Member Briefing March 27, 2023
US Capital Goods Orders Rise While Broader Durable Goods Decline
New orders for key U.S.-manufactured capital goods unexpectedly rose in February, but data for the prior month was revised sharply down, suggesting that business spending on equipment could be struggling to rebound in the first quarter. Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, increased 0.2% last month, the Commerce Department said on Friday. Core capital goods orders advanced 4.3% on a year-on-year basis in February. The data is not adjusted for inflation.
Durable goods orders dropped 5.0% in January. Durable goods orders last month were pulled down by a 6.6% decline in the volatile civilian aircraft category, which followed a 56.3% plunge in January. Boeing reported on its website that it had received just five aircraft orders in February, sharply down from 55 in January. Orders for transportation equipment fell 2.8% after tumbling 14.0% in January. Motor vehicle orders decreased 0.9%
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russia Presses Along Ukraine Front After Reports of Bakhmut Slowdown - Reuters
- Russia ‘Largely Stalled’ in Bakhmut, Shifting Focus, UK Says - AP
- Putin: Russia to Station Nuclear Weapons in Belarus - BBC
- NATO Reacts to Putin's Nuclear Threat: 'Dangerous, Irresponsible' – Hindustan Times
- Undersupplied Ukraine Prepares Spring Offensive With Limited Western Arms - Newsweek
- A Year Into War, Ukraine Faces Challenges Mobilizing Troops - WSJ
- Finland’s President Signs NATO Law as Accession Draws Nearer - Bloomberg
- As Ukraine War Drags on, NATO Steps Up War Readiness – CS Monitor
- A Scrappy Newscast in Kyiv Aimed at Russians Counters Putin's Propaganda Machine - NPR
- 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
One Year of Rate Hikes
Remember the olden days when everyone talked about inflation like it was a fleeting moment in time? This month, March, is an economic anniversary, though maybe not the fun kind. It’s been about a year since the Fed started raising interest rates to curb inflation and about two years since we started talking about inflation in the first place. A great deal has happened in the economy since.
“There were a lot of people ranging from Jerome Powell all the way down to me who dismissed this as a transitory blip that would soon go away,” said Laurence Ball, an economist at Johns Hopkins. The T word, “transitory” was not the name of the game. But Ball said even though inflation remains sticky, “it doesn’t look as though we’ve gotten into this pernicious spiral of inflation’s high so it’s expected to stay high.”
Banks Ramp Up Use of New Fed Facility Created During Crisis
American banks deepened their reliance on a new Federal Reserve lending program created after the collapse of Silicon Valley Bank this month. Institutions borrowed $53.7 billion from the Bank Term Funding Program as of Wednesday, up sharply from $11.9 billion last week. The new bank funding program was introduced March 12 to alleviate similar strains on banks and other institutions; it extends one-year loans backed by Treasurys or other secure assets, paying full price even if their market value is lower.
The new bank funding program was introduced March 12 to alleviate similar strains on banks and other institutions; it extends one-year loans backed by Treasurys or other secure assets, paying full price even if their market value is lower.
COVID News – Cases, Hospitalizations and Deaths all Down
The US CDC is reporting:
- 8 million cumulative cases
- 12 million deaths
- 149,955 cases week of March 15 (down from previous week)
- 1,706 deaths week of March 15 (down from previous week)
- This is the lowest weekly mortality since March 2020
- 8% weekly decrease in new hospital admissions
- 1% weekly decrease in current hospitalizations
The Omicron sublineages XBB.1.5 (90.2%), BQ.1.1 (3.5%), XBB (2.5%), and XBB.1.5.1 (2.2%) currently account for a majority of all new sequenced specimens, with various other Omicron subvariants accounting for the remainder of cases.
NYS COVID Update – (Note Change in Reporting Period)
The Governor updated COVID data for the week ending March 24.
- Weekly: 63 (Note change in reporting period)
- Total Reported to CDC: 79,078
- Average Daily Patients in Hospital statewide: 1,254
- Average Daily Patients in ICU Statewide: 158
7 Day Average Cases per 100K population
- 4.61 positive cases per 100,00 population
- 4.61 positive cases per 100,00 population
Moderna Will Charge Around $130 for its COVID Vaccine — and Congress Isn’t Too Happy
Members of Congress experienced severe sticker shock and were none too happy about the company’s recent announcement that it’s going to charge about $130 a shot for its COVID-19 vaccine after the national health emergency ends in May. During the hearing, Sen. Bernie Sanders, an independent from Vermont, highlighted billions of dollars the U.S. government spent to help develop and roll out Moderna’s extremely profitable mRNA-based vaccine.
