Member Briefing May 17,, 2022

Posted By: Harold King Daily Briefing,

Empire Manufacturing Survey: Activity Declined Across the Board

After growing significantly last month, manufacturing activity declined in New York State,  and firms expressed less optimism about the six-month outlook than they did earlier this year, according to the May Empire Manufacturing Survey. Here are some of the key numbers:

  • The general business conditions index retreated thirty-six points to -11.6, its second negative reading in the past three months. 
  • The new orders index fell thirty-four points to -8.8, and the shipments index plunged fifty points to -15.4, marking a sharp reversal for the two measures, both of which increased last month.
  • The unfilled orders index fell to 2.6. The delivery times index held steady at 20.2, pointing to continued lengthening in delivery times, and inventories increased.
  • The index for number of employees increased seven points to 14.0, and the average workweek index held steady at 11.9, indicating a modest increase in employment levels and the average workweek.
  • The prices paid index fell thirteen points to a still elevated 73.7, and the prices received index edged down to 45.6, signaling ongoing substantial increases in both input prices and selling prices, though at a slower pace than last month.
  • The index for future business conditions was little changed at 18.0. Increases in prices and employment are expected to continue in the months ahead. The capital expenditures index fell to its lowest level in several months.

Read more at the NY Fed

Invasion of Ukraine Headlines

China’s Economic Activity Plummets as COVID Lockdowns Hit Growth

China’s economic activity contracted sharply in April as a wave of lockdowns across the country posed the most significant challenge to its growth prospects since Covid-19 emerged more than two years ago. Retail sales, the country’s main gauge of consumer activity, slumped 11.1 per cent year on year, compared with forecasts of a 6.6 per cent fall by economists polled by Bloomberg. Retail sales dropped in March, down 3.5 per cent year on year.

Industrial production, which underpinned China’s rapid economic recovery from the initial COVID shock in early 2020 and was expected to rise slightly despite the recent restrictions, dropped 2.9 per cent.

Read more at the Financial Times

Global Wheat Prices Jump After India Export Ban

The price of wheat has jumped on international markets after India banned the export of the staple cereal. The benchmark wheat index rose as much as 5.9% in Chicago, the highest it has been in two months. The export ban comes after a heatwave hit India’s wheat crops, taking domestic prices to a record high.

The cost of everything from bread and cakes to noodles and pasta has risen in recent months as wheat prices soared on world commodity markets. Government officials also said the ban was not permanent and could be revised. The decision has been criticized by agriculture ministers from the Group of Seven (G7) nations meeting in Germany. “If everyone starts to impose export restrictions or to close markets, that would worsen the crisis,” German food and agriculture minister Cem Ozdemir said.

Read more at the BBC

US COVID – US Hits 1 Million Deaths from COVID-19

The United States has reached 1 million reported deaths from COVID-19, according to figures from the Centers for Disease Control and Prevention, a number that shows the shocking toll the virus has taken on the nation.   The U.S. has had more deaths per capita than Western Europe or Canada, and while new deaths have fallen, they are still rising.  

There are still more than 300 people dying every day from the virus in the U.S. on average, according to a New York Times tracker, though that is one of the lowest levels since the pandemic began. In addition to vaccinations, new treatment pills from Pfizer known as Paxlovid have helped to take some of the teeth out of the virus.  

Read more at The Hill

Draft NYS House Maps Released by Special Master – Changes in the Hudson Valley

The court appointed, neutral special master tasked with redrawing New York’s Congressional and state Senate district maps released a draft version of the map for House districts Monday morning. An interactive version of the map was posted online by Jonathan Cervas, a scholar on apportionment who was tasked with the job. The map is just a draft, with the final Congressional and state Senate maps due Friday, May 20. The public has through Wednesday to submit testimony regarding the maps to Steuben County Acting Supreme Court Judge Patrick McAllister,

The map seems to spell bad news for New York Democrats, who could have more competitive general elections than ever. Cervas seemed to prioritize that, drawing at least eight of the state’s 26 House districts in a way that either party could be competitive in November. The lines have national implications as well. Democrats have a narrow majority in the House of Representatives currently, and are expecting difficult conditions in this 2022 midterm election.

