Member Briefing July 18, 2022
Empire State Manufacturing Survey – Modest Growth in July, Pessimism for the Future
Manufacturing activity expanded modestly in New York State, according to the July survey. The general business conditions index climbed twelve points to 11.1. However, firms now expect activity to decline over the next six months, a sentiment only expressed three other times in the survey’s history. The index for future business conditions plunged twenty points to -6.2. The capital spending and technology spending indexes fell, but remained positive.
- The new orders index was little changed at 6.2, pointing to a small increase in orders,
- The shipments index surged to 25.3, indicating strong growth in shipments.
- The unfilled orders index held steady at -5.2.
- The delivery times index fell for a third consecutive month, declining six points to 8.7,
- The inventories index was little changed at 14.8, signaling that inventories expanded.
- The index for number of employees held steady at 18.0, pointing to a solid increase in employment,
- The average workweek index came in at 4.3, indicating a slight increase in hours worked.
- The prices paid index fell fourteen points to 64.3, and the prices received index moved down twelve points to 31.3.
War in Ukraine Headlines
- Ukraine and Russia: the Latest News – The Guardian
- Biden Administration Under Pressure to Up Ukraine’s Rocket Firepower – The Hill
- Ukraine’s President Fires Spy Chief and Top State Prosecutor – Reuters
- Chinese Firms Are Selling Russia Goods Its Military Needs to Keep Fighting in Ukraine – WSJ
- UK Summons Russian Envoy Over Briton’s Death in Breakaway East Ukraine Region – Reuters
- Russia Strikes South Ukraine City, Presses Attacks in East – AP
- Economic War of Attrition Takes Toll on Russia, West – WSJ
- Saudi Arabia Doubles Second-Quarter Russian Fuel Oil Imports for Power Generation – Reuters
- ‘I Worry About this Place’: A Day in Ukraine’s Donetsk – AP
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
11.3: U.S. Producer Prices Accelerate in June, But Underlying Inflation Slowing
The producer price index for final demand climbed 1.1% last month after rising 0.9% in May, the Labor Department said on Thursday. In the 12 months through June, the PPI increased 11.3%after advancing 10.9% in May. Excluding the volatile food, energy and trade services components, producer prices rose 0.3% in June. The so-called core PPI increased 0.4% in May. In the 12 months through June, the core PPI advanced 6.4% after rising 6.7% in May.
A 2.4% rise in goods prices accounted for three quarters of the increase in the PPI. Goods prices gained 0.4% in May. Nearly 90% of last month rise in goods prices was attributed a 10.0% jump in energy prices. There were strong increases in the prices of gasoline, diesel fuel, electric power and residential natural gas. Wholesale food prices edged up 0.1%.
US Retail Sales Top Forecast in Boost From High Inflation
Retail sales, a measure of how much consumers spent on a number of everyday goods, including cars, food and gasoline, rose 1% in June from the prior month, the Commerce Department said Friday. Economists surveyed by Refinitiv expected sales to rise 0.8%. It marked a major uptick from the decline of 0.1% in May, which was upwardly revised from the initial report of a 0.3% decline. The June advance is not adjusted for inflation, meaning that consumers may be spending the same but getting less bang for their buck. When taking inflation into consideration, retail sales would likely show a modest but steady decline in recent months.
A burst in spending at gas stations helped to propel retail sales higher: Gasoline sales climbed 3.6% in June as prices at the pump notched a record-high in mid-June, with the average gallon of gas briefly topping $5. Prices have since subsided, hovering around $4.57, according to AAA.
U.S. COVID – Hospitalizations Inch Higher
The US CDC is reporting 88.8 million cumulative cases of COVID-19 and 1,017,391 deaths. The average daily incidence has essentially plateaued over the past several weeks, holding relatively steady at approximately 100-110,000 new cases per day. Both new hospital admissions (+12.0% over the past week) and current hospitalizations (+11.4%) continue to increase, despite the ongoing plateau in daily incidence. New hospitalizations among children aged 17 years and younger are approaching its second-highest peak (November 2021).
Community transmission in the US is increasingly driven by the Omicron BA.5 sublineage. BA.5 is projected to have accounted for more than half of sequenced specimens starting the week of July 2, and the estimate reached 65% for the week of July 9. The BA.4 sublineage is also increasing in prevalence, although much more slowly than BA.5. Omicron variants represent essentially all new cases in the US.
NYS Vaccine and COVID Update –
Editor’s Note: Given the small changes in vaccinations we will no longer track this information in the briefing. Instead we will provide a link to the NYS Vaccination Tracker below)
The Governor updated COVID data through July 7. There were 20 COVID related deaths for a total reported of 72,417
- Patients Currently in Hospital statewide: 2,458
- Patients Currently in ICU Statewide: 237
7 Day Average Positivity Rate – Cases per 100K population
- Statewide 8.99% – 36.84 positive cases per 100,00 population
- Mid-Hudson: 8.55% – 31.44 positive cases per 100,00 population
One Coronavirus Infection Wards off Another — but Only if it’s a Similar Variant
Natural immunity induced by infection with SARS-CoV-2 provides a strong shield against reinfection by a pre-Omicron variant for 16 months or longer, according to a study1. This protection against catching the virus dwindles over time, but immunity triggered by previous infection also thwarts the development of severe COVID-19 symptoms — and this safeguard shows no signs of waning.
The study1, which analyses cases in the entire population of Qatar, suggests that although the world will continue to be hit by waves of SARS-CoV-2 infection, future surges will not leave hospitals overcrowded with people with COVID-19.
