Question

select 6-10 economic indicator that are of particular relevance to Amazon and explain why.

Outline strategy for how Amazon should respond to the information provided by the indicators with the goal of maximizing revenues in the years ahead

Answer 1

Top indicators which affect Amazon are :

• Inflation
• Real GDP
• Exchange rate
• Unemployment
• Gross national income
• Consumption rate growth

Current macroeconomic situation in US:

Spike in inflation last year was accustomed due to higher energy prices of crude oil and higher demand and spending which crossed inflation in CPi terms to 2.3percent.
The unemployment in 2019 has remained at 3.93 percent to 3.78 percent range and has decreased gradually due to higher capital expenditure by corporates after drastically cut downs of taxes which caused headroom inflation to spike and shoot.
As of 2019 end, the Fed funds rate remains at 1.7 percent and 10 year treasury yields at 1.8 percent and 30 year treasury yields at 2.07 percent. The chnages are exacerbated by anticipation of recession such that returns are higher in near term as risk is higher amd the economy looks to revive post 10 years which has caused yields to dip for 10 year and 30 years.
The yield curve has inverted which is strong indicator of recession as probability in near term as 5 year treasury yields are higher than 10 year and 30 years and hence long term view is stable but short term indicates slowdown.
Federal funds rate remains constant in anticipation of prevention of further inflation and st same time balancing counter effects of trade war so rise in funds rate can bring slowdown sooner however cut in rates can boost inflation levels and hence Fed maintain neutral stance.
Current primary concern of The US Fed is to monitor inflation as unemployment has been projected at 3.5 per cent however the negative implications of US china trade war and global uncertainty makes the Fed dovish but spiking inflation causes it to be hawkish amd thus is in tradeoff situation.

Strategy formulation

1. Amazon must take advantage of low unemployment and low inflation in short run by low wages for higher unemployment to maximise productivity and raise revenues
2. Exchange rate appreciation will help Amazon lower import bill
3. Higher forecast for real GDP means Amazon must adopt low cost pricing so consumption widens and make use of higher gross national income
4. Must adopt higher distribution spends and marketing spends to cater to festivals seasons.

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