Member Briefing November 28, 2022
Demand for US Manufactured Goods Increased in October
A pickup in aircraft orders boosted demand for big-ticket U.S. manufactured goods in October, with numbers rising more than expected, government data showed. Durable goods orders rose 1% to $277.4 billion last month, up from a revised 0.3% bump in September, the Commerce Department reported. Transportation equipment led the increase, with orders for nondefense aircraft and components growing 7.4%. In October, orders for computers and related products rose 4.7%, data showed.
Analysts expected the figures were likely boosted by civilian aircraft orders thanks to Boeing. Meanwhile, orders for defense aircraft and parts soared 21.7% from September to October. Surging inflation in the United States and supply chain problems have proven a challenge to industry and consumers, causing a pullback in spending and investment. But while observers braced for a further drop in demand for nondefense goods -- seen as a guide to equipment and software investment -- this number picked up in October, pointing to resilient demand.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Europe Scrambles to Help Ukraine Keep the Heat and Lights On - AP
- Ukrainian Women Have Started Learning a Crucial War Skill: How to Fly a Drone - NPR
- U.S. and NATO Scramble to Arm Ukraine and Refill Their Own Arsenals - NYT
- Moscow Probably Firing Cruise Missiles With Nuclear Warheads Removed, says UK – The Guardian
- Russia Steps Up Missile Barrage of Recaptured Ukrainian City - AP
- Ukraine Will Deliver Grain to Hungry Countries - Reuters
- Russia Risks Becoming Ungovernable and Descending Into Chaos – The Economist
- Russia Atrocities Bring NATO Members Closer - BBC
- Russian Strikes Hit Southern Ukraine as Country Scrambles to Restore Electricity - WSJ
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Huge COVID Protests Erupt in China's Xinjiang After Deadly Fire
Rare protests broke out in China’s far western Xinjiang region, with crowds shouting at hazmat-suited guards after a deadly fire triggered anger over their prolonged COVID-19 lockdown as nationwide infections set another record. Crowds chanted "End the lockdown!", pumping their fists in the air as they walked down a street, according to videos circulated on Chinese social media on Friday night. Reuters verified the footage was published from the Xinjiang capital Urumqi.
Videos showed people in a plaza singing China's national anthem with its lyric, "Rise up, those who refuse to be slaves!" while others shouted that they wanted to be released from lockdowns. The Urumqi protests followed a fire in a high-rise building there that killed 10 on Thursday night. Authorities have said the building's residents had been able to go downstairs, but videos of emergency crews' efforts, shared on Chinese social media, led many internet users to surmise that residents could not escape in time because the building was partially locked down.
Rail Strike Looms Again as New Deadline Nears
The US faces the prospect of a crippling strike by railroad unions that could stall transport of fuel, corn and drinking water, dramatically complicate holiday season train travel. If an agreement is not reached by December 9 at the latest, the world's largest economy could see nearly 7,000 freight trains grind to a halt, at a cost of more than $2 billion a day, according to the American Association of Railroads.
A large-scale strike would affect multiple sectors, even the supply of drinking water, given than many of the chemicals used in treatment plants are transported by train. A freight freeze would also impact passenger service, because some passenger trains run on tracks owned by freight companies. One possible scenario is the intervention of Congress, which has the power under the 1926 Railway Labor Act to keep the railroads operating. That is a politically difficult decision for the Democrat controlled body that relies heavily on the support of organized labor.
U.S. COVID - Omicron boosters Effective Against Hospitalizations
The Centers for Disease Control and Prevention, in a real-world study published this week, found the boosters are less than 50% effective against mild illness across almost all adult age groups when compared to people who are unvaccinated. For seniors, the booster was 19% effective at preventing mild illness when administered as their fourth dose, compared to the unvaccinated. It was 23% effective against mild illness when given as their fifth dose.
Though the vaccine’s effectiveness against mild illness was low, people who received the boosters were better off than those who did not. The booster increased people’s protection against mild illness by 28% to 56% compared to those who only received the old shots, depending on age and when they received their last dose.
