Member Briefing December 6, 2022

Posted By: Harold King Daily Briefing,

Commerce Department: Factory Orders Accelerate

A report from the Commerce Department on Monday showed factory orders jumped 1.0% in October after rising 0.3% in September. Economists had forecast orders advancing 0.7%. Orders shot up 12.8% on a year-on-year basis in October. Orders for machinery rose 1.5%. There were also solid gains in orders for computers and electronic products as well as electrical equipment, appliances and components

October's jump in factory orders was driven by a 2.2% rise in bookings for transportation equipment, which followed a 2.3% increase in September. Transportation equipment orders were boosted by increases in orders for both defense and civilian aircraft. Motor vehicle orders rebounded 1.7%.

Read more at Reuters


War in Ukraine Headlines


US Services Gauge Rises Unexpectedly on Business Activity Surge

U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy as it braces for an anticipated recession next year. The survey from the Institute for Supply Management (ISM) on Monday followed on the heels of news last Friday that the economy continued to create jobs at a solid clip in November, with wage growth accelerating. Consumer spending also rose strongly in October.

The ISM said its non-manufacturing PMI increased to 56.5 last month from 54.4 in October. It was boosted by a surge in business activity to an 11-month high. Comments from businesses included "gaining more business" and "demand for our services is increasing." Thirteen services industries including construction, healthcare and social assistance, retail trade as well as professional, scientific and technical services reported growth last month. But information, wholesale trade and management of companies and support services reported a decline.

Read more at Bloomberg


Bank of America CEO Brian Moynihan Says the Latest Jobs Report Supports his Prediction of a ‘Mild’ Downturn

“How could you have an unemployment-less recession?” Moynihan asked on CBS News’s Face the Nation program on Sunday, citing the 263,000 new jobs reported in the U.S. jobs report on Friday. The Bank of America CEO on Sunday said he expects the U.S. economy to contract by “just 1%” for the first three quarters of 2023, then return to positive growth. “This is a more mild recession,” Moynihan said.

In June, Bank of America’s incoming head of U.S. economics forecast that the U.S. might see a mild recession by the end of 2022. But strong consumer spending in September led Bank of America’s research team to move their recession forecast to 2023. “They keep pushing it out,” Moynihan joked last month at the Fortune CEO Initiative conference. Moynihan’s more upbeat take on the U.S.’s economic future contrasts sharply to other dire forecasts.

Read more at Fortune


U.S. COVID – Worst Flu Outbreak in More Than a Decade Spikes Hospitalizations

Yet another wave of viral illness is crashing on a health system already stretched to a breaking point by COVID-19 and, more recently, RSV. The worst flu outbreak in more than a decade has left nearly every state with high or very high levels of flu activity, underscoring how pandemic precautions may have left us more vulnerable to seasonal respiratory diseases. Public health experts say that masking and other pandemic precautions largely kept influenza at bay over the past two years and disrupted its seasonal spread. But the return to pre-pandemic life has left us "immunologically naïve" and more susceptible to infections.

Flu-connected hospital admissions over Thanksgiving week almost doubled over the previous week and were the highest seen for that period since the 2010-2011 season, per the CDC.  Adults 65 and older and kids 4 and under have been hit particularly hard during the unusually early surge, especially if they had underlying health conditions. But about 4 in 10 Americans say they don't plan to get a flu shot this season, largely over concerns the vaccines don't work well or have side effects.

Read more Axios


Manufacturing Orders From China Down 40% in Unrelenting Demand Collapse

U.S. manufacturing orders in China are down 40 percent, according to the latest CNBC Supply Chain Heat Map data. As a result of the decrease in orders, Worldwide Logistics tells CNBC it is expecting Chinese factories to shut down two weeks earlier than usual for the Chinese Lunar New Year — Chinese New Year’s Eve falls on Jan. 21 next year. The seven days after the holiday are considered a national holiday. “Many of the manufacturers will be closed in early January for the holiday, which is much earlier than last year,” Monaghan said.

Supply chain research firm Project44 tells CNBC that after reaching record-breaking levels of trade during the pandemic lockdowns, vessel TEU (twenty-foot equivalent unit) volume from China to the U.S. has significantly pulled back since the end of summer 2022 — including a decline of 21% in total vessel container volume between August and November.

