Member Briefing February 15, 2023
CPI = 6.4 - Inflation Rose 0.5% in January, More Than Expected
The consumer price index, which measures a broad basket of common goods and services, rose 0.5% in January, which translated to an annual gain of 6.4%. Economists surveyed by Dow Jones had been looking for respective increases of 0.4% and 6.2%. Excluding volatile food and energy, the core CPI increased 0.4% monthly and 5.6% from a year ago, against respective estimates of 0.3% and 5.5%.
- Shelter costs rose 0.7% on the month and was up 7.9% from a year ago.
- Energy also was a significant contributor, up 2% and 8.7%, respectively.
- Food costs rose 0.5% and 10.1%, respectively.
- Medical care services fell 0.7%,
- Airline fares were down 2.1%
- Used vehicle prices dropped 1.9%,
- Egg prices, however, rose 8.5% and are up a stunning 70.1% over the past year.
While price increases had been abating in recent months, January’s data shows inflation is still a force in a U.S. economy in danger of slipping into recession this year.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Dutch F-35s Intercept Three Russian Military Aircraft Near Poland - Reuters
- Russia Put 6,000 Ukrainian Kids in Re-Education Camps, Yale Study Finds - Bloomberg
- Putin's War Is a Long-Term Disaster for Russians – Foreign Policy
- The Russian Student Under Arrest for an Instagram Story - BBC
- Russia Denies Claims it Plans to Destabilize Moldova - AP
- Germany Chides Allies for Delays in Delivering Tanks to Ukraine - FT
- Kremlin Moves to Rein in Russian Mercenary Boss Prigozhin – Reuters
- U.S. Expects Ukraine to Launch Offensive Against Russia in Spring - NYT
- Russian-Linked Malware Was Close to Putting U.S. Electric, Gas Facilities ‘Offline’ Last Year - Politico
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Inflation Report Keeps Fed on Track to Continue Rate Increases
Tuesday’s strong inflation report is likely to keep Federal Reserve officials on track to raise interest rates at their meeting in March and to signal further increases will be likely. The recent trend of cooling inflation leveled off in January as energy, food, shelter and many other prices climbed, the Labor Department’s latest figures showed.
The inflation report illustrates why Fed officials in recent public appearances have steeled themselves for a longer inflation fight than anticipated by many investors, who in recent weeks have anticipated a swifter decline. The process of lowering inflation to the Fed’s goal of 2% “is likely to take quite a bit of time. It’s not going to be, we don’t think, smooth,” Fed Chair Jerome Powell said at a moderated discussion last week. “It’s probably going to be bumpy.” The expectation that inflation “will go away quickly and painlessly . . . is not the base case,” he added. “The base case for me is that . . . we’ll have to do more rate increases, and then we’ll have to look around and see whether we’ve done enough.”
Federal Reserve Vice Chair Lael Brainard is set to lead the White House National Economic Council.
President Biden is set to name Federal Reserve Vice Chair Lael Brainard to serve as his economic-policy coordinator. She will succeed Brian Deese as the director of the National Economic Council, which is responsible for advising the president on policy and personnel decisions and coordinating policy making across executive branch agencies. Mr. Deese is planning to step down this month.
Ms. Brainard, 61 years old, is an economist with extensive government experience. She grew up in West Germany and communist Poland as the daughter of a U.S. diplomat. She was appointed to a seat on the Fed’s board of governors by President Obama in 2014 and tapped by Mr. Biden in 2021 to serve as the central bank’s second-in-command after the president considered naming her to lead the Fed. He instead opted to reappoint Fed Chair Jerome Powell, who faced an easier path to Senate confirmation.
US COVID – Covid’s Omicron Variant, Thought to Be Milder, Can Increase Risk for Diabetes
People who’ve had Covid-19 have a higher risk of developing diabetes, and that link seems to have persisted into the Omicron era, a new study finds. Mounting evidence suggests Covid-19 infections are tied to a new diagnosis of diabetes, though it’s not clear whether this relationship is a coincidence or cause-and-effect.