Consumer Sentiment Remained Near Record Lows In Early July
The preliminary July results from the University of Michigan Surveys of Consumers show overall consumer sentiment ticked up in early July but remains near record lows. The composite consumer sentiment increased to 51.1 in early July, up from the record low 50.0 in June, a rise of 1.1 points or 2.2 percent. The index is consistent with prior recessions. The current-economic-conditions index rose to 57.1 from the record-low 53.8 in June.
The second sub-index – that of consumer expectations, one of the AIER leading indicators – lost 0.2 points or 0.4 percent for the month, dropping to 47.3. The index is at its lowest level since May 1980. According to the report, “Current assessments of personal finances continued to deteriorate, reaching its lowest point since 2011.” The report goes on to add, “Buying conditions for durables adjusted upwards, owing both to consumers who cited easing supply constraints and those who believed that one should buy now to avoid future price increases, which would exacerbate inflation going forward.”
US Chamber Met Life Index: Small Business Leaders Say Inflation is Their Top Concern
This quarter, more than two in five (44%) indicate inflation is the top challenge facing the small business community, an 11-percentage point increase from Q1 2022 and a 21-percentage point increase from Q4 2021. Supply chain issues (28%) and revenue (22%) remain in the top three, but they are now in a distant second-tier behind inflation.
Nearly nine in ten small businesses (88%) are concerned about the impact of inflation on their business, with almost half (49%) indicating they are very concerned (up from 44% in Q1 2022 and 31% in Q4 2021). The share of small businesses that report rising prices have had a significant impact on their business continues to rise—up to 80% this quarter compared to 74% in Q1 2022.
New York Urged to Pay Down Federal Unemployment Debt
Democratic state lawmakers in a letter on Monday urged Gov. Kathy Hochul’s administration to repay the $8.1 billion owed to the federal Unemployment Trust Fund before a major increase in tax costs hit New York businesses later this year. The letter, signed by 22 members of the state Assembly who represent suburban and upstate districts and released by Assemblywoman Carrie Woerner’s office, comes as New York largely remains an outlier among the states for the outstanding debt created by the economic crisis during the early months of the COVID pandemic.
“Making payments against the outstanding debt is the responsible thing to do; allowing the debt to grow through non-payment will endanger the State’s ongoing economic recovery,” the lawmakers wrote in the letter. “We urge you to take immediate action to repay the loan.” Business organizations, (including the Council of Industry) have urged New York officials to act before leaving Albany earlier this year.
U.S. Jobless Claims Reach Highest Level This Year
New applications for unemployment benefits edged higher last week, but still remained near historic lows, suggesting the strong labor market is cooling a bit as the economy slows. Initial jobless claims, a proxy for layoffs, rose slightly to a seasonally adjusted 244,000 last week from 235,000 the prior week, the Labor Department said Thursday. The figure stands a bit above the 2019 pre-pandemic weekly average of 218,000, when the U.S. labor market was also strong.
The four-week moving average for claims, which smooths weekly volatility, inched up to 235,750 last week, an increase of 3,250 from the previous week’s average. Continuing claims, a proxy for the total number of people receiving payments from state unemployment programs, fell by 41,000 to 1.3 million in the week ended July 2. Continuing claims are reported with a one-week lag.
Union Efforts, Unfair Labor Charges Spike in US
Union representation petitions filed at the National Labor Relations Board (NLRB) have gone up more than 50 percent since last year, the agency announced this week. By May, petitions already surpassed the total number of petitions filed last year. So far this year, 1,935 petitions have been submitted — 695 more than 2021, according to a statement from the agency.
Meanwhile, charges of unfair labor practices have jumped by 14.5 percent from 11,451 last year to 13,106 in the first three quarters of this fiscal year.
China’s Economy Slows Sharply in Q2, Global Risks Darken Outlook
China’s economic growth slowed sharply in the second quarter, highlighting the colossal toll on activity from widespread COVID lockdowns and pointing to persistent pressure over coming months from a darkening global outlook.
Gross domestic product in the April-June quarter grew a tepid 0.4% from a year earlier, official data showed on Friday. That was the worst showing for the world’s second-biggest economy since the data series began in 1992, excluding a 6.9% contraction in the first quarter of 2020 due to the initial COVID shock. It also missed forecast of a 1.0% gain in a Reuters poll of analysts and marked a sharp slowdown from 4.8% growth in the first quarter.
Senator Manchin Won’t Support Climate, Tax Measures in Economic Package
Sen. Joe Manchin (D., W.Va.), the pivotal vote in Democrats’ efforts to pass a bill aimed at fighting climate change, told Senate Majority Leader Chuck Schumer that he wouldn’t support an economic package that raises taxes or includes climate provisions, according to people familiar with the matter. “Senator Manchin believes it’s time for leaders to put political agendas aside, re-evaluate and adjust to the economic realities the country faces to avoid taking steps that add fuel to the inflation fire,” a spokeswoman for Mr. Manchin said.
Instead, Mr. Manchin told Mr. Schumer on Thursday that he would only support a bill that includes provisions aimed at lowering the price of prescription drugs and a two-year extension of Affordable Care Act subsidies, according to one of the people. The Senator’s decision comes after figures released by the government show inflation at a 41 year high.
Senate Plans Vote Focused on Semiconductor Portion of China Bill
Senate Majority Leader Chuck Schumer (D., N.Y.) is telling colleagues to expect a floor vote as early as Tuesday on a stripped-down China competition bill that would include more than $50 billion and investment tax credits to encourage semiconductor production in the U.S. but exclude other provisions.
The decision to hold the vote comes after a briefing from administration officials Wednesday pushing lawmakers to pass semiconductor funding as negotiations over a larger competition bill have stalled, and it remained uncertain whether Republicans would allow a slimmed-down bill to advance in the evenly divided Senate. Republicans have demanded that Democrats end their efforts to pass a partisan prescription-drug and climate bill as a condition for moving the China legislation.