Read more at CNBC


Redistricting Plan Would Dramatically Shake Up Assembly

For the first time, a bipartisan panel charged with drawing New York’s legislative district lines has struck a compromise agreement, a shift from the gridlock characterizing the body's brief existence. The 10-person panel on Thursday unanimously passed draft state Assembly district lines that are significantly different from those created by the Assembly itself earlier this year. The new lines appear to demonstrate the danger posed to incumbent politicians when line-drawing is not centered on protecting their interests.

In drawing the new draft lines – under court order – the 10-person commission sought to create districts with only small deviations in population among the districts, as well as districts that do not unnecessarily split cities, towns and counties.


Why a Global Recession is Inevitable in 2023

America’s economy enters 2023 in fundamentally stronger shape than either China’s or any in Europe. The Federal Reserve’s aggressive rate increases will tip the economy into recession, but with the labour market still strong and household savings copious, it will be a mild one. Although high petrol prices have reinforced the inflation surge and hurt the Biden administration, the country is a big energy producer and has therefore benefitted from this year’s commodity shocks.

Paradoxically, in 2023 America’s relative economic strength could prove more of a problem for the rest of the world than its weakness. The Fed will need to raise rates further for longer to quell inflation, in turn reinforcing the dollar’s strength and obliging other central banks to keep up. Domestically, the danger is that divided government and even a mild downturn will mean legislative sclerosis and yet more poisonous politics than usual in Washington. In that environment, support for assisting Ukraine could fade and the appeal of performative toughness over Taiwan would rise. The former would embolden Mr Putin; the latter enrage Mr Xi.

Read more at The Economist


Europeans Cut Back on Spending, Pointing to Recession Ahead

Europeans cut back sharply on their spending on goods during October, a sign that high prices at the start of a period of increasing energy usage are pushing the region’s economies toward recession. Consumer prices have surged 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.

Separate surveys released Monday by S&P Global indicate that a decline in spending is also hitting providers of consumer services. S&P’s Purchasing Managers Index for the eurozone’s services sector fell to 48.5 in November from 48.6 in October, reaching a 21-month low. A reading below 50.0 points to a decline in activity. The decline in household spending on goods and services is a sign that the eurozone economy is likely already contracting. The European Commission last month forecast that the economy would shrink this quarter and during the first three months of next year, thereby meeting a widely used definition of recession. 

Read more at the WSJ


Russian Crude Price Cap Kicks In

A price cap on Russian seaborne oil came into force on Monday as the West attempts to curb revenue flows to Moscow's war machine. After intense negotiations, G7 nations and Australia agreed to a $60 per barrel price level, with an adjustment mechanism that keeps the cap at least 5% below the market rate and allows for revisions every two months. Crude remains Russia's economic lifeblood, especially after the country put a stop to natural gas sales to Europe (a move that was first attributed to maintenance problems and later to sanctions).

The deal allows Russian oil to be shipped to third-party countries using G7 and EU tankers, only if the cargo is bought at or below the $60 per barrel cap. The level is seen as high enough to cover production costs and encourage more output. Russia is the world's second-largest oil exporter, meaning how the situation plays out could influence prices in the months ahead. Many analysts still say that Russia has enough of a shadow fleet to skirt the sanctions, meaning more shipments will be rerouted, which is already happening across global crude markets. While that could keep oil prices at current levels, or even depress them based on demand factors, others are more fearful about the future, saying that a drop in Russian sales or output could lead to a surge in crude and gasoline prices worldwide.

Read more at Seeking Alpha


Railroads Focus on Stabilizing Workforce After Strike Is Averted

President Biden signed a bill Friday restricting rail workers from striking, but the industry is still struggling with a big problem: having enough staff to handle customer demand. The largest U.S. freight railroads have reported strong profits in recent years, helped by higher prices and steady business in transporting everything from automobiles to fertilizer. Export demand for coal and grain, stemming from disruptions in supply chains in Europe after Russia invaded Ukraine, bolstered freight volumes this year, railroads said.

Railroad operators said they have had insufficient numbers of train and engine workers, though unions representing other types of railroad hands, such as signalmen and track workers, said they have shortages, too. Some freight railroad operators, such as Union Pacific and CSX Corp., CSX -1.93%decrease; red down pointing triangle said they have made progress on hiring and service levels since this past spring.

