Member Briefing April 19, 2023
U.S. Manufacturing Output Falls in March
Production at U.S. factories fell more than expected in March, but eked out a modest gain in the first quarter. Manufacturing output dropped 0.5% last month, the Federal Reserve said on Friday. Data for February was revised higher to show production at factories increasing 0.6% instead of edging up 0.1% as previously reported.
Manufacturing output rose at a 0.3% annualized rate in the first quarter after declining at a 3.1% pace in the October-December period. The modest growth in production last quarter is at odds with surveys that have suggested that manufacturing was in deep recession. Manufacturing, which accounts for 11.3% of the U.S. economy, is struggling as higher interest rates undercut demand for goods, which are typically bought on credit. Spending is also shifting from goods to services. Businesses are holding excess inventory as demand slows, reducing the incentive to place more orders with factories.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russian Court Upholds WSJ Reporter Evan Gershkovich’s Detention - WSJ
- Ukraine Agrees With Poland on Grain Transit, But Black Sea Deal in Doubt - Reuters
- Putin Visits Occupied Kherson Region in Ukraine - BBC
- Parking Meter for Stranded Russian Plane Hits $330,000 and Keeps Going - WSJ
- Russian Invasion of Ukraine Revolutionizes NATO Military Strategy - NYT
- Brazil's Lula Draws Russian Praise, U.S. Scorn for Ukraine Views While in China - Reuters
- Ukraine and Russia Need a Great-Power Peace Plan – Foreign Affairs
- Absolut Vodka Halts Exports to Russia After Backlash - BBC
- 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
Poll: Manufacturing Execs See Tighter Credit, Tougher Terms In Wake Of SVB Bank Failure
In the weeks since the failures of Silicon Valley Bank and Signature Bank, questions have swirled about the impact of a reduction in credit on the broader economy. A new poll of 150 U.S.-based manufacturing executives by Forbes, Xometry and Zogby in early April provides some answers and it’s potentially troublesome. These executives say that they’ve seen a change in the amount of available credit (64% of respondents), seen the terms of their loans get tighter (47%) and even seen their own banks cut their lines of credit (25%)
Yet the recent banking troubles did not alter most manufacturing executives’ plans for their businesses’ operations for 2023. The vast majority (87%) said they would move forward with their strategies for the year. Then, too, manufacturing execs remained largely optimistic about their own companies’ sales and profits. Nearly two-thirds (66%) said they expected first-quarter sales to be higher than in the same period last year, and a similar number (66%) said they expected profit for the first quarter to beat last year’s comparable-period results.
McCarthy Pitches Wall Street on Plan to Avert Default
During remarks at the New York Stock Exchange on Monday, Speaker Kevin McCarthy (R-Calif.) reiterated calls made by other Republicans to cap discretionary spending at fiscal year 2022 levels and limit growth to 1 percent annually over the next decade — all without “touching Social Security and Medicare.” He also pushed again for tougher work requirements, as more Republicans set their sights on potential changes to the Supplemental Nutrition Assistance Program (SNAP), previously known as the food stamps program.
McCarthy said Republicans will vote on a plan “to lift the debt ceiling into the next year,” as negotiations over the debt limit remain at a standstill between Republicans and the White House. As part of the pitch to Wall Street on Monday morning, the Speaker also stressed “full confidence” that the forthcoming Republican plan would help “grow our economy.”
COVID News – FDA Authorizes Additional Booster for Seniors and People with Weak Immune Systems
The Food and Drug Administration on Tuesday authorized an additional dose of Pfizer and Moderna’s Covid-19 vaccines targeting the omicron variant for seniors and people with weak immune systems. Seniors who are 65 years of age or older and who have already received a vaccine targeting the omicron BA.5 subvariant are now eligible to receive another dose at least four months after their last shot, according to the FDA. People with weak immune systems can receive another omicron shot at least two months after their last dose and receive additional shots at the discretion of their doctor.
Children 6 months through 5 years of age who are unvaccinated can now receive the full two-dose series of Moderna’s omicron vaccine. Kids 6 months through 4 years of age can receive three doses of Pfizer’s shot that targets omicron. Children who are 5 years old can receive either two doses of Moderna or a single dose of Pfizer.
