This Week in Business: Amazon’s Latest Acquisition
What’s new? (July 17-23)
Amazon’s leap into healthcare
It’s theoretically possible to spend a day patronizing only Amazon-owned businesses: you could buy groceries at Whole Foods, listen to a book on Audible on your commute, check your Goodreads account, then, of course, visit Amazon .com. Now the e-commerce giant is making another breakthrough in healthcare. Amazon announced Thursday that it has reached a $3.9 billion deal to buy One Medical, a network of primary care clinics, as part of its quest to become a major player in the industry. The deal is the first acquisition under Andy Jassy, who became chief executive a year ago after the resignation of Jeff Bezos. Mr. Jassy’s approach to the role was very different from that of his predecessor, but on this decision he didn’t diverge too much from Mr. Bezos. One Medical isn’t the first healthcare-related company Amazon has purchased. In 2018, it acquired PillPack, an online pharmacy.
A sharp rise in prices in Europe
Surprising to many, the European Central Bank raised its three interest rates by half a percentage point, rather than the originally planned quarter point, in a decisive move to rein in rapid inflation. Bank officials said they intended to “preload” its rate increases, taking into account the deteriorating economic outlook and an escalating energy crisis spurred by fears of natural gas cuts. of Russia in response to Western sanctions. The ECB has been slower to raise rates than some other central banks as inflation-boosting factors in Europe, such as problems in the global supply chain and rising energy prices due to the war in Ukraine, are largely beyond the control of decision-makers. These problems have also contributed to the weakening of the euro, worsening inflation. Some observers say officials are still moving too slowly, while others fear the central bank is getting too aggressive, causing Europe’s economy to stagnate.
It could have been worse
It was another dismal quarter for Netflix, but the streaming giant is reassuring its shareholders that the numbers weren’t as bad as they could have been. The company lost about one million subscribers from April to June, far fewer than the two million it forecast in its first-quarter earnings report in April. “Less bad results”, in the words of Reed Hastings, co-CEO of Netflix. Revenue rose 9% to $7.9 billion, but Mr Hastings said it was “hard to lose a million subscribers and call it a success”. Netflix says it expects to be able to add those subscribers back in the current quarter, remaining optimistic about the future of streaming and the company’s new business strategy of rolling out lower-cost advertising in 2023.
And after? (July 24-30)
Tech Giants Bulletin
The biggest tech companies — Meta, Apple, Amazon, Alphabet and Microsoft — are expected to report their second-quarter results this week. Financial reports from Snap and Twitter late last week did not bode well for the group, with slower sales growth and quarterly losses spooking investors. This earnings season is particularly interesting as the economy slows and investors look for signs of the nature of an impending downturn in corporate earnings reports. These reports could be particularly dismal for the tech sector, especially for companies that rely on online advertising. It’s already been a tough year for tech, with the Nasdaq index still languishing in a bear market.
The Fed’s Next Step
The Federal Reserve had suggested two possibilities for its July meeting: a big rate hike or an even bigger one. Officials were talking about a three-quarter point increase while saying they could make a bigger move if some indicators pointed to a still-warm economy. The signals have been mixed in recent weeks. A key measure of longer-term inflation expectations moderated – a good sign for the Fed – but retail sales were surprisingly strong – a bad sign for the Fed. Then Friday’s data showed a slowdown in business activity in the United States. The mixed results make it less clear which path policymakers will take, although some central bankers have been reluctant to hike rates more than three-quarters of a point because last month’s 0.75 point hike was already the biggest ever. for nearly three decades.
A shrinking economy?
Conventional wisdom says that two consecutive quarters of negative growth in the US economy means we are in a recession. And that could be the result of this week’s data on gross domestic product in the second quarter. The economy contracted 0.4% in the first quarter, or 1.4% on an annualized basis – the weakest quarter since the start of the pandemic. Growth was held back by a swelling trade deficit and slower inventory growth. But consumer spending remained strong in the last quarter, as did business investment, which bodes well for a strong economy. Despite the somewhat conflicting signals, if GDP retreats again, some could still declare a recession. But most economists argue that the United States has not yet met the criteria, and the semi-official arbiters of the economy – officials from the National Bureau of Economic Research’s Business Cycle Dating Committee – usually wait months to make their last call.
Meta revamped the Facebook app to act more like TikTok. YouTube said it would begin to regulate abortion content more strictly. Rivian, a young electric vehicle maker, is trying to meet Amazon’s demand for 100,000 electric vans by 2025.