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Economic Digest

Business Without Borders ®

Economic Digest – July 2017

America’s retail industry is huge, employing 15.9-million workers, representing one in nine jobs. However, it is undergoing wrenching change as e-commerce eats into sales. There is no more pressing test of society’s ability to cope with technology’s impact on work. For all the benefits that online retailing brings to consumers, it is causing immense pain to offline rivals. Last year 4,000 American stores closed, this year more than twice that number may close. Some formats, discount stores, groceries and high-end malls, continue to thrive but many will shrink. The industry has shed 50,000 net jobs since January and department stores may need to close more than 800 stores to reach productivity levels of 2006.

In 2015, operating revenues for the telecommunications industry in Canada increased 2.5 per cent over the previous year to C$60.3-billion. Operating expenses increased 0.9 per cent to $47 billion giving the industry a 22 per cent operating profit margin. Mobile services, including paging, continues to be the largest component, accounting for 39.6 per cent ($23.9-billion). Internet services were the second largest component, representing 15.5 per cent (9.6-billion).

Traffic lights fitted with artificial intelligence (AI) may spell the end of rush hour backups in British cities. Milton Keynes has become the first city to announce plans to install “smart” traffic lights that can detect where there is a heavy concentration of vehicles and alter their pattern to ease congestion. At the moment, traffic lights run in sequence but are not designed to react to the vehicles passing through them. Now, 2,500 AI-powered cameras will be installed into the lights in a 50-square mile area and will have an eye on all major junctions and car parking spaces. They will help traffic lights prioritise ambulances, buses and cyclists and ease the flow of traffic to prevent bottlenecks.

The price of cocoa has plummeted by 36 per cent since the start of 2016, to just under US$2 per kilogram. Oversupply is partly to blame: farmers in the Ivory Coast, which accounts for around 40 per cent of world supply, are forecast to increase production by 20 per cent in the current crop year. In Nigeria production is likely to increase by 15 per cent. A spike last January can partly be explained by a drought in East Africa but rising demand from countries in the Middle East should continue to support the market this year. Coffee prices have risen modestly since the start of 2016, shored up by declining levels of production in Brazil and Vietnam.

Hard to believe but the Nike self-lacing trainer, of which only 89 pairs were made, is now worth US$32,275 to collectors. Since the late 1980s, Nike and other trainer manufacturers have carefully nurtured a niche market with special edition trainers made in hundred-pair collections. The brands strike a balance between generating instant revenue and restricting supply which created demand. As a secondary trade thrives online, it is estimated that in the US, this specialty trainer industry is worth U$1.5-billion a year.

Following two consecutive years of increases, total spending on science and technology activities by federal government departments and agencies is expected to decrease 1.2 per cent to C$11.3-billion in 2017/2018, largely attributable to a decline in activity related to Statistics Canada’s Census programme. Science and technology activities encompass two types of scientific activities: research and development and related scientific activities. Overall, natural sciences and engineering expenditures account for over three-quarters on total expenditures on science and technology.

At a recent auction in the US, an American cent from 1793 sold for US$940,000, becoming the costliest penny ever. Returns on rare coins over ten years to the end of 2016 were 195 per cent, easily beating art (139 per cent), stamps (133 per cent) and furniture (-31 per cent). Coins are more portable than paintings and boast a higher value-to-volume ratio. Stamps may be lighter but cannot be melted down if necessary.

The world’s tallest mostly wood building is poised to be built in downtown Vancouver. When complete, the wood, glass and concrete building will stand nineteen floors and 71-metres tall. The present record holder is on the campus of UBC and stands 18 storeys and 53-metres tall. Architects are working on a 73-metre tower in Amsterdam and a 304-metre tower skyscraper in London, all in wood. Recently, with concerns about the environment and sustainability and wanting to use natural materials, architects and developers are returning to the use of wood,

China has for the first time extracted gas from an ice-like substance under the South China Sea considered key to future global energy supply. Methane hydrates, also called “flammable ice” hold vast reserves of natural gas. Many countries including the US and Japan are working on how to tap those reserves but mining and extracting are extremely difficult. Methane hydrates were discovered in Russia’s north in the 1960s, but research into how to extract gas from them from marine sediment only began in the last 10-15 years. One cubic metre of the compound releases about 160 cubic metres of gas, making it a high energy-intensive fuel.

Having concluded that the chaos on their streets is the result of a shortage of parking spaces, many cities have set about creating more. Countries, including Australia, China, India and the Philippines, require developers to create parking spaces whenever they put up a new building. In the US, these schedules have become ludicrously exact. St. Paul, in Minnesota, requires four spaces for every hole on a golf course and one space for every three nuns in a convent. It is because of these requirements that, in many office developments and shopping centres, more spaces are given over to cars than to people. Parking now adds 67 per cent to the cost of building a shopping centre in Los Angeles.

