Member Briefing February 16, 2022

February 16, 2022

Posted By: Harold King in Daily Briefing,

Steady On – Empire Manufacturing Survey

Manufacturing activity was little changed in New York State for a second consecutive month according to the February survey. Firms were generally optimistic about the six-month outlook, but optimism waned.

The general business conditions index edged up four points to 3.1.
The new orders index came in at 1.4.
The shipments index was 2.9, signaling little change in orders and shipments over the month.
The unfilled orders index came in at 14.4.
The delivery times index was unchanged at 21.6, as delivery times continued to lengthen
The index for number of employees climbed to 23.1, indicating solid gains in employment.
The average workweek index held steady at 10.9.
The prices paid index was little changed at 76.6.
The prices received index rose a steep seventeen points to a record high of 54.1

The index for future business conditions fell seven points to 28.2, its lowest level since the early stages of the pandemic. Longer delivery times, higher prices, and increases in employment are all expected in the months ahead. The capital expenditures index remained near a multi-year high, suggesting that firms plan significant increases in capital spending.

Read the full report at the NY Fed

PPI – U.S. Producer Prices Leapt in January

The Labor Department on Tuesday said the producer-price index, which generally reflects supply conditions in the economy, rose a seasonally adjusted 1% in January from the prior month, the sharpest rise since May 2021 and a pickup from December’s revised 0.4% rise. Producer prices held nearly steady at 9.7% on a 12-month basis.

Economists are watching the producer-price numbers closely for signs that uncomfortably high inflation might finally be peaking. The consumer-price index rose to a nearly four-decade high of 7.5% in January, the Labor Department said last week, adding pressure on the Federal Reserve to speed up a series of interest-rate increases expected this spring.

A Johns Hopkins Economist Says the Fed is Totally Wrong About What Led to Record Inflation

On Feb. 10, the Bureau of Labor Statistics announced that the year-over-year consumer price index jumped by 7.5% in January, the highest reading since February of 1982, and well above the roughly 6% that Wall Street experts had forecast. Once again, a single explanation dominated the headlines: As usual, economists, market strategists, and pundits argued that “supply chain” disruptions slowing shipments by land, sea, and air, and causing severe shortages of everything from semiconductors to building supplies, are the principal cause for rampaging prices.

Johns Hopkins economics professor Steve Hanke doesn’t buy the Fed’s theory. The monetarist’s take: “The current trend can only be explained by one force, an explosion in the money supply exceeding anything we’ve seen since World War II.” If Hanke is correct, the U.S. is facing at least two more years of gigantic price increases regardless of when the blockages ease.

Pantheon Macro: PPI is Not as Bad as it Looks

Rising food and energy prices lifted the headline PPI, but the big surprise is the core, which was driven higher by both the goods and services components, up 0.8% and 0.7% respectively. Goods prices were boosted by a 1.1% jump in capital equipment prices, the biggest in 41 years. No further detail is provided in the report, but this increase was double the prior trend pace so we expect a correction in February. Services prices were hit by big jumps in hospital charges; the weighted average of in- and out-patient charges jumped by 1.2%, about four times the recent trend. We’re assuming this is due to the 2.5% uplift in Medicare reimbursement rates announced late last year, so a further outsized increase in March is possible.

Elsewhere, car prices rose only trivially, pushing the y/y rate down to 1.8% from 2.0%; the peak was 3.5% in August. Light truck prices rebounded by 0.6% after recent weakness, but the y/y rate dipped to 3.1% from 3.4%; it too is trending down, after peaking at 4.7% in September. Overall, this is a disappointing report, but we remain of the view that core inflation is close to peaking and will be much lower by the end of this year as supply pressures ease and some of the huge increase in margins in some sectors is reversed by a return to more normal market conditions.

Learn more about Pantheon Macro

US COVID – Cases Decrease But Deaths Remain Elevated

Coronavirus cases have been decreasing since peaking in mid-January at more than 800,000 infections reported on average each day. The U.S. is now averaging about 175,000 new cases per day, according to data from the Centers for Disease Control and Prevention. As of Monday, new infections were trending down in every state, according to data from Johns Hopkins University.

