Member Briefing December 1, 2022

Posted By: Harold King Daily Briefing,

Fed's Powell Says December Rate-Hike Slowdown Possible, Inflation War Far From Over

The U.S. central bank could scale back the pace of its interest rate hikes "as soon as December," Federal Reserve Chair Jerome Powell said on Wednesday, while warning that the fight against inflation was far from over and key questions remain unanswered, including how high rates will ultimately need to rise and for how long.

"It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting," Powell said in a speech to the Brookings Institution think tank in Washington. But, emphasizing the work left to be done in controlling inflation, Powell said that issue was "far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level."

Read more at Reuters

War in Ukraine Headlines

EU Plans Subsidy War Chest as Industry Faces ‘Existential’ Threat From US

Europe is facing a double hammer blow from the U.S. If it weren't enough that energy prices look set to remain permanently far higher than those in the U.S. thanks to Russia's war in Ukraine, U.S. President Joe Biden is also currently rolling out a $369 billion industrial subsidy scheme to support green industries under the Inflation Reduction Act. EU industry chief Thierry Breton is warning that Biden's new subsidy package poses an "existential challenge" to Europe's economy.

The tentative solution now being prepared in Brussels is to counter the U.S. subsidies with an EU fund of its own, the two senior officials said. This would be a "European Sovereignty Fund," which was already mentioned in the State of the Union address by Commission President Ursula von der Leyen in September, to help businesses invest in Europe and meet ambitious green standards.

Read more at Politico

US Economy Rose 2.9% in Third Quarter, More than Early Report

GDP growth in the July to September period came in at 2.9%, annualized, better than the 2.6% figure reported in October by the Commerce Department. It was the first expansion this year, after two quarters of negative growth that deepened fears of a recession in the world's biggest economy.

The latest estimate "primarily reflected upward revisions to consumer spending and nonresidential fixed investment," the Commerce Department said Wednesday. But this was partially offset by private inventory investment that was lower than expected, while imports decreased more than earlier estimated, the statement added.but analysts have cautioned of a less rosy path ahead, saying that the leap seen in exports was unsustainable.

Read more at IndustryWeek

U.S. COVID - Covid Becomes Plague of Elderly, Reviving Debate Over ‘Acceptable Loss’

More than 300 people are still dying each day on average from covid-19, most of them 65 or older, according to data from the Centers for Disease Control and Prevention. While that’s much lower than the 2,000 daily toll at the peak of the delta wave, it is still roughly two to three times the rate at which people die of the flu — renewing debate about what is an “acceptable loss.”

And while older Americans have consistently been the worst hit during the crisis, as evident in the scores of early nursing home deaths, that trend has become more pronounced. Today, nearly 9 in 10 covid deaths are in people 65 or older — the highest rate ever, according to a Washington Post analysis of CDC data. Some epidemiologists and demographers predict the trend of older, sicker and poorer people dying at disproportionate rates will continue, raising hard questions about the trade-offs Americans are making in pursuit of normalcy — and at whose expense.

Read more at the Washington Post

House Votes to Avert Rail Strike

The House passed a bill on Wednesday to avert a railway strike, taking the first major step in avoiding a walkout of workers that would have drastic effects on the U.S. economy as it heads into the holiday season. The chamber passed the resolution in a 290-137 vote, sending it to the Senate for consideration just over one week out from the Dec. 9 strike deadline. Seventy-nine Republicans supported the measure, and eight Democrats voted “no.”

The resolution passed on Wednesday was a tentative agreement negotiated by the two largest rail unions in September with help from the Biden administration. It provides workers with 24 percent raises over five years and allows them to take time off for medical appointments without being penalized, a key sticking point.

Read more at The Hill

New York Rep. Hakeem Jeffries Elected to Lead House Democrats

Showing rare party unity after their midterm election losses, the House Democrats moved seamlessly from one history-making leader to another, choosing the 52-year-old New Yorker, who has vowed to “get things done,” even after Republicans won control of the chamber. The closed-door vote was unanimous, by acclamation. While Democrats will be relegated to the House minority in the new year, they will have a certain amount of leverage because the Republican majority is expected to be so slim and McCarthy’s hold on his party fragile.

