, low inflation might slow down the FED’s plans of increasing interest rates this year.
Two years ago, Amazon decided to remove price tags from the products within their brick and mortar stores in cities such as New York, Chicago and San Jose. The trick is, in order to find out the price, costumers have to scan the item using their Amazon apps and the prices are lower for those who have Amazon Prime subscription. Moreover, not only the prices are synchronized with the Amazon online store but the costumers are also able to view the book reviews after scanning the item. Most importantly, this strategy enables Amazon to access consumer browsing data and uses it to fill the shelfs according to the costumers needs.
After Amazon acquired Whole Foods in August, the e-commerce giant added a great number of modifications to its organic food subsidiary. Various of those modifications are tailored to encourage Whole Foods costumers to subscribe to Amazon’s Prime membership. Amazon might not necessarily remove tags from the grocery products to make Whole Foods costumers scan the items but they might keep the prices consistent with the website and lower them significantly. However, so far Amazon haven’t announced what their next step is going to be and for now they are selling the products online. In September alone, the sales of Whole Foods products through Amazon website reached $1.6 million.
The Organization of the Petroleum Exporting Countries continues keeping its promise of decreasing oil supply and that stabilized oil prices and brought it to above $501 a barrel from its $30 lows.
In May meeting, OPEC and Russia agreed to extend the process of curbing oil production output to March 2018. After the initial agreement between OPEC, Russia and other 9 non-OPEC countries on reducing the supply glut, oil prices have increased by 13%. Since last year there was a 2% decrease in the supply of oil, which accounts to 1.8 million barrels a day globally.
Many investors are bullish on oil due to the increasing confidence that OPEC and Russia will continue cutting supply. Given that Russia needs the price of $72 a barrel to be profitable this seems like a possible outcome.
For the past year oil prices were fluctuating between $45-$55 a barrel and that number seems to stay in $50-$55 range after the supply cut agreement started showing results. Recently, OPEC Secretary Mohammed Barkindo announced that stockpiles in the Organization for Economic Co-operation and Development were 170 million barrels above their five-year average level in August,” 170 million barrels less than it used to be in the beginning of the year.
Further actions regarding the output levels will be discussed during the OPEC and the Russia-led coalition meeting in November.
After AT&T disclosed its quarterly losses in traditional-TV customers, concerns grew that cord-cutting is putting heavy pressure on television distributers. Shares of AT&T, Dish Network Corp., Comcast Corp., and Chartered Communications all dropped, a sell-off erasing more than $24 billion in market value. In its securities filings, AT&T disclosed a decline of 90,000 customers of its video-subscriber base, a third quarterly drop in a row. More customers are becoming cord-cutters as they swap cable subscriptions for more affordable online substitutes.
Some of the subscriber loss was due to the recent string of hurricanes, but these natural disasters do not account for all of the problems in the video business. AT&T is now looking to expand its entertainment business and is proposing a takeover of Time Warner. This deal would be worth around $85 billion and is currently being reviewed by the Justice Department antitrust officials.
The White House will stop making federal payments to insurers. These payments are subsidies for low income people who purchase health plans through the health law’s exchange. The payments reduce the out-of-pocket costs such as deductibles when people need health-care; this potentially saves them thousands of dollars per year. Under the Affordable Care Act, the federal government is supposed to pay the subsidies, a cost estimated around $7 billion per year.
Trump’s decision deeply affects the insurers, because the insurers pay in advance for people eligible for subsidies and are later reimbursed for their advanced payment. With the change, insurers will continue to pay the out-of-pocket charges without the reimbursements leading to severe financial losses for these companies.
The U.S. International Trade Commission ruled that American solar panel makers are harmed by competition from Asia and the world. The commission will recommend a tariff on specific imports to improve the American solar-energy industry. Experts argue that a tariff would have the opposite effect and hurt the American solar-energy industry.
According to Bloomberg, most solar panels sold in the US are made in Asia. The increase of production in Asia has resulted in a growth of solar panel installations in the US since costs solar panels have decreased. Most of the American jobs in the solar-energy industry are involved in installation and project development, not manufacturing. Suniva and SolarWorld, two of the remaining panel makers in the US, are facing financial troubles. They have appealed to the federal government for tariffs to protect their business from foreign competition. A tariff on foreign imports of solar panels will hurt American business as costs will go up and the number of installation decreases.
Wells Fargo’s woes continue as it struggles in the third quarter compared to rival banks. The bank saw a decrease of total loans by 1% compared to a year earlier while its rivals saw growth between 2% to 3%. Consumer loans were down 3% from a year earlier. The loss of loans and the recent damages from the scandals has resulted in a 19% decrease in net income from the previous year.
Looking forward into the future, the bank may continue to lose money since it has not positioned itself to take advantage of increasing interest rates. For this quarter, the net interest margin decreased 0.03% while its domestic competitors saw an increase. As the Federal Reserve continue to hike interest rates, Wells Fargo may see their margins continue to decrease if they are not able to reposition itself to hold more short term loans.