Congressional Bids Fly After Release of Draft New York House Maps

New York officials started a cascade of announcements for congressional office on Monday after the state’s new boundaries for its 26 U.S. House of Representative seats were released just before noon.

  • Ulster County Executive Pat Ryan will run for Congress in New York’s new 18th District..
  • The new 18th District no longer incudes Dutchess County, but Dutchess County Executive Marc Molinaro, a Republican, announced he will continue to run in the 19th District he’s campaigned for since last September. 
  • Most recently representing the 18th District has been Rep. Sean Patrick Maloney, who said on Monday if these new boundaries are finalized, he will run in the 17th District, which includes Putnam and Rockland counties, and parts of Dutchess and Westchester counties.
  • Assemblymember Colin Schmitt, a Republican from New Windsor, will continue to campaign as the 18th District’s Republican and Conservative candidate.
  • Hudson Valley state Sen. James Skoufis, a Democrat from Woodbury, to announce he is weighing throwing his hat into the race for the new 18th Congressional District.

Read more at NY State of Politics

Study: Pfizer-BioNTech COVID-19 Vaccine Estimated to Have Averted 9 million Cases. 

The Pfizer-BioNTech COVID-19 Vaccine (BNT162b2) contributed to generate substantial public health impact and vaccine-preventable cost savings in the first year of its rollout in the US.

It was estimated that, in 2021, the Pfizer-BioNTech COVID-19 Vaccine (BNT162b2) contributed to averting almost 9 million symptomatic cases, close to 700,000 hospitalizations, and over 110,000 deaths, resulting in an estimated $30.4 billion direct healthcare cost savings, $43.7 billion indirect cost savings related to productivity loss, as well as discounted gains of 1.1 million QALYs. As only direct impacts of vaccination were considered, these estimates may be conservative. 

Read more at Public & Global Health

Euro Plummets Toward Parity With U.S. Dollar

If Americans can afford the airfare (that’s a big if), Europe might be a relatively affordable vacation spot this year. The euro is dropping fast against the dollar, an indication that markets see growing risks that Russia could curtail natural gas flows to the continent, hammering economic growth.

Currency movements are driven, to a large extent, by what central banks are expected to do with interest rates. Hikes tend to strengthen a currency, while cuts weaken it.  The euro’s drop against the greenback suggests investors think the Fed will follow through on its plans for aggressive rate hikes this year, because the U.S. economy will remain strong, and inflation high.  And despite statements from European Central Bank officials that the hiking cycle will start in July, the markets don’t think Europe’s economy will be strong enough for rates to rise much — perhaps because Russia will cut off energy supplies.

Read more at Axios

US, EU to Ramp Up Chip Making

The United States and the European Union announced on Monday a joint effort to boost microchip manufacturing and tackle Russian disinformation around the war in Ukraine.  The two sides met outside Paris as part of the Trade and Technology Council. In its final statement, the council accused Russia of an “all-out assault on the truth” in Ukraine and promised an “early response framework” to tackle disinformation in future crises.  And it promised action over Russian disinformation elsewhere in the world, accusing Moscow of seeking to deflect blame over food supply shortages caused by its war in Ukraine.

The forum pledged to give the chip industry the maximum possible subsidies.  “We hope to agree on high levels of subsidies — that they will not be more than what is necessary and proportionate and appropriate,” Vestager told reporters on Sunday.  The forum also announced an “early warning system” for disruptions in the supply of semiconductors, substances used to make chips, hoping to avoid excessive competition between Western powers.

Read more at IndustryWeek

Surging Natural Gas Prices Squeeze U.S. Industrial Sector

Skyrocketing natural gas prices have raised manufacturing and transportation costs across many U.S. industries, and the situation should persist as the United States exports more gas to Europe to make up for Russian supplies lost to sanctions.  U.S. natural gas futures have doubled this year, far more than the increases in retail gasoline and diesel. U.S. natural gas futures have surged to $7.854 per mmBtu on Friday from $3.730 at the start of 2022 but remain far lower than Europe’s benchmark of $31 and Asia’s of $24 per mmBtu.  Surging demand from Europe, which is trying to wean itself off Russian imports, has analysts expecting prices will remain elevated.

