Member Briefing November 16, 2023
Empire State Manufacturing Survey – Increased Activity, Weaker Labor Market
Manufacturing activity increased in New York State, according to the November survey. The general business conditions index rose fourteen points to 9.1, its highest reading since April. Here are some details:
- The new orders index held steady at -4.9, pointing to another small decline in orders.
- The shipments index rose eight points to 10.0, pointing to an increase in shipments.
- The inventories index rose eleven points to 9.1.
- The delivery times index was little changed at -6.1, suggesting that delivery times continued to shorten.
- The index for number of employees fell eight points to -4.5.
- The average workweek index fell six points to -3.8, reflecting a small decline in employment levels and hours worked.
- The prices paid index edged down three points to 22.2.
- The prices received held steady at 11.1, a sign that selling price increases remained modest.
Looking ahead the index for future business conditions plunged twenty-four points to -0.9, its lowest level in nearly a year. New orders and shipments are expected to increase only modestly, though employment is expected to grow. The capital spending index dropped seven points to 3.0, and the technology index fell to zero.
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- Israeli Says Its Forces Have Entered Gaza’s Largest Hospital - Forbes
- U.S. Says Hamas Using Tunnels Under Gaza Hospitals For Military Operations—And To Hide Hostages - Forbes
- WHO Loses Contact With Gaza Hospital Staff After Raid - Reuters
- Israeli Military Pushes Into Gaza Hospital, a Key Objective in Its Invasion - NYT
- Germany Suggests UN Take Control in Gaza After Israel-Hamas War Ends - Politico
- Tens of Thousands of Supporters of Israel Rally in Washington, Crying ‘Never Again’ - AP
- Biden Says a Deal to Free Hostages Held by Hamas is ‘Going to Happen’ as Officials Say They Are Nearing an Agreement - CNN
- Iran's Nuclear Enrichment Advances as it Stonewalls UN, IAEA Reports Show – Reuters
- FBI: Hamas May ‘Exploit’ Conflict in Israel to Conduct Attacks on U.S. Soil - WSJ
- Found Document Suggests Iran Sought to Help Hamas Make its Own Weapons Ahead of Attack, Sources Say - CNN
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukraine Army Claims Foothold on Bank of River Dnipro in South - BBC
- Russia Will Pay Heavy Price for Avdiivka, Says Ukraine – Yahoo
- Russia Says ‘Hell’ Awaits Ukrainians After Confirming They’ve Crossed Dnipro - CNBC
- As Putin Girds for a Long War, Europe Seeks to Harden Sanctions on Russia - WSJ
- On One Key Eastern Battlefield, The Russians Are Losing 14 Vehicles For Every One The Ukrainians Lose - Forbes
- Prague Freezes Russia's Property On Czech Territory – Barron’s
- Russia Pardons Man Convicted in Journalist’s Murder in Return for Ukraine Service - NYT
- Ukraine Hopes for More Air Defenses from Germany’s Spending Boost - Politico
- 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
US Producer Prices Slide 0.5% in October, Biggest Drop Since 2020
The Labor Department reported Wednesday that its producer price index — which measures inflation before it hits consumers — dropped 0.5% in October from September, the first decline since May and biggest since April 2020. On a year-over-year basis, producer prices rose 1.3% from October 2022, down from 2.2% in September and the smallest gain since July. Excluding volatile food and energy costs, so-called core consumer prices were unchanged from September to October and rose 2.4% from a year earlier.
The year-over-year gain in core producer prices was the smallest since January 2021. The wholesale price of goods fell 1.4% from September to October, pulled down by a 15.3% drop in the price of gasoline. Services prices were unchanged. Year-over-year wholesale inflation has dropped since hitting 11.7% in March 2022
Read more at NY State of Politics
Senate Sends Temporary Funding Bill to Biden's Desk, Averting a Government Shutdown
The Senate passed a stopgap funding bill Wednesday night, punting the GOP's spending fight and the threat of a government shutdown until after the holidays. The bipartisan vote was 87-11, with 10 Republicans and one Democrat — Sen. Michael Bennet of Colorado — voting against the bill. The short-term bill cleared the House on Tuesday on a lopsided 336-95 vote, with all but two of the no votes coming from Republicans. The funding bill next heads to President Joe Biden’s desk for his expected signature.
Passing a two-part CR that funds the government into the New Year will prevent Congress from adopting yet another massive omnibus spending package right before Christmas, argued Johnson, R-La. The CR is “clean,” with no spending cuts or contentious policy provisions that would alienate Democrats. It also does not include a supplemental package covering things like aid for Israel and Ukraine, humanitarian assistance or border security, leaving those issues for later in the year.
COVID 19 Update – CDC: About 36M American Adults Have Received the Updated COVID Vaccine
An estimated 36 million adults in the United States have received the updated COVID-19 vaccine as of Monday, according to new data from the federal government. Additionally, about 3.5 million children have also gotten the updated shot, according to the survey, which is a sample size of the U.S. population, from the Centers for Disease Control and Prevention. This is roughly equal to the number of Americans who had received the bivalent booster -- which was targeted against different COVID variants -- by this time last year.
