Member Briefing August 22, 2023
Conference Board’s Leading Economic Indicators Index for the U.S. Fell Again in July
The Conference Board Coincident Economic Index® (CEI) for the U.S. improved by 0.4 percent in July 2023 to 110.5 (2016=100), after no change in June. The CEI is now up 0.7 percent over the six-month period between January and July 2023—down slightly from the 0.9 percent growth rate recorded over the previous six months. Among the CEI’s component indicators—payroll employment, personal income less transfer payments, manufacturing trade and sales, and industrial production—are included among the data used to determine recessions in the US. Industrial production erased some of the losses reported in June and May and made the strongest positive contribution to July’s coincident index, followed by income, employment, and sales.
The composite economic indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The indexes are constructed to summarize and reveal common turning points in the economy in a clearer and more convincing manner than any individual component. The CEI is highly correlated with real GDP. The LEI is a predictive variable that anticipates (or “leads”) turning points in the business cycle by around 7 months.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukrainian Drone Destroys Russian Supersonic Bomber - BBC
- Russia Says F-16s Will Escalate Ukraine War; Kyiv Says They Will Tip the Balance in its Favour – Reuters
- Booming China-Russia Trade Sends Trench-Digging Machines to Ukraine’s Front Lines - WSJ
- Zelenskyy Hails F-16 Commitment on Visit to Netherlands - Politico
- Why Russia’s War in Ukraine Could Run for Years - WSJ
- Chernihiv: Russian Missile Strike Kills Seven and Injures 144, Ukraine Says - BBC
- Russia Seeks To Seize Power Assets Belonging To One Of Nation's Richest Individuals – Radio Liberty
- Ukrainian Children Brought to Camps in Belarus, Exposed to Pro-Kremlin Propaganda - WSJ
- Ukraine Exploits Biden's Cluster Bomb Gamble in Fight Against Russia - The Washington Post
- 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
China’s 40-Year Boom Is Over. What Comes Next?
For decades, China powered its economy by investing in factories, skyscrapers and roads. The model sparked an extraordinary period of growth that lifted China out of poverty and turned it into a global giant whose export prowess washed across the globe. Now the model is broken. What worked when China was playing catch-up makes less sense now that the country is drowning in debt and running out of things to build. Parts of China are saddled with under-used bridges and airports. Millions of apartments are unoccupied. Returns on investment have sharply declined.
Economists now believe China is entering an era of much slower growth, made worse by unfavorable demographics and a widening divide with the U.S. and its allies, which is jeopardizing foreign investment and trade. Rather than just a period of economic weakness, this could be the dimming of a long era. What will the future look like? The International Monetary Fund puts China’s GDP growth at below 4% in the coming years, less than half of its tally for most of the past four decades. Capital Economics, a London-based research firm, figures China’s trend growth has slowed to 3% from 5% in 2019, and will fall to around 2% in 2030.
Fed's Long-Term GDP Outlook is Dismal; the Economy Hasn't Got the Message Yet
The Federal Reserve had a reckoning at its policy meeting in September of 2016. Because of poor productivity and population aging, typical U.S. economic growth of 2.5% or more annually was "not possible anymore" on a sustained basis, said John Williams, the current New York Fed president who at the time was head of the San Francisco Fed, according to transcripts of a session where policymakers cut their median long-term GDP growth outlook to 1.8%, continuing a roughly decade-long slide. For the next three years and continuing on the other side of a world-altering pandemic, the U.S. has left that seeming constraint in the dust, with growth exceeding 1.8% in 21 of the 28 quarters since.
When policymakers gather later this week for an annual Fed research symposium in Jackson Hole, Wyoming that will be focused on "structural shifts," they will have to grapple with an economy in deep flux - from U.S. labor force growth that has been better than anticipated, a manufacturing construction surge, changing global supply chains, continued high inflation, and, now, hints of improving productivity.
