Member Briefing March 15,2023

Posted By: Harold King Daily Briefing,

CPI = 6.0% - Inflation Gauge Increased 0.4% in February, 6% from a Year Ago

Inflation rose in February but was in line with expectations, likely keeping the Federal Reserve on track for another interest rate hike next week despite recent banking industry turmoil. The consumer price index increased 0.4% for the month, putting the annual inflation rate at 6%, the Labor Department reported Tuesday. Both readings were exactly in line with Dow Jones estimates. Some key items:

  • Core CPI rose 0.5% in February and 5.5% on a 12-month basis.
  • Food prices rose 0.4% and 9.5%, respectively. (Eggs tumbled 6.7%, though they were still up 55.4% from a year ago.)
  • The energy sector fell 0.6% for the month, bringing the year-over-year increase down to 5.2%.
  • Shelter costs, which make up about one-third of the index’s weighting, jumped 0.8%, bringing the annual gain up to 8.1%.
  • Used vehicle prices, a key component when inflation first began surging in 2021, fell 2.8%

Read more at SME

War in Ukraine Headlines


CEO Confidence Slips In March As Fed Chair Talks Down Expectations

For the majority of the 177 U.S. CEOs Chief Executive polled March 7-9 as part of our monthly Confidence Index, Fed Chair Jerome Powell’s aggressive signaling on interest rates during congressional testimony was more than enough to dampen expectations. Other issues aren’t helping: concerns over the debt ceiling, regulations, continued rising costs—especially wages—in a continually challenging labor market were all listed as reasons for reduced optimism.

The Index—which asks CEOs to predict business conditions 12 months from now—slipped to 6.1 out of 10 on our scale (1=poor and 10=excellent), down 4 percent from last month, as an increasing proportion of CEOs are now expecting conditions to worsen over the course of the year. CEOs’ confidence in current business conditions remains unchanged at 6.2 out of 10, with many chiefs sharing that they have yet to see indications of a recession on the consumer side—other than interest rate hikes.

Read more at Chief Executive

Gradually, Then Suddenly. This is How Did Silicon Valley Bank Collapsed

Two ways. Gradually, then suddenly. That is how Silicon Valley Bank (svb), the 16th-largest lender in America, with about $200bn in assets, went bust. Its financial position deteriorated over several years. But just two days elapsed between the San Francisco-based bank’s announcement on March 8th that it was seeking to raise $2.5bn to plug a hole in its balance-sheet, and the declaration by the Federal Deposit Insurance Corporation, which regulates American bank deposits, that SVB had failed.

This graphic explains how the bank went from lending to start-up firms to holding deposits from them as those firms became flush with cash during the pandemic.  SVB paid high interest on those deposits while investing the funds in longer term US Treasuries.  As inflation and Fed tightening drove interest rates higher those bonds declined in value. When depositor wanted their money the bank was forced to sell those assets at a loss to meet their obligations.

Read more at USA Today

US COVID – Are Some Immune to Covid? Science is Trying to Unravel Immunity to the Virus

Three years into the pandemic, a select group of people have achieved something some once thought impossible: They have never tested positive for Covid. Scientists around the world are searching for the genetic reasons these people have dodged Covid — despite repeated exposure to the virus. scientists believe it is possible that some people have never been infected because they entered the pandemic equipped with a kind of biological armor against the virus that causes Covid.  

"We are searching for rare genetic variants that make people resistant to SARS-CoV-2 infection," said Dr. Jean-Laurant Casanova, a pediatric immunologist, geneticist and professor at Rockefeller University in New York. "If we were to discover them, the impact would be significant." In theory, some people may have DNA that prevents ACE2 or other genes from allowing a Covid invasion. If researchers can zero in on a protective genetic factor, it's possible that they could develop drugs to prevent infection and further spread of the virus.

Read more at NBC News

China is Fully Reopening to Tourists After Three Years of Border Restrictions

After three years of pandemic border restrictions, China is fully reopening to foreign visitors – including tourists. In a Chinese-language statement posted on its website Monday, China’s Embassy in the United States said the country would resume issuing all categories of visas for foreigners from Wednesday. Monday’s announcement also comes as Beijing seeks to revive the world’s second-largest economy and its domestic tourist industry after a year of tepid growth exacerbated by pandemic measures.

In 2022, China registered 115 million cross-border trips, far below the 2019 pre-pandemic level of 670 million. Foreigners accounted for 97.7 million of those trips in 2019 – a figure that dropped to just 4.47 million last year as Covid restrictions kept almost everyone but residents out.

