Member Briefing June 15, 2022

June 15, 2022

Posted By: Harold King in Daily Briefing,

NFIB: Small Business Owners’ Expectations for the Future at 48-year Low

The NFIB Optimism Index fell 0.1 points in May to 93.1, marking the fifth consecutive month below the 48-year average of 98. Owners expecting better business conditions over the next six months decreased four points to a net negative 54%, the lowest level recorded in the 48-year-old survey. Expectations for better business conditions have deteriorated every month since January.

Twenty-eight percent of owners reported inflation was their single most important problem in operating their business, a decrease of four points from April.
The net percent of owners raising average selling prices increased two points to a net 72% (seasonally adjusted), back to the highest reading in the 48-year-history of the survey last reached in March and 32 points higher than May 2021.
Fifty-one percent of owners reported job openings that could not be filled, up four points from April.
The net percent of owners who expect real sales to be higher decreased three points from April to a net negative 15%.
A net 46% (seasonally adjusted) of owners reported raising compensation, down three points from April with a net 25% planning to raise compensation in the next three months, down two points from April but historically high.
Thirty-nine percent of owners report that supply chain disruptions have had a significant impact on their business, up three points. Another 31% report a moderate impact and 22% report a mild impact. Only 8% of owners report no impact from the recent supply chain disruptions.

War in Ukraine Headlines

10.8 Percent – PPI Up Again Solidly in May

The producer price index for final demand rose 0.8% last month after advancing 0.4% in April, the Labor Department said on Tuesday. In the 12 months through May, the PPI increased 10.8% after accelerating 10.9% in April. Excluding the volatile food, energy and trade services components, producer prices rose 0.5% in May. The so-called core PPI gained 0.4% in April. In the 12 months through May, the core PPI increased 6.8% after rising by the same margin in April.

With inflation far exceeding the Federal Reserve’s 2% target by all measures and pressuring consumers, risks of the economy stagnating or plunging into recession next year are growing. Fed officials are expected to raise interest rates today for a third time this year, with a three-quarters-percentage point increase now seen as the likely outcome and the possibility of signals for more large hikes to combat inflation.

Dollar at Two-Decade High as Risky Assets Sell Off; Yen Recovers Ground

The safe-haven U.S. dollar rose to a fresh two-decade high against a basket of currencies on Monday, supported by fears of a global economic slowdown and bets on steep interest rate hikes by the U.S. Federal Reserve. Global financial markets continued to smart from Friday’s hotter-than-expected U.S. inflation data that led to a broad-based rise in risk aversion and fuelled bets on even more aggressive policy tightening.

The U.S. Dollar Currency Index , which tracks its performance against six other major currencies, was up 0.6% at 105.04, after scaling its highest since December 2002.The battered Japanese yen, floundering near lows against the dollar not seen since 1998, was one major currency that advanced against it on Monday.

US COVID – Pediatric Vaccines

last week, the Biden Administration outlined its SARS-CoV-2 vaccination plans for children under 5 years of age. The current estimates suggest that up to 18 million children may become eligible for SARS-CoV-2 vaccination once the US FDA authorize existing vaccines for emergency use in younger children. The White House has allocated 10 million doses for states to distribute to dispensing sites. Notably, the White House estimates that 85% of the newly eligible pediatric population lives within 5 miles of one of these sites. The allotment of vaccines is approximately even between the Pfizer-BioNTech and Moderna vaccines.

Despite a ready supply of vaccines and a plan to make them accessible to a large number of children in this age group, questions remain regarding the willingness of parents and caretakers to get the children vaccinated. In the age group of children from 5-11 years, only one-third of eligible children have received the vaccine.

COVID and Smell Loss: Answers Begin to Emerge

Researchers are finally making headway in understanding how the SARS-CoV-2 coronavirus causes loss of smell. And a multitude of potential treatments to tackle the condition are undergoing clinical trials, including steroids and blood plasma.

Early in the pandemic, a study showed3 that the virus attacks cells in the nose, called sustentacular cells, that provide nutrients and support to odor-sensing neurons. Since then, clues have emerged about what happens to the olfactory neurons after infection. Researchers including biochemist Stavros Lomvardas at Columbia University in New York City examined people who had died from COVID-19 and found that, although their neurons were intact, they had fewer membrane-embedded receptors for detecting odor molecules than usual.

Update on New York’s Unemployment Insurance Trust Fund: Challenges Continue

While many states had to borrow from the federal government to support UI claims, New York is one of only seven states or territories with UI funds that continue to be in debt to the federal government, and the size of the outstanding loan balance—$8.1 billion—is second only to California.

In May 2022, New York State paid $1.2 billion of its federal loan, but New York’s UI debt has remained stubbornly high despite steady employment gains and State tax rates that have already increased to maximum permissible levels. If New York’s outstanding balance is not fully repaid by November 10, 2022, interest costs will mount, as will the federal portion of employers’ 2022 tax bills. Absent any significant federal or State action, employer costs will continue to grow, potentially impeding the State’s employment recovery amid growing economic uncertainty.

Hochul, Zeldin Hold Double-Digit Leads in NY Governor Primaries: Poll

Gov. Kathy Hochul (D-N.Y.) and Rep. Lee Zeldin (R-N.Y.) hold double-digit leads in their parties’ respective New York gubernatorial primaries, according to an Emerson College Polling-PIX11-The Hill poll released Monday. Hochul, who replaced former Gov. Andrew Cuomo (D) last year after he resigned in disgrace, leads the field with 57 percent support among very likely Democratic primary voters. Rep. Tom Suozzi follows with 17 percent, and New York City Public Advocate Jumaane Williams comes in third with 6 percent. Another 20 percent say they are undecided. Of those who say they are undecided, 42 percent lean toward Suozzi, while 32 percent lean toward Hochul and 26 percent lean toward Williams.

