Member Briefing February 16, 2023
Empire Manufacturing Survey – Conditions Continue to Worsen
After falling steeply last month, manufacturing activity continued to decline in New York State, according to the NY Federal Reserve’s Empire Manufacturing February survey. The general business conditions index climbed twenty-seven points but held below zero at -5.8. Below are some of the key findings.
- The new orders index rose twenty-three points to -7.8, pointing to a small decline in orders, and the shipments index rose to 0.1, indicating that shipments held steady.
- The unfilled orders index came in at -9.2, a sign that unfilled orders continued to decline.
- The delivery times index fell ten points to -9.2, its first significant negative reading since before the pandemic, indicating that delivery times shortened.
- The inventories index was little changed at 6.4, pointing to a small increase in inventories.
- The index for number of employees fell to -6.6, its first negative reading in over two years.
- The average workweek index remained negative at -12.1, indicating that hours worked shrank for a third consecutive month.
- The prices paid index rose twelve points to 45.0, and the prices received index climbed ten points to 28.4.
Looking ahead the index for future business conditions rose seven points to 14.7, suggesting that firms expect some improvement over the next six months. New orders and shipments are expected to rise somewhat, and delivery times are expected to shorten further. Employment is not expected to increase in the months ahead. The capital spending index edged down to 18.3, and the technology spending index fell to 10.1.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Suspected Iranian Weapons Seized by U.S. Navy May Go to Ukraine - WSJ
- When Will the War in Ukraine End? Experts Offer Their Predictions – Defense News
- U.S. Focuses on Training Ukrainian Troops to Use Less Ammo - Politico
- Migrants in Russia Forced to Fight in Putin's War - BBC
- Russia Has Deployed 97% of Army in Ukraine but Is Struggling to Advance, U.K. Says - WSJ
- Russia Declares Battlefield Gains as Ukraine Urges Faster Military Aid - Reuters
- Russian Journalist Maria Ponomarenko Jailed for Highlighting Mariupol Killings - BBC
- Ukraine, IMF Begin Loan Talks as Country’s Economic Woes Deepen - WSJ
- Video: Go Inside the Plant Making Artillery Rounds for U.S. and Ukrainian Armies – Defense News
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Federal Reserve: Manufacturing Production Rises
After dipping sharply in November and December, manufacturing production increased by 1.0% in January, according to the Federal Reserve. Output: Durable and nondurable goods output rose 0.8% and 1.1%, respectively, and manufacturing capacity utilization bounced back from a 15-month low, to 77.7% in January from 77.1% in December. Manufacturing production data were led by significant growth in apparel and leather goods, nonmetallic mineral products, textiles, food and machinery, among other categories. Categories that contracted last month include plastics and rubber products, wood products, furniture and petroleum products.
“Manufacturing production once again proved its resilience despite struggles with weaker-than-desired global growth and ongoing geopolitical and economic uncertainties,” said NAM Chief Economist Chad Moutray. “Nonetheless, manufacturing production edged up just 0.3% over the past 12 months.”
U.S. Homebuilder Sentiment Increases by Most Since Mid-2020
Homebuilder confidence in the market for newly built single-family homes in February rose 7 points to 42, according to the National Association of Home Builders/Wells Fargo Housing Market Index. This is the highest reading since September and the largest monthly gain since June 2013. Anything below 50 is considered negative, but sentiment had fallen to 31 in December. The index stood at 81 in February of last year, before mortgage rates began to rise.
Builders say affordability is improving, as mortgage rates fall back from their highs of last fall and start to settle in a narrow range. The average rate on the popular 30-year fixed mortgage had peaked at 7.37% last October, according to Mortgage News Daily but spent much of January in the low 6% range. Rates have moved up slightly in the past two weeks to the mid-6% range.
US COVID Update - WHO Abandons Plans for Crucial Second Phase of COVID-Origins Investigation
The World Health Organization (WHO) has quietly shelved the second phase of its much-anticipated scientific investigation into the origins of the COVID-19 pandemic, citing ongoing challenges over attempts to conduct crucial studies in China, Nature has learned. Researchers say they are disappointed that the investigation isn’t going ahead, because understanding how the coronavirus SARS-CoV-2 first infected people is important for preventing future outbreaks. But without access to China, there is little that the WHO can do to advance the studies, says Angela Rasmussen, a virologist at the University of Saskatchewan in Saskatoon, Canada. “Their hands are really tied.”
