Member Briefing August 24, 2022
Pat Ryan Defeats Marc Molinaro in 19th Congressional Special Election
Ryan fended off Molinaro in a special election Tuesday for the vacated 19th district seat, in unofficial results. Ryan garnered 51.07% of the vote to Molinaro’s 48.75%, according to the state Board of Elections. More than 129,000 ballots were cast, not counting absentees, of roughly 476,000 active registered voters in the district. Ryan won his home county by more than 9,000 votes.
Molinaro based his campaign in recent weeks on the faltering economy and public safety, tying Ryan to complaints with the leadership of Democrats Gov. Kathy Hochul and President Joe Biden. Ryan likewise discussed economic solutions, but focused on personal freedoms, namely abortion rights. He often framed issues through the lens of his military background. Ryan is a U.S. Army veteran who served two combat tours in Iraq after graduating from the U.S. Military Academy at West Point.
War in Ukraine Headlines
- Ukraine and Russia: the Latest News – The Guardian
- US to Send $3 Billion in Aid to Ukraine as War Hits 6 Months – USA Today
- State Department Advises U.S. Citizens to Leave Ukraine, Russia is ‘Stepping up Efforts’ Against Civilians – Politico
- Football Returns to War-Torn Ukraine as Shakhtar Draw with Metalist 1925 – Reuters
- After Six Months of War in Ukraine, Momentum Tilts Against Russia – WSJ
- Meltdown Averted but Six Months on, Russians Face Economic Pain – Reuters
- Putin’s War is Shattering Views of Russia and Ukraine – The Hill
- Ukraine warns Moscow against ‘despicable show trial’ of POWs – Politico
- Russia and Turkey’s Deepening Ties Prompt Concern in West Over Sanctions Compliance – WSJ
- Baltic States, Poland and Finland Could Ban Russian Tourists, Says Lithuania – Reuters
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
US: S&P Manufacturing PMI drops to 51.3 in August
The data published by S&P Global showed on Tuesday that the business activity in the US private sector contracted at a stronger pace in early August than it did in July with the Composite PMI falling to 45 from 47.7. The Manufacturing PMI declined to 51.3 from 52.2 and the Services PMI plunged to 44.1 from 47.3. Both of these readings fell short of market expectations.
“August flash PMI data signaled further disconcerting signs for the health of the US private sector. Demand conditions were dampened again, sparked by the impact of interest rate hikes and strong inflationary pressures on customer spending, which weighed on activity,” noted Siân Jones, Senior Economist at S&P Global Market Intelligence.
Global Economies Flash Warning of Sharp Slowdown
Business activity in Europe and Japan fell in August, according to new surveys, pointing to a sharp slowdown in global economic growth as higher prices weaken consumer demand and the war in Ukraine scrambles supply chains. The PMI for Germany pointed to the sharpest decline in business activity since June 2020, while the measure for France pointed to the first decline in activity since the first wave of the Covid-19 pandemic.
Data firm S&P Global said its composite Purchasing Managers Index for the eurozone—which measures activity in both the manufacturing and services sectors—fell to 49.2 in August from 49.9 in July, reaching an 18-month low. A reading below 50.0 indicates a decline in activity. Manufacturing output fell for the third straight month, while the services sector narrowly avoided a contraction. Businesses in both sectors reported a decline in new orders, which points to weakness in the months to come, while factories reported a buildup in inventories as goods remained unsold.
On August 19, the US FDA expanded its emergency use authorization (EUA) of Novavax’s protein-based COVID-19 vaccine to include adolescents. The FDA initially authorized the 2-dose primary series vaccine for adults in July, demonstrating 90% efficacy, and the shots will now be available for individuals aged 12 to 17, among whom it showed 80% clinical efficacy. The 2 doses are given 3 weeks apart.
The Novavax vaccine uses a more traditional, protein-based technology that teaches the immune system to recognize small, modified pieces of the coronavirus spike protein. This older technology is also used in vaccines for hepatitis B, HPV, and pertussis. The Novavax vaccine also contains the Matrix-M adjuvant, which helps to induce a broader immune response. In July, the company announced that the vaccine shows “broad” immune response to circulating variants, including Omicron BA.4 and BA.5. However, Novavax is also working on an updated version of the vaccine that specifically targets the Omicron variant and subvariants. The company intends to file for authorization for a bivalent vaccine later this year.
NYS COVID Update
The Governor updated COVID data through August 12.
- Daily: 20
- Total Reported to CDC: 73,214
- Patients Currently in Hospital statewide: 2,447
- Patients Currently in ICU Statewide: 239
7 Day Average Positivity Rate – Cases per 100K population
- Statewide 7.08% – 27.54 positive cases per 100,00 population
- Mid-Hudson: 5.71% – 26.88 positive cases per 100,00 population
Pfizer COVID-19 Vaccine 73 Percent Effective in Children Under 5
Pfizer’s COVID-19 vaccine was 73.2 percent effective against the disease in children under five, the company said Tuesday. The company touted the data as reinforcing the importance of the vaccine, which was authorized in June, after months of waiting for a vaccine for the youngest children. The results, based on 34 cases, came when the strain of the virus circulating was primarily the omicron subvariant BA.2, slightly different than the BA.5 omicron subvariant that is largely circulating now.
The effectiveness is for after three shots of the vaccine. The Pfizer vaccine’s authorization was delayed earlier this year to allow time to study a third shot, with the idea that two shots was not enough.
New York State Led US Life-Expectancy Drop in 2020, CDC Says
Every state saw a decline in life expectancy during the first year of the COVID-19 pandemic, according to new federal data published Tuesday. The report, from the Centers for Disease Control and Prevention’s National Center for Health Statistics, looked at death data for 2020, the last year for which complete data is available.
