Member Briefing August 17, 2022
US Industrial Output Jumps in July on Solid Manufacturing Gain
A solid rebound in American manufacturing, especially vehicles, following two months of declines, help push overall industrial production up in July, the Federal Reserve said Tuesday. A massive 6.6% surge in motor vehicle and parts production was a key driver the 0.7% rise in manufacturing, which was the biggest gain since March, the data showed. That boosted total industrial output by 0.6% last month. The gain contrasted with the massive decline in a regional survey by the New York Fed for the first week of August, which briefly spooked investors on Monday.
- Mining production rose 0.7%, for the month on “gains in coal mining and in oil and gas well drilling.”
- Utilities fell 0.8% for the month.
- Overall production was 3.9% higher year on year.
- Manufacturing production was 3.2% higher year on year.
- Industrial capacity in use edged back over 80%, to 80.3%, after slipping below that threshold in June.
War in Ukraine Headlines
- Ukraine and Russia: the Latest News – The Guardian
- Ukraine Says it Can Export 3 Million Tonnes of Grain from Ports Next Month – Reuters
- Explosions Hit Russian Ammunition Depot in Crimea – WSJ
- Russia Blames Sabotage for ‘State of Emergency’ in Crimea – USA Today
- Russia Says ‘No Need’ to Use Nuclear Weapons in Ukraine – Reuters
- Ukraine Is Using These Long-Range Rockets to Repel Russia – WSJ
- Russia’s Black Sea Fleet Struggling With Effective Sea Control, UK Says – Reuters
- Finland Limits Visas to Russians Amid Rush of Europe-Bound Tourists – Reuters
- Russian Withdrawal Brings More Shelling in Southern Ukrainian Town – WSJ
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Biden Signs Bill Aimed at Lowering Drug Costs, Boosting Renewable Energy
President Biden signed into law sweeping legislation to lower prescription drug prices, boost the renewable energy sector and impose new taxes on large corporations. The Democrat-backed package is one of Mr. Biden’s most consequential accomplishments since taking office, the latest in a string of legislative victories that the president’s aides hope will improve his standing heading into November’s midterm election. Republicans have criticized the measure, casting it as government overreach and arguing that it would do little to tamp down high inflation, despite its name, the Inflation Reduction Act.
The bill falls short of the ambitious vision Mr. Biden laid out during his presidential campaign and in the early months of his time in office. But it nonetheless marks a hard-fought win for the president, who less than a month ago was facing the prospect that a signature piece of his governing agenda was dead in the Senate.
U.S. Housing Starts Tumble in July; Building Permits Fall
U.S. homebuilding fell sharply in July, weighed down by higher mortgage rates and prices for materials, suggesting that the housing market could contract further in the third quarter. Housing starts plunged 9.6% to a seasonally adjusted annual rate of 1.446 million units last month, the Commerce Department said on Tuesday.
Data for June was revised slightly higher to a rate of 1.599 million units from the previously reported 1.559 million units. Economists polled by Reuters had forecast starts declining to a rate of 1.540 million units. Permits for future homebuilding fell 1.3% to a rate of 1.674 million units.
U.S. COVID – Why the CDC is Loosening Some of its COVID-19 Guidelines
As students and teachers across the U.S. prepare to head back to school, the CDC is relaxing its COVID-19 guidelines. It marks a significant shift in how the nation approaches the pandemic as the new guidance prioritizes keeping kids in class. But some health experts worry the agency has gone too far. Julia Raifman, who leads the COVID-19 U.S. State Policy Database, joins PBS’ Stephanie Sy to discuss.
Raifman thinks we should be looking to the CDC to set a high bar on evidence-based standards and standards that are equitable and inclusive. She says she would like to see is more of an emphasis on vaccine delivery at schools. “Just about half of children are vaccinated at this point. So, we really need increased vaccination coverage to help reduce preventable severe disease in kids,” she says.
Why has Polio Been Found in London, New York and Jerusalem, and How Dangerous is it?
Polio, a deadly disease that used to paralyze tens of thousands of children every year, is spreading in London, New York and Jerusalem for the first time in decades, spurring catch-up vaccination campaigns. There is no cure, but since a vaccine was found in the 1950s, polio is entirely preventable. Globally, the wild form of the disease has almost disappeared. There are two main forms of poliovirus. Alongside the wild-type outlined above, there are also rare cases of what is known as vaccine-derived polio.
