Member Briefing June 13, 2022

June 13, 2022

Posted By: Harold King in Daily Briefing,

8.6 – US Consumer Price Inflation Rises to 41 Year High

U.S. inflation resurged in May as the consumer price index jumped 8.6% compared to 2021, the biggest increase since December 1981, according to government data released Friday. CPI jumped 1% compared to April, after the modest 0.3% gain in the prior month, the Labor Department reported, far higher than expected by analysts who were looking for inflation pressures to ebb slightly.

The data showed gasoline jumped 4.1% in the month, with big gains in housing, airline fares and used and new vehicles.
Energy has soared 34.6% over the past year, the fastest since September 2005, while food jumped 10.1% — the first increase of more than 10% since March 1981, the report said.
Food and fuel prices have accelerated in recent weeks since the Russian invasion of Ukraine sent global oil and grain prices up, and American drivers are facing daily record gas prices, with the national average hitting $4.99 a gallon on Friday, according to AAA.
Even excluding volatile food and energy components, CPI gained 0.6% compared to April and 6% in the latest 12 months, the data showed.

War in Ukraine Headlines

Consumer Sentiment Hits Record Low in June as Inflation Weighs on Consumers

Soaring energy and food prices, coupled with falling stock prices, are a toxic combination for consumers’ sentiment, and the Michigan index is now at a record low. The University of Michigan’s consumer sentiment index fell to 50.2 from 58.4, well below the consensus, 58.1

Both the current conditions and expectations measures in the Michigan survey plunged this month, down 8.4 points and 7.9 points respectively. In the past, expectations readings as low as May’s 46.8 would have been consistent with a hefty outright decline in real consumers’ spending, but Pantheon Macro’s Ian Shepardson sees no sign of that right now. He notes that consumers in aggregate are sitting on an extra $3.5T in bank accounts and money market funds, relative to what we would have expected in the absence of the pandemic. Sentiment matters to politicians, but spending matters to the economy. Finally, inflation expectations rose, with the five-to-10-year reading rising by 0.3 points to 3.3%, a new cycle high.

ECB Confirms July Rate Hike Plans, Raises Inflation Projections Significantly

The European Central Bank laid out plans to increase interest rates for the first time in more than a decade, joining many of its peers in raising borrowing costs to tackle persistent inflation that is spreading far beyond the U.S. Following the latest monetary policy meeting, the Governing Council announced it intends to raise key interest rates by 25 basis points at the July meeting.

The ECB also downgraded its growth forecasts and upwardly revised its inflation projections. Annual inflation is now expected to hit 6.8% in 2022, declining to 3.5% in 2023 and 2.1% in 2024. This marks a substantial increase from its March projections of 5.1% in 2022, 2.1% in 2023 and 1.9% in 2024.

US COVID – Cases Peaking

The US CDC is reporting 84.9 million cumulative cases of COVID-19 and 1,004,732 deaths. The average daily incidence appears to be peaking, down slightly from the most recent high of 110,433 on May 26 to 104,511 on June 7. Daily mortality continues to remain relatively steady at approximately 290 deaths per day—with the exception of the week following the Memorial Day holiday weekend.

Both new hospital admissions (+6.3% over the past week) and current hospitalizations (+8.4%) continue to increase; however, both trends appear to be tapering off. Community transmission in the US continues to be driven by the BA.2.12.1 sublineage of Omicron (62.2%), followed by BA.2 (24.8%), BA.5 (7.6%), and BA.4 (5.4%). These variants represent essentially all new SARS-CoV-2 infections in the US. Analysis from the Johns Hopkins World In Data—based on data from the US Department of Health and Human Services—indicates that US test positivity continues to increase, up to 13.8% on June 3. The current average is 30% higher than the peak of the Delta surge (10.6%), but still considerably lower than the first Omicron surge (29.2%).