A New Yorker also leads the Democrats in the Senate.  Charles Schumer remains Senate Majority Leader.  He will negotiate either a 50-50 split with Republicans or a one seat majority depending on the outcome of the Georgia runoff election between Raphael Warnock and Herschel Walker.

Read more at The AP

Covid Controls Hit Chinese Factories, Adding Risks to Global Growth

Gauges of activity in Chinese manufacturing, services and construction deteriorated by more than expected this month, a sign of weakening economic output as authorities persist in using widespread curbs on business and daily life to respond to Covid-19 outbreaks. Auto makers in China, meanwhile, including Volkswagen AG and Honda Motor Co., have halted production at some plants as authorities persist in using strict measures to control the spread of the virus.

The purchasing managers index for China’s manufacturing sector fell to 48 in November, from 49.2 in October, China’s National Bureau of Statistics said Wednesday. A reading below 50 indicates that activity is contracting. The surveys suggest China’s economy is headed for a feeble final quarter in 2022 as factories, stores, restaurants and construction sites once again feel the squeeze from strict Covid-19 controls.

Read more at the WSJ

Eurozone Inflation Eased in November, but Further Rate Rises Likely

The annual rate of inflation in the eurozone fell in November for the first time since mid-2021 as energy prices dropped. However, the slowdown isn’t likely to stop the European Central Bank from increasing interest rates further, economists warned. Consumer-price inflation across the 19 countries that share the euro has increased since Russia’s invasion of Ukraine, and the Kremlin’s decision to weaponize the country’s vast stores of energy to undermine European support for Kyiv.

Wednesday’s data from the European Union’s statistics agency showed that consumer prices in November were 10% higher than a year earlier, down from the 10.6% annual rate of inflation recorded in October as energy prices fell. Economists surveyed by The Wall Street Journal last week had expected to see a decline to 10.4%.

Read more at The WSJ

India to Step up State Spending to Boost Growth - Finance Minister

India plans to use government capital spending to sustain strong economic growth, finance minister Nirmala Sitharaman told the Reuters NEXT conference on Wednesday, forecasting a "very good" economy ahead of 2024 national elections. The government will also place a priority on health and education, said Sitharaman, who is preparing the national budget due on Feb. 1, the last full budget before the elections.

The government's top economic advisor on Wednesday forecast economic growth for the fiscal year to March 31 at 6.8-7%. Economists have warned, however, that growth momentum may ease in the coming months due to higher interest rates and slowing exports. Other measures to boost growth include a possible expansion of India's main industrial incentive scheme beyond the current sectors, which include autos, electronic manufacturing and solar, Sitharaman said.

Read more at Reuters

Governor Hochul Announces More Than $68 Million Awarded in Round XII of the Regional Economic Development Council Initiative

Governor Kathy Hochul last week announced that more than $68 million has been awarded to support 74 projects across New York State through the Regional Economic Development Council initiative. Round XII included core capital grant and tax-credit funding from Empire State Development, which was made available on a continuous and competitive basis to support the immediate needs of communities.

Funding will support impactful projects that align with each region's strategic goals. The application for Empire State Development Grant funds remains open, and applications are being reviewed on an on-going basis until funds are exhausted. Applicants with strong, shovel-ready projects that align with the state and region's economic development priorities can apply through the Consolidated Funding Application.

Stewart Low on Hanger Space, Passenger Service Less Than Half Pre-Pandemic Peak

New York Stewart International Airport is out of hangar space with only one new facility on the horizon. Signature Aviation has airport approval to construct a hangar with plans on the drawing board right now. Airport Development Director Michael Torelli told the advisory Stewart Airport Commission on Tuesday that other hangar space may be in the offing.

On the passenger service side of the airport, ridership continues to improve since the height of pandemic. Three airlines currently serve at Stewart – Allegiant and Frontier, both serving southern destinations, and Play Airways, which flies to Europe via Iceland. Torelli estimated that over 300,000 people will fly through Stewart by the end of the year. That compares with about 700,000 passengers in 2018, before COVID-19 emerged and effectively shut down air travel.

