Member Briefing June 9, 2022

Posted By: Harold King Daily Briefing,

Half Full: Three Key Indicators Showing Inflation is Poised to Ease

After months of rising prices and tightening purse strings, the price of semiconductor chips, shipping, and fertilizer is receding down to normal levels—indicating that global inflation might be past its peak. These three supply-side metrics, which have soared over the last year, pushing inflation levels globally to the highest point in 40 years, are now turning around and falling from their pandemic highs.

The price of semiconductors is finally showing signs of easing. The inSpectrum Tech PC DRAM contract price is at half of its July 2018 peak and down 14% from the same time last year, according to Bloomberg data. Meanwhile, the spot rate for shipping containers, which is used as an indicator for future prices, has declined 26% since its September 2021 all-time high. And finally, the price of fertilizer, which has soared since Russia invaded Ukraine on Feb. 24, is 24% below its record high in March.

Read more at Fortune 

Half Empty: Fed’s Mester Says Inflation Hasn’t Peaked and Multiple Half-Point Hikes Are Needed

Cleveland Federal Reserve President Loretta Mester said Friday that she doesn’t see ample evidence that inflation has peaked and thus is on board with supporting a series of aggressive interest rate increases. While other recent data points have shown that at least the rate of inflation increases has diminished, the policymaker said she will need to see multiple months of that trend before she’ll feel comfortable.

“The No. 1 problem in the economy remains very, very high inflation, well above acceptable levels, and that’s got to be our focus going forward,” Mester said. Recent statements from the rate-setting Federal Open Market Committee indicate that 50 basis point — or half-point — rate increases are likely at the June and July meetings. Officials are then likely to evaluate the progress that the policy tightening and other factors have had on the inflation picture. But Mester said any type of pause in rate hikes is unlikely, though the magnitude of the increases could be reduced.

Read more at CNBC

US COVID – BA.4, BA.5 Variants Rise Among U.S. Covid-19 Cases

Omicron Covid-19 variants BA.4 and BA.5 are on the rise in the U.S., adding two more highly contagious versions of the virus to the mix that has fueled a springtime surge in cases. The spread of the subvariants could at least prolong the time it takes to emerge from the current wave fueled by other versions of Omicron, some health experts said.

The closely related subvariants represented a combined 13% of U.S. cases for the week ended June 4, according to estimates the Centers for Disease Control and Prevention released on Tuesday. Evidence suggests the variants are yet-more contagious versions of Omicron, public-health experts said, that may be able to evade some of the immune protections people built up from infections triggered by another version of Omicron during the winter.

Read more at the WSJ

FDA Panel Recommends Novavax COVID-19 Vaccine, Fourth for Use in US

A federal advisory committee recommended Tuesday that a fourth COVID-19 vaccine be authorized for use in the USA, this one from Novavax, a company based in Gaithersburg, Maryland. The two-dose Novavax vaccine was shown to be safe and 90% effective in a large study conducted in late 2020 and early 2021. 

The vaccine, which was supported by $1.8 billion in taxpayer funding, relies on a more traditional approach than the vaccines from Moderna and Pfizer-BioNTech. The Novavax vaccine is a protein-based vaccine and includes an adjuvant to boost its effectiveness. The protein-based technology has been used in other vaccines.  The spike protein found on the surface of the coronavirus that causes COVID-19 is manufactured in insect cells, then delivered, along with the adjuvent, inside a nanoparticle. The immune system learns to recognize this spike protein and to attack it when seen again on the virus. 

Read more at USA Today

Moderna Says its New Vaccine Booster Shows ‘Superior’ Response to Omicron

Moderna says its new vaccine candidate, which fights both the original COVID-19 strain and the now-dominant omicron variant, shows a “superior neutralizing antibody response” against the coronavirus compared to its original vaccine. The “bivalent” vaccine — meaning it targets two different antigens — is Moderna’s leading candidate to have an effective booster ready for fall of 2022, the company said.

Because of the higher antibody response seen with the new vaccine candidate, Moderna predicts that people who get the booster will have protection that is “more durable over time” against omicron, compared to the original Moderna vaccine.

Read more at NPR

NY GOP Gubernatorial Primary Still a ‘Free-For-All’ as Voting Day Nears

The New York GOP have to decide whether Long Island Rep. Lee Zeldin, former White House aide Andrew Giuliani, former Westchester County Executive Rob Astorino or businessman Harry Wilson should be the party’s pick to, in all likelihood, face Gov. Kathy Hochul in November. With fewer than three weeks to go before the June 28 primary – early voting begins June 18 – the race is still up in the air, though a Post analysis of fundraising and polling indicates two candidates have separated themselves from the rest. 