“This vaccine would not exist without [the National Institutes of Health’s] partnership and expertise and the substantial investment of the taxpayers of this country,” Sanders said. The $130 refers to the list price of the vaccine, which is something of a starting point for negotiations, according to Richard Hughes, a partner at the law firm Epstein Becker Green. He was a Moderna executive until about a year ago.
Work-From-Home Era Ends for Millions of Americans
Some 72.5% of business establishments said their employees teleworked rarely or not at all last year, according to a Labor Department report released this week. That figure climbed from 60.1% in 2021. The survey showed about 21 million more workers on-site full time in 2022, compared with the prior year. An establishment is defined as each business location—such as an individual restaurant in a chain.
The new number is also close to the share of establishments—76.7%—that said they had no employees teleworking before the Covid-19 pandemic, and that were open in February 2020, the Labor Department said. Employers recently have begun pushing harder to get staff to work on-site more often, as recession fears prompt an increased emphasis on worker productivity.
US Weekly Jobless Claims Tick Down as Labor Market Remains Tight
The number of Americans filing new claims for unemployment benefits edged down last week, showing no signs yet that the recent financial market turbulence following the failure of two regional banks was having an impact on the economy. The unexpected dip in claims reported by the Labor Department on Thursday suggested March could be another month of solid job growth. The weekly unemployment claims report is the most timely data on the economy's health.
Initial claims for state unemployment benefits fell 1,000 to a seasonally adjusted 191,000 for the week ended March 18. Unadjusted claims dropped 4,659 to 213,425 last week. A jump in filings in Indiana and an increase in Massachusetts were offset by decreases in California, Illinois and New York. With 1.9 job openings for every unemployed person in January, employers are generally reluctant to let go of workers.
Report: Price Controls Hurt Innovation
Data shows that price controls included in the Inflation Reduction Act will harm life science innovation and could lead to fewer new products and medicines developed and introduced in the United States. For decades, the U.S. has led the world in developing and accessing innovative medicines. But today, that leadership is at risk. The U.S. Chamber’s new Patient Access Report shows how imposing artificial price controls and similar policies deters future innovation.
Countries that use price controls see fewer overall biopharmaceutical product launches, fewer oncology products, and delayed access to treatments. Business groups such as the US Chamber of Commerce and the NAM are urging government officials to consider the implications of price controls on patients before implementing a framework that jeopardizes U.S. leadership on biopharmaceutical innovation and access to new, life-saving treatments.
Most Americans Doubt Their Children Will Be Better Off, WSJ-NORC Poll Finds
An overwhelming share of Americans aren’t confident their children’s lives will be better than their own, according to a new Wall Street Journal-NORC Poll that shows growing skepticism about the value of a college degree and record-low levels of overall happiness. The survey with NORC at the University of Chicago, a nonpartisan research organization that measures social attitudes, showed pervasive economic pessimism underpins Americans’ dim hopes for the future. Four in five respondents described the state of the economy as not so good or poor, and nearly half said they expect it will get worse in the next year.
The WSJ-NORC poll surveyed 1,019 adults from March 1 to 13, largely before the collapse of Silicon Valley Bank and subsequent turmoil in the financial industry. Roughly 4 in 10 cited healthcare and housing costs as big worries, and nearly two-thirds said inflation is a major concern.
Bank of England Lifts Rates by Quarter Point, Following Fed
The Bank of England raised its key interest rate by a quarter percentage point Thursday, a fresh sign that policy makers around the world are determined to press down on inflation despite strains in the banking system. The central bank had previously indicated that it might pause a series of rate increases that dates back to December 2021, but an unexpected pickup in inflation during February helped persuade policy makers that another increase in borrowing costs was needed to cool price rises.
“We believe that inflation will begin to fall quite rapidly before the summer, but as yesterday’s release for February showed, we need to see that happening,” said BOE Gov. Andrew Bailey. Policy makers said the U.K.’s banking system “remains resilient,” and warned they may need to raise the key rate again. The British pound strengthened after the BOE decision, appreciating 0.6% against the dollar before easing moderately.