While this means that uptake has not lagged compared to previous seasons, it also means just 13.9% of the adult population has gotten vaccinated. The same CDC survey showed that 91 million U.S. adults, or 34.8% of the adult population, have received the flu vaccine and nearly 11 million over the age of 60, 13.5% of this age group, have received the RSV vaccine. Meanwhile, 23 million children, or 4.9% of the pediatric population, have received the flu shot, data survey showed.
Joe Biden, Xi Jinping, in First Meeting in a Year, Agree to New Talks on Apec Sidelines
President Joe Biden on Wednesday kicked off his first meeting in a year with China’s Xi Jinping by stressing the need for the two superpowers to avoid conflict, an urgent call to ease tensions coming against a backdrop of global tumult. Biden underscored the high stakes of the gathering held on the sidelines of a Pacific states summit, declaring “the world” was watching its outcome.
Xi also downplayed the need for competition, noting the inherent differences between the U.S. and China and that it was “not realistic for one side to try to shape the other” Xi said through an interpreter. “Planet Earth is big enough for both countries to succeed,” he Xi, before the two sides began a closed-door meeting expected to last for hours. U.S. officials previewed a series of modest goals for the summit, including agreements to negotiate further on climate change and fentanyl, as well as for the two nations’ superpowers to resume communicating after months of silence.
N.Y. Budget Leaders Want to Avoid Education, Health Cuts, Tax Increases Amid $4.3B Gap
State budget Director Blake Washington led the earliest spending talks Tuesday at the annual quickstart budget meeting — which includes Senate, Assembly and state Comptroller's office staffers — to reach consensus on the state's updated financial estimates. The state Budget Division is slated to publish updated revenue and spending estimates later this week on its website. "It helps to kind of get our creative energy moving so we are not caught flat-footed when the executive budget comes out in January," Washington said at the start Tuesday's meeting held in the Capitol.
The Budget Division estimates a $231 billion budget next year, and the multi-year budget gap now several billion dollars lower than expected. The deficit is expected to swell to $9.5 billion next year and $7.7 billion in Fiscal Year 2027. New York increased statewide spending about 20% in the first two years of the COVID pandemic following higher tax receipts, statutory tax increases and higher capital gains. Washington was clear the state will not increase taxes on New York millionaires and billionaires to increase revenue.
Read more at NY State of Politics
China’s Spending on Green Energy Is Causing a Global Glut
China’s newest solar-energy manufacturers include a dairy farmer and a toy maker. The new entrants are examples of a green-energy spending binge in China that is fueling the country’s rapid build-out of renewable energy while also creating a glut of solar components that is rippling through the industry and stymying attempts to build such manufacturing elsewhere, particularly in Europe.
China’s state-guided economy spent nearly $80 billion on clean-energy manufacturing last year, around 90% of all such investment worldwide, BloombergNEF estimates. The country’s annual spending on green energy overall has increased by more than $180 billion a year since 2019, the International Energy Agency says. Inside China, some companies fear a green bubble is about to pop. Meanwhile, Chinese exports of everything from batteries and electric vehicles to solar panels and wind turbines have surged, raising hackles in places such as Europe and the U.S., which are trying to grow their own domestic clean-energy manufacturing.
Retail Sales Slip in October as Consumers Pull Back After Summer Splurges
Retail sales fell 0.1% last month after jumping a strong 0.9% in September, according to a report released Wednesday by the Commerce Department. September’s figure was revised higher from an initial 0.7% gain. Excluding sales of gas and autos, retail sales ticked up 0.1%. The figures reflect a slowdown in consumers’ willingness to spend after a blowout summer. Consumer spending jumped in the July-September quarter, but economists forecast it will slow in the final three months of the year, as credit card debt — and delinquencies — rise and average savings fall.
Consumer spending may still take a hit with the resumption of student loan repayments, the persistence of high prices, and wars raging in the Middle East and in Europe. The moratorium on student loan payments lifted Oct. 1.
Japan’s Economy Shrinks for First Time in Three Quarters
Japan’s economy shrank for the first time in three quarters in the July-September period because of sluggish household and corporate spending, contrasting with the U.S. and China, which showed solid growth during the quarter. The Japanese economy contracted 0.5% in the three months to September from the previous quarter after 1.1% growth in the April-June quarter. The economy shrank 2.1% on an annualized basis, which reflects what would happen if the third-quarter pace continued for a full year.
In the third quarter, capital expenditures fell 0.6% amid uncertainty over the global economic outlook. External demand, or exports minus imports, subtracted 0.1 percentage point from Japan’s gross domestic product. Economists say exports will likely remain soft because of a possible economic slowdown in Japan’s trading partners.
UK Inflation Slows Sharply
British inflation cooled more than expected in October as household energy prices dropped from a year ago and there was also a wider softening of price pressures, offering relief to the Bank of England and Prime Minister Rishi Sunak. Annual consumer price inflation plunged to a lower-than-expected 4.6% from 6.7% in September, official data showed. The increase was the smallest in two years and prompted investors to increase their bets on BoE rate cuts next year.
