Member Briefing November 14, 2022
U.S. Dollar, Hitting New Multiyear Highs, Challenging Manufacturers
The U.S. dollar has risen 15.2% against a trade-weighted, broad-based index of currencies for goods and services since June 7, 2021. Companies are starting to cite a strong dollar in their earnings releases. In addition to the trade-weighted index, the strength of the U.S. dollar can be seen in the foreign exchange rates for key markets. For instance, the U.S. dollar achieved its strongest performance against the British pound since March 1985. In addition, the U.S. dollar is the strongest levels since August 1990 against the Japanese yen, in 20 years against the euro and since December 2007 against the Chinese yuan renminbi.
It is important to note that a stronger dollar has a nuanced impact on manufacturers, making it more difficult to increase demand for exports but lowering the cost of imported raw materials and overall imports. At the same time, a stronger dollar creates foreign exchange risk when translating the earnings of foreign operations.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukrainian Flag Raised in Kherson After Russia’s Retreat - CNBC
- Ukraine Troops Greeted With Flowers in Kherson After Russian Retreat - Reuters
- Ukraine Races to Restore Power, Water in Kherson After Russian Withdrawal - WSJ
- A New Banksy Mural Adorns a Destroyed Building in Ukraine - NPR
- Russia Maintains Grip on Global Nuclear Energy Landscape – Financial Times
- Putin Can’t Escape Fallout from Russian Retreat in Ukraine - BBC
- Turkey Seeks Ukraine Peace Talks Despite Western Actions, Erdogan Says - Reuters
- Imagining Peace in Ukraine – The Economist
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Democrats Keep Control of U.S. Senate
Democrats held onto control of the U.S. Senate, handing a major victory to President Joe Biden and extinguishing hopes of the "red wave" that Republicans had expected leading into the midterm elections. Biden - who struggled with low approval ratings ahead of Tuesday's elections, partly due to public frustration over inflation - said the late Saturday outcome made him look forward to the remainder of his term in office.
Senate Majority Leader Chuck Schumer described it as a "victory and vindication" for Democrats and their agenda. He accused the Republican Party of stoking fear and division during the campaign. Republicans, however, remained close to seizing control of the House of Representatives as officials continued counting ballots. Hovering over the 2022 midterm elections all year has been former President Donald Trump, who used his continued popularity among hard-right conservatives to influence the candidates the Republican Party nominated.
NYS Democrats Keep Wide State Senate Majority, Supermajority Still Possible with 2 Elections Undecided
New York Democrats are poised to retain a comfortable majority in the State Senate but could lose the supermajority they have held since the 2020 elections. Senate Democrats headed into the general election with 42 members in the 63-seat legislative chamber and needed to hold on to that number to keep their supermajority. Republicans held 20 seats, while one that was most recently held by a Democrat was vacant.
Democrats were victorious in at least 40 seats, with two more races that were too close to call, one of which is headed to a recount. “The voters of New York have spoken, electing another strong Democratic Majority in the State Senate,” said Senate Majority Leader Andrea Stewart-Cousins, in a statement that said her conference would hold at least 40 seats. “In these unprecedented times in our country, the people know that the Senate Democrats have and will continue to deliver meaningful results.”
U.S. COVID – Hospitalizations Rise
The US CDC is reporting 97.6 million cumulative cases of COVID-19 and 1.07 million deaths. Incidence for the week ending November 2 rose slightly over the previous week, rising to 273,110 from 260,830 for the week ending October 26. Weekly mortality remained relatively steady for the week ending November 2, down slightly to 2,504 reported deaths from 2,581 deaths the week ending October 26. Both new hospital admissions rose 6.2% over the past week, while current hospitalizations remained stable, falling slightly by 0.4%.
The BA.5 sublineage is quickly losing dominance in the US, accounting for 39.2% of sequenced specimens. The Omicron sublineages BQ.1.1 (18.8%) and BQ.1 (16.5%) are exhibiting growth advantages over other sublineages, including BA.4.6 (9.5%) and BF.7 (9%). Several other Omicron sublineages continue to exhibit increasing or steady trends, including BA.5.2.6 (3.1%), BA.2.75 (2.3%), and BA.2.75.2 (1.3%).
NYS COVID Update
The Governor updated COVID data through September October 21.