The raw data showed that people who’d had Covid-19 had higher risks of being diagnosed with diabetes, high cholesterol and high blood pressure after their infections. But when the researchers adjusted those numbers to account for the benchmark diagnosis, only the risk of diabetes remained significantly elevated. Covid-19 increased the odds of a new diabetes diagnosis by an average of about 58%.
Long COVID Now Looks like a Neurological Disease, Helping Doctors to Focus Treatments
People with long COVID have symptoms such as pain, extreme fatigue and “brain fog,” or difficulty concentrating or remembering things. As of February 2022, the syndrome was estimated have forced between two million and four million Americans out of the workforce, many of whom have yet to return. The risk appears at least slightly higher in people who were hospitalized for COVID and in older adults. Women face higher risk, as do people who smoke, are obese, or have any of an array of health conditions, particularly autoimmune disease.
The most common, persistent and disabling symptoms of long COVID are neurological. Some are easily recognized as brain- or nerve-related: many people experience cognitive dysfunction in the form of difficulty with memory, attention, sleep and mood. If the virus does hang around in some form, antiviral medications could potentially clear it, which might help resolve neurological symptoms. That's the hope of scientists running a clinical trial of Paxlovid, Pfizer's antiviral drug for acute COVID.
Read more at Scientific American
Poll: CEOs Remain Wary In February Amid Continuing Economic Uncertainty
Chief Executive’s February poll of 177 U.S. CEOs - fielded February 7-9 - finds muted optimism about the future as strong economic indicators including a surprisingly robust labor market—normally great news—continue to fuel fears of a Fed-led recession instigated to snap inflation. Overall, CEOs say they are motivated by easing inflation and strong employment numbers but remain concerned that high interest rates and potential layoffs will diminish consumer spending power and slow the economy.
The Index—which asks CEOs to predict business conditions 12 months from now—remains at 6.3 out of 10 on our scale (1=poor and 10=excellent), unchanged from last month. Meanwhile, the proportion of CEOs who forecast improving conditions slid this month, after reaching a multi-year peak in January. CEOs’ confidence in current business conditions ticked up 2 percent to 6.2 out of 10, up sharply from last quarter as business owners say that demand has yet to falter in most industries.
Patience Wanes Over West Coast Port-Labor Talks as Cargo Drops
Talks for a new labor pact between West Coast dockworkers and their employers are stretching into a 10th month, but with no agreement in sight and volumes dropping, patience is wearing thin. The pandemic-era pickup in cargo movement has largely eased, partly due to businesses shifting goods to East and Gulf coast ports to avoid a repeat of Covid-era supply-chain logjams and seeking to avert the risk of delays that marred labor negotiations in 2014 and 2015.
The volume slowdown is lowering urgency on the new deal for 22,000 dockworkers, according to people working in the logistics industry. Shipping costs have also plunged — as have ocean-carrier profits — sparking anxiety about future demand and threatening to weaken employee leverage. The sides haven’t announced major progress since they struck a tentative agreement on health benefits just three weeks after the prior contract expired July 1.
Maersk Sues Evergreen Over 2021 Blocking of Suez Canal
The world’s biggest shipping company said Monday it sued a rival shipping line in a Danish court, seeking compensation for ship delays that resulted from the blocking of the Suez Canal by a hulking vessel two years ago. The Panama-flagged vessel Ever Given, operated by Evergreen Marine Corp., ran aground in March 2021, blocking the global waterway for nearly a week. The enormous vessel was released in a massive salvage operation.
In an email to The Associated Press, shipping giant A.P. Moeller-Maersk said it filed a claim against Evergreen Marine, the vessel’s Japanese owner and its German technical manager, Bernhard Schulte Management, in the Danish Maritime and Commercial High Court in Copenhagen, Denmark. The Copenhagen-based shipping company said the claim is related to losses suffered during the canal’s blockage. It did not provide further details, including when it filed the claim.
Read more at The Seattle Times
Is the Green Transition Inflationary?
While the physical effects of climate change such as extreme temperatures may already be impacting inflation, our analysis focuses on the relation between climate policies and inflation—an immediate concern for central bankers, as policies aimed at discouraging high emission activities and promoting clean energy have already been introduced in many advanced economies, and more are likely to come.