“The manufacturing sector cannot invest and create jobs without assurances that our natural gas and electricity prices will not be imperiled by excessive LNG exports,” Paul Cicio, president of he Industrial Energy Consumers of America (IECA), a trade group whose members include smelters, plastics and paper-goods makers, said last month in a letter to U.S. Energy Secretary Jennifer Granholm. 

Read more at Reuters

White House Releases Plan to Boost Housing Supply

The White House on Monday outlined a plan to boost housing availability and lower costs for renters and homeowners Among the measures detailed as part of the plan are using new financing mechanisms to build and preserve more housing where there are currently financing gaps and expanding federal financing by making certain loans more widely available for multifamily developments.

The plan also includes steps to ensure government-owned housing goes to owners who will live in the dwellings, or nonprofits who will rehab the buildings, rather than large investment firms that may neglect the properties.

Read more at The Hill

EU Sees Economic Contraction if Russian Gas Supplies Are Halted

In the latest of four reports on the economic outlook published each year, the EU said that Russia’s invasion of Ukraine would slow economic growth this year as higher energy prices drain household spending power and eat into company profits. European governments want to wean the region off Russian oil and gas to deprive Moscow of funds to finance its war effort and to reduce the economic leverage the Kremlin currently has on European governments.

European nations have been scrambling to sever their energy relationship with Russia since the start of the war in Ukraine. While some have made significant progress, Monday’s warning underlines the extent of the work that remains to be done to end the continent’s reliance on Russian supplies.

Read more at the WSJ

Biden Administration Launches $6 Billion Nuclear Power Credit Program

It may not be popular, but Democrats are increasingly reconciling themselves to the necessity of nuclear energy to tackle climate change. The Biden administration has given states until this week to apply for a $6bn fund to rescue nuclear power stations facing closure. Among the applicants is energy-hungry California, where Diablo Canyon, the state’s only nuclear plant, is slated to close in 2025. The governor, Gavin Newsom, has announced he would seek support for the facility, which supplied 6% of the state’s electricity last year.

Red tape, competition from natural gas and political unpopularity have conspired to put nuclear power in America on life support. Nuclear energy accounts for 8% of the country’s electricity generation, but capacity is lower today than it was in 1989 as ageing plants have closed. Just one new reactor has been built since 1996. Even if the lights stay on at Diablo Canyon for a while longer, the future of America’s nuclear industry still looks dim.

Read more at Reuters

Kim Blasts Pandemic Response as North Korean Outbreak Surges

North Korean leader Kim Jong Un criticized officials over slow medicine deliveries and mobilized the military to respond to a surge in suspected COVID-19 infections, as his nation struggled to contain a fever that has reportedly killed dozens and sickened nearly a million others in a span of three days.

North Korean health authorities said Monday that eight more people died and an additional 392,920 were newly found to have feverish symptoms. That brings the death toll to 50 and illnesses to more than 1.2 million, respectively. Kim has acknowledged that the fast-spreading fever, highly likely driven by COVID-19, is causing “great upheaval” in the country, and outside experts say the true scale of the outbreak is likely much bigger than what’s described in the state-controlled media.

Read more at the AP

China Competitiveness Bill Faces Hurdles as Time Runs Short

Disagreements over legislation designed to boost U.S. competitiveness against China are clouding its prospects in Congress, as lawmakers enter a period of make-or-break negotiations.  Many lawmakers say the sprawling, complex package—which even includes a section on kitchen sinks—remains likely to pass this year. But squabbles are emerging over proposed national-security reviews of outbound U.S. foreign investments; waivers of tariffs on Chinese imports; and curbs on the sale of counterfeit goods online, among other provisions.

The flashpoints are worrying those who support the bill’s central goal of boosting U.S. high-tech research and manufacturing to counter advancements by China and other commercial rivals. The legislation would expand federal investment in technologies such as quantum computing and dedicate $52 billion in new subsidies to rebuild semiconductor manufacturing in the U.S., which has been eclipsed by Taiwan and other overseas competitors.

Read more at the WSJ