Over the past three decades the area of sea ice in the Arctic has fallen by more than half and its volume has dropped by three –quarters. It is now estimated that the Arctic will be free of ice in the summer by 2040. Scientists had previously suggested that this would not occur until 2070. In theory shipping firms should benefit from access to a more open seaway. Using it to sail from northern Europe to north-east Asia can cut the length of voyages by two-fifths compared with travelling via the Suez Canal, but even in the summer months the Arctic Ocean is stormy making timely delivery of goods impossible to guarantee. Also, ships must be strengthened to withstand drifting ice, adding to construction costs.

US scientists have re-engineered a vital antibiotic in a bid to wipe out one of the world’s most threatening superbugs. Their new version of vancomycin is designed to be ultra-tough and appears to be a thousand times more potent than the old drug. It fights bacteria in three different ways making it much less likely that the bugs can dodge an attack. However, it has yet to be tested on animals and humans. Experts have repeatedly warned that we are on the cusp of a post-antibiotic era where some infections could become untreatable.

Brazil is the world’s biggest producer of both oranges and orange juice, but changing breakfast tastes, especially in Europe, means the country’s reliance on the fruit may have to change. Three years ago, Brazil produced 400-million boxes of oranges. In the latest harvest for 2016-17, that number had fallen to just 242-million boxes. 15 years ago, Brazil had about 20,000 orange producers. That number has now dropped to just 6,000. Half of all orange juice drunk worldwide is from Brazil.

After displacing US workers, robots are poised to do the same thing in Asia too. The fact that robots can be reprogrammed far faster and easier than humans can be retrained is disrupting labour markets worldwide. Between 2010 and 2015, the average annual growth of Canada’s robot orders was 35 per cent. By 2019, it is estimated that there will be 2.6-million industrial robots in use worldwide.

South Africa is about to harvest the highest maize crop in 40 years, a year after a drought caused by El Nino devastated output of the country’s staple food. Farmers are set to produce over 15-million tonnes which means the country will have a 50 per cent surplus for the year. The bumper harvest is the result of good rains earlier in the year and the extra produce is expected to help push food prices down in a country where food security is a major concern for many.

Canada has overtaken the US as the top North American supplier of pork to China as farmers and meat packers in both countries battle for lucrative shares of the biggest global market. According to government data, Canada has only exceeded the US a few times in the past two decades. Rising affluence is driving China’s voracious appetite for pork, including parts of the pig, feet, elbows, innards which command little value in most countries. Canadian farmers have almost completely removed the growth drug ractopamine from their pigs’ diet, largely because it is banned in China

A new industry report says that people are drinking fewer alcoholic drinks. The global market for all alcoholic drinks contracted by 1.3 per cent in 2016. Cider sales which had been growing for several years were down 1.5 per cent. Beer sales in China fell 4.2 per cent, were down 5.3 per cent in Brazil and 7.8 per cent in Russia. The fall was largely blamed on economic weakness in some emerging markets and increased regulation. However, gin sales were up by 3.7 per cent, largely led by European sales. After five years of decline, mixed drinks swung back into fashion

Road traffic accidents are the biggest killer of teens globally. In 2015, more than 1.2-million adolescents died and road injuries were to blame for one in ten of those deaths. Most of the road fatalities involved males between the ages of 10 and 19. However, chest infections and self-harm were the biggest global killers of girls and young women. Globally, adolescent deaths as a whole have been reducing but some fatalities like self-harm are increasing in many regions.

Kenya has now opened, 18 months early, the Nairobi to Mombasa Madaraka Express railway. The US$3.2-billion Chinese funded line is the country’s biggest infrastructure project since independence. The journey from Mombasa to Nairobi by train will now take four-and-a-half hours, compared to nine hours by bus or 12 hours on the previous railway. The line is supposed eventually to connect South Sudan, Democratic Republic of Congo and Burundi with Mombasa. The cost of the project has been criticised by opposition parties who say it is too expensive and the economic returns exaggerated.

One-third of seniors in the US say they never use the internet according to a recent Pew Research survey. The over-65 demographic make up 15 per cent of the US population, about 46-million people. Roughly half the seniors do not have broadband internet at home compared with 81 per cent of adults aged 31-49 and 75 per cent of 50-64 demographic. Income plays an important part: 87 per cent of seniors who earn US$75,000 a year have broadband while just 27 per cent of those earning below $30,000 do. Some 42 per cent of seniors say they own a smartphone, compared to 18 per cent in 2013.

Rome’s rubbish is helping to power Austrian homes, and it gets to Austria by train. The Italians are paying an Austrian company to dispose of up to 70,000 tonnes of Roman household rubbish this year. The waste is transported through northern Italy, over the Alps and ends up at a thermal utilization plant on the Danube. Up to three trains are sent each week, each carrying airtight containers loaded with about 700 tonnes of rubbish. The refuse is incinerated and converted into hot flue gas which generates steam which is converted into electricity and used to power 170,000 homes in Lower Austria.

An overdue library book borrowed in Dudley, England has been returned eight years later and 4,000 miles away in Kentucky, USA. Librarians on both sides of the Atlantic are baffled by the book’s journey.

NOTE: All details pertaining to CARM R2 processes are based on the current information available at the time of writing. As this is subject to change, it’s recommended you periodically check in with the CBSA or your customs broker.