COVID Update - Upstate Medical’s 2 Hospitals to Require Masks Again as Covid Cases Tick Up
Upstate Medical’s two hospitals in Syracuse, University and Community General, reimposed mandatory face-masking Thursday morning after reporting an uptick in COVID-19 cases. Covid testing is now also required for all patients being admitted to the hospitals, according to a memo sent to Upstate staff and provided to Syracuse.com. The hospital reported an increase in staff out sick with COVID, an increase in patients hospitalized with COVID and more Covid found in wastewater from the hospitals and the community at large. A new variant, EG.5, is responsible for the rise in cases, the hospital said.
“Effective immediately, mandatory masking is required by all staff, visitors, and patients in clinical areas of Upstate University Hospital, Upstate Community Hospital, and ambulatory clinical spaces,” the memo reads. “Clinical areas are defined as any location patients gather, wait, transport through, or receive care. Masking is strongly recommended in all non-clinical areas.”
Report: America's Manufacturing Boom Could Add 250,000 Jobs in Two Years
Roughly 200,000 to 250,000 new manufacturing jobs could be added in the U.S. over the next two years, according to a new estimate from Goldman Sachs. The increase, which amounts to about 2% of current manufacturing employment levels, is partly due to the incentives and investments for the semiconductor and green technology sectors included in the Biden administration's signature bills, the Inflation Reduction Act and the CHIPS and Science Act.
To come up with their employment estimate, the analysts considered a few different measures. Looking at historical data for the regions where most of the hiring is expected (in the western U.S. especially), they found that every $1 million increase in manufacturing construction spending leads to roughly nine new manufacturing jobs. Since they expect spending to be around $65 billion over the next two years, that pencils out to 585,000 new jobs. However, the Goldman analysts reckon that estimate is too high because of "labor supply bottlenecks."
The Panama Canal is Turning into a New Bottleneck for Seaborne Global Trade
A flotilla of ships are stuck on both sides of the Panama Canal, waiting for weeks to cross after the waterway’s authorities cut transits to conserve water amid a serious drought.Vessel-tracking data show more than 200 ships currently waiting to transit, a figure that has been climbing since the canal capped daily transits to 32 last month from an average 36 under normal conditions.
The waterway’s entrances on the Pacific and Atlantic oceans are dotted with ships that are backed up for more than 20 days. Most are bulk cargo or gas carriers that are typically booked on short notice. Some shipowners are rerouting traffic to avoid the backlog. The canal, which uses three times as much water as New York City each day, relies on rainfall to replenish it. If there isn’t enough rain, ship transits are cut and those that cross pay hefty premiums that boost transport costs for cargo owners such as American oil and gas exporters and Asian importers.
China Surprises With Modest Rate Cut Amid Growing Yuan Risks
China cut its one-year benchmark lending rate on Monday as authorities seek to ramp up efforts to stimulate credit demand, but surprised markets by keeping the five-year rate unchanged amid broader concerns about a rapidly weakening currency. The recovery in the world's second-largest economy has lost steam due to a worsening property slump, weak consumer spending and tumbling credit growth, adding to the case for authorities to release more policy stimulus.
The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.45% from 3.55% previously, while the five-year LPR was left at 4.20%. The yuan has lost nearly 6% against the dollar so far this year to become one of the worst performing Asian currencies. The reduction in the one-year LPR came after the People's Bank of China (PBOC) unexpectedly lowered its medium-term policy rate last week.
Texas Wins July Manufacturing Jobs Race
Texas created the most net new manufacturing jobs in July, adding 6,600 workers, and it also reported the greatest growth in manufacturing employment over the past 12 months, with 32,700. At 1.7%. According to figures from the BLS. Unemployment rates were lower in July in 7 states, higher in 3 states, and stable in 40 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Twenty-three states had jobless rate decreases from a year earlier, 5 states and the District had increases, and 22 states had little change. The national unemployment rate, 3.5 percent, changed little over the month and was the same as in July 2022.
