Member Briefing November 16, 2022
Empire Manufacturing Survey: Current Activity Grows Along with Pessimism About the Future
Manufacturing activity grew slightly in New York State, according to the November survey. The general business conditions index rose fourteen points to 4.5, its first positive reading since July. The indexes for future new orders and shipments fell into negative territory, though employment is expected to continue to increase. Modest increases in capital spending and technology spending are planned for the months ahead.
- The new orders index slipped seven points to -3.3, pointing to a small decline in orders, while the shipments index increased eight points to 8.0.
- The unfilled orders index moved down to -6.8, a sign that unfilled orders were slightly lower.
- The delivery times index came in at 2.9, indicating delivery times were little changed.
- The inventories index rose twelve points to 16.5, pointing to rising inventories.
- The index for number of employees climbed five points to 12.2, pointing to an increase in employment levels.
- The average workweek index edged up to 6.9, signaling a small increase in hours worked.
- The prices paid index was little changed at 50.5, while the prices received index rose four points to 27.2.
- The index for future business conditions fell four points to -6.1, indicating that on net firms expect conditions to worsen over the next six months.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- 'Long and Difficult Path' Ahead - Zelensky in Kherson - BBC
- Why Stop Now? Ukraine Seen Pressing Advantage After Kherson Victory - Reuters
- Russian Activist Writes Letters from Jail - BBC
- Russian Missiles Strike at Least Seven Ukrainian Cities - CNN
- Ukraine: Zelensky Snubs Russia as He Addresses 'G19' at G20 - BBC
- Russian Forces Reposition After Kherson Retreat - WSJ
- NATO's Stoltenberg Warns Against Underestimating of Russia - Reuters
- UK's Sunak Extends Support to Ukraine, Awards $4.9 bln Contract to BAE Systems – Reuters
- Russian Oil Exports Hold Up Despite Impending EU Ban - WSJ
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
PPI = 8.0%. Wholesale Prices Rise Less Than Expected as Inflation Shows Signs of Easing
Wholesale prices increased less than expected in October, adding to hopes that inflation is on the wane, the Bureau of Labor Statistics reported Tuesday. The produce price index rose 0.2% for the month, against the Dow Jones estimates for a 0.4% increase. On a year-over-year basis, PPI rose 8% compared to an 8.4% increase in September and off the all-time peak of 11.7% hit in March.
Excluding food, energy and trader services, the index also rose 0.2% on the month and 5.4% on the year. Excluding just food and energy, the index was flat on the month and up 6.7% on the year. One significant contributor to the slowdown in inflation was a 0.1% decline in the services component of the index. That marked the first outright decline in that measure since November 2020. The pullback came despite a 2.7% increase in energy costs and a 0.5% increase in food.
Fed’s Brainard Says Rate-Rise Pace Can Slow Soon
Fed Vice Chair Lael Brainard signaled the central bank is likely to increase rates by 0.5 percentage point at its Dec. 13-14 gathering, following four consecutive increases of 0.75 percentage point. “It probably will be appropriate soon to move to a slower pace of increases,” Ms. Brainard said during a moderated discussion hosted by Bloomberg News on Monday.
The Fed has lifted rates by 3.75 percentage points since March, the most rapid interval of rate rises since the early 1980s. The central bank raised rates to a range between 3.75% and 4% at its meeting earlier this month. A slower pace of rate rises would allow the Fed more time to study how its moves this year are slowing the economy in ways that can’t be observed yet, Ms. Brainard said. Ms. Brainard said officials would be monitoring economic data closely to assess how much higher rates would have to go to combat inflation, which is running near a 40-year high. After that, she said, officials would have to determine how long to keep rates at that level.
U.S. COVID – U.S. Will Keep Covid Public Health Emergency in Place at Least Until Mid-January
The U.S. Covid public health emergency will remain in place past Jan. 11 after the federal government did not notify states or health-care provides on Friday of any intent to lift the declaration. Health and Human Services Secretary Secretary Xavier Becerra has promised to give stakeholders 60 days notice before lifting the emergency declaration so they can prepare for a return to normal operations. In October, HHS extended the public health emergency until Jan. 11.
HHS did not provide a 60-day notice on Friday, which was the deadline to alert states and health-care providers if the federal government planned to lift the declaration on Jan. 11, according to a Health and Human Services spokesperson. Since HHS did not provide notification, the emergency will remain in place for at least another 60 days until mid January. How the U.S. fares against Covid this fall and winter will help determine whether the emergency needs to be renewed again moving forward, Becerra told reporters in October.
