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Economic Digest

Business Without Borders ®

Economic Digest – April 2018

Sales and profits of Lego fell for the first time in 13 years because of too much stock in warehouses and shops. 75-billion bricks of 3,700 different types are sold annually in over 140 countries and 700-million Lego tires are produced each year. 19,000 employees from over 80 countries are employed by Lego. Revenue for 2017 dropped by 8 per cent to US$5.8-billion.

According to the International Energy Agency (IEA), booming American oil-shale supply will dominate global crude growth over the next few years, but there will be room for increased Canadian exports into the US as producers there target export markets. Over the next five years, the US is expected to add 3.7-million barrels a day bringing the total production to 17-million barrels a day. In its annual outlook for world oil markets, the IEA forecasts that the US, Canada and Norway will account for virtually all global supply growth over the next five years and warns of a long-term supply crunch unless investment increases to satisfy growing demand.

Maersk, the world’s largest container shipping company has announced that it will compete directly with package delivery companies UPS and FedEx. Maersk aims to expand its services to all parts of the supply chain giving customers the ability to deal with one company when shipping goods from one end of the world to another. Maersk has sold off the majority of its energy assets to focus entirely on transport and logistics.

Experts claim that nine in 10 leading car companies in the UK could be putting lives at risk by not fitting automatic safety brakes to new cars as standard, 10 years after the life-saving breakthrough was launched. Autonomous Emergency Braking (AEB) has been hailed as the most important development in car safety since the seat belt. It automatically applies the brake to prevent a crash when a driver fails to react in time. If the AEB was fitted as standard to all new models sold in the UK, it would prevent 1,100 road deaths and 122,860 casualties over the next decade. The system is available as an option but manufacturers say that buyers often choose to spend any surplus cash on optional extras such as upgraded entertainment systems, fancy alloy wheels or leather upholstery instead.

Total operating revenue for the Canadian spectator sports, event promoters, artists and related industries grew 4.5 per cent to C$9.1-billion in 2016, while operating expenses increased 3.5 per cent to $8-billion. This resulted in an operating profit margin of 11.3 per cent. For the first time since 2012 spectator sports accounted for the largest share of total operating revenue (36.4 per cent). The spectator sports industry group is composed of sports teams playing for a paying audience, horse racing tracks, racing events and independent athletes.

2018 is already shaping up to be a year when both Procter & Gamble and Unilever, two of the biggest consumer products groups (CPG) brands in the world are demanding more out of their digital advertising by putting pressure on platforms and asking agencies to clean up their act. P&G’s efforts to weed out ineffective advertising has resulted in cuts of US$200-million of 2017 spending on digital advertising. The cuts are being reinvested in television, audio and ecommerce.

One department of the US administration thinks climate change is a hoax while another sees it as a threat to national security. A report published in January by the Department of Defence (DOD) found that more than half of the 3,500 sites surveyed are already reporting climate-related problems. Droughts are leading to water shortages, heat waves are causing some live-fire exercises to be cancelled and shifting wind patterns are disrupting aircraft sorties. Also, sea levels are rising twice as fast as 25 years ago. Twenty years from now, a new US$1-billion radar installed on the Marshall Islands and Diego Garcia an Indian Ocean staging post may both be submerged.

All citrus fruits can trace their roots to the southeast foothills of the Himalayas, according to DNA evidence. The first citrus trees appeared about eight million years ago before spreading around the world. The trees eventually gave rise to the fruit on our tables from sweet oranges to bitter lemons. The analysis shows that today’s citrus fruits are the result of millions of years of evolution, followed by thousands of years of human plant breeding. The fossil record of citrus fruits is poor, however, a fossil citrus leaf found in south-western China dating to about eight million years ago supports the data from genetic studies.

It seems that driverless cars may in fact be the latest cause of tension for motorists, after it emerged that two out of six crashes with self-driving cars in California involved humans attacking them. One was attacked by an angry taxi driver. Currently, self driving cars can be tested on public roads in California as long as someone is behind the steering wheel and can take control if necessary. Of the six accidents reported so far, three were in self-driving mode and three were being manually controlled by humans.

China is distributing 300,000 television sets to some of its poorest regions as Beijing seeks to spread its propaganda into some of the country’s hardest to reach households. It is part of a plan to tackle poverty in China but also as one of a series of drives to push the ruling Communist Party’s message deeper into Chinese society. Local governments are also taking on the challenge and have mobilised whatever transportation tools are at hand, cars, tractors, motorbikes and even horses to deliver the televisions to households for installation.

Global defence spending as a share of GDP was just under two per cent last year. The US remains the biggest spender with China a distant second. Saudi Arabia still outspends them as a proportion on GDP, a staggering 11 per cent. The biggest increase in spending was in Europe: it rose by 3.6 per cent in part thanks to US pressure to meet NATO spending targets.