New Hampshire had the lowest jobless rate in July, 1.7 percent. The next lowest rates were in Maryland and Vermont, 1.8 percent each. Nevada had the highest unemployment rate, 5.3 percent. In total, 21 states had unemployment rates lower than the U.S. figure of 3.5 percent, 3 states and the District of Columbia had higher rates, and 26 states had rates that were not appreciably different from that of the nation.
Army Invests Billions in Organic Industrial Base
With the US Army preparing to invest nearly $4.5 billion over the next 15 years to modernize its Organic Industrial Base (OIB) in order to support a next-generation vehicle fleet, an Army officer said Thursday those dollars will be prioritized towards improvements in tooling, machinery, energy consumption and cybersecurity. Speaking at the 15th Annual Ground Vehicle Systems Engineering & Technology Symposium, in Novi, Mich, Brig. Gen. Michael B. Lalor, head of the Army Tank-Automotive & Armaments Command (TACOM), said the money will also enable the branch “to build [in] some surge capacity.”
The OIB comprises 23 depots, arsenals and ammunition plants owned by the government. Lalor told the audience that some of the OIB infrastructure “dates back 70, 80 years,” and their modernization will enable integrating robotic processes and removing personnel from hazardous work environments. This improvement effort is part of the Army’s Organic Industrial Base Modernization Implementation Plan, which was established in 2021 and will comprise over 500 initiatives across the OIB.
US to Impose Tariffs on Tin Mill Steel from Canada, China, Germany
The U.S. Commerce Department on Thursday said it will impose preliminary anti-dumping duties on tin-plated steel imports from Canada, Germany and China, sparing five other countries in a decision that drew some relief from food can manufacturers that had feared higher tariffs. The department said the highest preliminary anti-dumping duties of 122.5% will be imposed on tin mill steel imported from China, including the country's largest producer, Baoshan Iron and Steel.
The department will impose preliminary duties of 7.02% on tin mill imports from German producers, including Thyssenkrupp and 5.29% on imports from Canadian producers, including ArcelorMittal DOFASCO. No duties will be imposed on the shiny silver metal - widely used in cans for food, paint, aerosol products and other containers - imported from Britain, the Netherlands, South Korea, Taiwan and Turkey, the Commerce Department added.
Russia’s First Lunar Mission in Decades Crashes Into the Moon
Russia’s first lunar mission in decades has ended in failure with its Luna 25 spacecraft crashing into the moon’s surface. The incident, a blow to Russia’s space ambitions, happened after communication with the robotic spacecraft was interrupted. Russia’s space agency, Roscosmos, said it lost touch with Luna 25 on Saturday around 2:57 p.m. Moscow time. “The measures taken on August 19 and 20 to search for the device and get into contact with it did not yield any results,” the space agency reported.
The spacecraft was meant to complete Russia’s first lunar landing mission in 47 years. The country’s last lunar lander, Luna 24, landed on the surface of the moon on August 18, 1976. The Luna 25 probe launched from the Vostochny Cosmodrome in Russia’s Amur Oblast on August 10, setting the vehicle on a swift trip to the moon. A specially formed commission will investigate the reasons for the loss of Luna 25, the agency added.
Moon Landing Anticipation Builds for India After Russia's Crash
India's space agency on Monday released images its spacecraft took of the far side of the moon as it headed for an attempted landing on the lunar south pole, just days after the failure of a Russian lander. The Indian Space Research Organisation's (ISRO) Chandrayaan-3 spacecraft had been in a race with Russia to be the first to land on the lunar south pole, a region whose shadowed craters are thought to contain water ice that could support a future moon settlement.
ISRO said that Chandrayaan-3 was on course to land on Aug. 23. All systems on the spacecraft are working "perfectly" and no contingencies are anticipated on the landing day, the space agency said on Monday. The mission - Chandrayaan means "moon vehicle" in Hindi and Sanskrit - is India's second attempt to land on the south pole of the moon. In 2019, ISRO's Chandrayaan-2 mission successfully deployed an orbiter but its lander crashed.