NYS Budget Negotiations: Officials Reach a Tentative Compromise on Bail
After weeks of holding up the budget over her proposal to further tweak the state bail laws, a source with knowledge of negotiations told City & State that Gov. Kathy Hochul and legislative leaders have all but finalized a deal that would give judges greater discretion to set bail in violent felony cases. The compromise would remove the requirement that judges impose the “least restrictive means” when determining whether to set bail for violent felonies but would still define bail strictly as a means of ensuring a defendant’s return to court. The governor had originally proposed removing that strict definition of bail.
An Albany insider told City & State that negotiations have now shifted to housing
Read more at NY State of Politics
New York Releases Final Revised Sexual Harassment Prevention Model Policy & Training
On April 11, 2023, the New York State Department of Labor (DOL), in consultation with the New York State Division of Human Rights, released a revised sexual harassment prevention model policy. Importantly for employers, there are substantial differences between the new model policy and the policy released in 2018 that has been in use up until now.
The final policy places a strong emphasis on gender identity discrimination as a type of sexual harassment claim. There is a new paragraph discussing the “gender spectrum,” which sets forth “the three most common ways people identify” as cisgender, transgender and nonbinary. This is in keeping with a boarder emphasis throughout the policy on different types of discrimination. The final policy also includes new sections on bystander intervention and the way sexual harassment can impact the remote workplace.
Housing Starts Plunge 17.2% In March, New Home Sales Rise
The number of housing starts tumbled in March, an indication that the housing market is taking a hit and may be falling into a recession. Housing starts measure the change in the number of new residential buildings that began construction. Starts fell 17.2% from March 2022 to this past month, according to a Tuesday report from the Census Bureau. They are now at 1.42 million. From February to March, they fell 0.8%.
In other housing news, sales of new homes increased slightly from January to February, a sign that buyers might be reentering the market amid lower mortgage rates, according to data released late last month by the Census Bureau. New home sales in February increased from the month before, rising 1.1% last month to a seasonally adjusted annual rate of 640,000. Nevertheless, sales were 19% lower than in February 2022.
Read more at The Washington Examiner
China’s Economy Grew 4.5% in the First Quarter, the Fastest Pace in a Year
China’s first-quarter gross domestic product rose sharply while global peers face slowing growth as central banks hike rates to tame inflation. GDP grew by 4.5% in the first quarter, China’s National Bureau of Statistics said Tuesday. That marks the highest growth since the first quarter of last year — when China’s economy grew by 4.8%. Quarter-on-quarter, the economy grew 2.2%.
China’s growth has been under the spotlight as it reopens after ending most of its strict Covid restrictions that were in place for nearly three years. The economy expanded 2.9% in the fourth quarter of 2022. Retail sales jumped 10.6% in March as online sales of physical goods picked up. Industrial output rose 3.9%, slightly lower than Reuters’ forecasts of 4%.
US Retail Sales Post Steeper Fall Than Expected as Consumer Strength Fades
Retail sales in the United States slipped more than anticipated in March, according to government data released Friday, extending a downward trend that signals cooling in the economy. The U.S. central bank has raised interest rates steeply since early last year to lower demand and rein in high inflation, and there are signs that its policy is starting to bite.
Retail sales fell by 1%in March from a month prior, to $691.7 billion, said the Commerce Department, adding that February's contraction was revised to a smaller 0.2% as well. But compared with the same period last year, retail sales were still 2.9% higher.
Here’s What Manufacturers Need to Know About the Energy Market
Every year, the industrial sector spends billions of dollars on energy. Yet for many organizations, managing energy is perceived as just a cost of doing business. It’s worthy of more attention. Energy prices tend to fluctuate more than the prices of other commodities. And while “market volatility” doesn’t always indicate higher prices, it does indicate the potential for significant uncertainty, or a sudden shift in prices.
If you're responsible for a business' energy decisions, you may be wondering if the best strategy is to wait for prices to drop further or to renew your contract before energy prices rise again. In the past, a business might lock in its prices for the year in September and then do so again 12 months later. But now, with longer-term volatility factors in play, it’s important to take a longer-term approach. Given the current volatility, analysts suggest that we could range anywhere from $1.30 to $13.00 for natural gas in February 2024. As far as your plans go, this might mean looking out three to five years when making your energy contract decisions. Long-term energy prices are still relatively affordable, even despite the recent swings in the market.
