United States consumers aren’t confident in the economy but small businesses are. McDonald’s is switching to cage-free eggs over the next decade. A new report from the Federal Reserve suggests 2015 has been the year of central banks taking their money out of the Fed’s vaults. China has been dumping U.S. Treasurys to raise money for their slumping economy. And taxicabs in Toronto, Canada want to compete against Uber.
These are the five headlines that dominated the world of business last week.
1. Consumers Not Confident, Small Businesses Are
US consumers aren’t too optimistic about the overall economy for the month of September, says a new report from the University of Michigan. According to the poll, consumer sentiment reached 85.7 in September, down from the previous month’s 91.9. It also missed a Thomas Reuters’s poll of analysts which was 91.2.
Consumers were 4.6 percent less confident regarding economic conditions in September for a rating of 100.3. Meanwhile, expectations tumbled 8.4 percent for September for a reading of 76.4. This is the lowest it’s been since October of last year.
The drop in confidence and sentiment is likely due to the immense volatility in the global stock market, among other weak economic data coming from the US and other parts of the world. It’s an important barometer because it measures American consumers’ overall sentiment, future expectations and beliefs of the current economy.
"Consumers still anticipate a weaker domestic economy due to the global slowdown and are less optimistic about future growth in jobs and wages than they were a few months ago," Richard Curtin, surveys of consumers economist, said in a statement.
Just how do American small businesses feel? Well, if a new survey is to be taken seriously, then their viewpoint is a lot better than their customers.
New research from the National Federation of Independent Business (NFIB) suggests that small business confidence jumped in August. This may mean that the economy could experience steady gains in the third quarter.
The Small Business Optimism Index received a half-point gain reaching 95.9. The organization noted that the survey of 656 small businesses wasn’t affected by the recent plunge in global financial markets. However, the poll was taken prior to the Chinese market crisis.
2. McDonald's Going Cage-Free by 2025
American and Canadian customers could be eating better eggs over the next several years.
McDonald’s announced that it would be switching over to cage-free chickens for its famous Egg McMuffins. This is part of a growing transformation of the iconic but fledgling brand, which has been trying to reinvent itself as a "modern, progressive burger company."
Marion Gross, senior vice-president of the North American supply chain at McDonald’s, confirmed that it would be working closely with its current crop of egg suppliers to change current housing systems for hens.
McDonald’s will join a large number of other food companies adopting cage-free eggs, like Starbucks, Chipotle, and Subway. Indeed, improving animal welfare standards has become a crucial part of these companies’ marketing efforts.
The Canadian Federation of Humane Societies (CFHS), which has been working with the National Farm Animal Care Council to rejuvenate animal welfare guidelines, lauded McDonald’s for this initiative.
"While this change only applies to the restaurant’s North American supply chain, it will have a profound impact on the quality of life of thousands of laying hens in the United States and Canada," the CFHS said in a statement.
The company has done a lot more, too, in the past several months. The Oak Brook, Illinois-based firm announced it would be using fewer antibiotics in its meals, while also raising the pay of its workers at about 10 percent of its U.S. locations. It has been quickly adopting technological advancements by automating a lot of its practices.
This move comes as McDonald’s plans to offer select breakfast menu items all day in the US beginning October 6. So this means the company will be increasing its egg buying habits over a longer period of time.
3. Central Banks to Fed: Give Me Back My Gold
Germany’s Deutsche Bundesbank made headlines last year when it wanted to repatriate much of its gold holdings from the Federal Reserve. Austria also made headlines when it demanded the same thing. Even the state of Texas has lost trust in the US central bank as it wanted some of its yellow metal back.
This isn’t isolated to just a handful of central banks or countries/states. According to a new report from the Federal Reserve, foreign gold holdings at the Fed’s vaults have dropped every single month in 2015 (except in June).
As of August, the Fed’s physical gold holdings from foreign central banks tumbled 9.6 tons to a total of 5,960 tons. When translated into currency, total foreign physical gold holdings is about $8 billion, down $67 million since January.
Over the past 12 months, foreign central banks have repatriated 192 tons of gold. When looking back even further to January 2014, the number is even greater at 246 tons.
Analysts say that central banks want to bring an essential reserve asset back home in the event of a financial crisis amid the potential chaos stemming from the currency wars. Moreover, financial experts suggest there is a growing distrust of the Fed, and the exodus could prove as an indication that the US central bank may not hold as much precious metals as says it does.
4. China Doesn't Want US Treasurys Anymore
China and Japan are the two largest holders of US debt – they oftentimes trade places between No. 1 and No. 2 Treasury holders. Due to the growing uncertainty, financial crisis and bursting of its stock market bubble, China has decided to sell billions of dollars’ worth of Treasurys in order to raise cash to help contain the weak economy.
Data from the People’s Bank of China (PBOC) show that China sold a record $94.6 billion, or just under three percent, of its holdings. China now owns a little bit more than $1.3 trillion.
Essentially, China is in need of cash. It recently introduced a number of measures to keep the stock market from further crashing, while slashing interest rates multiple times. All of this is to just keep the market from continuing its immense bleeding.
At the same time, this places America’s borrowing costs into the spotlight. Of course, China buying US debt has allowed the country to remain the trends of spending more than it takes in and not making any serious cutbacks.
"Capital outflows have skyrocketed in China and the yuan is under intense selling pressure,” said Walter Zimmerman, chief technical analyst at United-ICAP, in an interview with CNN. “The only thing they could do is sell Treasuries to buy their own currency."
We could already be seeing hints of trouble with US debt. When markets tumble, investors usually flee to safety in the form of US Treasurys, which means yields fall. However, Treasury yields actually inched higher – part of this is also due to the potential Federal Reserve rate hike.
The yield on the 10-year Treasury currently stands at 2.2 percent, which is relatively unchanged from a month ago. And with record-low rates, appetite for US debt is big, but for how long?
5. Taxis Trying to Compete Against Uber in the Big Smoke
Are taxicab firms finally starting to take the hint that ride-sharing app Uber is here to stay? It’s possible after Beck Taxi recently submitted a petition to Toronto City Hall urging officials to lower fares and drop the cost of licensing fees.
Although Beck Taxi hasn’t said exactly what the fare rates should be, company representatives say they should be able to cover the numerous costs that go behind owning and operating a taxi ($316 taxi license, $303 renewal fee, and the hefty costs of a police background check).
At the present time, Toronto taxi passengers are charged $4.25 immediately upon entry of the cab. After this, they are required to pay 25 cents for each 0.143 km in addition to 25 cents for every 29 seconds of standing while the car is engaged.
Beck Taxi isn’t the only Toronto-based cab company looking to spice things up.
During this past summer, Co-op Cabs urged the city to lower fares by 20 percent, but also ensuring that each driver has commercial insurance and regular car inspections.
Soon after Beck issued this petition, city staff announced that Uber, and services like it, would fall under the purview of a brand new licensing category and regulatory body. City staff proposed that the fare passengers pay upon entry be lowered from $4.25 to $3.25, which would help taxis compete.
The industry still isn’t pleased, however.
“This will kill us. This report is absolutely the death of the taxi industry,” said Sam Moini of the Toronto Taxi Alliance.
American consumers are not too confident about the economy, but small business sentiment is on the rise. McDonald’s cares about the welfare of animals so it’s going cage-free in the years to come. The Fed shows that central banks are quickly taking their gold back and following the suit of Germany, Austria, and even the state of Texas. China is looking to raise money so it’s selling US Treasurys. Toronto taxicabs want permission from city hall to compete against Uber.