Member Briefing April 14, 2022

April 14, 2022

Posted By: Harold King in Daily Briefing,

11.2% – Producer Prices Index Rise in March is Highest on Record, Core was 7.0%

The producer price index, which measures the prices paid by wholesalers, increased 11.2% from a year ago, the most in a data series going back to November 2010. On a monthly basis, the gauge increased 1.4%, above the 1.1% Dow Jones estimate and also a new record. PPI is considered a forward-looking inflation measure as it tracks prices in the pipeline for goods and services that eventually reach consumers.

Stripping out food, energy and trade services, so-called core PPI rose 0.9% on a monthly basis, nearly double the 0.5% estimate and the biggest monthly gain since January 2021. Core PPI increased 7% on a year-over-year basis. In the details, car prices rose only 0.3% in March, but light truck prices jumped 0.9%; supply constraints continue to bite. The PPI recorded a 6.9% leap in airline fares, less than the 10.7% surge in the CPI version; they are measured differently but follow the same broad trends over time. Finally, healthcare prices rose only 0.1% and remain well-contained.

Invasion of Ukraine Headlines

NFIB Survey: Inflation Overtakes Labor Quality as Top Business Problem For Small Businesses

The NFIB Small Business Optimism Index decreased in March by 2.4 points to 93.2, the third consecutive month below the 48-year average of 98. Thirty-one percent of owners reported that inflation was the single most important problem in their business, up five points from February and the highest reading since the first quarter of 1981. Inflation has now replaced “labor quality” as the number one problem.

Key findings include:

Owners expecting better business conditions over the next six months decreased 14 points to a net negative 49%, the lowest level recorded in the 48-year-old survey.
Forty-seven percent of owners reported job openings that could not be filled, a decrease of one point from February.
The net percent of owners raising average selling prices increased four points to a net 72% (seasonally adjusted), the highest reading in the survey’s history.

The surveys activity and sentiment reading of 93.2 is the lowest since April 2020, the first full month of the pandemic.

Global Trade Declined in March Hit by Ukraine War, China Lockdowns

In its latest projections, published Tuesday, the World Trade Organization said it expects the global economy to expand just 2.8% in 2022, weaker than the 3% average between 2010 and 2019. It expects global trade in goods to grow just 3%, after adjusting for price changes, compared with 9.8% in 2021. The Geneva-based WTO said it marked down its expectations because Russia’s invasion of Ukraine has disrupted trade in essential goods such as grain and fertilizer, and lockdowns in China “are again disrupting seaborne trade at a time when supply chain pressures appeared to be easing.”

Data from China, Japan, South Korea and Taiwan all point to a pullback in global trade as European consumers wilted under the pressure of surging energy prices, and Chinese factories slowed to a crawl as major cities such as Shanghai and Shenzhen locked down. The U.S. appetite for imports has held up, but is likely to be challenged as inflation and rising interest rates bite into consumer spending.

US COVID – ‘We Are Probably Only in the 4th Inning’

Last week, more than 31,000 new cases were reported daily nationwide, a 3% increase from just two weeks ago, according to the New York Times’s COVID database. In big cities like New York City COVID cases have increased nearly 40% in the past two weeks, largely because of the emergence of the BA.2 subvariant. Now some doctors say that rolling back COVID safety precautions may have come too soon, and that the continued rise in cases poses a higher risk to even the most careful followers of COVID safety guidelines.

Dr. Manoj Gandhi, senior medical director at medical instruments maker Thermo Fisher Scientific, said the pandemic is far from over and compared the country’s battle against the virus to a nine-inning baseball game. “We are probably only in the fourth inning, maybe the top of the fifth,” Gandhi told Fortune. “This virus is not going anywhere anytime soon, and we will end up seeing some [new] different variants down the line.”

Why It Is Hard to Know Who Needs a Covid Booster: Mysterious T Cells

People 50 years and older can now get the additional booster at least four months after their first. The CDC isn’t pushing those eligible to get the shots, however, and many vaccine experts say healthy people under 65 years old can wait. A big reason: researchers’ limited understanding of the molecular soldiers known as T cells that help mount the immune defense against Covid-19. T cells continue to work against the virus, according to the experts and studies, after antibodies have waned or lost effectiveness because of a variant.

T cells, and another molecular soldier known as memory B cells, are also mobilized by Covid-19 vaccines to protect against the new coronavirus. T cells and B cells play a longer game than antibodies, however. Antibody levels jump after each Covid-19 shot but fall back weeks or months later, as they do with other vaccines. The T cells and memory B cells stick around, researchers have found, an army waiting for when the body becomes infected.

TSA Extending Travel Mask Mandate for Two Weeks

The Biden administration will extend the federal mask mandate for all transportation networks through May 3, 15 days after it is set to expire amid a new coronavirus surge fueled by the BA.2 variant. The Transportation Security Administration’s (TSA) mask mandate for travel on airplanes, in airports and on buses and on rail systems was set to expire on April 18. The two-week extension is from an order from the Centers for Disease Control and Prevention (CDC), based off the rise in cases from BA.2 since early April.

“At CDC’s recommendation, TSA will extend the security directive and emergency amendment for 15 days, through May 3, 2022,” a CDC spokesperson said. This extension of the mandate is the shortest yet. The mandate has been in place for 14 months and initially went into effect with an expiration date of May 2021.

Hochul Faces Tough Choices After Lt. Gov. Benjamin’s Arrest and Resignation

Now the job she once held had become a political albatross for Governor Hochul. The person she wound up picking for that role — then state Sen. Brian Benjamin — has been indicted in an alleged bribery scheme. On Tuesday, he was arrested and arraigned in federal court in Manhattan. By the end of the day, he announced he had resigned to focus on “explaining in court why his actions were laudable—not criminal.”