Lego Looks to Build Bigger US Sales With Virginia Factory
Lego A/S is targeting areas of the US where sales have been slow and expects a new $1 billion factory in Virginia, its first in the country, will help it win market share. There are still large parts of the US where the maker of the colorful building blocks hasn’t yet reached the popularity it enjoys in Europe, its home market, according to Chief Operating Officer Carsten Rasmussen. Over the past decade, Lego’s strong brand has helped it leapfrog US rivals Mattel Inc. and Hasbro Inc. to become the world’s largest toymaker. The Danish company, which is owned by the billionaire Kirk Kristiansen family, has roughly doubled US sales over the last four years, but has had a hard time penetrating the southern part of the country.
“Looking at the US potential, we still have a long way to go,” he said in a phone interview in connection with Lego breaking ground at the Richmond facility last week. “On the east coast and in the north, we’re already very strong but it leaves a lot of potential elsewhere and we think we can succeed with that over the coming years.” Lego is currently serving the US market from its factory in Mexico, which it’s expanding at the same time.
Toyota, Exxon Test Low-Carbon Fuels in Gasoline Engines
Exxon Mobil Corp. and Toyota Motor Corp. formed a partnership to test out low-carbon fuels in gasoline engines, potentially offering a way for drivers to reduce emissions without upgrading to an electric vehicle.
The fuel blends are made from cleaner feedstocks and could one day cut greenhouse gas emissions from internal combustion engines by as much as 75 percent compared with regular gasoline, said Andrew Madden, Exxon’s vice president for strategy and planning, citing initial trial results. The fuels proved compatible with Toyota vehicles, raising the prospect of a drop-in solution that could compete with battery-powered cars in future. The fuels are “very much at the test phase” and would require government policy support before becoming commercially available, Madden said
NY Fed Service Industry Survey Shows Continued Decline in Activity
Activity in the region’s service sector continued to decline modestly, according to firms responding to the Federal Reserve Bank of New York’s April 2023 Business Leaders Survey. The survey’s headline business activity index was little changed at -9.8. The business climate index moved down nine points to -47.7, suggesting the business climate remains much worse than normal. Employment levels were unchanged, representing the first time in two years that employment has not increased. Wage increases moderated noticeably, and input and selling price increases slowed.
Looking ahead, firms do not expect conditions to improve over the next six months. Employment is expected to grow modestly in the months ahead, and wage and price increases are expected to remain widespread.
UPS and Teamsters Kick Off Contract Negotiations
Part-timers and weekend drivers are expected to be among the key points of debate as the Teamsters and United Parcel Service Inc. begin talks this week on the largest collective bargaining agreement in the U.S. The parcel-delivery industry has changed since the International Brotherhood of Teamsters and UPS last signed a five-year agreement in 2018. UPS and rival FedEx Corp. have become more focused in recent years on delivering more profitable packages rather than increasing volume.
The new UPS contract will map out the delivery giant’s cost structure at a time when customers demand more options for deliveries. The union wants UPS to raise the pay for part-timers and do away with a second category of drivers to handle weekend deliveries. UPS says it wants more flexibility to have employees work during the weekends in response to shifts in demand from parcel recipients wanting deliveries any day of the week.
Proposal to Have Oil, Gas Companies Pay for Climate Impact Advances in State Legislature
A proposal that would enable the state to charge the oil and gas industry to help mitigate the effects of climate change in New York advanced in the state Senate on Monday, with advocates for the measure calling for its final adoption. Multiple proposals in recent months have sought ways of making companies responsible for pollution foot the bill, including a measure to expand recycling as well as make it easier for people to sue firms over climate change.
The Business Council of New York State argues the legislation is meant to "mask" the true cost of the transition from fossil fuels. "Meeting New York state’s greenhouse gas emissions reduction and renewable energy product targets will be costly and disruptive, regardless of any long-term benefits, so it is essential that the state’s implementation efforts are cost-effective, workable, and avoid significant damage to the state’s economic climate," the group wrote in a memo of opposition. "We believe there are many reasonable measures that can be part of the state’s implementation plan."