Tesla's Price War Reshuffles Chinese Market, May Wipe Out Some Automakers
Tesla Inc. triggered a price war in China that’s poised to reshape the world’s biggest car market, with hefty discounts threatening to drive some automakers out of business. In October, the U.S. electric-vehicle maker — a major player in hyper-competitive China — cut prices on models produced at an enormous factory on the outskirts of Shanghai. The cuts escalated in January, with another discount that left Tesla’s locally-made vehicles up to 14 percent cheaper than last year, and in some cases almost 50 percent less expensive than in the U.S. and Europe.
The moves left rivals with little option but to follow suit. Among them were local EV upstarts such as Xpeng Inc. and Nio Inc. as well as leading international brands like Volkswagen Group and Mercedes-Benz Group, which offered discounts of up to 70,000 yuan ($10,000). Ford Motor Co.’s Mach-E electric crossover is down to a starting price of 209,900 yuan, about a third cheaper than in the U.S.
Sticker Shock Awaits New Yorkers’ Utility Bills to Fund Renewables
New York is eager to move away from fossil fuels. Customers, though, will feel the switch in their wallets. The state has largely funded the recent investments in clean energy, electric vehicle chargers, heat pumps and new transmission lines incrementally through piecemeal decisions by the quasi-independent Public Service Commission, which regulates utilities. “Financing them exclusively through rates, particularly on residential, is the least progressive mechanism for financing anything. We make no judgment whether you have the money to pay or you don’t have the money to pay,” John Howard, a commissioner on the Public Service Commission, said at last month’s meeting.
While lawmakers’ concerns are growing over the impact on consumers, they have few levers to shift course on the already-approved costs. A wholesale transition of the state’s energy system is not optional: It is mandated under a sweeping 2019 law requiring 70 percent renewable electricity by 2030 and an emissions free grid by 2040, alongside overall reductions in planet-warming gasses. So it requires a wholesale electrification of the state’s economy if New York is to meet the statutory targets.
Weekday Metro-North Train Schedule Changes Begin Today
New schedules for Metro-North trains on the Harlem and Hudson lines will begin on Sunday, March 26, 2023. The schedules will affect weekday and weekend service on both lines. Beginning on March 26 and going until June 10, weekend trains will depart on an hourly schedule to accommodate much-needed repairs. Regular weekend service will resume on June 11, 2023.
There are minor adjustments to weekday service on all Harlem and Hudson line
New York State’s Latest Idea to Bolster New York City’s Subway: Taxing Your Netflix Subscription
Lawmakers are considering a sales tax on streaming services such as Netflix Inc. to prevent fares from rising on New York’s subways as state budget talks head toward a critical deadline next week. The focus on the MTA during Albany’s budget talks comes as transit authorities across the country grapple with deficits, largely stemming from the slow return of riders after the Covid-19 pandemic.
State lawmakers are poised to reject Gov. Kathy Hochul’s plan to bail out the Metropolitan Transportation Authority by increasing payroll taxes. Her $700 million payroll-tax-increase proposal was paired with a mandate for more contributions from New York City’s government. Democratic leaders in the Legislature are trying to coalesce around an alternative, weighing increases in corporate taxes and many other measures such as a fee on package deliveries, a new surcharge on ride-hailing trips or taxes on streaming services.
Boeing Draws JAL Contract for 737 MAX Jets
Boeing Co. confirmed reports that it has an order to supply Japan Airlines Co. with 21 new 737 MAX-8 aircraft, a deal reportedly worth $2.5 billion. Deliveries for the new narrow-body aircraft will begin in 2026, according to Boeing. Adding the new 737s will aid JAL’s efforts to modernize its fleet as travel volumes on domestic and regional routes recover their pre-pandemic levels of service.
The new jets will be JAL’s first 737 MAX models, and will replace its 737-800 aircraft, according to JAL president Yuji Akasaka. The 737 MAX is Boeing’s best-selling aircraft, with a net total of 561 ordered in 2022, as it began to recover orders following the 2019-2020 grounding that resulted from two deadly accidents. With over 4,200 outstanding orders, Boeing is planning to establish a fourth assembly line for 737 MAX series jets in the second half of 2024.