Average daily deaths from COVID-19 remain elevated at over 2,200 each day, and coronavirus transmission is still at a “high” level in every state, according to CDC data.

NYS Vaccine and COVID Update –

Vaccine Stats as of February 15:

One Vaccine Dose

88.4% of all New Yorkers – 16,311,852 (plus 5,042 from a day earlier).
In the Hudson Valley 1,695,907 (plus 765).

Fully Vaccinated

75.0% of all New Yorkers – 14,547,250 (plus 6,518).
In the Hudson Valley – 1,482,975 (plus 949).

Boosters Given

All New Yorkers – 6,804,774
In the Hudson Valley – 815,559

The Governor updated COVID data through February 15. There were 66 COVID related deaths for a total reported of 68,374.

Hospitalizations:

Patients Currently in Hospital statewide: 3,504.
Patients Currently in ICU Statewide: 573

7 Day Average Positivity Rate – Cases per 100K population

Statewide 2.98% – 22.45 positive cases per 100,00 population
Mid-Hudson: 2.95% – 19.66 positive cases per 100,00 population

Useful Websites:

Hochul: ‘Combination of Factors’ Will Decide School Mask Mandate

There will not be a single, specific metric that will trigger a lifting of New York’s mandate on mask wearing in schools, Gov. Kathy Hochul on Tuesday said. Instead, she reiterated she will continue to monitor “a combination of factors” to determine when and how the mask mandate would end in school buildings amid a heated debate over their continued use for kids and education workers.

A decision will likely come in early March. But as other northeastern states, typically more cautious with pandemic mitigation efforts, have started to fully repeal mask rules, Hochul has said she will take a more deliberate approach.

FDA Advisory Committee Postpones Vaccine Meeting on Vaccine for Children Under 5 Years Old

The US FDA on February 11 postponed an advisory committee meeting set for February 15th to discuss data on the Pfizer-BioNTech SARS-CoV-2 vaccine for young children ages 6 months through 4 years. Pfizer notified the agency of new data from an ongoing clinical trial, and the postponement will allow the FDA time to consider that data. The companies originally tested the vaccine as a 2-dose regimen, with each dose containing 3 μg, one-tenth of the dose given to those ages 12 and older. However, the companies announced late last year that among children aged 2 to 4 years old, 2 doses generated only 60% of the antibody levels seen in individuals aged 16 to 25 years who received 2 doses.

The FDA originally pushed Pfizer and BioNTech to request authorization for an initial 2-dose regimen while collecting data on a third dose, Pfizer Board Member Dr. Scott Gottlieb said the delay was due to a “low number of cases” in the trial, perhaps insufficient for data analysis. The companies expect data on the 3-dose regimen to be available in early April.

SUNY Expands Microcredentials for In-Demand Job Fields

Governor Kathy Hochul today announced the expansion of fast and flexible learning options with more than 400 microcredentials across 31 SUNY campuses to help everyone from current students to working professionals gain skills, knowledge, and experience that employers are looking for. Microcredentials are designed to be completed in a shorter timeframe than a college degree, taking one or two semesters, not years, to complete, and providing immediate evidence of skills mastered via a college transcript or digital badge.

Focused in more than 60 areas of study, SUNY’s microcredentials are in high-demand fields including healthcare, business, education, clean energy, information technology, criminal justice, and advanced manufacturing. Every microcredential provides immediate, workforce-ready skills, and most (64 percent) offer academic credits toward another microcredential, certificate, or an initial or advanced degree. SUNY campuses can customize microcredentials to help meet the workforce needs of businesses, P-12, or community organizations.

How OEMs and Suppliers are Navigating the Supply Crisis

The world economy’s supply chain snarls continue having far-reaching effects. Some corporations are investing in new manufacturing and/or logistics capacity closer to home to lower their risk profiles. For others, investments in automation are gathering steam as recruiting and retention challenges force the hands of hiring managers. In a great number of cases, though, the relationships between original equipment manufacturers and their suppliers are being tweaked, renegotiated and maybe even redefined.

The pain points laid bare by the shortages of semiconductors, freight containers and workers to build and ship those products are helping suppliers secure contracts with higher minimums and more guarantees. Contract negotiations also bringing OEMs and suppliers closer together and improving the points of connection between the two parties.

