Member Briefing March 16, 2023
Empire State Manufacturing Survey: “Activity Continued to Decline”
Manufacturing activity continued to decline in New York State, according to the March survey. The general business conditions index fell nineteen points to -24.6, continuing the see-saw pattern of ups and downs within negative territory seen in recent months. Here are the key numbers:
- The new orders index fell fourteen points to -21.7, indicating that orders declined substantially.
- The shipments index fell fourteen points to -13.4, pointing to a decline in shipments.
- The unfilled orders index came in at -6.7, a sign that unfilled orders continued to decline.
- The inventories index moved down eight points to -1.9, indicating that inventory levels held steady.
- The index for number of employees fell four points to -10.1, indicating that employment levels continued to decline.
- The average workweek index fell six points to -18.5, its lowest level since early in the pandemic.
- The prices paid index fell three points to 41.9, and the prices received index moved down six points to 22.9.
- The index for future business conditions fell twelve points to 2.9, suggesting that firms do not expect activity to improve over the next six months.
- The capital spending index and technology spending index both fell to 13.3.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- U.S. Will Continue Drone Flights After Russian Jet Incident: Live Ukraine War - NYT
- Moscow Warns U.S. Aircraft Away from its Air Space After Drone Crash - Reuters
- Moscow Says It’ll Try to Retrieve U.S. Drone; British and German Fighter Jets Intercept Russian Aircraft - CNBC
- US, Russian Military Chiefs Resume Contact to Discuss Drone - AP
- Russia Strikes Kharkiv as Ukraine’s Allies Discuss Military Support - WSJ
- EU Nears Deal to Restock Ukraine’s Diminishing Ammo Supplies - Politico
- Russia Is Blocked From Collecting $4.5 Billion in Ukraine Bond Dispute - WSJ
- Are Russians Again Dizzy With Success? Putin Would Have Us Believe So – The Hill
- Senators From Both Parties Press Austin on Sending F-16s to Ukraine - Politico
- 60 Percent of Americans Think China is a Bigger Threat Than Russia – The Hill
- Interactive Map: Assessed Control of Terrain in Ukraine - Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
4.6% - Producer Prices Decline
US producer prices unexpectedly declined in February after downward revisions to the prior month, pointing to an easing of cost pressures in corners of an economy still battling the highest inflation in a generation. The producer price index for final demand fell 0.1% from the prior month and increased 4.6% from a year earlier, according to data out Wednesday from the Bureau of Labor Statistics. Excluding the volatile food and energy components, the so-called core PPI was unchanged from a month earlier at 4.4%.
The PPI report showed food prices declined for a third month, reflecting a 36.1% slide in chicken eggs. Energy prices edged lower. Excluding the food and energy components, final demand for goods increased 0.3%. Costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, fell 0.4% on declines in food and energy.
Retail Sales Dip 0.4% in February After Buying Burst in January
The government said Wednesday that retail sales slipped 0.4% after jumping a revised 3.2% in January, helped by an increase in auto sales. Retail sales were down in November and December, the critical holiday period. The February retail sales figure was weighed down by a 1.8% drop in auto sales as well as declines at restaurants and stores selling furniture and clothing. Excluding autos, sales slipped 0.1% from January, according to the Commerce Department.
Sales at furniture stores fell 2.5%, while business at restaurants declined 2.2% in February from January. Sales at department stores slid 4%. But shoppers spent more online and at electronics stores, health and beauty stores and food retailers, according to the report.
COVID News – Paxlovid is Safe, Effective and Doesn’t Cause ‘Rebound,’ FDA Says
Pfizer’s antiviral COVID-19 treatment Paxlovid is safe and effective at treating adults with mild to moderate COVID-19 who are at high risk of progressing to severe disease, including hospitalization or death, according to a Food and Drug Administration (FDA) staff report. The report found Paxlovid is not associated with cases of “rebound,” in which patients test positive or have symptoms days after a 5-day course of the drug is completed.
The report was released in briefing documents ahead of an agency advisory committee meeting on Thursday, where outside advisers will discuss whether to recommend Paxlovid for full approval. Paxlovid is currently on the market through an emergency use authorization granted in 2021. The FDA typically follows the advice of its outside panels but is not required to.
