Member Briefing February 14, 2023

Posted By: Harold King Daily Briefing,

January CPI Report Forecasts Show a Bump in the Road to Lower Inflation

Forecasts for the January CPI report due out later this morning suggest the run of good news on inflation could hit a pause, and some economists see an increasingly bumpy path ahead. The strong wage inflation and low unemployment rate seen in the latest jobs report is what’s complicating the picture. January CPI report forecast according to FactSet:

  • CPI to rise 0.5% for the month versus 0.1% in December,
  • Core CPI (excluding food and energy) to rise 0.3% for the month after rising 0.4% in December.
  • CPI, year over year, to rise 6.2% versus 6.5% in December.
  • Core CPI, year over year, to rise 5.5% versus 5.7% in December.

Read more at Morningstar

War in Ukraine Headlines


From Apple to VW, CEOs Gradually Returning to China After Its Reopening

Top executives from multinational companies are trickling back into China with the country’s reopening, even as U.S.-China tensions grow following the appearance of a suspected Chinese surveillance balloon over the continental U.S. Volkswagen AG’s chief executive visited China from late January to early February, the company said, while Apple Inc. CEO Tim Cook and Pfizer Inc. pointing triangle CEO Albert Bourla are expected to visit next month, people familiar with the matter said. Ola Källenius, Mercedes-Benz Group AG’s chairman, also plans a visit to China, the company said.

For some executives, site visits to local operations and meetings with managers are a priority, while others are looking to meet local business partners and government officials. Dozens of executives are expected to attend business conferences planned for the coming months in the country after China’s pandemic restrictions were dropped.

Read more at The WSJ

U.S. Consumer Sentiment Improves, Inflation Expectations Rise

U.S. consumer sentiment improved to a 13-month high in February, but households expected higher inflation to persist over the next 12 months, a survey showed on Friday. The University of Michigan's preliminary February reading on the overall index of consumer sentiment came in at 66.4, the highest reading since January 2022, up from 64.9 in the prior month. Economists polled by Reuters had forecast a preliminary reading of 65.0.

The improvement in sentiment was probably driven by a rally on the stock market and persistent labor market strength. It raised hope that the economy could avoid the much-feared recession and that any downturn would likely be short and mild, economists said. Rising sentiment also suggested that the sharp declines in retail sales in November and December were a fluke.

Read more at Reuters

US COVID – U.S. Government to Buy 1.5 Million more Novavax Doses

The U.S. government has agreed to buy 1.5 million more doses of Novavax Inc (NVAX.O) COVID-19 vaccine, the company said on Monday, adding that the modified agreement includes funds for development of an updated vaccine by fall this year. Sales of the company's vaccine have been hurt by a global supply glut and waning demand, with Novavax cutting its full-year revenue forecast for the shots twice last year.

The protein-based vaccine was expected to convince those skeptical of the new mRNA-based vaccines against the virus from rivals such as Pfizer Inc and Moderna. The deal comes even as the United States plans to end its COVID-19 emergency declarations on May 11, nearly three years after it imposed sweeping measures to curb the spread of the pandemic.

Read more at Reuters

While Biden Celebrates a Soft Landing, Powell is Worrying

President Joe Biden is traveling the country touting the resilience of the economy and its remarkably booming job market. Federal Reserve Chair Jerome Powell is sending a very different message: If the economy keeps powering ahead, he says, the central bank will likely slam harder on the brakes to kill inflation. How the economy reacts to the Fed’s highest interest rates in 15 years will shape the legacy of both men.

With job growth surging and wage gains leveling off, there is more hope now than in almost a year that the economy can slow along with inflation without a painful recession — a so-called soft landing. But prices still rose faster than they had in four decades last year, and Powell says he’ll do what it takes to keep borrowing costs high and prevent price increases from becoming a more permanent feature of the economy.

Read more at Politico

Debt Talks Can Include Everything But Cuts to Social Security and Medicare, Republicans Say

Republicans say they would not cut Social Security and Medicare programs but "everything else is on the table" in talks over raising U.S. government borrowing limits, House Oversight Committee Chair James Comer said on Sunday. "We need to shore those programs up. They're running out of money. But at the end of the day, those programs are going to be off the table with respect to cuts, but everything else is on the table," Comer said in an interview on ABC

The U.S. government neared its $31.4 trillion debt ceiling earlier this month, prompting the Treasury to warn that it may not be able to stave off default past early June. But as that deadline looms, Republican lawmakers and President Joe Biden are locked in a disagreement over the path to raising the borrowing limit. Biden says he would not negotiate over raising it, while Republicans say they would not agree to raise it without spending concessions.

Read more at Reuters

EU Economic Forecasts: Inflation Past its Peak, No Recession

The EU's executive branch published revised economic forecasts on Monday, saying the bloc will narrowly avoid a technical recession and has already passed its inflation peak as natural gas prices continue to retreat from the historic levels of mid-to-late 2022. But the European Commission also warned that consumers would continue to feel the pinch of reduced purchasing power as inflation remains above 5%.

Growth for 2023 should reach 0.8% for the 20 countries using the euro single currency, and 0.9% for the 27-member bloc as a whole, the Commission said. That's compared to forecast growth of 0.3% in its previous quarterly report. The Commission also forecast that the bloc would avoid a contraction in the current January-March quarter, and thereby narrowly stave off a technical recession. This follows growth of just 0.1% in the previous quarter.