It is this second form detected in wastewater in the British capital, London, and in New York in the United States, with one case of paralysis reported in New York state. Genetically similar virus has also been found in Jerusalem, Israel, and scientists are working to understand the link, the Global Polio Eradication Initiative (GPEI) said. It stems from the use of an oral polio vaccine containing weakened live virus. After children are vaccinated, they shed virus in their faeces for a few weeks. In under-vaccinated communities, this can then spread and mutate back to a harmful version of the virus.
The Hunt for a Universal Covid-19 Vaccine
The first step towards a possible universal coronavirus vaccine is likely to be a so-called “variant-proof” vaccine, which aims to protect against all current and future strains of Sars-CoV-2 and help end the worst impacts of the pandemic. With the continuing emergence of problematic variants causing repeated surges in case numbers and hospitalisations, beginning with Alpha in September 2020, to Delta, Omicron, and now BA.4 and BA.5, the need for such a vaccine remains high.
“A variant-proof vaccine could slow the transmission of Covid-19 and stopping such transmission is the only way we can move past the pandemic,” says Patrick Soon-Shiong, CEO of ImmunityBio, one of six US government-funded research groups or companies taking on the challenge. In order to do this, scientists are trialling a kaleidoscope of vaccine technologies. They range from modified, harmless viruses known as adenoviruses to ferritin nanoparticles and self-amplifying RNA, which works in a similar fashion to messenger RNA (mRNA) except it can copy itself once inside the body’s cells, meaning much smaller doses are needed.
China Factories Ration Power as Heatwave Sends Demand Soaring
Chinese lithium hub Sichuan province will ration electricity supply to factories until Saturday, state media reported, as a heatwave sends power demands soaring and dries up reservoirs. Temperatures in the province — home to nearly 84 million people — have hovered above 40-42 degrees Celsius (104-108 degrees Fahrenheit) since last week, according to data from China’s Meteorological Administration, increasing the demand for air conditioning. The region relies on dams to generate 80% of its electricity, but rivers in the area have dried up this summer, Beijing’s Water Resources Ministry said.
The province in China’s southwest produces half the nation’s lithium, used in batteries for electric vehicles, and its hydropower projects provide electricity to industrial hubs along the country’s east coast. But the local government has decided to prioritize residential power supply, ordering industrial users in 19 out of 21 cities in the province to suspend production until Saturday, according to a notice issued Sunday. Several companies including aluminum producer Henan Zhongfu Industrial and fertilizer producers Sichuan Meifeng Chemical Industry said in stock exchange statements they were suspending production.
Cutting Tool Demand Falls Flat
U.S. machine shops and other manufacturers consumed $175.9 million worth of cutting tools during June 2022 – slightly more (0.3%) than during May and 2.2% more than the June 2021 consumption total. Through six months of 2022 activity, consumption of cutting tools has totaled $1.1 billion, which is 7.9% higher than the comparable January-June 2021 figure.
Christopher Chidzik, principal economist at AMT, suggested that raw material shortages may be a factor slowing cutting-tool consumption. “While (cutting tool) shipments appear to have hit a plateau, the value of those shipments in 2022 are at the highest monthly average since 2019. There is still some way to go before monthly orders match their pre-pandemic levels. Shortages of materials, particularly certain metals, mean there is an upper limit on the number of tools that can currently be used. Shops only need as much tooling as they have metal to work.
Postal Service To Hike Rates For Holiday Mailings
It will cost more to send packages this holiday season in what the United States Postal Service (USPS) is calling a “temporary price adjustment.” The planned peak-season pricing, which was approved by the governors of the Postal Service on Aug. 9, would affect prices on commercial and retail domestic competitive parcels including Priority Mail Express (PME), Priority Mail (PM), First-Class Package Service (FCPS), Parcel Select and USPS Retail Ground. International products would be unaffected.
If it is rubber stamped by the Postal Regulatory Commission (PRC), the temporary rates would go into effect on Oct. 2 and remain in place until Jan. 22, 2023. The PRC set an Aug. 25 deadline for public comments on the temporary rate adjustment. “Anyone who mails USPS packages (Priority Mail, Priority Mail Express, First-Class Package Service, Parcel Select Ground, and USPS Retail Ground) between October 2 and January 22 will have to pay more than regular pricing,” explained Stephen Kearney, executive director of the Alliance of Nonprofit Mailers.
Walmart Revenue, Profit Rise as Higher Prices Lift Business
Walmart on Tuesday said that it is gaining market share in some categories such as grocery as shoppers grapple with inflation and that some Covid-19 related costs have shrunk. But higher prices have led shoppers to hold back on some purchases, prioritizing lower-margin food items, eating into profits. Walmart is also selling through a glut of inventory leading to higher discounts.