NYS COVID Update
The Governor updated COVID data through November 25
- Daily: 24
- Total Reported to CDC: 75,689
- Patients Currently in Hospital statewide: 2,823
- Patients Currently in ICU Statewide: 273
7 Day Average Positivity Rate - Cases per 100K population
- Statewide 6.30% - 19.23 positive cases per 100,00 population
- Mid-Hudson: 6.39% - 18.53 positive cases per 100,00 population
Next Covid-19 Strain May be More Dangerous, Lab Study Shows
A South African laboratory study using Covid-19 samples from an immunosupressed individual over six months showed that the virus evolved to become more pathogenic, indicating that a new variant could cause more illness than the current predominant omicron strain. Over the six months the virus initially caused the same level of cell fusion and death as the omicron BA.1 strain, but as it evolved those levels rose to become similar to the first version of Covid-19 identified in Wuhan in China.
The study, led by Alex Sigal at the Africa Health Research Institute in the South African city of Durban, indicates that the Covid-19 pathogen could continue to mutate and a new variant may cause more severe illness and death than the relatively mild omicron strain. The study is yet to be peer reviewed and is based solely on laboratory work on samples from one individual.
Early Voting Begins in Georgia in Crucial Senate Runoff
Georgia voters are heading to the polls today for early voting which started Saturday in some parts of the state as well. The state’s runoff Senate election between Democratic incumbent Raphael Warnock and Republican Herschel Walker nears in the coming weeks. Georgia’s Senate race remains undecided due to its unique election system. If neither candidate earns more than 50% of the vote in the general election, a runoff election is held with only the top two vote-getters.
Democrats will maintain control of the Senate through 2024 due to important wins in Nevada and Arizona, guaranteeing at least a 50-50 split. Democrats hold the majority in an even Senate thanks to Vice President Kamala Harris' ability to cast tie-breaking votes. But winning Georgia would give Democrats more breathing room and outright control of the chamber, meaning they won’t need Joe Manchin’s vote to advance legislation so the stakes for both parties remain high.
Employers Rethink Need for College Degrees in Tight Labor Market
Companies such as Alphabet Inc.’s Google, Delta Air Lines Inc. and International Business Machines Corp. have reduced educational requirements for certain positions and shifted hiring to focus more on skills and experience. U.S. job postings requiring at least a bachelor’s degree were 41% in November, down from 46% at the start of 2019 ahead of the Covid-19 pandemic, according to an analysis by the Burning Glass Institute, a think tank that studies the future of work.
Some occupations have universal degree requirements, such as doctors and engineers, while others typically have no higher education requirements, such as retail workers. There is a middle ground, such as tech positions, that have varying degree requirements depending on the industry, company and strength of the labor market and economy.
China Recovery Set Back by Record Covid Outbreak as Lockdowns Spread
Widespread lockdowns imposed across China as authorities there struggled this week to contain the country’s largest Covid-19 outbreak threaten to again create uncertainty in global supply chains and dim the prospects for world economic growth. Beijing’s continued zero-tolerance approach to Covid likely means the world can’t rely on China to be a locomotive of growth as the U.S. and European economies slow.
Beijing’s battle to contain the virus—including sharp restrictions on everyday life and commerce in cities from the major port city of Tianjin in the north to Guangzhou in the south—comes as economies elsewhere lose speed as central banks raise interest rates to beat back inflation. The heavy-handed and widely applied steps send a strong signal that the country and its leaders aren’t ready for a sustained reopening almost three years after the start of the pandemic and long after other major economies have dismantled almost all Covid controls.
German GDP Growth Raises Hopes of Less Severe Recession
The German economy grew slightly more in the third quarter than suggested by preliminary figures on the back of consumer spending, adding to signs that a coming recession will not hit as hard as initially feared, data showed on Friday. Europe's largest economy expanded by 0.4% quarter on quarter and by 1.3% on the year, adjusted for price and calendar effects, the federal statistics office said.
Household spending was the main reason for the increase, as consumers travelled and went out more after nearly all pandemic restrictions had been lifted. Among retailers there has been a notable decrease in pessimism regarding the coming months, the Ifo economic institute found, and German retailers have reported that supply problems had eased slightly in November from the previous month.