What Should a Manufacturer Do if its Bank Fails?
Recent collapses of three banks have brought the risk to the forefront in the minds of many business owners and executives.
- Be proactive
- Be transparent
- Communicate with your customers and suppliers immediately
These are just some of the recommendations given by SecurityInfoWatch.com. Their recent story reports on the recent bank failures and offers advice on how security businesses should react in the event their own bank fails. Although originally meant for the security industry, the advice and is still suitable for most manufacturers.
Assembly, Senate One House Budget Bills Take a Knife to Hochul’s Agenda
On Tuesday, the state Senate released its one-house budget that excluded many of Governor Hochul’s top priorities: bail reform, the charter school cap and suburban housing mandates. Instead, the proposed budget included a number of progressive policy proposals that the governor had ignored, including “good cause” eviction protections and health insurance coverage for undocumented immigrants.
In its one-house budget the Assembly also offered a strong rebuke of the governor's agenda but didn’t go quite as far as the upper chamber. Both chambers also chose to exclude the governor’s plan to lift the cap on charter schools in New York City and make changes to bail reform. Perhaps the biggest blow to the governor comes in changes to her ten-year Housing Compact which sought to spur 800,000 units of new housing through a combination of zoning changes, developer incentives and municipal benchmarks for growth.
ECB Still Looks to Raise Rates Despite Banking System Turmoil
Renewed unease gripped world markets on Wednesday as news that Credit Suisse's largest investor said it could not provide the Swiss bank with more financial assistance sent its shares and broader European shares sliding once more. Investors rushed back into safe-havens, with two-year German bond yields down 21 basis points at 2.71%. "The Credit Suisse share price is falling and government bonds are rallying on the back of that. Still very much driven by the perceived health of the banking sector, but this time in Europe," said Antoine Bouvet, senior rates strategist at ING.
The European Central Bank is still leaning towards a half-percentage-point rate hike on Thursday, despite turmoil in the banking sector, given high inflation, a source close to its Governing Council told Reuters.
The UK Is Budgeting For Growth
Today’s economic forecast by the independent Office for Budget Responsibility (OBR) reinforces that moniker since the UK is now expected to avoid a technical recession. GDP is expected to contract by 0.2 percent this year with growth returning by the third quarter in the summer. That good news is tempered by slower growth over the longer term from next year.
It’s also tempered by the OBR forecasting that real household disposable income per person, which measures standards of living, is expected to decline by 5.7 percent until April 2024, which is the worst drop on record. That’s also when the economy is forecast to finally recover to its pre-pandemic level. So, in early 2024, the economy will only be as large as it was in 2019. Thus, there is an urgent need for a Budget that gets the economy going and growing.
China’s Economy Rebounds, Spurred by Consumption
Retail sales in China grew 3.5% in January and February compared with the same period last year, marking a sharp turnaround from the 1.8% annual contraction recorded in December, China’s National Bureau of Statistics said Wednesday. Industrial production in the first two months rose 2.4%, up from a 1.3% increase in December. Investment in fixed assets such as infrastructure and machinery increased 5.5%.
China’s statistics agency combines major economic indicators for January and February to avoid distortions from holidays around Lunar New Year, when businesses take a break and workers head home for family reunions. The revival in economic activity followed the dismantling of China’s signature zero-Covid strategy in December after almost three years of strict controls aimed at smothering even the tiniest disease outbreaks.
Mortgage Demand Rises Despite Volatile Interest Rates
Demand for mortgages increased for the second straight week, despite some volatility in mortgage rates. Total application volume rose 6.5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Mortgage applications to purchase a home rose 7% for the week but were still 38% lower than the same week a year ago. Homebuying basically stalled in early February, after rates rose about a full percentage point, but buyers seem to be coming back now, perhaps because they are concerned rates will go even higher.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.71% from 6.79%, with points falling to 0.79 from 0.80 (including the origination fee) for loans with a 20% down payment. That was the average, but mortgage rates were largely higher for most of the week before dropping sharply Friday on news of the Silicon Valley Bank failure.
