This Week in Business: The Latest Amazon Acquisition
what’s up? (July 17-23)
Amazon’s Leap in Healthcare
It’s theoretically possible to spend a day sponsoring only Amazon-owned businesses: You can buy groceries at Whole Foods, listen to a book about Audible on your commute, check your Goodreads account, and then of course visit Amazon.com. Now, the e-commerce giant is making a new push 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 Gacy, who became CEO a year ago after Jeff Bezos stepped down. Mr. Gacy’s approach to this role was much different from that of his predecessor, but based on this decision, he did not stray too far from Mr. Bezos. One Medical isn’t the first healthcare-related company that Amazon has purchased. In 2018, it acquired PillPack, an online pharmacy.
Significant increase in prices in Europe
To the surprise of many, the European Central Bank raised all three interest rates by half a percentage point, not a quarter point as initially expected, in a crucial move to control rapid inflation. Bank officials said they intend to “front-load” its price increases, focusing on the deteriorating economic outlook and a escalating energy crisis sparked by fears of a natural gas cut to Russia in response to Western sanctions. The European Central Bank has been slower to raise interest rates than some other central banks because the factors driving inflation in Europe, such as obstacles in the global supply chain and rising energy prices due to the war in Ukraine, are largely outside the control of policymakers. These problems have also contributed to the weakening of the euro, making inflation worse. Some observers say officials are still moving too slowly, while others fear the central bank will become too aggressive, causing the European economy to stagnate.
It could have been worse
It’s been another bleak quarter for Netflix, but the streaming giant is reassuring its shareholders: The numbers weren’t as bad as they could have been. The company lost about 1 million subscribers from April through June, far less than the 2 million it had forecast in its April first-quarter earnings report. “Less bad outcomes,” in the words of Reed Hastings, Netflix co-CEO. Revenue grew 9 per cent, to $7.9 billion, but Mr Hastings said it was “hard to lose a million subscribers” and called it a success. Netflix says it believes it can add these subscribers again in the current quarter, and remains optimistic about the future of streaming and the company’s new business strategy, which includes rolling out a low-cost ad category in 2023.
What’s Next? (24-30 July)
Tech giants report card
The biggest tech companies — Meta, Apple, Amazon, Alphabet and Microsoft — are due to report second-quarter results this week. Financial reports from Snap and Twitter last weekend did not predict anything good for the group, with slower sales growth and quarterly losses scaring investors. This earnings season is especially important as the economy slows and investors look for signs of the impending downturn in corporate earnings reports. These reports can be particularly dismal for the tech sector, especially for companies that rely on online advertising. It’s been a really tough year for technology, with the Nasdaq still languishing in a bear market.
The Fed’s next step
The Federal Reserve suggested two possibilities for the July meeting: a significant increase in rates or an even larger increase. Officials were talking about a three-quarter point increase while also saying they could take a bigger step if some indicators point to a still-hot economy. Signs have been mixed in recent weeks. A key gauge of long-term inflation expectations was moderate – a good signal for the Fed – but retail sales came in surprisingly strong – a bad signal for the Fed. Then, Friday’s data showed business activity in the United States slowing. The mixed results make it unclear which path policy makers will take, although some central bankers have been wary of raising rates by more than three-quarters of a point because last month’s 0.75 point increase was already the largest in nearly three decades.
An economy is shrinking?
Conventional wisdom says that two consecutive quarters of negative growth in the US economy means we are in a recession. This may be the result of this week’s data on GDP in the second quarter. The economy contracted 0.4 percent in the first quarter, or 1.4 percent year on year — the weakest quarter since the start of the pandemic. Growth slowed due to a ballooning trade deficit and slowing inventory growth. But consumer spending remained strong in the last quarter, as did business investment, indicating a strong economy. Despite the somewhat contradictory signals, if GDP falls again, some could still declare a recession. But most economists contend that the United States has not yet met the criteria, and semi-formal economics arbitrators — officials on the National Bureau of Economic Research’s Business Cycle Dating Committee — typically wait months for their final call.
Meta has revamped the Facebook app to work like TikTok. YouTube said it would start regulating abortion content more stringently. Rivian, the fledgling electric vehicle maker, is trying to meet Amazon’s demand for 100,000 electric trucks by 2025.