In January 2021, an international team of experts convened by the WHO travelled to Wuhan, China, where the virus that causes COVID-19 was first detected. Together with Chinese researchers, the team reviewed evidence on when and how the virus might have emerged, as part of phase one. The team released a report in March that year outlining four possible scenarios, the most likely being that SARS-CoV-2 spread from bats to people, possibly through an intermediate species. Phase one was designed to lay the groundwork for a second phase of in-depth studies to pin down exactly what happened in China and elsewhere.
Bird Flu Spreads to New Countries, Threatens Non-Stop "War" on Poultry
Avian flu has reached new corners of the globe and become endemic for the first time in some wild birds that transmit the virus to poultry, according to veterinarians and disease experts, who warn it is now a year-round problem.
Experts and farmers on four continents said the prevalence of the virus in the wild signals that record outbreaks will not abate soon on poultry farms, ramping up threats to the world's food supply. They warned that farmers must view the disease as a serious risk all year, instead of focusing prevention efforts during spring migration seasons for wild birds. Egg prices set records after the disease wiped out tens of millions of hens last year, putting a staple source of cheap protein out of reach to some of the world's poorest at a time the global economy is reeling from high inflation.
U.S. Retail Sales Rebounded Sharply in January
U.S. retail sales jumped a seasonally adjusted 3% in January from December, the largest monthly increase in nearly two years after declines in the final two months of last year, the Commerce Department said Wednesday. Hiring and consumer spending are important elements of economic growth, and the recent gains potentially complicate the Fed’s campaign to bring down inflation that reached a four-decade high last year.
The retail spending spurt came as goods prices cooled significantly from an earlier run up in prices that drove the inflation surge when pandemic-related supply bottlenecks collided with surging demand as the economy fully reopened. While inflation has cooled in recent months it remains high and can have a mixed impact on spending as rising prices push up sales figures. Unlike many government reports, retail sales aren’t adjusted for inflation and reflect price differences as well as purchase amounts.
E.U. to Ban Fossil Fuel Cars, Slash Truck and Bus Emissions
The European Union will ban new sales of fossil fuel cars from 2035, after MEPs approved a new law Tuesday, as Brussels also draws up plans to slash carbon emissions from trucks and buses.European Union member states have already approved the legislation on cars and vans and they will now formally nod it into law, but much debate lies ahead on proposed measures against larger freight and passenger vehicles.
Supporters of the car bill -- passed in the European Parliament in Strasbourg -- argue it gives European automakers a clear timeframe to switch production to electric vehicles and will spur investment to counter competition from China and the United States. But opponents argue that neither industry nor many motorists are ready for such a dramatic end for internal combustion engine vehicles -- and that hundreds of thousands of jobs are at risk.
US Machine Tool Demand Dropped 6.0% in 2022
U.S. manufacturers ordered $434.1 million worth of new machine tools during December 2022, nearly -2.0% less than the November result and -26.9% less than the December 2021 total. The full-year total value for new orders was $5.54 billion, a decrease of -6.0% from the 12-month value reported for 2021. Machine shops supplied the largest share of new orders for the year, though that market share decreased versus the previous year. Agriculture-equipment manufacturers' orders also decreased year-over-year, while aerospace manufacturers' orders rose over the 2021 total.
“Of the 27 customer industries tracked by USMTO, the number who are underperforming 2019 could almost be counted on a single hand,” Patrick W. McGibbon, chief knowledge officer at AMT – the Assn. for Manufacturing Technology. “Over the last two years, we have been pointing out potential hurdles that could upend the historic run of order activity. Each time, the industry responded by taking in more orders than expected, which is a testament to the health of the United States manufacturing sector and a great way to begin 2023.”
India, Soon World's Most Populous Nation, Doesn't Know How Many People it Has
In two months, India is projected to become the world's most populous country with over 1.4 billion people. But for at least a year, and possibly longer, the country won't know how many people it has because it hasn't been able to count them. India's once in a decade census, due in 2021 and delayed due to the pandemic, has now got bogged down by technical and logistical hurdles and there are no signs the mammoth exercise is likely to begin soon.
Experts say the delay in updating data like employment, housing, literacy levels, migration patterns and infant mortality, which are captured by the census, affects social and economic planning and policy making in the huge Asian economy.