Read more at CNN

As Budget Negotiations Continue in Albany Hochul Says On-Time Budget Not Her Top Priority

Both chambers are close to releasing their one-house proposals, which are just as malleable as Hochul’s executive budget in terms of final results later this month. However, the coming resolutions do give us an eye on where the discrepancies among their visions (the fights) might lie. It’s looking like the Senate and Assembly have their own version of a broad housing plan for the state amid criticism from local leaders over Hochul’s proposal to mandate new housing in the New York City suburbs and upstate.

According to legislators and their aides, the Democratic majorities want to squelch the part of Hochul’s plan that would allow the state to override local zoning to meet certain goals. The one-house budget proposals are also expected to rebuff Hochul's plan to expand the number of charter schools operating in the state and her suggested change to state's bail laws. The governor told reporters Monday that an on-time budget, while preferable, isn’t her top priority when it comes to “the work of the people of New York State.”

Read more at Poltico New York Playbook

Hudson Valley Unemployment Rate Rises, Labor Force Falls

The January 2023 unemployment rate for the Hudson Valley Region is 3.5 percent.  That is up from 2.7 percent in December 2022 and down from 3.6 percent in January 2022.  In January 2023, there were 40,000 unemployed in the region, up from 30,800 in December 2022 and down from 41,800 in January 2022.  Year-over-year in January 2023, labor force decreased by 4,300 or 0.4 percent, to 1,150,600. Statewide the unemployment rate is 4.6 % down from 5.6% in January 2022.

There were 42,400 people working in manufacturing in the region in January, 500 fewer than the previous month but 600 more than were working in the sector in January 2022. Statewide there were 419,900 people working in manufacturing in January, 8,100 fewer than the previous month but 5,900 more than were working in the sector in January 2022

Read the January 2023 Report

EPA Proposes Regulations for ‘Forever Chemicals’ in Drinking Water

The Environmental Protection Agency on Tuesday proposed the first federal limits on so-called forever chemicals in public drinking water, a move that is expected to cost water utilities billions of dollars to filter out substances that have contaminated the water supplies of millions of people. The proposed limits under the federal Safe Drinking Water Act come after more than two decades of study by the agency and reflect growing concern over PFAS. The EPA has requested comment from the public, water-system managers and public-health professionals on the proposed rule, which the agency has indicated it aims to finalize by the end of 2023.

The agency is proposing maximum allowable levels in the nation’s public drinking-water systems for two compounds in a class of chemicals known as perfluoroalkyl and polyfluoroalkyl substances, or PFAS, which were used for decades in carpeting, clothing, food packaging, firefighting foam and other consumer and industrial products. The EPA also said it would regulate four other PFAS chemicals by requiring treatment if the combined level reaches a certain concentration.

Read more at The WSJ

California Appeals Court Reverses Most of Ruling Deeming Prop. 22 Invalid

A California appeals court reversed most of a ruling invalidating Proposition 22, the state’s 2020 voter-approved gig economy law allowing giant ride-hailing and delivery companies to classify their workers as independent contractors rather than employees. The group of companies that backed Proposition 22, called the Protect App-based Drivers & Services coalition, celebrated the ruling as a “historic victory for the nearly 1.4 million drivers who rely on the independence and flexibility of app-based work to earn income, and for the integrity of California’s initiative system.”

A small group of app-based drivers and the Service Employees International Union had mounted the legal challenge to Proposition 22. Plaintiffs and the union said in an emailed statement that the appeals court decision showed powerful corporations had “hijacked” the ballot referendum process, but praised the court for knocking down provisions restricting workers collective bargaining rights.

 Read more at The LA Times

Illinois Enacts Mandatory Paid Leave ‘for Any Reason’

Starting Jan. 1, Illinois employers must offer workers paid time off based on hours worked, with no need to explain the reason for their absence as long as they provide notice in accordance with reasonable employer standards. Illinois employees will accrue one hour of paid leave for every 40 hours worked up to 40 hours total, although the employer may offer more. Employees can start using the time once they have worked for 90 days.

Proponents say paid leave is key to making sure workers, especially low-income workers who are more vulnerable, are able to take time off when needed without fear of reprisal from an employer. But critics say the law will overburden small businesses already struggling to survive the post-pandemic era amid the high inflation that has gripped the nation for nearly two years.