Read more at Mid-Hudson News

Rivian CEO: Supply Chain Loosening Up In ‘Powerful Ways’

Slower growth in some parts of the economy is easing supply chain pain for electric vehicle maker Rivian Automotive Inc., founder and CEO RJ Scaringe said Nov. 29. Speaking to an investor conference hosted by research firm Redburn, Scaringe said the work his team has been doing to solidify and grow relationships with suppliers is being helped by demand softening in some sectors, especially for chips.

“The supply chain being less over pressurized is actually helpful, particularly with semiconductors,” Scaringe said. “We’ve seen that space and across the various stages of supply chain start to loosen up in powerful ways that we think are going to alleviate a lot of the challenges that we had throughout this year. Each supplier has to go through their own associated challenges with ramping,” he said. “We’ve seen those ramps occur and we’ve seen our confidence grow with those suppliers and vice versa.”

Read more at IndustryWeek

German Machine Tool Orders Up Again

German machine-tool builders reported a 9.0% year-over-year increase in new orders for the third quarter of 2022, continuing a sustained recovery from the weak results of 2021. During the most recent quarter, orders from German manufacturers were up 3.0%, while foreign customers orders were up 12.0% for the period. The German manufacturers’ new-order data is supplied on a quarterly basis by the German Machine Tool Builders’ Assn. (VDW), which represents one of the largest components of the mechanical engineering sector in that country, and one of the largest machine-tool manufacturing industries in the world.

Through nine months of the current year, new orders have increased 26.0%, with demand coming almost equally from foreign and domestic (German) buyers. For comparison, U.S. machine shops’ new orders for the January-September period were 2.7% higher than the nine-month total for 2021, according to AMT’s U.S. Manufacturing Technology Orders report.

Read more at American Machinist

Global Aircraft Orders Rise

Global aircraft orders in October 2022 have increased compared to previous months, the 299 aircraft ordered is the most for the month since 2019. For the full year to date, aircraft orders are now the largest for the first ten months of the year since 2014. Single-aisle aircraft continue to dominate both the orderbook and recovery, accounting for 90% of orders placed so far in 2022.

Aircrafts deliveries also rose, with 95 aircraft delivered (75 single-aisle and 20 wide-body), a 51% increase on October 2021. Following the high delivery numbers seen in recent months, aircraft deliveries remain in line with the ADS forecast with 860 deliveries made so far in 2022. Year to date, single aisle deliveries are 73% ahead of October 2021, and wide-bodies are 14% ahead from the same point of time in 2021. The backlog of global aircraft orders stands at 13,577, a 7% increase on October 2021 and continues to rise with demand and market confidence.

Read more at Aerospace Manufacturing (UK)

Hydrogen Propulsion Technologies on the Rise

While there are many technologies available or under development today that can reduce the carbon dioxide output of heavy equipment, nothing comes closer to net zero than hydrogen. By all accounts, it will be the fuel of the future, even if it isn’t widely adopted until close to mid-century. There are two different hydrogen propulsion technologies emerging with two very different timelines:

The first, hydrogen combustion engines run compressed hydrogen gas through fuel lines into the cylinders of an internal combustion engine (ICE). Spark plugs ignite the gas in the cylinders and power a conventional drivetrain. The second, hydrogen fuel cell technology, consists of two electrodes—one negative, one positive - sandwiched around an electrolyte. Hydrogen is fed to the negative terminal, and air is fed to the positive creating a chemical reaction that delivers a continuous flow of electricity to batteries that drive electric motors.

Read more at Equipment World

OPEC Oil Output Drops in November After Cut Pledged -Survey

OPEC oil output has fallen in November, led by top exporter Saudi Arabia and other Gulf members, after the wider OPEC+ alliance pledged steep output cuts to support the market amid a worsening economic outlook, a Reuters survey found on Wednesday. The Organization of the Petroleum Exporting Countries (OPEC)pumped 29.01 million barrels per day (bpd) this month, the survey found, down 710,000 bpd from October. In September, OPEC output had been the highest since 2020.

OPEC and its allies, known as OPEC+, have been boosting output for most of 2022 as demand recovered. For November, with oil prices weakening amid concern of recession, the group made its largest cut since the early days of the COVID-19 pandemic in 2020.

Read more at The AP