Member Briefing April 17, 2023
PPI = 2.7. Supplier Prices Fell in March, Adding to Signs of Moderating Inflation
The producer-price index, which generally reflects supply conditions across the economy, fell 0.5% in March from the prior month, the largest monthly decrease since April 2020, the Labor Department said Thursday. From a year earlier, supplier prices rose by 2.7% in March, a significant slowdown from highs reached last year, but above prepandemic levels. PPI increased 4.9% in February, from a year earlier.
Cooling supplier prices can signal future fading of consumer inflation, if firms pass on easing costs. The consumer-price index rose 5% in March from a year earlier, extending a cooling trend but well above the Federal Reserve’s 2% inflation target. Consumer inflation, especially excluding volatile food and energy costs, remains elevated enough for the Fed to contemplate another interest-rate increase next month.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Poland, Hungary Ban Grain and Food Imports From Ukraine - Reuters
- WSJ Reporter Evan Gershkovich Named to Time 100 List of Most Influential People - WSJ
- ‘Not Losing Hope’: Jailed Russia Reporter Evan Gershkovich Writes to His Parents – The Guardian
- Airman Suspected of Leaking Secret US Documents Hit with Federal Charges - Reuters
- Leaks Suggest Both Sides Hold Mixed Hands for Next Phase of War - CNN
- Russia's Commando Units Gutted by Ukraine War, U.S. Leak Shows – Washington Post
- Pentagon Looking Into How Accused Leaker Accessed Top Secret Documents - WSJ
- Interactive Map: Assessed Control of Terrain in Ukraine - Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Council Members Invited to Participate in the 2023 NYS Business Leader Workforce Development Survey
In 2021 and 2022, The Business Council teamed up with the New York State Department of Labor and Empire State Development to survey thousands of businesses on the challenges and needs in a world deeply changed by COVID. These results continue to shape workforce development practices and policy from the P-12 system to higher education and among training providers across New York State.
This year, they are again partnering to gather real-time feedback on the state of the workforce and the needs of businesses in 2023. Collective results from this survey will be used by the State to address needs. Individual responses will be kept confidential. The survey will close at noon on Friday, April 28.
U.S. Factory Production Declines on Weaker Equipment Demand
Production at US factories fell in March for the first time this year. The 0.5% drop in output last month followed an upwardly revised 0.6% increase in February, according to Federal Reserve data released Friday. Including mining and utilities, total industrial production climbed 0.4% in March. Factory output is down 1.1% from a year ago and the outlook for manufacturing is cloudy as higher borrowing costs risk upending capital spending plans and thwarting consumer spending on big-ticket merchandise.
The drop in factory output was driven by a pullback in production of durable goods. Output of consumer durable goods, including automobiles and appliances, slid 0.9%. By market group, production of business equipment dropped 1%, the most this year, while output of consumer goods increased on clothing and energy.
COVID News – Cases Down, Deaths Tic Up Last Week
The US CDC is reporting:
- 2 million cumulative cases
- 13 million deaths
- 120,820 cases reported week of April 5 (down from previous week)
- 1,773 deaths reported week of April 5 (up from previous week)
- 1% weekly decrease in new hospital admissions
- 0% weekly decrease in current hospitalizations
The Omicron sublineages XBB.1.5 (88.3%), XBB.1.9.1 (5.1%), XBB.1.5.1 (2.4%), and XBB (1.9%) currently account for a majority of all new sequenced specimens, with various other Omicron subvariants accounting for the remainder of cases.
Read more at The Johns Hopkins Center for Health Security
NYS COVID Update – (Now Reporting Weekly)
The Governor updated COVID data for the week ending April 14.
- Weekly: 61
- Total Reported to CDC: 79,333
- Average Daily Patients in Hospital statewide: 863
- Average Daily Patients in ICU Statewide: 105
7 Day Average Cases per 100K population
- 10 positive cases per 100,00 population, Statewide
- 10 positive cases per 100,00 population, Mid-Hudson
- Read the Press Release (No release this week)
- Visit the NYS COVID-19 Data Hub
- NYS Vaccination Tracker
U.S. Consumer Spending Falls
Retail sales fell 1 percent in March, according to Census Bureau data released Friday. Analysts had expected sales to fall just 0.4 percent. Retail sales are up 2.9 percent annually, but when adjusting for elevated inflation sales are actually down 2 percent annually — meaning Americans are buying fewer products. The data will only reinforce predictions of a recession later this year. Consumers have been dealing with sky-high prices for years, and it has eaten into their finances.
Spending at gas stations, general stores, electronics retailers, car dealerships and furniture stores saw significant drops. Online spending was the only area where sales picked up, rising 1.9 percent in March.
NYS Budget, Day 17: Comptroller Warns Action is Required by Tuesday to Guarantee State Worker’s Pay
State Comptroller Tom DiNapoli wrote a letter to Governor Kathy Hochul and legislative leaders in the State Senate and Assembly to put them on notice that if a final budget deal, or third emergency extender, is not approved by Tuesday thousands of state workers could go without a paycheck. The state budget was due on April 1st, however, delays in the final adoption have resulted in two 10-day emergency budget extenders being passed to fund state government. Without the emergency spending order, state employees would not be paid and the government would shut down.
