Member Briefing October 18, 2022
Empire State Manufacturing Survey: Activity Declines Modestly in October
Business activity declined modestly in New York State, according to firms responding to the October 2022 Empire State Manufacturing Survey. Manufacturing activity declined in New York State, according to the October survey. The general business conditions index fell eight points to -9.1. Twenty-three percent of respondents reported that conditions had improved over the month, and thirty-two percent reported that conditions had worsened.
- Shipments index plunged twenty points to -0.3, pointing to a levelling off of shipments after they increased significantly last month.
- The delivery times index held near zero for a third consecutive month, indicating that delivery times held steady.
- The index for number of employees was little changed at 7.7, pointing to a modest increase in employment levels, and the average workweek index climbed to 3.3.
- The prices paid index rose nine points to 48.6.
- The prices received index held steady at 22.9.
- The indexes for future new orders and shipments remained depressed, though employment is expected to continue to increase.
- Delivery times are expected to shorten and increases in capital spending are planned for the months ahead.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- NATO Begins Nuclear Exercises Amid Russia War Tensions - AP
- Belarus Says it Will Host Just Under 9,000 Russian Troops - Reuters
- EU to Propose Gas Price Cap for Avoiding ‘Extreme Volatility’ as Winter Looms in an Energy Crisis - Fortune
- Elon Musk Says SpaceX Will Keep Funding Starlink in Ukraine Despite Losing Money - Reuters
- UNICEF: 4m More Children in Poverty in Eastern Europe and Russia Due to War and Inflation - Euronews
- Who is Sergey Surovikin, Russia’s New Commander in Ukraine? – The Economist
- Greta Thunberg Breaks Ranks with German Green Party and Urges Germany Not to Shut Down Nuclear Power Plants - Fortune
- Kyiv Hit by Drone Attacks as Russia Targets Infrastructure - WSJ
- Fighter Jet Crashes in Russian City Near Ukraine – The Guardian
- Before-and-After Photos Show the Moment an Iranian 'Suicide Drone' Detonates in Russian Strike on Ukraine – Business Insider
- Russia’s Putin is Forcing Foreign-Owned Companies to Participate in His Conscription Campaign - Fortune
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Economists Now Expect a Recession, Job Losses by Next Year
On average, economists put the probability of a recession in the next 12 months at 63%, up from 49% in July’s survey. It is the first time the survey pegged the probability above 50% since July 2020, in the wake of the last short but sharp recession.
On average, the economists now predict GDP will contract at a 0.2% annual rate in the first quarter of 2023 and shrink 0.1% in the second quarter. Employers are expected to respond to lower growth and weaker profits by cutting jobs in the second and third quarters. Economists believe that nonfarm payrolls will decline by 34,000 a month on average in the second quarter and 38,000 in the third quarter. According to the last survey, they expected employers to add about 65,000 jobs a month in those two quarters.
China Communist Party Congress -Xi Stands Firm
China President Xi Jinping stood firm on his policies in a two-hour speech at the 20th National Congress of the Communist Party of China on Sunday. Xi said that per-capita GDP would rise to the level of a "medium-developed country" in a "giant new leap" by 2035. While he did not give a specific number, economists told Bloomberg that would mean doubling GDP and per-capita income, with an average GDP growth rate of 4.7%.
Xi focused on economic development that he said would not sacrifice national security. Importantly, he announced no changes to his Zero-COVID policy. “In responding to the sudden attack of COVID-19, we put the people and their lives above all else and tenaciously pursued a dynamic Zero COVID policy," Xi said. "We have protected the people's health and safety to the greatest extent possible and made tremendously encouraging achievements in both epidemic response and economic and social development.” Still, there is a chance that policy evolves.
US COVID – Covid Officials Scramble to Plan for Omicron Subvariant Threat
Top Biden health officials are increasingly concerned about the rise of new Covid variants in the U.S. that appear to evade existing treatments used to protect immunocompromised people from severe illness, according to three senior administration officials. The variants — known as BQ1 and BQ1.1 — have spread swiftly throughout the U.S. over the past few weeks, and now account for more than 11 percent of all cases nationwide, according to the Centers for Disease Control and Prevention, roughly double the proportion they represented a week earlier.
While the vaccines and the main Covid treatment, Paxlovid, still work against those strains, the development could leave hundreds of thousands of people with compromised immune systems vulnerable to a winter wave without the two therapies that they’ve come to rely upon.
NYT Poll: Republicans Hold New Polling Advantage for Taking Back Congress
Republicans hold a 4-point advantage over Democrats with the midterm elections less than a month away, according to a New York Times-Siena College poll published Monday. About 49 percent of likely voters said they would back the GOP nominee, while 45 percent said they would support a Democratic candidate. The figures are rounded; when the unrounded figures are used, the GOP holds closer to a 3-point edge at 48.51 percent to 45.47 percent.
This is a shift since September, when the Times poll found Democrats holding a slim 1-point edge over Republicans among likely voters. But it is in line with several other polls suggesting Republicans have regained a lead over Democrats, who appear to be losing ground after a surge of support following the Supreme Court’s controversial decision in June overturning abortion rights.
Hochul’s lead over Zeldin shrinks in NY gov race, indy poll finds
A new independent poll suggests the race for governor in New York is tightening — with Democratic incumbent Kathy Hochul holding a narrow, 6-point lead over her Republican challenger, Rep. Lee Zeldin. The survey, conducted by Schoen Cooperman Research, shows Hochul with 50% support from likely voters to 44% for Zeldin, the Long Island Congressman. The remaining 6 percent of voters are still undecided ahead of the Nov. 8 election, with early voting beginning on Oct. 29. Schoen said undecided voters “mostly break” away from the incumbent during a midterm election when the sitting president, in this instance Democrat Joe Biden, is unpopular.