 Read more at Deutsche Welle

Clothing Companies Lean on Retailers to Help Ease Inventory Glut

Several major apparel and accessory brands this week reported weaker sales, a sign that the industry is still struggling to address last year’s retail inventory glut and the prospect of weaker consumer spending. Companies have been discounting everything from Levi’s skinny jeans to Vans sneakers and reporting squeezed profits as a result. At the same time, department stores have been slower to replenish merchandise or canceled orders as consumer demand remains fragile and they address their own product glut, retail executives said.

The tension reflects how several brands, even those that have their own physical stores and websites, still rely on wholesaling, or selling goods often in large quantities to third parties, to support their business and reach a wider range of customers.

Read more at the WSJ

How Much Can the Fed’s Tightening Contract Global Economic Activity?  

Recent empirical research used cross-country firm level data and information on input-output linkages and finds that the impact on sales and investment spending is largest in sectors with exposure to trade in intermediate goods. The research also finds that financial factors drive differences, with U.S. monetary policy spillovers having a much smaller impact on firms that are less financially constrained.

The baseline model identifies a large and statistically significant negative impact of a U.S. monetary policy tightening on investment and sales for the average foreign firm. In particular, a 100-basis point monetary tightening in a given year lowers the ratio of investment spending to fixed assets in the subsequent year by an amount equivalent to the sample average of the annual change in this ratio observed in the data.

Read more at the NY Fed

State Releases Graduation Data for 2022 School Year

Recently released data from the state indicates that graduation rates statewide are up around one percent, from 86 percent in 2021 to 87 percent in 2022. The data reflects students who entered the ninth grade in the 2018-2019 school year and includes graduates who earned both Regents and local diplomas.

Here are the school districts with the highest and lowest graduation rates in the Mid-Hudson region, by county.

Airbus Roiled by Poor Start to 2023 as Industrial Pressure Grows

Reuters reports that the boss of European planemaker Airbus (AIR.PA) has read the riot act to executives about disappointing deliveries in January and warned them that in 2023 Airbus cannot deliver fewer jets than its now-abandoned target for 2022, industry sources said. Until now, Airbus has blamed mounting delays on suppliers led by engine makers. But the structure, operational controls and performance inside Airbus are increasingly in the spotlight as several suppliers predict more aircraft delays, they said.

So far, sources have said they expect a delivery goal not far above the original 720 for 2022, though Faury's remarks do not exclude a pain threshold as low as 700. Many analysts nonetheless expect a goal closer to 750, up from 661 in 2022. The first major test will be the first quarter for which suppliers say Airbus seeks close to 140 deliveries. After a weak January, that requires a steeper curve than in recent years.

Read more at Reuters

Semiconductor Wafer Producer Pallidus Relocating Corporate HQ, Manufacturing Operations from New York to South Carolina

Innovative silicon carbide (SiC) wafer semiconductor manufacturer Pallidus will relocate its corporate headquarters and manufacturing operations to York County, SC. The company’s $443 million investment will create 405 new jobs in the Charlotte Region. Operations are expected to be online by the third quarter of 2023. Relocating its corporate headquarters from New York to Rock Hill, Pallidus’ York County facility marks its first operations in South Carolina. The 300,000-square-foot facility will serve as the company’s new corporate headquarters and manufacturing plant. Pallidus’ plans include the growth of its manufacturing capacity to expand the U.S. semiconductor market.

Pallidus uses proprietary M-SiC technology to increase the quality and lower the cost to produce silicon carbide wafers used in semiconductors. The company’s next-generation technology has garnered traction in the rapidly expanding transportation, green energy and industrial power electronics markets.

Read more at Business Facilities

The Case for Immersive Tech (AR and VR) in Apprenticeship Programs

Immersive technologies have already proved to be useful in supplementing classroom education and on-the-job training. Those successes underscore how implementing the technology can bolster the effectiveness of apprenticeship programs in the United States. As most apprenticeship programs are managed or heavily influenced by state and federal governments, policymakers will play a central role in this potential deployment.

The promising results of using AR/VR for classroom and on-the-job training indicate that apprenticeship programs could benefit from adopting this technology. This report explores the state of apprenticeship programs in the United States, current uses of AR/VR for on-the-job training and its benefits, and how the technology could be used to improve apprenticeship programs. It also identifies potential barriers to implementation—such as cost, awareness, ergonomics, technology, and scalability—and discusses how stakeholders can tackle these issues.

Read more at ITIF

US DOE Ramps Up Efficiency Standards For Appliances

The U.S. Department of Energy on Friday proposed new energy efficiency standards for refrigerators and clothes washers that the agency says will save consumers about $3.5 billion annually on energy and water bills. The new standards could come into effect as soon as 2027, under DOE’s preferred timeline. Today, the typical new refrigerator uses 75% less energy than its 1973 counterpart while offering more useful features and  20 percent more storage capacity. Today, washing machines use 70% less energy than in 1990 and offer 50% more tub capacity. The new proposed rules will continue this trajectory of innovation and savings, DOE says in a press release dated February 10.

The Association of Home Appliance Manufacturers would like DOE to abandon its policy of ratcheting up its appliance efficiency standards on a regular basis. On its website, it claims, “More stringent federal efficiency standards are likely to increase costs for manufacturers and consumers without providing meaningful energy savings. Most appliances covered by the program now operate at or near peak efficiency.”

Read more UtilityDive