The latest indication from the state capital is that a budget deal is nearing. The main sticking point–changes to the state’s controversial bail reform law passed in 2019. Hochul wants to see changes to the law including additional discretion for judges to issue bail for defendants, however members of the legislature are pushing back.
Chinese Exports Surge as Trade With Russia and Southeast Asia Jumps
China’s exports bounced back sharply in March, a surprise that reflects greater demand in Asia and Europe as well as improved supply chain conditions. Another major reason that was behind the unexpectedly strong result: A more than doubling of Chinese exports to Russia in March from a year earlier, highlighting warming economic ties between the two like-minded neighbors.
Outbound shipments from China soared 14.8% in March from a year earlier, data from China’s customs bureau showed Thursday, reversing the 6.8% decline recorded during the first two months of 2023 and ending a nearly half-year string of such drops stretching back to October. Imports fell by 1.4% in March from a year earlier, compared with a 10.2% decline in the first two months of the year. The unexpectedly strong figures reflect Beijing’s growing economic ties with Moscow as its tensions with the West escalate.
Jobless Claims Rise But Remain at Historically Low Levels
Jobless claims in the U.S. for the week ending April 8 rose by 11,000 to 239,000 from the previous week, the Labor Department said Thursday. That’s the most since January of 2022 when 251,000 people filed for unemployment benefits. The four-week moving average of claims, which evens out some of the week-to-week fluctuations, rose by 2,250 to 240,000. That’s the most since November of 2021.
Layoffs have been mounting in the technology sector, where many companies hired aggressively during the pandemic. IBM, Microsoft, Salesforce, Twitter and DoorDash have all announced layoffs in recent months. Amazon and Facebook have each announced two sets of job cuts since November. About 1.81 million people were receiving jobless aid the week that ended April 1, a decrease of 13,000 from the week before. That number is close to pre-pandemic levels.
U.S. Chamber of Commerce Report Shows Public Companies’ Policy Risk Concern has Increased by 27% Since 2013
Public companies’ concerns about policy risks—like changes in taxes, regulations, and enforcement—have increased by 27% over the last decade, according to a new report from the U.S. Chamber of Commerce. The study analyzed how many times S&P 500 companies referenced terms commonly associated with public policy risk in their 10-K filings with the SEC from 2011 to 2021, finding that policy risk mentions dramatically increased over the last decade as compared with other risks, which were relatively flat.
Like other risks, companies must anticipate, monitor, manage, and, when necessary, mitigate risks posed from changes in public policy. This includes closely monitoring public policy developments, engaging with policymakers, and—as we saw for example in response to trade restrictions—adjusting their business operations. The healthcare and utilities sectors saw the biggest increase in concerns about public policy risk over the last decade.
The Tri-State Region’s Recovery from the Pandemic Recession Three Years On: NY Fed
The tri-state region’s economy was hit especially hard by the pandemic, but three years on, is close to recovering the jobs that were lost. Indeed, employment initially fell by 20 percent in New York City as the pandemic took hold, a significantly sharper decline than for the nation as a whole, and the rest of the region experienced similar declines, creating a much larger hole than in other parts of the country.
Three years later, the recovery has been uneven: Recent job growth has been particularly strong in New York City, where employment remains just slightly below pre-pandemic levels, and in Northern New Jersey, which has more than recovered all of the jobs lost early in the pandemic. But it has been sluggish in downstate New York outside of New York City, and in upstate New York, and employment across the region has clearly not reached the level implied by pre-pandemic trends. A dearth of available workers remains a significant constraint on growth in the region, particularly in upstate New York, which had already been suffering from a lack of workers well before the pandemic began.
Explainer: Why Methane Accounting Method Matters
In a surprise development, Governor Kathy Hochul has recommended changing the way the state accounts for emissions of methane, a greenhouse gas. The proposal has big implications for New York’s climate policy, with one critic describing it as a “grenade.” In this explainer, James Hanley from the Empire Center shows how the GWP20 and GWP100 approaches differ, and why that difference matters for public policy.
Currently, New York accounts for the global warming potential (GWP) of greenhouse gases over a 20-year time frame (called GWP20), an approach mandated by the state’s Climate Leadership and Community Protection Act. Hochul’s proposal would shift New York’s approach to the much more commonly used model of accounting for methane emissions over a 100-year period (GWP100), used by 49 other states, the U.S. and most other countries.
Read more at The Empire Center
SUNY Drops SAT, ACT Testing Requirement for Admission
The State University of New York will no longer require students to take either the SAT and ACT tests to apply to its four-year undergraduate colleges as enrollment declines. The SUNY board of trustees unanimously scrapped the admission test requirement — for decades a rite of passage for high school students applying to colleges — during a meeting this week.