Mortgage Demand Drops as Interest Rates Bounce Higher
Total mortgage application volume fell 7.7% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.39% from 6.18%, with points rising to 0.70 from 0.64 (including the origination fee) for loans with a 20% down payment. The rate was 4.05% one year ago.
Applications to refinance a home loan dropped 13% for the week and were 76% lower than the same week one year ago. At the current rate, 100,000 fewer borrowers can benefit from a refinance compared with just one week ago, according to data from Black Knight. Mortgage applications to purchase a home fell 6% for the week and were 43% lower than the same week a year ago. Real estate agents across the country are reporting a jump in buyer demand in the past few weeks, perhaps indicating an early start to the historically busy spring market.
Tesla Agrees to Open Chargers to Public Amid White House Electric Vehicle Push
The Biden administration unveiled moves Wednesday to expand the nation’s supply of electric vehicle chargers — including opening up thousands of Tesla’s proprietary stations to rival companies’ cars and trucks.
The upgrades will allow Tesla to qualify for federal dollars under the administration’s plans to build a national network of 500,000 chargers, and comes despite two years of on-and-off tension between CEO Elon Musk and President Joe Biden’s administration. Tesla’s pledge is among a growing list of private-sector commitments, hailed by the White House, that are aimed at putting 100,000 new public chargers on the nation’s roads.
Tesla Workers at the Buffalo Plant Announce a Union Campaign
On Tuesday, some Tesla workers at the Buffalo plant announced a union campaign with Workers United, an affiliate of Service Employees International Union that helped organize Starbucks baristas in Buffalo and beyond. If the Tesla workers succeed, it would be the company’s first unionized location. But the union drive won’t be Musk’s first challenge or venture in New York, or even in Buffalo.
The Tesla founder and embattled Twitter owner has a long and (predictably) controversial history in New York. Here are a few of his most notable entanglements in the Empire State including the hyperloop, pandemic promises and gigafactories.
Natural Gas Buyers and Sellers are Hedging Less Against Price Swings
Over the past six months, the price of natural gas has fallen by more than half. That’s good news for natural gas consumers, particularly utilities that burn it to produce electricity. But it’s not-so-good news for natural gas producers. After a very profitable year following Russia’s invasion of Ukraine, they’re now confronting a change in fortunes. To protect themselves from this kind of volatility in energy prices, companies in the industry literally hedge their bets.
Hedging has declined recently in the natural gas industry. Last year, 52% of production was hedged. This year, it’s down to 36%, according to consultants at Energy Aspects. It’s not just sellers that hedge; buyers do too. And those buyers may be cutting back as well, said RJO Futures’ senior market strategist Eli Tesfaye, whose clients include agribusinesses that purchase fertilizers made with natural gas. “From their standpoint, at these weaker levels, they don’t need to hedge,” he said. “It’s not going to impact their costs that much.”
Younger Employees Will Switch Jobs For An Employer Who Invests In Them
A recent survey conducted by Amazon and Workplace Intelligence found that 74% of Gen Z-ers and Millennials are contemplating a career change in the next 12 months due to a lack of career mobility and skills development options. Despite the threat of a recession or a layoff, younger workers continue to prioritize working for employers who will provide them with the perks they’re looking for such as career development, company culture and flexibility, as well as compensation and benefits.
“Companies need to reinvent people processes, including employee development plans for Millennials and Gen Z,” says Jenny von Podewils, co-CEO of Leapsome. “An employee development plan helps your people perform their best in their current roles and prepares them for new opportunities within your organization. It enables top performers to identify opportunities for growth that build on their strengths and are aligned with their career goals.”
EPA Draft: US Greenhouse Gas Emissions Saw Record Single-Year Spike in 2021
U.S. greenhouse gas emissions rose 5.5 percent in 2021 from the previous year, an all-time year-over-year spike, but were still below 2019 levels, according to a draft Environmental Protection Agency (EPA) report.
In the draft of its annual inventory, the agency found total emissions of 6,347.7 million metric tons in 2021, driven largely by increased auto emissions as driving rebounded in the second year of the COVID-19 pandemic. Fossil fuel combustion-related emissions increased 7 percent relative to the year before, while emissions from coal consumption rose 14.6 percent.