Core inflation, which strips out energy and food prices, fell to 5.7% from 6.1%, while service sector inflation also fell by more than the central bank had expected to 6.6% from 6.9%. Although inflation has more than halved from its October 2022 peak of 11.1%, the BoE has warned that the "last mile" of getting it down will be tougher. The central bank forecasts that inflation will only return to its 2% target in late 2025, though many economists say it will happen sooner.
US Plans to Buy 1.2 Million Barrels of Oil for Strategic Petroleum Reserve
The U.S. plans to buy 1.2 million barrels of oil to help replenish the Strategic Petroleum Reserve after it sold off the largest amount ever last year, the Energy Department said on Monday. The administration of President Joe Biden last year conducted the largest ever sale from the SPR of 180 million barrels, part of a strategy to stabilize soaring oil markets and combat high pump prices in the aftermath of Russia's invasion of Ukraine. If the purchase is finalized it will have bought back about 6 million barrels.
The department said the planned purchase for the oil is at an average price of $77.57 a barrel from two companies after 18 bids were submitted. As oil prices have risen on production cutbacks by Saudi Arabia and Russia, it has been difficult for the administration to buy back oil for the reserve. Last month it raised the price at which it hopes to buy back oil to $79 or less a barrel, up from an earlier price range of about $68 to $72.
GM Snatches Key Tesla Gigacasting Supplier
For years, a little-known company called Tooling & Equipment International (TEI) has helped Tesla push back the frontiers of "gigacasting", the process it pioneered to cast large body parts for cars in one piece to save time and money. Until 2023, that is. TEI is now part of General Motors after agreeing a deal that may have flown under the radar but is a key part of the U.S. automaker's strategy to make up ground on Tesla, four people familiar with the transaction said.
By snapping up a specialist in sand casting techniques that accelerated the development of Tesla's gigacasting molds and allowed it to cast more complex components, GM has jump-started its own push to make cars more cheaply and efficiently at a time when Tesla is racing to roll out a $25,000 EV, the people said. With TEI gone, Tesla is leaning more heavily on three other casting specialists it has used in Britain, Germany and Japan to develop the huge molds needed for the millions of cheaper EVs it plans to make in the coming decade, the four people said.
Hyundai joins Honda and Toyota in Raising Wages After Auto Union Wins
Hyundai said Monday it will raise factory worker pay 25% by 2028, matching the general wage increase won by the UAW during that period. Toyota raised factory pay 9% to 10% starting in January, while Honda said it will increase wages 11% during the same period. Labor experts say the increases are at least in part aimed at thwarting UAW President Shawn Fain’s strategy of trying to organize U.S. auto plants run by foreign automakers and Tesla in order to increase the union’s bargaining power. Fain said terrified auto executives at nonunion plants are raising wages, and he called Toyota’s pay increase the UAW bump.
In announcing its factory pay increases, Hyundai wouldn’t say how much the hourly wage is at its factory in Montgomery, Alabama, or how much it will pay at an electric vehicle factory under construction near Savannah, Georgia. By early next year the company said it will have increased factory worker pay 14% in the past year.
New Climate Report Offers Warm, Dry Projections
The Fifth National Climate Assessment, released Tuesday, shows the planet will likely heat up by an average of between 4.5 and 7.2 degrees Fahrenheit compared to pre-industrial times — outpacing goals of both the U.S. and international community. The average U.S. temperature is likely to rise between 4.4 and 5.6 degrees, with northern and western parts of the country likely to experience the warming at disproportionate levels, according to the report.
In the coming years, “precipitation from extreme events is projected to increase with warming,” the report explains. But, they also note that while extreme events with greater precipitation may become more common, overall precipitation totals could still decrease. That means you may experience more events that cause flooding over a day or two, but fewer normal rainy or snowy days, where the overall accumulation is smaller. The largest snowpack declines are expected in the Northwest, New England, the upper Midwest, and into the South, according to the report.
Warren Buffett’s Berkshire Hathaway Sheds Investments in GM, J&J and P&G
Warren Buffett’s Berkshire Hathaway eliminated its stake in a handful of American blue chips, including General Motors GM 4.83%increase; green up pointing triangle and Johnson & Johnson, while the stock market’s rally sputtered in the third quarter. The company also sold off smaller positions in Procter & Gamble, Mondelez International and United Parcel Service, while trimming its investments in Amazon.com, Chevron and HP, among others.
In addition to managing a hefty investment portfolio, Berkshire owns businesses including insurer Geico AND BNSF Railway. Berkshire’s recent quarterly report showed the company was a net seller of stocks in the period, unloading just shy of $7 billion worth of shares, while buying $1.7 billion. Berkshire had trimmed its position in GM in the first quarter and again in the second quarter before exiting it entirely. The company had been a longtime investor in Johnson & Johnson. Shares of both GM and J&J are down 16% so far in 2023.