NYS Vaccine and COVID Update –

Vaccine Stats as of June 10:

One Vaccine Dose

90.7% of all New Yorkers – 16,636,019
In the Hudson Valley 1,730,396

Fully Vaccinated

77.5% of all New Yorkers – 14,928,944
In the Hudson Valley – 1,525,547

Boosters Given

All New Yorkers – 8,648,496
In the Hudson Valley – 1,049,605

The Governor updated COVID data through June 10. There were 17 COVID related deaths for a total reported of 71,670

Hospitalizations:

Patients Currently in Hospital statewide: 2,009
Patients Currently in ICU Statewide: 210

7 Day Average Positivity Rate – Cases per 100K population

Statewide 5.41% – 30.31 positive cases per 100,00 population
Mid-Hudson: 5.44% – 28.17 positive cases per 100,00 population

Useful Websites:

WHO: COVID Origins Unclear but Lab Leak Theory Needs Study

Over two years after the coronavirus was first detected in China, and after at least 6.3 million deaths have been counted worldwide from the pandemic, the World Health Organization is recommending in its strongest terms yet that a deeper probe is required into whether a lab accident may be to blame. That stance marks a sharp reversal of the U.N. health agency’s initial assessment of the pandemic’s origins.

WHO concluded last year that it was “extremely unlikely” COVID-19 might have spilled into humans in the city of Wuhan from a lab. Many scientists suspect the coronavirus jumped into people from bats, possibly via another animal. Yet in a report released Thursday, WHO’s expert group said “key pieces of data” to explain how the pandemic began were still missing. The scientists said the group would “remain open to any and all scientific evidence that becomes available in the future to allow for comprehensive testing of all reasonable hypotheses.”

Mortgage Demand Falls to the Lowest Level in 22 Years

Total mortgage application volume fell 6.5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand hit the lowest level in 22 years. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.40% from 5.33%, with points rising to 0.60 from 0.51 (including the origination fee) for loans with a 20% down payment.

Refinance demand, which is most sensitive to weekly rate moves, fell another 6% for the week and was 75% lower than the same week one year ago. The vast majority of mortgage holders now have rates considerably lower than the current one, and even those who would like to pull cash out of their homes are choosing second mortgages, rather than refinancing their first liens.

The J.P. Morgan Global Manufacturing PMI Inched up to 52.4 in May

Global manufacturing production declined for the second successive month in May, as new order growth remained
lacklustre and international trade volumes contracted. Inflationary pressure was elevated, as rates of increase in input costs and selling prices stayed among the highest registered in the survey history.

The J.P.Morgan Global Manufacturing PMI™ – a composite index produced by J.P.Morgan and S&P Global in association
with ISM and IFPSM – posted 52.4 in May, little-changed from April’s 20-month low of 52.3. The headline PMI has remained above the neutral 50.0 mark since July 2020. Lower production volumes reflected lacklustre demand, disruption from stretched supply chains, elevated inflationary pressures, the war in Ukraine and the downturn in Chinese manufacturing. By sector, further contractions (albeit at slower rates) were registered in both the intermediate and
investment goods categories, while consumer goods output returned to moderate expansion.

Ports At Near-Record Volume, As West Coast Contract Deadline Approaches

Imports at the nation’s major retail container ports should see near-record volume again this month as retailers work to meet still-strong consumer demand and also protect themselves against potential disruptions at West Coast ports, according to the monthly Global Port Tracker report released on June 8 by the National Retail Federation and Hackett Associates. U.S. ports covered by Global Port Tracker handled 2.26 million TEUs. in April, the latest month for which final numbers are available. That was down 3.6% from March’s 2.34 million TEU – the record for the number of containers imported in a single month since NRF began tracking imports in 2002 – but up 5.1% year over year.

“We’re in for a busy summer at the ports,” NRF vice president for Supply Chain and Customs Policy Jonathan Gold said in a statement. “Back-to-school supplies are already arriving, and holiday merchandise will be right behind them. And the big wild card is what will happen with West Coast labor negotiations with the current contract set to expire on July 1. We continue to encourage the parties to remain at the table until a deal is done, but some of the surge we’ve seen may be a safeguard against any problems that might arise.”

Weekly Jobless Claims Rise By 27,000 Week on Week

New jobless claims jumped higher during the first week of June, according to data released Thursday by the Labor Department.

In the week ending June 4, initial applications for unemployment insurance totaled 229,000, a gain of 27,000 from the previous week’s revised total of 202,000 claims.
The U.S. has seen an average of 215,000 claims per week over the past four months, rising from an average of 207,000 claims in May.

Jobless claims have remained low for most of 2022 as employers struggle to fill a record number of open jobs from a workforce still smaller than it was before the onset of the coronavirus pandemic in March 2020.