Walmart’s U.S. comparable sales, those from stores and digital channels operating for at least 12 months, rose 6.5% in the quarter ended July 29, helped by higher prices, market share gains in grocery and strong store brand product sales. Overall, revenue rose 8.4% to $152.86 billion.
Home Depot Notches Record Sales, Reaffirms Guidance
Home Depot Inc. on Tuesday reported quarterly comparable sales above Wall Street estimates on steady demand for home-improvement goods from builders and handymen. Analysts have said demand from home-improvement professionals has been strong, even as do-it-yourself customers are reining in their spending, due to a healthy pipeline of remodeling work. Around 40% to 45% of Home Depot’s customers are professionals, compared with just 20% to 25% for smaller rival Lowe’s.
Home Depot’s comparable sales rose 5.8% for the second quarter. Net sales for the largest U.S. home improvement chain climbed 6.5% to a $43.79 billion. Higher product prices drove average spending per transaction up more than 9%, even as customer transactions at its stores dropped 3%, helping the company record its highest ever quarterly sales and earnings.
U.S. Approves Nearly All Tech Exports to China, Data Shows
The U.S. has identified intensifying technological competition with China as a top national-security threat. But a Commerce Department-led process that reviews U.S. tech exports to the country approves almost all requests and has overseen an increase in sales of some particularly important technologies, according to an analysis of trade data. Of the U.S.’s total $125 billion in exports to China in 2020, officials required a license for less than half a percent, Commerce Department data shows. Of that fraction, the agency approved 94%, or 2,652, applications for technology exports to China. The figures omit applications “returned without action,” meaning their outcomes were uncertain.
The result: The U.S. continues to send to China an array of semiconductors, aerospace components, artificial-intelligence technology and other items that could be used to advance Beijing’s military interests.
German Manufacturers Increasingly Short of Skilled Workers
German manufacturers of machinery and equipment are increasingly short of skilled workers, a constraint that adds to the shortages in materials and intermediate goods that they are also suffering, the Ifo economic institute reported on Tuesday. The Munich-based Ifo said its survey of some 4,000 companies showed the skills shortage extends beyond trained engineers, mechanics, and IT specialists, with a shortage of low-skilled employees emerging as well.
In the July survey, Ifo found 43.0% of manufacturing companies that it polled reported shortages of skilled workers, compared with 38.7% in April. “Manufacturers of machinery and equipment are feeling the effects of layoffs they carried out before and during the coronavirus pandemic,” said Ifo industry expert Nicolas Bunde. “Now these companies are desperately seeking suitable staff.”
TerraPower Raised $750M For Cheaper Nuclear To Tackle Global Warming, Cut Costs
Bill Gates’ nuclear innovation company, TerraPower, announced Monday it has secured at least $750 million in new funding. The funding was co-led by Gates and SK. Gates is the founder and chairman of TerraPower. SK, one of South Korea’s largest energy providers, invested $250 million.
Nuclear energy has been undergoing a renaissance because the energy created by nuclear reactors doesn’t release the greenhouse gasses that cause climate change. There is, however, long-lasting nuclear waste that has to be stored carefully. TerraPower is working with GE Hitachi Nuclear Energy, a division of General Electric, to commercialize the Natrium system. It includes a smaller reactor than the conventional ones used in the United States and a molten salt energy storage system that allows the microreactor to boost its energy output for short periods of time as needed.
Fed Survey – Remote Work at Service Firms Equals 21 Percent of Total Hours, 7 Percent at Manufacturers
In supplemental questions to the Empire State Survey businesses were asked to estimate the proportion of their staff working remotely at least some of the time, at three time horizons—now, before the pandemic, and a year from now. Among service sector firms, an average of 30 percent of employees were estimated to now be working remotely at least some of the time—up from 9 percent before the pandemic. Among manufacturers, in contrast, only 9 percent were said to be doing some work remotely, versus 3 percent before the pandemic. When asked how many days these employees worked remotely, the average service firm indicated 3.3 days a week, while the average manufacturer reported 2.8 days.
Combining these estimates across firms, and assuming a five-day workweek, we estimate that the share of hours worked remotely averaged 21 percent at service firms—considerably higher in finance and in professional and business services —but just 7 percent among manufacturers. Looking ahead to a year from now, the average service firm expected this percentage share to decline only moderately, to 18 percent, whereas the average manufacturer saw it holding steady at 7 percent.