Is the Chip Shortage Over? It’s Complicated
Reports show that the shortage is easing. This is largely because demand has decreased, driven by declines in the overall macroeconomic environment. Consumer behavior may be changing as well. With the pandemic ending, consumers are returning to purchasing more services than goods. As a result, the third quarter of 2022 saw a 6.3% decline in global semiconductor sales from the previous quarter. In fact, many companies now have an oversupply of chips instead of a shortage. As manufacturers tried to ramp up production, the buyers of chips over-ordered and created stockpiles. These stockpiles, coupled with softening demand, has left many sitting on excess inventory.
So, is the chip shortage really over? Not exactly. There are many different types of chips that perform different specialized functions, and particular industries have unique needs. Global averages tend to obscure these subtler dynamics. Whether the shortage is easing or persisting depends on the type of chip and the industry. For example, while the automotive industry was hit hard, the aviation sector has emerged from the shortage relatively unscathed.
Germany and France Join Forces Against Biden in Subsidy Battle
The EU’s two leading economies put aside their bad blood of the past weeks to issue a joint statement vowing to "explore industrial policy possibilities" to safeguard European industries from discriminatory trade measures from Washington and also Beijing.
Paris and Berlin are increasingly frustrated that U.S. President Joe Biden's administration is showing little interest in addressing their concerns about the Inflation Reduction Act, a $369 billion package of subsidies and tax breaks to boost American green businesses. From a European perspective, the American act is a protectionist measure because it encourages companies to shift investments from Europe and incentivizes customers to "Buy American" when it comes to purchasing an electric vehicle.
What to Know About the Pause on Student Debt Relief, Payments
While the administration recently notified certain borrowers who are eligible for forgiveness, it also indicated that it cannot execute the program while the Justice Department fights legal challenges in court, leaving borrowers confused over the status of their promised debt relief. The administration has also stopped accepting applications for the program as a result. Biden on Tuesday announced another extension to the pause on federal student loan payments.
Despite the payment pause deadline being extended to June, a firmer deadline on any court decisions remains unknown. Borrowers could be waiting anywhere from weeks to months before they know if Biden’s program will be executed and any actual debt be forgiven. In the meantime, the Biden administration has encouraged borrowers to sign up for updates from the Department of Education regarding the program so borrowers can know when any updates are available.
Oil Prices Face Fresh Volatility With New Russia Sanctions, OPEC Decision
OPEC and its allies are due to make a big call on oil production next week, a day before expanded sanctions are set to strike Russia’s energy industry. The potential impact of these moves is helping shroud the oil market in uncertainty at a time when coronavirus outbreaks are hammering demand in China. “All of these things are so significant to the oil markets that they could whip prices from one direction to the other very significantly,” said Michael Haigh, head of commodities research at Société Générale.
Brent-crude futures have risen or fallen by at least 1% on all but three trading days in November while sliding 12% over the course of the month to $83.63 a barrel. The oil benchmark traded in a range of more than $5.50 a barrel on one day last week after The Wall Street Journal said that the Organization of the Petroleum Exporting Countries and its partners had discussed an increase in output—a report denied by Saudi Arabia.
Who’s Stockpiling All the Gold
Somebody or something out there has been buying a lot of gold — 400 tons of it in the third quarter, more than $20 billion worth at today’s price. That’s double the amount that changed hands in the second quarter, and more than quadruple that of the first quarter, all according to the World Gold Council. Central banks bought a quarter of it, but the rest? Nobody knows. Maybe some country or countries. But who? And why?
Since 2008, while most central banks have been selling gold or not bothering with it, a few have been buying it up and then some. There are reasons gold could be useful. Central banks can use it to control their currencies’ value or pay for imports during a crisis. If a country holds U.S. Treasuries, the U.S. can seize them. See: Russia. Gold in a vault at home is safe. So whoever is buying all that gold — Gagnon thinks it’s Russia, others suspect China — may be doing it to evade the long arm of the U.S.