New Yale Study Finds Promising Results with Nasal COVID-19 Vaccine
A nasal booster vaccine could be key for preventing COVID-19 transmissions, according to a new study published by Yale researchers. The research team hopes to prevent the COVID-19 vaccine’s efficacy from waning over time with their nasal vaccine, called “Prime and Spike.” Immunity from the intranasal vaccine would build off of the initial vaccination to help produce mucosal immunity — immunity specifically located in the nose, respiratory tract and lungs. The nasal vaccine — which would be administered as a booster shot after an initial intramuscular vaccination — is a subunit vaccine, meaning it delivers a part of a COVID-19 spike protein to prime the body for infection.
“[Prime and Spike] leverages the immune effector and memory responses that are created by the conventional vaccine and [redirects] it to the nasal mucosa,” Iwasaki said in a webinar hosted by the International Union of Immunological Societies. “This enables robust immune induction in the nasal cavity as well as in the lower respiratory tract … establishing tissue resonant memory cells.”
GOP on Cusp of Retaking House Control With Slim Majority
Republicans were on the cusp of retaking control of the House late Monday, just one victory shy of the 218 seats the party needs to secure a majority, narrowing the path for Democrats to keep the chamber and raising the prospect of a divided government in Washington. The full scope of the party’s majority may not be clear for several more days — or weeks — as votes in competitive races are still being counted. Still, the party was on track to achieve 218 with seats in California and other states still too early to call.
Despite its underwhelming showing, the GOP will still see its power in Washington grow. Republicans will take control of House committees, giving them the ability to shape legislation and launch probes of Biden, his family and his administration.
US, China Agree to Resume Climate Cooperation
The United States and China will resume cooperation on fighting climate change that Beijing had halted in anger after U.S. House Speaker Nancy Pelosi visited Taiwan, the White House said Monday. China scrapped a series of talks and ripped up cooperation agreements with Washington, including on tackling global warming, after Pelosi, second in line to the U.S. presidency, visited Taiwan in August.
But after U.S. President Joe Biden and his Chinese counterpart Xi Jinping held talks on Monday in Bali, Indonesia, the White House said the superpowers had agreed to resume work on "transnational challenges." China's foreign ministry in a statement said it was in the "mutual interest" of both sides to "promote post-Covid global recovery, tackle climate change and resolve regional issues through China-U.S. coordination and cooperation." The leaders agreed to "jointly work for the success" of the COP27 climate conference under way in Egypt's Sharm el-Sheikh, the statement added.
China's Economy Loses Momentum as COVID Curbs Hit Factories, Consumers
China's economy suffered a broad slowdown in October as factory output grew more slowly than expected and retail sales fell for the first time in five months, underscoring faltering demand at home and abroad. Industrial output rose 5.0% in October from a year earlier, missing expectations for a 5.2% gain in a Reuters poll and slowing from the 6.3% growth seen in September, data from the National Bureau of Statistics (NBS) showed on Tuesday. Retail sales, a gauge of consumption, fell for the first time since May, when Shanghai was under a city-wide lockdown. Sales dropped 0.5%, against expectations for a 1.0% rise and compared with a 2.5% gain in September.
In response to the weak data, investment bank JPMorgan revised down its year-on-year GDP forecast for China in the fourth quarter to 2.7% from a prior 3.4%, while Citi also trimmed to 3.7% from 4.6% previously.
Third Union Rejects National Rail Contract
A third U.S. rail union voted on Monday to reject a tentative national contract reached in September, but expects to continue negotiating to reach a deal. The International Brotherhood of Boilermakers (IBB), which represents about 300 rail employees, rejected the agreement, said the union and the National Carriers’ Conference Committee (NCCC), which represents the nation’s freight railroads.
The railroad industry group said it was disappointed in the vote but "will remain engaged with IBB throughout the remaining cooling off period." On Nov. 21, the two largest rail unions representing conductors and engineers will announce their votes on the contract. They represent approximately half of all unionized rail employees. A rail shutdown could freeze almost 30% of U.S. cargo shipments by weight, stoke inflation, cost the American economy as much as $2 billion per day and unleash a cascade of transport woes affecting U.S. energy, agriculture, manufacturing, healthcare and retail sectors.