Results found that life expectancy declined in all 50 states and the District of Columbia from 2019 to 2020, mainly due to COVID and “unintentional injuries,” such as drug overdoses, according to the report. For the United States overall, life expectancy at birth was 77.0 years — a decrease of 1.8 years from the life expectancy of 78.8 years in 2020. New York saw the biggest drop from 80.7 years to 77.7 years, and Hawaii saw the smallest drop from 80.9 years to 80.7 years.
NY Fed: Pass-Through of Wages and Import Prices Has Increased in the Post-COVID Period
The broad-based nature of the recent inflation readings has increased concerns that inflation may run above the Federal Reserve’s target for a longer period than anticipated. In this post we use detailed industry-level data to examine two prominent cost-push-based explanations for high inflation: rising import prices and higher labor costs.
A study from the NY Fed finds that the pass-through of wages and input prices to the U.S. Producer Price Index has grown during the pandemic. Both the large changes in these costs and a higher pass-through into domestic prices have contributed toward higher inflation.
New Home Sales Fall 12.6% in July as Rising Prices Take a Toll
Sales of newly constructed homes fell by 12.6% in July from June and were down 29.6% from a year ago, according to a joint report from the US Department of Housing and Urban Development and the US Census Bureau. It was the second consecutive month of declines.
Only 511,000 new homes were sold last month, at a seasonally adjusted annualized rate, down from a revised 585,000 in June. That’s the lowest sales number since January 2016. A year ago, 726,000 newly constructed homes were sold. Meanwhile, the median price for a new construction home rose to $439,400, up from $402,400 the previous month.
Economic Growth In Japan Close To Stalling In July Led By Renewed Manufacturing Decline
The preliminary PMI survey results for July signal a significant loss of growth momentum in the Japanese economy at the start of the third quarter. While second quarter growth had been boosted by the reopening of the economy from Omicron-related containment, July has seen this rebound fade leading to much-reduced service sector growth and a renewed fall in manufacturing output.
The details found in the survey’s sub-indices, such as new orders and inventories, points to the trend deteriorating further in August. Price pressures meanwhile cooled amid the waning demand environment, albeit down only slightly from June’s all-time high.
UK Manufacturing Downturn Pushes Economic Activity to Stagnation
Britain’s factories are bearing the brunt of the slowdown in the economy as higher costs, weaker demand and supply bottlenecks combine to send output plunging. Two separate snapshots of industrial activity showed a decline in manufacturing activity – part of a Europe-wide trend exacerbated by the economic fallout from the war in Ukraine. The monthly purchasing managers’ index from S&P/Cips found manufacturing output at its weakest level since the early stages of the pandemic in the spring of 2020.
Modest growth in the UK’s much bigger service sector prevented the overall measure of private-sector activity dipping below 50, but the drop from 52.1 to 50.9 left the composite index at its weakest in 18 months. The eurozone’s overall PMI fell from 49.9 to 49.2 in August, also the lowest in 18 months.
Foreign Exchange Markets – Dollar Runs as Euro Plunges
Risk aversion took over financial markets at the beginning of the week amid recession fears hitting European shores. Gas prices soared in the region to new record highs as Russia announced unscheduled maintenance on the Nord Stream 1 pipeline, announcing it will shut it down for three days starting August 31.
The EUR/USD pair collapsed to a fresh 22-year low of 0.9925, holding nearby early in the Asian session. GBP/USD fell to its lowest since March 2020, trading at around 1.1760. Commodity-linked currencies were also down, with AUD/USD trading at the lower end of its August range in the 0.6870 area and the USD/CAD pair reaching a one-month high of 1.3060. The greenback appreciated against its safe-haven rivals, with USD/CHF trading at 0.9640 and USD/JPY 137.40. Gold trades at around $1,737 a troy ounce.
How U.S. Companies Suffer From A Strong Dollar
A strong dollar is great for businesses that import products or parts and a strong dollar is good for the international traveler. However, the negative impact on U.S. companies that do business internationally or have international customers, cannot be discounted. And in the case of a pending 2022 global recession, it’s going to be like a 1-2 punch for U.S. based firms operating on foreign soil.
One reason for the additional strength is that we are seeing an increase in interest rates. The higher rates attract foriegn investors to hold their money in U.S. dollars and this drives up the demand for the currency, thus strengthening the dollar. Foriegn exchange markets are always changing.
Endless Demand Spurs U.S. Natural-Gas Prices to Shale-Era Highs
The 14-year highs reached this week by U.S. natural-gas futures show the unceasing demand for U.S. shale gas across the Atlantic—and likely point to higher prices ahead. Surging prices in Europe, weather that remains hotter than normal in much of the country and the heart of hurricane season, when storms can knock out production platforms in the Gulf of Mexico, threaten to send prices higher, analysts and traders say.
The latest price spike came in response to Russia’s plans to shut down one of Europe’s main fuel arteries for a few days at the end of the month. The shutdown announced Friday is either the latest episode of unplanned maintenance along the vital Nord Stream gas pipeline or an act of economic warfare on Russia’s part in retaliation for Western Europe’s support for Ukraine.
White House to Announce Student Loan Cancellation, Payment Pause Extension Today
Sources said President Biden’s intended measure will include at least $10,000 in loan forgiveness for borrowers who make less than $125,000 annually, as well as another payment freeze for roughly four months. The $10,000 figure would be the largest forgiveness of federal student loans per individual to date.
The move comes just a week ahead of the White House’s self-imposed Aug. 31 deadline. The timing has left millions of Americans waiting for guidance from the Department of Education on whether student loan payments that have been deferred since the start of the pandemic would resume next month.