Member Briefing April 13, 2022
8.5% – CPI in March Rises by the Most Since 1981. Core CPI up 6.5%
The Bureau of Labor Statistics’ (BLS) Consumer Price Index (CPI) rose 8.5% in March compared to the same month last year, according to the latest report released Tuesday. That marked the fastest rise since December 1981. This followed a 7.9% annual increase in February. On a month-over-month basis, prices rose 1.2% in March following a 0.8% monthly rise in February.
Some of the biggest contributors to the latest increase in inflation were food, shelter and gasoline, according to the BLS. In fact, the index tracking gas prices surged to rise 18.3% month-on-month in March, comprising more than half of the total monthly increase in CPI. In February, gasoline had posted a 6.6% monthly increase. But even excluding more volatile food and energy prices, the CPI also posted a marked move higher in March. The so-called core CPI jumped 6.5% in March.
Invasion of Ukraine Headlines
- Ukraine and Russia: What You Need to Know Right Now – Reuters
- Pentagon Monitoring Reports of Possible Russian Chemical Weapons Attack in Mariupol – CNBC
- Putin Says Peace Talks with Ukraine are at Dead End, Goads the West – Reuters
- Ukrainian Defenders Dig in as Russia Boosts Firepower – The Hill
- U.N.: Nearly Two-Thirds of Ukraine’s Children Have Fled Homes – Politico
- Russia’s Economy Set for Biggest Contraction Since 1994, Kudrin Says – Reuters
- Arnold Schwarzenegger’s Anti-War Video Trends on Russian Social Media – BBC
- Russian War Worsens Fertilizer Crunch, Risking Food Supplies – The AP
- Here’s How the Russia-Ukraine War is Driving Up Prices – The Hill
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
A Final Report Card on the States’ Response to COVID-19
More than two years into the Covid-19 pandemic, it’s time to draw some conclusions about government policy and results. In a study published last week as a working paper by the National Bureau of Economic Research (NBER). The authors are University of Chicago economist Casey Mulligan and Stephen Moore and Phil Kerpen of the Committee to Unleash Prosperity. They compare Covid outcomes in the 50 states and District of Columbia based on three variables: the economy, education and mortality. It’s a revealing study that belies much of the conventional medical and media wisdom during the pandemic, especially in its first year when severe lockdowns were described as the best, and the only moral, policy.
The bottom 10 are dominated by states and D.C. that had the most stringent lockdowns and were among the last to reopen schools. Their economies are for the most part still behind most others in recovering from the pandemic. New York, whose former Governor Andrew Cuomo was celebrated as a Covid hero, ranks 49th. Albany’s severe and overlong economic shutdown (48th) had no payoff in mortality (47th).
More on Inflation from Pantheon Macroeconomics
On a month-to-month basis, the March headline was boosted by an 18.3% jump in gasoline prices, triggered by the war in Ukraine, and a 1.0% rise in food prices, in line with the recent trend. In the core, rents – 40% of the index – rose 0.43%, also in line with the recent trend, and contributing 0.17% to the m/m increase. Elsewhere, airline fares and lodging costs rose sharply, up 10.7% and 3.3% respectively, These components together contributed 0.12% to the core. But these gains were more than offset by a 3.8% drop in used vehicle prices, which subtracted 0.16%. New vehicle prices are still rising, up 0.2% in March, but the rate of increase has slowed this year after a long run of 1%-plus monthly gains.
The headline inflation rate jump to 8.5% from 7.9%, and the core rate rose to 6.5% from 6.4%. But these will be the peaks, because a run of favorable base effects from last spring, when used vehicle prices exploded, will exert substantial downward pressure over the next few months. We expect the headline and core rates to drop to xx% and xx% respectively by June, but much depends on the path of vehicle prices and the state of the oil market.
US COVID – Uptick in Cases in the Northeast
Since the middle of March, the US has averaged between 25,000 and 30,000 new daily COVID-19 cases. But some health experts believe the country may be experiencing a new surge of cases, fueled by the Omicron BA.2 subvariant and masked by incomplete data from unreported at-home testing, a lack of testing among milder cases, and reduced access to testing centers.