In terms of price developments, the outcome of these policies is to raise the price of dirty sectors such as oil and gas, and lower those of green sectors such as renewable energy, relative to those of the rest of the economy. But since these are adjustments in relative prices, not absolute ones, they can in principle take place with any level of overall inflation.
China, Is Losing More of its Manufacturing and Export Dominance, Latest Data Shows
China is losing more manufacturing and export market share in key sectors to Asian neighbors, with recent “Zero Covid” policies a significant factor leading to further erosion in its long-time dominance of global trade. According to data shared with CNBC by transport economics firm MDS Transmodal, China has lost ground in key consumer categories, including clothing and accessories, footwear, furniture, and travel goods, while also seeing declines in its share of exports from minerals to office technology.
“Drilling down to the individual commodity groups exported from China, we observe that China has been continuing to lose market share, with Vietnam amongst the countries gaining importance on the international landscape,” said Antonella Teodoro, senior consultant at MDS Transmodal. That view matches other recent market research on the gains being made by Vietnam in particular.
UK Firms Plan Biggest Pay Rises Since 2012 to Fill Staff Gaps
British employers expect to raise wages for their staff by the most in at least 11 years but the 5% pay deals for workers would still fall well below expected inflation, a survey published on Monday showed.
With the Bank of England fearing the surge in inflation could be harder to tame if pay deals keep rising, the Chartered Institute of Personnel Development (CIPD) said 55% of recruiters planned to lift base or variable pay this year as they struggle to hire and retain staff in Britain's tight labour market.
Ford to Build EV Battery Plant in Michigan, Use Chinese Tech
Ford Motor Co. announced Monday it will build a $3.5 billion electric vehicle battery plant in Michigan that uses Chinese technology, a move the company believes will bolster its ability to take advantage of President Joe Biden’s landmark climate law. The deal between Ford and China-based Contemporary Amperex Technology Co. Ltd., or CATL, is landing in the Great Lakes state after Virginia Gov. Glenn Youngkin, a Republican, said he rejected a proposal to nab the plant, citing concerns around CATL’s connections to the Chinese Communist Party .
Ford workers will build both nickel cobalt manganese and lithium iron phosphate (LFP) batteries at the facility, slated to come online in 2026, while CATL will continue to own the technology to create the cells and be contracted to provide some additional services. When asked about the political risks of working with a Chinese company, Lisa Drake, Ford vice president of EV industrialization, emphasized on a call with reporters Monday that it’s a “very global marketplace” especially when it comes to EV batteries.
Air India Reveals Orders for 470 Boeing, Airbus Jets
Air India unveiled orders Tuesday for 470 Boeing and Airbus passenger jets as it races to tap surging demand for increasingly affordable air travel from the nation’s growing ranks of middle-class consumers. Air India is seeking to reinvent itself by expanding its operations and modernizing its fleet. The new jets will help the airline’s owner, Tata Sons, compete against upstart discount rivals including India’s dominant carrier, IndiGo.
India’s largest international airline and second-largest domestic carrier is buying 220 Boeing aircraft valued at $34 billion. It marks the U.S. plane maker’s third-largest sale of all time, in dollar value, and its second of all time in quantity. Air India is also buying 250 passenger jets from European plane manufacturer Airbus, with the orders championed by the leaders of the U.S., France and India.
Ford Halts Production, Shipments of F-150 Lightning Over Potential Battery Issue
In a blow to the company’s growing EV ambitions, Ford (F) today confirmed it is halting production and shipments of its F-150 Lightning electric pickup due to a potential battery issue."I can confirm a Stop Build and In-Transit Stop Ship for F-150 Lightning,” Ford spokesperson Emma Bergg said in a statement. “As part of our pre-delivery quality inspections, a vehicle displayed a potential battery issue and we are holding vehicles while we investigate."
The production and shipment halt was first reported by Motor Authority. Ford also said it is unaware of any incidents or issues stemming from this potential issue with trucks already sold and that it is not issuing a “stop-sale” directive to dealers regarding F-150 Lightnings that are already at dealer lots and cleared for scheduled delivery.