Alleged Gunman in Shooting at Maryland Manufacturer Charged with Murder

A 23-year-old man is facing multiple charges of murder and assault, among other charges, for allegedly opening fire at his workplace in Maryland earlier this week. The suspect is Hedgesville, W.Va., resident Joe Louis Esquivel, who faces more than two dozen charges in connection with a shooting at Columbia Machine Inc. on Thursday in Smithsburg, Md., that left three people dead and one person critically injured.

Esquivel had been an employee there and had shown up to work his shift that day as usual. He allegedly left work on Thursday afternoon to grab a weapon from his car before heading back inside the building, where he allegedly “proceeded to the area of the breakroom” and began “to fire upon employees,” officials said. The motive for the shooting is still under investigation.

NAM’s Timmons Urges Administration to Oppose Controversial WTO IP Waiver

In a letter sent on June 8 to U.S. Trade Representative Katherine Tai and other senior members of the Biden administration in advance of the June 12-15 WTO 12th Ministerial Conference, NAM President and CEO Jay Timmons urged the administration to oppose a controversial waiver of intellectual property for vaccines at the WTO. In the letter, Timmons stressed:

Manufacturers’ critical role in developing, creating and distributing critical products needed to fight the pandemic at an unprecedented scale and scope, and the central role of innovation and intellectual property protections to enable those efforts.
The direct harm to U.S. manufacturing leadership posed by the proposed WTO/TRIPS waiver, and its ineffectiveness in tackling the biggest current challenges to the pandemic response, such as supply chains, distribution and demand issues.
A strong call for the U.S. government to oppose the waiver, and instead pursue practical, effective solutions such as the Trade in Health and “zero-for-zero” initiatives that would fight COVID-19 and strengthen the global trading system.

The NAM continues to lead the charge for manufacturing innovation and against proposals such as the WTO/TRIPS waiver through letters, submissions, public reporting and public advocacy to raise concerns with the waiver approach and working towards constructive solutions.

Intel Joins Other Tech Companies Putting a Freeze on Hiring, as the Chip Industry Faces a Reset

The chip crunch of 2021 may have been frustrating for consumers and electronics manufacturers, but it was a boon for chipmakers, many of which reported record revenues for the year and shot up the Fortune 500 rankings. But the sector is now bracing for a reset, caused by a worsening economy, declining consumer demand, and continued disruption from China’s lockdowns.

Intel, one of the world’s leading chipmakers, has responded to global headwinds by joining a string of other tech companies in placing a freeze on new hires as it seeks ways to cut costs. Intel said in a statement provided to Fortune on Thursday Intel is placing a two-week hiring freeze on its client computing group, which creates PC chips for desktop and laptop computers. Client computing is Intel’s largest division by sales, generating just over 50% of the manufacturer’s revenue last quarter. In April, Intel issued weaker-than-expected profit guidance for the second quarter, citing reduced PC chip sales.

China Digs in for Permanent Zero-COVID With Testing and Quarantine Regime

China is building hundreds of thousands of permanent coronavirus testing facilities and expanding quarantine centres across many of its biggest cities as part of its zero-Covid policy, despite the economic and human toll on the world’s most populous country.

Tough restrictions in scores of cities have driven the country to the edge of recession for just the second time in three decades. But even though measures have been eased in many areas, experts believe the government’s virus infrastructure programme is designed to sustain the mass-testing and quarantine policies through 2023.

Court Upholds Danskammer DEC Permitting Denial Under Still-Evolving CLCPA

In the first decision regarding an administrative agency’s authority to deny permit applications based on New York’s Climate Leadership and Community Protection Act (“CLCPA”), Orange County Supreme Court in Danskammer Energy, LLC v. NYS Department of Environmental Conservation, et al., found that “the Department of Environmental Conservation has authority under § 7(2) of the [CLCPA] to deny a permit application, if warranted, based upon application of the same.”

Danskammer argued, in part, that without the enforcement regulations, DEC was without authority to deny its application under CLCPA § 7(2) alone (CPLR 7803 (2)), and/or DEC’s denial was made in violation of lawful procedure (CPLR 7803 (3)). The Court, however, disagreed. In reaching its decision, the court relied on settled canons of statutory construction.