Read more at The WSJ


UK Economy to Shrink in 2023, Risks 'Lost Decade': CBI

Britain's economy is on course to shrink 0.4% next year as inflation remains high and companies put investment on hold, with gloomy implications for longer-term growth, the Confederation of Business Industry forecast on Monday. "Britain is in stagflation - with rocketing inflation, negative growth, falling productivity and business investment. Firms see potential growth opportunities but ... headwinds are causing them to pause investing in 2023," CBI Director-General Tony Danker said.

The CBI's forecast marks a sharp downgrade from its last forecast in June, when it predicted growth of 1.0% for 2023, and it does not expect gross domestic product (GDP) to return to its pre-COVID level until mid-2024. Unemployment would rise to peak at 5.0% in late 2023 and early 2024, up from 3.6% currently, the CBI said. The GDP forecast is less gloomy than that of the British government's Office for Budget Responsibility - which last month forecast a 1.4% decline for 2023.  British inflation hit a 41-year high of 11.1% in October. The CBI predicts it will be slow to fall, averaging 6.7% next year and 2.9% in 2024.

Read more at Reuters


SUNY Board of Trustees Appoints John B. King, Jr. System’s 15th Chancellor

The State University of New York Board of Trustees today announced the appointment of John B. King Jr. as the 15th chancellor of SUNY, the largest comprehensive system of public higher education in the United States. Chancellor King brings to this position decades of experience as a leader in education administration and policy at the local, state, and national levels. He has championed expanding access to high-quality, affordable education in recognition of the transformative power it holds for students from all walks of life.

Chancellor King is currently the President of The Education Trust, a nonprofit organization that promotes high academic achievement for all students in early childhood, K-12 education, and higher education. Prior to his appointment to that post in 2017, Chancellor King served as U.S. Secretary of Education under President Barack Obama. From 2011 to the beginning of 2015 when he joined the Obama Administration, Chancellor King served as New York State’s first African American and first Puerto Rican education commissioner.

Read the SUNY Press Release


Pratt & Whitney to Test New Propulsion Technologies

Pratt & Whitney has joined a consortium of engine and propulsion technology companies to develop hybrid-electric and water-enhanced turbofan technology. P&W’s GTF™ geared-turbofan engine architecture will be the basis for testing a new-concept propulsion system combining Water-Enhanced Turbofan (WET) technology and hybrid-electric propulsion.

The Sustainable Water-Injecting Turbofan Comprising Hybrid Electrics (SWITCH) project aims to demonstrate technologies that will improve fuel efficiency by up to 25% over today’s standards, and reduce aircraft emissions, compared to current state-of-the-art propulsion systems for short- and medium-range aircraft. The technologies developed will be compatible with clean alternative fuels – including sustainable aviation fuel (SAF) — and will be evaluated for future use with hydrogen fuel.

Read more at American Machinist


3 Ways Manufacturers can Reduce Trucking Costs

After a couple years of sky-high trucking rates and tight capacity, the U.S. trucking market is finally softening. Today, retailers have too much inventory and consumer demand has dropped due to inflation and renewed spending on services. The result is weakening demand for truck capacity and falling trucking rates. Truckload spot market rates are below contract prices and 15% lower than a year ago.

Trucking expenses will be flat or decline further through the first quarter of 2023. But the forecast is anything but certain. With full employment, high inflation, war and a new Congress, there are many potential pitfalls. For sure, the softening market won’t last forever.  How can manufacturers take advantage of today’s lower transportation costs while building in the flexibility needed to deal with an uncertain future? Here are 3 ideas.

Read more at IndustryWeek


Oxford’s Word of the Year Speaks to the ‘Unapologetically Self-Indulgent and Lazy’ Among Us

The naming of this year’s Oxford Word of the Year—a term or expression that captures the zeitgeist of the past 12 months—has shown that, for English speakers, a pushback against demanding movements like hustle culture has permeated our lives. Oxford University Press, which runs the campaign, announced “goblin mode” as its 2022 winner on Monday. The expression is defined by Oxford’s language analysts as “a type of behavior which is unapologetically self-indulgent, lazy, slovenly, or greedy, typically in a way that rejects social norms or expectations.”

“Seemingly, it captured the prevailing mood of individuals who rejected the idea of returning to ‘normal life’ or rebelled against the increasingly unattainable aesthetic standards and unsustainable lifestyles exhibited on social media,” Oxford University Press said in its Word of the Year announcement Monday.

Read more at Fortune