Read more at The AP

Machine Tool Orders Continue to Drop in 2023

U.S. manufacturers’ orders for new machine tools declined in January for the fourth straight month, down -16.3% from December to $355.6 million. That figure is -20.3% lower than the January 2022 total, according to the data reported by AMT - the Association for Manufacturing Technology in its latest U.S. Manufacturing Technology Orders report. In addition, the value of January orders is lower than any monthly total for 2022, and the total for units is the lowest figure during that 13-month sequence.

The regional results for January revealed particularly strong orders in the South Central region, where new orders for metal-cutting machinery totaled $35.27 million – up +20.4% over December and +46.3% over January 2022. Metal-cutting machinery orders increased to $74.17 million in the North Central-East region, up 11.2% from December but down -32.7% versus January 2022.

Read more at American Machinist

Volkswagen Plans Almost $200 Billion in Investment Focusing on EVs, New Tech

Volkswagen is planning a spending spree of close to $200 billion over the next five years to fix its struggling business in China and try to hoist the German car maker out of its niche as an also-ran in the U.S. The German auto maker said Tuesday it would target 68% of that investment, or about $131 billion, on the development of electric vehicles and new digital technology, with a particular focus on expansion in China and the U.S. That compares with about 56% in the previous investment plan.

The big spending by Volkswagen—totaling 180 billion euros, equivalent to $193.2 billion—comes as governments around the world shell out subsidies to encourage companies to invest in technologies that speed up the transition away from greenhouse-gas emitting fossil fuels. VW is relatively flush with cash after reaping billions of euros in proceeds from the listing of sports-car maker Porsche AG last year. VW said Monday that it would build its first battery plant outside Europe in Canada. That announcement followed a decision earlier this month to invest $2 billion to build a new factory in South Carolina to build Scout brand all-electric trucks and SUVs.

Read more at the WSJ

Airbus Supply Chain Challenges Continue in “Make or Break' Delivery Year

Airbus (AIR.PA) and U.S. rival Boeing (BA.N) were locked in a dead heat for deliveries for the first two months of the year, but the European planemaker has a tougher task to meet annual forecasts amid ongoing supply woes. Both groups delivered a total of 66 jets in January and February. But whereas this makes up some 12% of market forecasts for Boeing's 2023 deliveries, Airbus has secured just 9% of its 2023 target of 720 jets, below the trend for this time of year.

In February, Airbus delivered 46 jets, up from 20 in January, for a total of 66 in the first two months of 2023. That compares with 79 in the same period of 2022. Boeing said on Tuesday it delivered 28 aircraft in February, down from 38 in January amid a pause in 787 deliveries. It is not unusual for Airbus to start the year more slowly than Boeing after running flat-out in December, but this year's cumulative tally lags behind the average for the European firm.

Read more at Reuters

Administration Approves ConocoPhillips Alaskan Oil Drilling Project  

The Biden administration announced yesterday it had approved a large oil drilling venture in Alaska’s National Petroleum Reserve. The ConocoPhillips project—known as Willow—will provide a boost to domestic oil and gas production over the next decade, but the move drew plenty of criticism from environmentalists, climate activists, and Democratic lawmakers. The approval reflects the tightrope the administration is now trying to walk between pursuing a climate agenda and continuing oil production to tamper gas prices and avoid further supply crunches.

The Willow project has been in the works since 2018, but was put on a preliminary track toward approval last July, when the Bureau of Land Management (BLM) released an environmental assessment that detailed several potential routes forward for drilling. The option the Interior Department ultimately chose yesterday involved scaling down the five planned drilling pads to three, with ConocoPhillips releasing the rights to 68,000 acres of additional oil leases the company holds in the National Petroleum Reserve-Alaska (NPR-A).

Read more at The Department of the Interior

U.S. Opens $2.5B Funding Program to Build EV Chargers in Urban, Rural Communities

The federal government on Tuesday announced $2.5 billion in new grants for the construction of electric vehicle charging stations and alternative fueling infrastructure, aiming in part at increasing access in underserved neighborhoods and communities. Known as the Charging and Fueling Infrastructure or CFI program, the grants will be doled out over a five-year period, with an emphasis on both highway chargers but also locations in traditionally underserved and disadvantaged urban, rural and tribal communities.

The $2.5 billion in funding is split evenly into two tracks: a Community Program which seeks to strategically distribute chargers in underserved locations in cities and communities; and a Corridor Program, which will focus on highways with the goal of establishing Alternative Fuel Corridors to enable gasoline-free cross-country travel and long-haul trucking.

Read more at News10 (Albany)