- Daily: 24
- Total Reported to CDC: 75,317
- Patients Currently in Hospital statewide: 2,822
- Patients Currently in ICU Statewide: 286
7 Day Average Positivity Rate - Cases per 100K population
- Statewide 6.08% - 20.99 positive cases per 100,00 population
- Mid-Hudson: 5.75% - 20.08 positive cases per 100,00 population
Combination COVID/Flu Vaccine - Pfizer and BioNTech Initiate Phase 1 Study of Single Dose mRNA-Based Combination Vaccine Candidate
Pfizer and BioNTech announced last week they are once again partnering to test a new vaccine candidate—an mRNA-based combination SARS-CoV-2 and influenza vaccine that incorporates the current bivalent SARS-CoV-2 vaccine with a new quadrivalent influenza vaccine candidate called qIRV (22/23). The Phase 1 trial, which has already begun and aims to enroll 180 healthy volunteers between the ages of 18-64 years in the US, will assess the vaccine candidate’s ability to generate immune response, safety, and tolerability.
In addition to the Pfizer-BioNTech candidate, Moderna and Novavax also are developing combination SARS-CoV-2 and influenza vaccines. If any of the vaccine candidates under development are successful, it would relieve people from the burden of scheduling and receiving separate annual shots for 2 respiratory diseases.
Long-COVID Treatment Effective for Lingering Effects - US-Israeli Study
With long-COVID patients being relatively new to the medical profession, there has been no decisive protocol for treating them. However, collaboration between scientists at Tel Aviv University and US board-certified rheumatologist and internal medicine specialist Dr. Norman Gaylis and colleagues at Arthritis & Rheumatic Disease Specialties’ (AARDS) Long-Haul Clinic in Aventura, Florida, has revealed a new nutraceutical formulation that provides relief for such patients.
The study appeared in Frontiers in Nutrition under the title “The results of a unique dietary supplement (nutraceutical formulation) used to treat the symptoms of long-haul COVID.” The supplement contains nutrients and plant bio-extracts for critical immune restoration after surviving a viral infection, with ingredients including zinc, vitamin D, quercetin, bromelain, St. John’s wort, Indian frankincense and beta caryophyllene, a cannabinoid CB2 agonist (agonists turn protein molecule receptors on; antagonists turn them off).
Rail Deadline Extended; Strike Threat Delayed
The National Carriers’ Conference Committee (NCCC), issued the following statement November 10th:
The NCCC and the Brotherhood of Maintenance of Way Employees Division of the International Brotherhood of Teamsters (BMWED) have agreed that the current cooling off period, which had been set to expire on November 19, will be extended until at least December 4 and is subject to further extension to maintain alignment, if necessary, with other labor organizations. This extension eliminates the threat of a near-term freight rail service disruption. The railroads will remain engaged with BMWED throughout the extended cooling off period and will continue to seek an agreement based on the framework recommended by Presidential Emergency Board 250. Agreements based on the PEB’s recommendations were endorsed by President Biden as a “win for tens of thousands of rail workers” and have been ratified by the members of seven other unions. Three unions have open ratification votes, and the cooling off period extension announced today will allow the members of these unions to complete their voting without disruption from the threat of a strike.
China Shortens Quarantines as it Eases Some of its COVID Rules
China on Friday eased some of its strict COVID rules, including shortening quarantines by two days for close contacts of infected people and for inbound travellers, and removing a penalty for airlines for bringing in too many cases. The loosening of curbs, a day after President Xi Jinping led his new Politburo Standing Committee in a meeting on COVID, cheered markets even as many experts warned that the measures were incremental and reopening probably remained a long way off.
Under the new rules, centralised quarantine times for close contacts and travellers from abroad were shortened from seven to five days. The requirement for three further days in home isolation after centralised quarantine remains. China will also stop trying to identify "secondary" contacts - a major annoyance for residents of cities who are caught up in sweeping contact-tracing efforts when a case is found - while still identifying close contacts.
Biden and Xi Meet at G-20 With High Stakes … and Low Expectations
When President Biden meets Chinese President Xi Jinping for highly anticipated talks Monday, the two sides will seek to dial down tensions that have run high for months and establish a better understanding of each other’s priorities over the coming years, U.S. and Chinese officials said. Both sides said the meeting is unlikely to yield major policy breakthroughs. But Mr. Biden’s advisers said they hope it will help improve communication and set expectations on significant issues between the two powers, including their differences over Taiwan, China’s relations with Russia and recent missile tests by North Korea.
“I know him well. He knows me,” President Biden said Sunday. “We just got to figure out where the red lines are.”