The high-profile case puts Hochul in a difficult position as she seeks a full term this year while tethered to Benjamin. While Benjamin is out of office, Hochul could be forced to maintain political ties to Benjamin through the June primary election — and maybe run on the same ticket in November should he win the Democratic nomination and turns down options for bowing out of the race.

Noteworthy Corporate Earnings News

Several companies in a variety of industries reported earnings yesterday that may provide insights into the direction of the economy.

BlackRock Profit Increases 20%, but the firm’s assets under management dipped from over $10 trillion to $9.6 trillion. The firms is a top provider of exchange-traded funds and other low-cost alternatives that track market indexes. But the firm’s actively managed funds, its higher-fee products, made up nearly half of the manager’s fees last quarter, despite only making up about a quarter of BlackRock’s total assets under management.

Delta Airlines reported a Q1 loss, but raised guidance amid ‘all time high’ demand. The company reported revenue of $8.16 billion during the quarter which was restored to 79% of the levels seen prior to the COVID-19 pandemic, and business operations returned to profitability during the month of March during a surge in consumer demand.

JPMorgan Chase & Co.’s first-quarter profit dropped 42%, weighed down by lower Wall Street fees and higher expenses. The nation’s biggest bank earned $8.28 billion, or $2.63 per share, compared with $14.3 billion, or $4.50 per share, a year ago. Analysts had expected $2.72 per share, according to FactSet.

Revenue fell 5% to $30.72 billion, ahead of analyst expectations for $30.59 billion.

Oil Prices Extend Gains, Falling Supplies in Focus

Oil prices rose by more than 2% on Wednesday after Moscow said that peace talks with Ukraine had hit a dead end, fuelling supply worries, while weak economic data from China and Japan kept a lid on gains.

Brent crude rose by $2.26, or 2.2%, to $106.90 a barrel by 1126 GMT while U.S. West Texas Intermediate (WTI) crude futures gained $2.02, or 2%, to $102.62. Both benchmarks had surged by more than 6% on Tuesday.

States Compete to Become “Hydrogen Hubs”

States, either in alliances or on their own, are announcing their interest in claiming a share of the $8 billion earmarked for these hubs. Companies worldwide are exploring hydrogen as a fuel for long-haul trucks, factories, trains, ships and even airplanes, though many efforts are in their early stages. Establishing hydrogen hubs could provide the jolt needed for the gas to gain ground in the country.”

Current contenders include West Virginia, which intends to compete alone for a portion of the funds, as well as an alliance between New York, Massachusetts and New Jersey. A group comprising U.S. Steel Corp., Equinor ASA and Marathon Petroleum announced in February that “they would help work on a hub that would knit together Ohio, Pennsylvania and West Virginia.

GM Signs Cobalt Deal with Glencore as Rush for Battery Metals Intensifies

General Motors Co (GM.N) said on Tuesday it would buy cobalt from miner Glencore PLC (GLEN.L) to use in its electric vehicles (EVs), as automakers around the world scramble to stock up on the critical raw material amid supply chain disruptions. Metals to make batteries that last longer are hard to come by due to supply chain disruptions, which has led to automakers rushing to secure supplies of lithium, nickel and cobalt. The prices of these rare metals have soared to multi-year highs.

Global automakers, ranging from EV leader Tesla Inc (TSLA.O) to Volkswagen (VOWG_p.DE), are splurging billions of dollars on developing vehicles for a market that could be worth $5 trillion over the next decade.

MetLife: Zillennial Workforce is Stressed Out

As workforce needs continue to be front and center for companies, research has devised yet another category of people calling them Zillennials. They are a micro-generation born between 1993-1998 that has increased in size by more than 5 million workers over the last 5 years. MetLife’s annual survey, U.S. Employee Benefit Trends Study, released March 21, found that this group is very insistent on a work culture and environment that better aligns with their personal values. The report finds they are the least satisfied in their jobs – amid a 20-year low across all generations – and more than half of Zillennials (53%) say having an unfulfilling job is currently a top source of stress.

Over the past twenty years that MetLife has been issuing this report looking at workers’ shifting perceptions of their employers as work-life balance, some new trends have emerged. Purposeful work and supportive cultures have emerged as key retention-driving aspects of the employee experience.

Shanghai’s Covid-19 Cases Resume Setting Daily Records After a One-Day Pause, Extending Horizon of Citywide Lockdown

Shanghai reported 26,330 confirmed Covid-19 infections on Wednesday, setting a daily record for the 11th time in 12 days, underscoring how the disease has defied more than a week of lockdowns and quarantines to be deeply entrenched in the population of 25 million people. Symptomatic cases surged to 1,189 cases from 914 a day earlier. The vast majority of infections remained asymptomatic, and no fatality has yet been linked directly to Covid-19 since March 1.

Shanghai authorities ordered a citywide lockdown on April 5, reversing an earlier plan for a two-phase quarantine for both sides of the Huangpu River – Pudong and Puxi – which was supposed to end that day.

Starbucks Prepares to Expand Worker Benefits That Might Exclude Unionized Staff

Starbucks Chief Executive Howard Schultz is ramping up the company’s campaign against a unionization push in its U.S. stores, saying new benefits being developed for chain employees legally can’t be extended to unionized locations. In an online forum with U.S. store leaders this week, Mr. Schultz said he is reviewing the company’s benefits to develop an expanded employee-benefit package in an effort to better recruit and retain baristas.

Mr. Schultz told store leaders that expanded benefits will help reduce attrition among Starbucks workers, but that those new benefits legally can’t go to the growing number of stores that have voted to unionize. Federal law requires separately negotiated contracts for union-represented workers’ pay and benefits, and the company can’t change their compensation unilaterally, Mr. Schultz said, citing Starbucks’s legal counsel.