Earnings Reports of Note
Walmart said Tuesday that sales rose by nearly 9% in the fiscal third quarter, as Americans across income levels bought the company’s low-priced groceries. Earnings per share were $1.50 adjusted vs. $1.32 expected and revenue was $152.81 billion vs. $147.75 billion expected. The company posted a net loss of $1.8 billion, or 66 cents per share, down from a profit of $3.11 billion, or $1.11 per share, a year earlier. Shoppers are watching how they spend, Walmart Chief Financial Officer John David Rainey said. They are buying less-expensive proteins such as hot dogs, beans and peanut butter instead of pricier meats. They are waiting for sales events to buy items like TVs and air fryers and are spending less in the apparel and home categories. - CNBC
Home Depot topped third-quarter expectations Tuesday morning. HD stock fell slightly and LOW stock was little changed before the open Tuesday following Home Depot earnings. Earnings rose 8.2% to $4.24 per share while revenue increased 5.6% to $38.87 billion. Same-store sales rose 4.3% for the third quarter after growing 5.8% in Q2. Home Depot is still stuck with bloated inventories, which rose more than 24% year-over-year in Q3. But that is down from 35% in the second quarter. The company reaffirmed its 2022 outlook still expecting mid-single-digit EPS growth with total sales and comps increasing about 3% and a 15.4% operating margin. Wall Street has forecast Home Depot earnings rising 3.6% and revenue growing 1.8%. – Investors Business Daily
Solid Results for Machine Tool Orders
U.S. manufacturers new orders for machine tools increased to $519.3 million during September, a 12.9% boost from the August total that likely is attributable to IMTS 2022, staged during the second week of that month. It was the second consecutive month of rising order levels after a mostly lackluster second-quarter for 2022. However, the new result is -12.4% lower than the September 2021 total, illustrating the extent of the overall weakness in manufacturing demand.
According to AMT – the Assn. for Manufacturing Technology, 2022 was the first time on record that September orders trailed the year-earlier total when the new figures include results from that biannual manufacturing technology expo. Year-to-date 2022 manufacturing technology orders stand at $4.2 billion, a 2.7% rise versus January-September 2021.
Read more at American Machinist
Natural Gas Futures Climb on November Cold
Boosted by a cold shot sweeping through key markets, natural gas futures advanced in early trading Tuesday, though questions surrounding the export demand outlook this winter continue to linger. Data early Tuesday indicated a sharp drop in production, while daily LNG demand above 12.0 Bcf/d for the third time in four days. This comes as cold temperatures through the middle of this month could stir enough weather-driven demand to provide incremental support for the Nymex front month over the next seven to 10 days. The latest six- to 10-day outlook from Maxar’s Weather Desk Tuesday, covering temperatures for Sunday through Nov. 24, pointed to moderating conditions in the Lower 48.
The market continues to wrestle with uncertainty over the timeline for the restart of the Freeport LNG export terminal, which had been slated for a return to service this month. However, a Bloomberg News report Monday, citing anonymous sources, said Freeport had told liquefied natural gas buyers it would likely cancel shipments slated for this month and December because repair work and efforts to secure regulatory approvals are ongoing.
Read more at Natural Gas Intelligence
Appeals Court Blocks Biden Student Debt Cancellation Plan
A federal appeals court on Monday temporarily blocked the Biden administration’s student loan forgiveness program, which had already been halted nationwide by a separate court ruling. The latest ruling, by a unanimous three-judge panel on the U.S. Court of Appeals for the 8th Circuit, added to the legal jeopardy surrounding President Biden’s massive debt relief plan.
The panel, which comprised two Trump-appointed judges and one appointee of former President George W. Bush, said its order would remain in effect until further notice by the 8th Circuit or the Supreme Court. The ruling was a win for six conservative-led states — Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina — which argued they were harmed by a freeze on the collection of student loan payments and interest.
Buttigieg: ‘We’re Not Out of the Woods’ on Holiday Travel
Transportation Secretary Pete Buttigieg said Monday that travel infrastructure has improved since the country saw flight cancellation spikes and other strains this summer but that there’s still more to do to get the sector ready for the looming holiday travel surge. The U.S. faced significant transportation sector struggles as COVID-19 restrictions were lifted and demand for airline travel started to stretch back toward pre-pandemic levels, with tens of thousands of flights canceled and delayed this summer.
According to data from the Department of Transportation, around a quarter of all flights across June, July and August were canceled or delayed 15 minutes or more. Around 8 percent of flights were delayed more than an hour. “There’s a lot of catching up to do in the system as it works its way through some of the profound disruptions that took place during the pandemic. I think we’re on the right track, but there’s more to do.” Buttigieg said on “NBC Nightly News,” speaking with host Lester Holt.
Try, Try Again. Artemis I Moon Launch Attempt Set for Earlier Today
NASA will try to get its enormous moon rocket off a launchpad for a third time early Wednesday morning after technical problems stymied earlier attempts. The mission is a critical jumping-off point for Artemis, the National Aeronautics and Space Administration’s multiyear agency program to return astronauts to the lunar surface for the first time since 1972 and set the stage for broader agency space-exploration efforts. NASA plans to try to blast an SLS rocket from the Kennedy Space Center in Florida as soon as 1:04 a.m. ET Wednesday, when a two-hour window opens.
Artemis I, as this mission is called, is designed as an intense test of the vehicles that NASA is depending on, specifically the Space Launch System rocket that will blast the uncrewed Orion spacecraft toward the moon. Boeing Co. developed the SLS rocket, while Lockheed Martin Corp. is the lead company behind Orion.