Japan’s Economy Recovered in Fourth Quarter

In the final quarter of 2021, the world’s third-largest economy after the U.S. and China grew 1.3% from the previous quarter. That was equal to 5.4% on an annualized basis, showing what would happen if the quarter’s growth continued for a full year.

The growth was due largely to private spending, which increased 2.7% from the previous quarter. Spending on services recovered solidly after a state of emergency in Tokyo and other cities was lifted on Sept. 30. About 80% of the nation’s population was vaccinated by the end of 2021, making people feel safer to dine out or travel.

Corporate Climate Claims in Question

Some of the world’s largest companies, accounting for nearly 5% of greenhouse gas emissions, are failing to meet their own climate targets. The BBC cites a report that rapid acceleration of corporate climate pledges, in addition to fragmented approaches, makes it difficult to distinguish between genuine climate leadership and unsubstantiated claims. The New Climate Institute reports that many large corporations routinely exaggerate or misreport climate progress.

Some apparently ambitious targets may lead to very little short-term action. It may be possible for CVS Health to achieve their 2030 emission reduction target with limited additional action, since the target is compared to a base year with extraordinarily high emissions. GlaxoSmithKline may delay the implementation of key emission reduction measures until 2028/2029, ahead of its 2030 target.

GM to Bring Back Bolt Production After Months-Long Shutdown

General Motors Co. will bring back production of the Chevrolet Bolt EV and EUV the week of April 4 after a months-long shutdown as it worked through a recall on the products, the automaker told employees Tuesday. GM in August recalled more than 141,000 Bolts for battery fire risk and has kept the Orion Assembly plant in Lake Orion mostly down since then while it prioritized new batteries for the recalled Bolts.

The reopening news comes after GM last month announced it would invest $4 billion into the Orion plant to build electric trucks there starting in 2024. The investment should create more than 2,350 new jobs at Orion and retain about 1,000 jobs when the plant is fully operational. The automaker estimates the new jobs at Orion will be filled by a combination of GM transferees and new hires.

Global Semiconductor Sales Top Half a Trillion Dollars for First Time

Global semiconductor sales topped half a trillion dollars for the first time, as companies ramped up production to meet demand amid a worldwide chip shortage, a top industry association said. In 2021, global semiconductor industry sales reached a record $555.9 billion, up 26.2% year on year, the U.S.-based Semiconductor Industry Association (SIA) said on Monday.

The industry shipped a record 1.15 trillion semiconductor units last year. The global chip crunch hit industries across the board from consumer electronics to automakers, and companies became unable to deal with the demand for and shortage of products.

People Are Going Out Again, but Not to the Office

Thousands of companies that closed their offices in March 2020 have yet to announce return plans. An average of 33% of the workforce returned to the office during the first week of February in the 10 major cities monitored by Kastle Systems, which records building-access-card swipes. The number has been slowly rising from 23% during the first week in January, when even companies that had brought back workers were sending them home because of renewed health risks.

Meanwhile, the return rate to movie theaters in the first week of February was 58% of what it was before the pandemic, according to a Kastle analysis of industry statistics. Restaurants were nearly three-quarters as full as they were before Covid-19, and air travel had recovered to about 80%. Attendance at National Basketball Association games was 93% of what it was in February 2020.

Machine Tool Orders at New Record High

U.S. machine shops and other manufacturers’ December orders for new machine tools totaled $597.1 million, pushing the 12-month total for 2021 new machine-tool orders to $5.91 billion – and representing “the best year ever” for manufacturing technology orders, according to AMT – the Assn. for Manufacturing Technology. The December new orders totaled $588.5 million, down -6.4% from November and yet +33.0% higher than the December 2020 total. The annual total of $5.91 billion represents a +54.8% rise over the January-December 2020 result.

AMT publishes the monthly U.S. Manufacturing Technology Orders report, compiling nationwide and regional data of new orders for metal-cutting and metal-forming and -fabricating machinery. The totals – presented in actual dollar values – serve as a forward-looking indicator of overall manufacturing activity, as machine shops and other manufacturers make capital investments in preparation for demand expected in the weeks and months ahead.