Tyson to Close Two Chicken Plants, Laying Off 1,700 Workers
Tyson Foods Inc. plans to shut down two of its poultry plants and lay off nearly 1,700 workers as it tries to improve its chicken operations that produce about one-fifth of the U.S. supply. “The current scale and inability to economically improve operations has led to the difficult decision to close the facilities,” a company spokesman said in a statement.
Tyson notified the nearly 1,000 employees at its Van Buren, Ark., chicken plant on Monday that it would close on May 12, the company said. About 700 workers at Tyson’s plant in Glen Allen, Va., also found out on Monday that its plant would close in May, according to the local United Food and Commercial Workers International Union, which represents employees at the Virginia plant. Tyson’s long-dominant chicken business is under increased pressure as the company’s profit margins fall from historic highs during the pandemic.
Honda to Move Accord Production from Ohio to Indiana as Part of EV Shift
Honda Motor Co.'s U.S. unit said on Tuesday it would move production of its Accord sedan to Indiana in 2025 after assembling the model in Marysville, Ohio, for more than 40 years, as part of its shift to EV production. Marysville will be Honda's first U.S. auto plant to transition to making EVs. Honda said last year it was separately investing $700 million to retool three Ohio plants for electric vehicle production by 2026, including Marysville.
The move comes after Honda and South Korea's LG Energy Solution Ltd in October announced they would build planned $4.4 billion joint-venture battery plant at a site near Jeffersonville, Ohio, and broke ground earlier this month. The battery plant, to be completed by the end of 2024, will cover more than 2 million square feet (185,806 square meters) and aims for about 40 Gigawatt hours (GWh) of annual production capacity.
Boeing Wins Huge 787 Order From Riyadh Air, Saudia
Saudi Arabian flag carriers Riyadh Air and Saudia have placed orders for up to a combined 121 Boeing 787s in what could amount to the fifth largest commercial order by value in the OEM’s history. The 787s will be powered by GE Aerospace GEnx engines, according to the U.S. Secretary of Commerce. The Saudi Arabian state-owned carriers said they will order 78 787s with options for a further 43 aircraft. The new orders will be posted to Boeing’s Orders and Deliveries website once finalized, Boeing said.
Finalizing both orders would boost Boeing’s 787 backlog 14% and fill delivery slots being created by a planned production ramp-up. The company has been building 787s at a rate of about two per month recently, and is targeting five per month in 2024, climbing to 10 per month in 2025-26. Boeing’s 787 firm-order backlog stood at 574 aircraft on March 1, including 59 in the ASC 606 accounting category that flags them as on shaky ground due to customer issues.
Republicans Introduce Major Energy Package
House Republicans on Tuesday afternoon introduced a sprawling energy package aimed at boosting fossil fuels and mining and limiting environmental reviews for infrastructure projects. The nearly 200-page bill, which they announced last week would be H.R.1 – signaling that it is the party’s top priority — is highly partisan and is unlikely to pass through a divided Congress.
However, it does outline Republican goals and positions – particularly as they seek to both criticize the Biden Administration’s energy policies but also to try to find a bipartisan compromise for speeding up infrastructure project approvals. “I am proud to introduce today H.R. 1, the Lower Energy Costs Act, to cut red tape and increase energy production here at home so we can lower energy costs and stop our dependence on hostile foreign countries for our energy and minerals,” Majority Leader Steve Scalise (R-La.) said in a statement.
Why Gas Bills Are Going Crazy—With No End in Sight
Last year was the most volatile on record for natural gas, boosting the cost to heat homes, generate electricity and manufacture economic building blocks such as fertilizer and steel. Prices in 2022 whipsawed from unseasonable lows to shale-era highs and back again. Benchmark gas futures, which determine what millions of Americans pay for heat and electricity, swung by at least 7% on 44 days last year, the most since at least the early 1990s, when gas markets were deregulated and the modern trading era began.
Analysts, traders and big gas buyers expect this kind of instability to become the norm. Coal-fired power plants have been retired en masse without wind and solar farms ready to replace their output, pressuring utilities to pay up for gas. Infrastructure to export more gas is being built, but pipeline projects to move more gas within the country have been slowing. The Kremlin’s invasion of Ukraine last year sent global markets haywire, sparking a scramble by European buyers to replace Russian supplies and tethering U.S. prices to international events even more.