“It’s a tough race to handicap and right now, it looks like a free-for-all – it’s wide open and a lot of positioning in terms of where they’re gonna be,” Lee Miringoff, director of the Marist Poll, told the Post Wednesday. “But Republicans recognize they’re the smaller party in New York and this could be a Republican year nationally. The debate becomes very important for them.”

Read more at the NY Post

The World Bank Says Most Countries are Headed for a Recession

Investors, bankers, and entrepreneurs have been discussing the chances of a coming recession for months. Now the world’s premier international credit institution is joining the chorus that a recession is likely, and warns that something even worse might be on the horizon.

Global economic growth is expected to slow down before the end of the year, and most countries should begin preparing for a recession, according to the World Bank’s latest global economic forecast released on Tuesday. “For many countries, recession will be hard to avoid,” wrote World Bank president David Malpass. “Just over two years after COVID-19 caused the deepest global recession since World War II, the world economy is again in danger.” 

Read more at Fortune

US Logistics Industry Witnesses Slowing Job Growth

Trucking, parcel delivery and warehousing companies together added 32,900 jobs in May, a decrease from 44,700 in April and mirroring overall slowing growth in the US job market, according to the Bureau of Labor Statistics. Trucking businesses accounted for the addition of 13,300 jobs in May and over 70,000 jobs in the past year, which experts say could be the result of companies offering higher salaries for new recruits and independent owner-operators joining bigger trucking firms as employees.

Except for a dip of 2,700 jobs reported for March, total employment in truck transportation has risen every month since the almost 80,000-job plunge in April 2020, the first month of the pandemic. This year, besides the March dip, the increases were 11,000 in February, 14,000 in April and the latest increase of 13,300 jobs.

Read more at FreightWaves

U.S. Mulls Lifting Some China Tariffs to Fight Inflation

U.S. Commerce Secretary Gina Raimondo said on Sunday that President Joe Biden has asked his team to look at the option of lifting some tariffs on China that were put into place by former President Donald Trump, to combat the current high inflation.

“There are other products – household goods, bicycles, etc – and it may make sense” to weigh lifting tariffs on those, she said, adding the administration had decided to keep some of the tariffs on steel and aluminum to protect U.S. workers and the steel industry.

Read more at Reuters

Natural Gas Futures Soar as Supply Cuts Hit; $10 Gas Possible in ‘Fairly Near Future’

In one of the most explosive sessions in recent weeks – and that’s saying a lot – natural gas futures rocketed higher Monday as production struggles to gain momentum and heat is starting to intensify ahead of what’s expected to be a hot summer. The July Nymex gas futures contract jumped 79.9 cents to $9.322/MMBtu. August futures climbed 79.6 cents to $9.306.

Production has been a source of frustration for the gas market. After nearing late-2021 highs early last week, output softened later in the period and failed to recover over the weekend. Estimates showed production at around 95 Bcf on Monday, 2 Bcf shy of the highs largely viewed as needed to loosen up supply/demand balances.

Read more at Natural Gas Intel

Wondering Why the Price of Natural Gas is Suddenly so Damn High? The Booming US LNG Export Industry

Exports of Liquefied Natural Gas (LNG) from the US to the rest of the world jumped by 18% over the first four months of 2022, to an average of 11.5 billion cubic feet per day (Bcf/d), compared to the annual average in 2021, according to the EIA today. Exports of LNG have been increasing at huge rates – by 49% in 2021, by 31% in 2020, by 68% in 2019, by 53% in 2018, and by 279% in 2017. This growth comes as a function of the completion of new LNG export terminals.

In 2021, the US shipped 34% of its annual LNG production to Europe. But over the first four months this year, a massive shift occurred, when 74% of US LNG was exported to Europe, tripling the volume to 7.3 Bcf/d, and accounted for 49% of total LNG imports. This shift from Asia to Europe was driven by spiking spot prices for LNG at European trading hubs that incentivized US exporters with destination flexibility in their contracts to ship LNG to the EU and the UK.

Read more at Wolf Street

Supply Chain, Inflation Drag Cutting-Tool Demand

U.S. machine shops and other manufacturers consumed $175.5 million during April 2022, a -10.1% drop from the March consumption figure but still 3.8% ahead of the April 2021 total. The figures are supplied by the U.S. Cutting Tool Institute (USCTI) and AMT – the Association for Manufacturing Technology in their monthly Cutting Tool Market Report – an index to overall manufacturing activity, because cutting tools are a primary consumable across manufacturing sectors. Through four months of activity, the year-to-date consumption total according to CTMR is $700.4 million, up 9.1% compared to January-April 2021.

While the industrial economy continues to be strained by an unreliable supply chain – supplies for parts and materials are inconsistent or unavailable, and many business continue to operate below capacity while struggling to fill open positions – the USCTI head’s comment acknowledges the growing concern for inflation’s effects on overall economic growth.

Read more at American Machinist