Numbers of new cases are beginning to rise in the northeast region of the country; of the 10 states with the highest 7-day case rates per 100,000 people, 7 are in the northeast. Average daily COVID-19 case numbers have increased approximately 53% in Rhode Island and 64% in both New Jersey and New York over the last 2 weeks. Other northeastern states experiencing increases in COVID-19 case loads include Connecticut, Maine, and Vermont. COVID-19 levels in wastewater have increased nationwide over the last 3 weeks, with the northeast showing the highest levels, according to Biobot Analytics.
High Profile Cases and Public Pandemic Sentiment
Several recent outbreaks among high-profile politicians and celebrities could represent the tip of the iceberg in understanding ongoing SARS-CoV-2 transmission in the US. Health officials note that politicians and celebrities are tested more frequently than the average individual, and increases in cases among their ranks might signal that more people are becoming infected but experiencing mild or no symptoms.
More than 70 high-profile people tested positive after an event known as the Gridiron Dinner in Washington, DC, including New York City Mayor Eric Adams, US Agriculture Secretary Tom Vilsak, US Attorney General Merrick Garland, US Commerce Secretary Gina Raimondo, several US lawmakers, and many others. Some of those who were infected are reportedly up-to-date on their vaccinations. Meanwhile, less than 10% of the US population feels that COVID-19 represents a serious crisis in the country, 17% say it is not a crisis at all, and 73% feel the pandemic is a manageable problem, according to an Axios-Ipsos poll. Notably, an average of 500 people in the US die daily from COVID-19.
Some More Details on the 2022 New York State Budget
The New York State Legislature approved a FY 2023 State Budget over the weekend. The approximately $220 billion agreement between the Legislature and Governor, boosted by federal funds and a tax surplus, includes several measures to aid small businesses, enhance workforce development initiatives, and expand childcare eligibility.
The budget includes continued funding for the Manufacturers Intermediary Apprenticeship Program (MIAP) to sustain the program and additional monies to expand and enhance the program statewide. It also included small business tax relief – that will expand the small business tax relief subtraction modification under the personal income tax. It also will expand the definition of a small business to include a limited liability company, partnership, or S corporation that is not a farm business and has a New York gross business income less than $1.5 million. fortunately, the final state budget does not include a proposal to ban the use of natural gas in most new construction buildings, though this is still under consideration by the legislature.
NY Lt. Gov. Brian Benjamin Resigns Following Arrest in Campaign Finance Fraud Case
New York Lt. Gov. Brian Benjamin has resigned after he surrendered to authorities to face campaign finance fraud-related charges in connection with a past campaign, Gov. Kathy Hochul announced. “I have accepted Brian Benjamin’s resignation effective immediately. While the legal process plays out, it is clear to both of us that he cannot continue to serve as Lieutenant Governor. New Yorkers deserve absolute confidence in their government, and I will continue working every day to deliver for them,” Hochul said in a statement Tuesday afternoon.
Appointed by Gov. Kathy Hochul (D) last year, Benjamin was planning to run alongside her in their bid for a full term. Hochul served as former Gov. Andrew Cuomo’s lieutenant governor and took office in August 2021 after Cuomo resigned amid sexual assault allegations.
Chaotic Trading in Energy, Metals and Food Spills Into Real World
Wild swings in futures markets are complicating business for the people and companies who actually produce and use natural gas, zinc or soybeans, to name a few. They are driving speculators and others from the markets, an exodus that has led in turn to even choppier trading and higher prices. Russia’s invasion of Ukraine has added to market disruption, especially in energy and grain sectors. Bouts of inclement weather and supply-chain problems have complicated delivery in some markets.
Appalachian coal, soybean oil, oats, canola, rapeseed oil, natural gas in the Netherlands, wheat in Paris and Chicago, gasoline, diesel, propane, palm oil, copper and tin have all notched new highs in 2022. Soybeans, lean hogs, frozen pork bellies and zinc aren’t far off their records. The surge has been propelled by demand from consumers emerging from the pandemic flush with savings and government stimulus and ready to spend.
Fed’s Brainard Says Lowering Inflation Is Central Bank’s Key Mission
“Inflation is too high,” said Fed governor Lael Brainard, who is awaiting Senate confirmation to serve as the Fed’s vice chairwoman. “Getting inflation down is going to be our most important task,” she said, speaking Tuesday at The Wall Street Journal Jobs Summit, as the central bank is raising interest rates as part of its most aggressive effort in decades to curb price pressures.