Power Grid Instability May Soon Affect Manufacturers
Clayton Penhallegon Jr., president of Integrated Services Group (ISG) in Thomasville, Ga., told attendees at the recent SPE Annual Blow Molding Conference (ABC) in Philadelphia that turbulent times are coming for manufacturers in energy-intensive industries. Widely distributed generation has been added to the grid, causing cyclical and random variations in output. Varying and even reversing grid power flows have increased the chance for problems.
There have been reliability warnings in the Midwest and West Coast this summer. From about 2000 to 2022, industrial power prices were fairly steady or declined in some areas thanks to competitive power contracts, pricing-driven load management rates and steady gas prices. Now there is pressure to reduce carbon emissions, the historical core of power supply generation. Penhallegon said manufacturers need to prepare for higher pricing and variability. Average costs for electric power could rise by 25 to 50 percent. Market-based prices may go even higher, he said.
HSBC Poll: Global Supply Chains Set for Overhaul Next Year
More than 40 percent of corporate decision-makers see an urgent need to overhaul their supply chains in 2023, with inflation, higher interest rates and weaker global trade acting as some of the stiffest economic headwinds, a new survey showed. Asked about the biggest impediments to their business next year, 38 percent cited inflation, 32 percent pointed to higher interest rates and 27 percent said an uncertain political environment, the poll showed.
Just 11 percent of respondents in the HSBC Holdings Plc survey said transforming their supply chain wasn’t a priority next year, but 42 percent plan to do so and almost 47 percent see it as a priority at some stage in the future. Conducted by the research firm Toluna, the poll covered 2,170 executives at medium-size companies in 14 countries from September 28 to October 24, according to the London-based bank.
NLRB General Counsel Issues Memo on Electronic Monitoring, Artificial Intelligence and Employee’s Section 7 Rights
On October 31, the National Labor Relations Board (Board) general counsel (GC) released a new memo cautioning against the potential violations of Section 7 of the National Labor Relations Act (Act) that use of such electronic monitoring may raise by “significantly impairing or negating employees’ ability to engage in protected activity and keep that activity confidential from their employer[.]” The GC announced intent to urge the Board to “zealously enforc[e]” existing Board precedent in this context and protect employees rights “to the greatest extent possible.”
The GC notes several specific ways an employer can violate the Act using electronic monitoring and related tools. For example, the memo states that “an employer violates Section 8(1)(a) if it institutes new monitoring technologies in response to activity protected by Section 7; utilizes technologies already in place for the purpose of discovering that activity, including by reviewing security-camera footage or employees’ social-media accounts; or creates the impression that it is doing such things.” (emphasis added). Along the same lines, the memo further explains that “certain conduct can be unlawful even if it merely creates an impression of surveillance,” and that whether employer surveillance of Section 7 activity is overt or covert is irrelevant. (emphasis added).
Rivian Demand Remains Strong, CEO Says After $1.7B Q3 Net Loss
Demand remains strong for Rivian Automotive Inc.'s R1T pickup and R1S SUV, CEO RJ Scaringe said after the automaker posted a $1.7 billion third-quarter net loss and pushed back the launch of a smaller R2 platform to 2026. "We continue to see strong demand for our product," Scaringe said on the company's earnings call Wednesday.
Rivian said it had preorders for 114,000 vehicles on its current R1 platform, up from 98,000 that it reported at the end of the second quarter. Those preorders are separate from an Amazon order for delivery vans. The automaker reiterated its 2022 production target of 25,000 units for its three vehicles — the R1T, R1S and EDV delivery vans. Amazon has ordered 100,000 of the electric vans.
New Federal Inquiry Starting of FAA, Boeing
A U.S. Dept. of Transportation Inspector General plans to begin an audit of the Federal Aviation Administration’s history in monitoring and supervising the design and development of the Boeing 737 MAX, according to a DoT memo. Specifically, the audit will focus on FAA’s oversight of the Maneuvering Characteristics Augmentation System (MCAS) and the Angle-of-Attack (AOA) Disagree Indicator; the MCAS is designed to adjust aircraft handling characteristics during manual flight, to compensate for aerodynamic changes resulting from Boeing’s decision to install larger engines on the 737 MAX than were featured on the previous generation aircraft. Post-crash reports cited the MCAS as a contributing factor in both accidents, which has concentrated Boeing’s credibility and FAA’s responsibility during the 737 MAX airworthiness-certification process from 2012 to 2017.
In February 2019, FAA reviewed Boeing’s decision and agreed that the alert was not necessary for safe operation of the 737 MAX. The memo details that the audit will begin this month.