On the Republican side, Zeldin leads the field with 34 percent support among very likely GOP primary voters. He is trailed by former Westchester County Executive Rob Astorino with 16 percent, businessman Harry Wilson at 15 percent and Andrew Giuliani, the son of former Mayor Rudy Giuliani (R), with 13 percent. Another 22 percent are undecided.

Amazon to Deliver Packages by Drone, After a Decade of Promises

On Monday, Amazon announced that customers in Lockeford, Calif., will be “among the first to receive Prime Air deliveries.” In an appearance on the TODAY Show, Amazon said it plans to deliver packages weighing less than five pounds within an hour, using drones ferrying items from a facility roughly 15 miles away. The FAA did not immediately respond to requests for comment on Monday’s announcement.

The drones — which have the ability to identify fixed objects in its flight path — will “descend to the customer’s backyard, and hover at a safe height,” the company said in a blog post, adding “it will then safely release the package and rise back up to altitude.”

Larry Summers Sees Likely U.S. Recession in Next 2 Years

“When inflation is as high as it is right now and unemployment is as low as it is right now, it’s almost always followed within two years by recession,” Summers said on CNN’s State of the Union, Bloomberg reported. Regarding inflation, “the Fed’s forecasts have tended to be much too optimistic there, and I hope they’ll realize fully the gravity of the problem,” he said. Summers, who has predicted severe inflation since last year, said that a recession will “more likely than not” occur within the next two years, if not this year.

Former Federal Reserve Chair Ben Bernanke said Sunday that the Fed has a “decent chance” of averting recession and orchestrating a “soft-ish landing” for the economy. Such a landing, however, would depend on supply-side inflation pressures improving, Bernanke said on CNN’s Fareed Zakaria GPS, Bloomberg reported.

Bernanke: Great Inflation of the 1960s and ’70s ‘Almost Certainly’ Won’t be Repeated

Former Federal Reserve chair Ben Bernanke wrote in an opinion piece published Tuesday that despite current high inflation, the U.S. is likely not in danger of repeating the experiences of the 1960s and 1970s. Bernanke wrote in The New York Times that while inflation in recent months “evokes memories of America’s Great Inflation of the 1960s and ’70s,” the country is “almost certainly not” heading for a repeat of that era.

Bernanke admitted that the current economic situation had some similarities to the past, such as heavy federal spending and shocks on global energy and food prices, but he wrote that there are critical differences as well.

The former Federal Reserve chair said that inflation was met with “stiff political resistance” in the past, first using former President Lyndon Johnson as an example.

LA Port Braces for Peak Cargo Season to Arrive Early as Consumers Keep Buying

The Port of Los Angeles, the US’s busiest, is preparing for the early arrival of the 2022 peak season for cargo as retailers stock up on back-to-school and fast-fashion products despite high inventory levels, Executive Director Gene Seroka said. Retailers have been building up inventories amid soaring consumer demand and transportation bottlenecks, but many including Target Corp. and Walmart Inc. are trying to figure out how to sell all their products as people shift to spending more on services over goods.

“The upstream orders coming from Asia — getting ready for an early arrival of peak-season goods — look strong; the June numbers will be very healthy,” Seroka said in an interview on Bloomberg Television Friday. He added that the port handled just under 970,000 units of cargo in May, making it the operation’s third-busiest month on record.

Lawmakers Make Bipartisan Push for New Government Powers to Block U.S. Investments in China

Congress is pressing ahead with legislation that could rewrite the rules for American companies investing abroad, proposing the screening of investments in countries like China seen as adversaries to protect U.S. technologies and rebuild critical supply chains. The measure, part of broader legislation to bolster U.S. competitiveness with China, would require the executive branch to form a new interagency panel to review and block investments on national security grounds, according to congressional aides and a revised draft of the bill reviewed Monday by The Wall Street Journal.

Democratic and Republican supporters in the Senate and the House of Representatives have in recent days agreed on revised text narrowing the investment screening to certain specified sectors and technologies deemed critical, the aides said. The broader legislative package has been stuck in debate for months over its scope, though House Majority Leader Steny Hoyer (D., Md.) said last Tuesday that he wants a vote before the July 4 recess.

White House Takes New Look at Federal Gas Tax Holiday

The White House is showing signs that it is more seriously considering a federal gas tax holiday, sources tell The Hill. President Biden’s economic team has discussed the gas tax holiday recently and is expected to meet later this week for further talks.

Suspending the federal gas tax would require an act of Congress, but a public push by Biden in favor of the policy could help spur action on Capitol Hill. A handful of states have already moved to suspend their gas tax, and Wolf said he would support Biden calling on remaining states that haven’t yet done so to follow suit.

U.K. Economy Shrinks for Second Month as Outlook Dims

The U.K.’s statistics agency said Monday that gross domestic product—a broad measure of the goods and services produced in an economy—fell by 0.3% from March. Economists had expected to see a small increase in output, following a 0.1% fall in the previous month.

The U.K. is unusual among large economies in providing a monthly measure of economic growth. A second month of contraction is an indication that the rising prices of energy and food caused by Russia’s invasion of Ukraine are likely to be a drag on global growth this year. U.K. households faced a 54% increase in home energy bills during April, sending the annual rate of inflation to a four-decade high of 9% and squeezing spending power.