Fed officials signaled they could raise rates by a half percentage point at their meeting early next month and begin trimming their $9 trillion asset portfolio, according to minutes of the Fed’s March 15-16 meeting released last week. The meeting minutes followed remarks by Ms. Brainard last week that sent bond yields rising amid anticipation of tighter Fed policy this year.
Canada to Invest C$2 billion on Mineral Strategy for EV Battery Supply Chain
Canada’s federal budget will include an investment of at least C$2 billion ($1.6 billion) for a strategy to accelerate the production and processing of critical minerals needed for the electric vehicle (EV) battery supply chain, two senior government sources said. The investment could be spread over more than one year, but the sources declined to comment on the time frame.
“Canada has an abundance of valuable critical mineral deposits, and with the right investments, this sector can create thousands of new good jobs, grow our economy, and make Canada a vital part of the growing global critical minerals industry,” said Adrienne Vaupshas, press secretary for Finance Minister Freeland.
EPA Will Allow More Ethanol in Gas This Summer in Bid to Tame Prices
The Biden administration plans to temporarily allow high-ethanol content gasoline to be sold in the hot summer months in a bid to tame high fuel prices. The decision will allow gasoline with 15% ethanol to be sold between June 1 and Sept. 15. Normally only a 10% ethanol blend can be sold during that time period to reduce smog caused by the 15% blend’s higher volatility.
Allowing fuels with a higher ethanol content will lessen reliance on oil and give drivers more options, senior administration officials said, adding that it could save drivers 10 cents a gallon off current prices. Oil-industry officials have questioned whether such moves would lower prices. Higher ethanol blending can sometimes raise prices on refiners. Corn prices, like oil, have also seen sharp increases this year because of Russia’s invasion of Ukraine.
US airports top ranking of ‘world’s busiest’ hubs in 2021, Total Traffic Still off 2019 Levels
Eight airports in the United States were in the top 10 in the Airports Council International‘s (ACI) preliminary list based on passenger traffic, along with two airports in China. At the top of the list was the Hartsfield-Jackson Atlanta International Airport, which saw roughly 75.7 million passengers last year. It was followed by Dallas/Fort Worth International Airport, which saw nearly 62.5 million passengers in 2021, and Denver International Airport, with about 58.8 million passengers.
According to ACI, the total number of global passengers in 2021 is estimated to have been close to 4.5 billion, which was an increase of almost 25 percent from 2020. Despite the increase recorded last year, however, passenger traffic figures were still down more than 50 percent from 2019 results.
China’s Li Issues Third Growth Warning as COVID Takes Toll
China’s Premier Li Keqiang issued a third warning about economic growth risks in less than a week, suggesting heightened concern about the outlook as widespread Covid lockdowns disrupt production and spending. Authorities should “add a sense of urgency” when implementing existing policies, Li told local authorities at a seminar Monday. China will study and adopt stronger economic policies as needed to support the economy, he said.
The comments come days after similar warnings from Li, highlighting the toll the economy is taking from lockdowns and other virus control measures imposed to curb the latest wave of omicron outbreaks. Nomura Holdings Inc. economists said the risk of recession is rising in China, estimating that about 373 million people in 45 cities are now under full or partial lockdown, making up 40% of China’s gross domestic product.
2022 Machine Tool Orders Near $1B
U.S. manufacturers ordered $479.3 million worth of machine tools during February, an 8.9% rise over January’s order value and a 27.1% increase over the February 2021 figure. Comparing two months of machine-tool new orders, machine shops and other manufacturers’ capital investments are 30.4% higher than the comparable 2021 total. The $919.46 million year-to-date increase in order values compared to January-February 2021 represent the highest total for that period since 1998.
“The industry seems to be carrying the momentum of 2021 into the beginning of 2022, recording the best start to the year in over two decades,” according to Douglas K. Woods, president of AMT – the Assn. for Manufacturing Technology. AMT compiles the monthly U.S. Manufacturing Technology Orders report, from which the new-orders data is sourced.