SUNY Chancellor John King said the use of SAT and ACT test results for admission purposes should be nixed indefinitely. “Each SUNY campus will continue its longstanding commitment to a holistic review of student applications that includes grades, program of study, academic achievements, non-academic achievements, and other activities that allow for the evaluation of the potential success of a candidate for admission,” the chancellor said. SUNY’s enrollment has shrunk 20% over the last decade, though King did not cite the drop as a major factor in eliminating SAT-ACT scores for admissions.
Big Bank Earnings Beat Expectations
JP MORGAN CHASE Posts Record Revenue That Tops Expectations on Higher Interest Rates. Adjusted earnings were $4.32 per share and revenue was $39.34 billion. The bank said profit jumped 52% to $12.62 billion, or $4.10 per share, in the first three months of the year. That figure includes $868 million in losses on securities; excluding those losses lifts earnings by 22 cents per share, resulting in adjusted profit of $4.32 per share. Companywide revenue rose 25% to $39.34 billion, driven by a 49% rise in net interest income to $20.8 billion, thanks to the Federal Reserve’s most aggressive rate-hiking campaign in decades. CNBC
CITI GROUP Beats Estimates on Higher Income from Loans. Citigroup Inc's first-quarter profit beat Wall Street expectations as it earned more from borrowers paying higher interest on loans. While its net interest income rose 23% to $13.3 billion, Citi also set aside $241 million to cover potential loan losses, from $138 million a year earlier, according its results reported on Friday. Citi earned $1.86 per share in the first quarter, beating analysts' average estimate of $1.67, according to Refinitiv data. The shares were up 2.8%. Net income rose 7% to $4.6 billion, or $2.19 per share, in the three months to March 31 from $4.3 billion, or $2.02 per share, a year earlier. Reuters
WELLS FARGO Tops Wall Street 1Q Targets, Earning $5 Billion. Wells said Friday that it earned $5 billion, or $1.23 per share, in the three months ended March 31, beating analyst projections by 10 cents a share. Revenue of $20.7 billion topped Wall Street’s target of $20.1 billion, a 17% increase. Wells’ profit rose 32% from last year, when the San Francisco-based bank posted net earnings of $3.8 billion, or 91 cents per share. Wells set aside $643 million for potential loan losses, specifically commercial real estate loans, credit cards and auto loans. The AP
Boeing Pauses MAX Deliveries After Parts Problem
Boeing Co. said it was pausing deliveries of some 737 MAX jets because of incorrectly installed parts, disrupting an important business line as the plane maker seeks to improve its finances. The company said Thursday there would be a significant impact on near-term deliveries of the 737 MAX 7, 737 MAX 8 and larger MAX 8-200 jets, as well as the P-8 military reconnaissance planes that are also based on the 737.
Boeing said it was notified by a supplier of “a nonstandard manufacturing process” used to install two fittings at the rear of the plane. Regulators have strict rules on parts installation, and Boeing said it was in contact with the Federal Aviation Administration over the issue. Spirit AeroSystems Holdings Inc. said it was the supplier, and that it was working to develop a repair for the affected fuselages.
India’s Population Surpasses China’s, Shifting the World’s ‘Center of Gravity’
China’s population has reigned as the largest in the world for more than two centuries. Now India is taking its place, heralding a major shift in the global order. The United Nations has said India’s population is projected to surpass China’s sometime this year. Many demographers estimate it could happen this month, if it hasn’t already. India’s population is expected to reach 1.429 billion by the end of the year, according to the U.N. China will fall to second place, with 1.426 billion people. Both dwarf the U.S. at a projected 340 million.
India’s rising population means it’s likely to keep its economy growing, buy more of the world’s goods and play a bigger role in global affairs, even as it grapples with poverty and a lack of jobs. China’s demographic headwinds will make it harder for the country to achieve its economic ambitions, or to supplant the U.S. as the world’s biggest economy, despite its rising wealth and military power. India, as the world’s largest democracy, has been a natural partner and investment destination for the U.S. But it’s also an unpredictable one, with a tendency to assert its own interests and protect its companies over Western ones.
U.S. Foreign Military Sales Bounce Back
In January, the Defense Security Cooperation Agency announced the U.S. arms transfer figures for fiscal year 2022, showing that U.S. defense sales to foreign militaries bounced back after two years of decline. Arms transfers through the Foreign Military Sales program increased year-over-year by 49 percent up to $51.9 billion, and Direct Commercial Sales transactions increased by the same percentage up to $153.7 billion. FMS and DCS are alternative legal frameworks for the sale of U.S. defense materiel or services to foreign governments. The core distinction between these frameworks is the role of the U.S. government. In FMS transactions, the U.S. government is a contractual party acting as an intermediary between the contractor and the foreign government. In contrast, DCS transactions are directly between the contractor and the foreign government.
Unsurprisingly, Russia’s unprovoked invasion of Ukraine was a major driver, as Ukraine’s FMS transactions increased more than fivefold, and several European countries near Russia significantly increased their FMS purchases, as seen in the table.