In 1858 the first trans-Atlantic cable was laid and was hailed as one of the great technological achievements of its time and celebrated with fireworks and 100-gun salutes. Within weeks the cable had failed. Recently another cable was welcomed with much less fuss. The 6,600km bundle of eight fibre-optic threads, roughly the size of a garden hose, is the highest capacity connection across the ocean. Stretching from Virginia Beach, Virginia to Bilbao, Spain, it is capable of transferring 160 terabits of data every second, the equivalent of more than 5,000 high-resolution movies. It is jointly owned by Facebook and Microsoft. It is estimated that 100,000km of submarine cable was laid in 2016, up from just 16,000km in 2015.

Saudi Arabia says it will invest US$64-billion in developing its entertainment industry over the next decade. Construction of the country’s first opera house has also begun in Riyadh. The investment is part of a social and economic reform programme known as Vision 2030 unveiled two years ago. The 32 year old Crown Prince wants to diversify the economy and reduce the kingdom’s reliance on oil. It follows a range of other firsts for the conservative Gulf kingdom, including allowing women spectators to attend football matches and announcing that as of June women will be permitted to drive.

A British company has been enlisted by the government to help stop drones being used to smuggle phones, drugs and weapons into prisons. Contracts have been issued for companies to test out ways to stop unmanned aerial vehicles flying above prison grounds and near cell windows. So widespread is the abuse of drones in prisons that the government put aside $9.5-million for someone to come up with a solution. Another company is testing “shield” technology that jam’s a drone’s computer. Last year, ten men were sentenced for 45 “flyovers” in which they delivered $1.4-million worth of goods to several prisons.

While there are a flood of reports about gender inequalities, one gap is gradually narrowing: that in wealth. As money managers seek to attract and serve rich women, and as those women express their values through their portfolios, the impact will be felt within the investment industry and beyond. Between 2010 and 2015 private wealth held by women grew from US$34-trillion to $51-trillion. Women’s wealth also rose as a share of all private wealth. By 2020 they are expected to hold $72-trillion, 32 per cent of the total. In 2000, Forbes list of the world’s 100 richest individuals featured just four women. Today, ten women make the top 100.

The International Seabed Authority, an intergovernmental body, is drafting proposals on how countries can carve up the seabed to exploit mineral resources. Relatively new extractive industries such as deep-sea mining and open-ocean fish farming, once prohibitively expensive, are becoming viable. Seafloor deposits of gold alone are estimated to be worth US$150-trillion. Aquaculture production has grown from being just a sliver of that of wild fisheries in the 1980s to overtaking their output in 2014.

Due to an energy dispute between Kosovo and Serbia which has affected Europe’s power grid, clocks have been running late. Entsoe, the body representing electricity transmission operators across 25 European countries, said bedside clocks had slowed by up to six minutes since mid-January. Central heating timers and oven clocks have also been affected. but not computers or smart phones. The UK and some Nordic countries have not been affected.

A new University of Victoria study suggests that the tiny fruit of a wild shrub that grows abundantly in B.C. is a contender for the healthiest berry on the planet. Research found that the berries of the salal plant beat blueberries hands down for two key compounds associated with health benefits. The fruit has high levels of antioxidants and tannins and are a traditional food of indigenous peoples on the West Coast. Salal berries have levels five times higher than that of blueberries which are considered one of the prime healthful berries.

A Japanese company has announced plans for the world’s tallest wooden building, an 1148-foot skyscraper in central Tokyo that will dwarf all previous wooden buildings. The tower will require more than 6.5-million cubic feet of wood and it is estimated that it will cost US$5.7-billion. The completed tower will house shops, offices, a hotel and residential units. Stringent Japanese regulations have previously made it difficult for designers to use wood in residential or commercial properties.

With its iconic red label and secret recipe, it has been one of the world’s most famous soft drinks for more than a century. Now, however, Coca-Cola is on the brink of a new chapter with plans to launch its first alcoholic drink. The company is currently experimenting with the creation of a popular type of Japanese alcopop known as Chu-Hi, containing distilled shochu alcohol mixed with flavoured carbonated water. This coincides with a shrinking global demand for soft fizzy drinks, due to health concerns relating to sugar consumption.

Millennials have been accused of disrupting many industries, from newspapers to brick-and-mortar stores. Credit cards appear to be next in line. Just one in three millennials carries plastic according to a new study. In addition, the study found the 18 to 24 demographic preferred to pay cash more than others. And if they do carry a card, it tends to be of the prepaid or debit variety.

Twelve prized camels have been disqualified from a beauty contest in Saudi Arabia after the owners tries to tweak their good looks with Botox. Judges are looking for perfectly placed humps, muscular physiques and leathery mouths.

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