A poll released Thursday by Marist College had Hochul ahead of Zeldin by just 8 points among the most committed voters. The Schoen Cooperman poll is the second in a week showing Hochul’s lead down to single digits.
Moderna CEO: Not Everyone Will Need an Annual COVID Booster
The COVID-19 booster market is starting to look more like an annual flu season than it did in the first two years of the pandemic. That's according to Moderna (MRNA) CEO Stéphane Bancel, who joined Yahoo Finance's 2022 All Markets Summit to discuss the COVID vaccine outlook.
Bancel noted that not everyone is likely to need an annual booster. "I think it's going to be like the flu. If you're a 25-year-old do you need an annual booster every year if you're healthy? You might want to ... but I think it's going to be similar to flu where it's going to be people at high risk, people above 50 years of age, people with co-morbidities," Bancel said. That isn't the 8 billion global population potential market of the pandemic, but it is still 1.5 billion people that fall into those categories, Bancel said.
China Abruptly Delays GDP Release During Communist Party Conference
China abruptly delayed the publication of its third-quarter gross domestic product data Monday, a day before it was set to be released, an unusual move as the country’s ruling Communist Party stages a key political gathering this week. The quarterly GDP figure, as well as a series of other major economic indicators including monthly retail sales, property sales and fixed-asset investment, originally slated to be released Tuesday, were marked as “delayed” on the website of China’s National Bureau of Statistics Monday afternoon. Data on home prices across 70 major cities, scheduled for release Wednesday, has also been delayed, according to the statistics bureau website.
The website didn’t provide a reason for the delays and didn’t say when the data would be released. The delayed release of the GDP figure—perhaps the highest-profile indicator of the world’s second-largest economy, closely watched by investors, economists and Chinese government officials alike—coincides with the Communist Party’s twice-a-decade congress, which opened Sunday and is all but certain to end with leader Xi Jinping breaking with recent precedent in securing another term power.
The Economist Who Just Won the Nobel Prize Warns the Fed Will Cause ‘All Kinds of Trouble’ if it Continues on its Current Path
The last thing the US needs right now is another financial crisis, but two trends leave the country exposed to such a catastrophe, Douglas Diamond, one of the three economists to win the Nobel Memorial Prize in Economic Sciences on Monday, told Business Insider.
Diamond knows a thing or two about the financial system and its vulnerabilities. He and his colleague Philip Dybvig — with whom he shared the Nobel prize, along with former Federal Reserve Chair Ben Bernanke — wrote a hugely influential paper in 1983 that explained the role banks serve in the economy. Amid soaring inflation and the Fed's historically intense fight against rising prices, it might not take much for distrust of the financial sector to grow. Financial crises are inherently unpredictable, and faster-than-usual rate increases could be enough to throw off the public's sense of security, Diamond said.
U.S. Screened 2.49 Million Air Passengers Sunday, Highest Since Early 2020
The U.S. Transportation Security Administration (TSA) screened 2.49 million air passengers on Sunday, the highest daily number since February 2020. The number was, however, below the 2.61 million screened on the same day in 2019. The Sunday checkpoint traffic was the highest since Feb. 11, 2020, when TSA screened nearly 2.51 million passengers and comes as airlines reported business and leisure travel is increasing. The figure is just above the number screened on July 1.
"After two years of delaying travel, it is clear that consumers are getting out and traveling the world," Bastian said. "Business travel continues to recover in line with our expectations as bookings have improved after Labor Day and companies reconnect with their teams and their customers."
New UK Finance Minister Hunt Reverses Truss's Economic Plan in Dramatic U-Turn
Britain's new finance minister Jeremy Hunt scrapped Prime Minister Liz Truss's economic plan and scaled back her vast energy support scheme on Monday, making a historic policy U-turn to try to stem a dramatic loss of investor confidence.
Under the new policy, most of Truss's 45 billion pounds of unfunded tax cuts will go and the two-year energy subsidy scheme for households and businesses - expected to cost well over 100 billion pounds - will now be curtailed in April.
Xi Jinping’s Ideological Ambition Darkens China’s Economic Prospects
Xi Jinping laid out ambitious plans two years ago to expand China’s wealth and double the size of the nation’s economy by 2035. The target would require China’s economy to grow an average of nearly 5% annually over 15 years, according to estimates by officials involved in policy-making. Many economists inside and outside of China now believe 5% won’t be achievable, not just for this year, but also for the longer term.
Private-sector economists, the World Bank and other institutions expect China’s growth to rebound to around 4.5% next year after an estimated 3% or so in 2022, assuming Beijing eventually relaxes its zero-Covid policy. Many economists predict growth will remain weaker than before the pandemic, in part due to a shrinking workforce and rising debt levels.
VW Targets 20-30% Automation at New EV Plant
Volkswagen Group is looking at automating 20-30 percent of production at its upcoming Trinity plant near its Wolfsburg headquarters, the plant's chief production officer, Sebastian Schmickartz, said. The Trinity plant, where the automaker will build a new flagship electric sedan, is due to begin pre-series production in 2025, with the official start of production in 2026.
The key to automating more of its assembly line will be moving to a module-based strategy, Schmickartz said, condensing 50 parts into one through techniques like die casting to produce front-end, back-end and roof modules.
Microchip Shortage: Automakers Begin Cutting 2023 Production
Automakers are expecting the microchip shortage to drag on into a third year and are already lowering their production plans for 2023, according to AutoForecast Solutions.Nearly 3.6 million vehicles have been axed from automakers’ global production schedules since the start of this year because of semiconductor shortages, on top of the roughly 10.5 million units that were cut in 2021. While chip supply has been improving, the end of the automotive microchip shortage “continues to move further into the future,” Fiorani said.
Last week, AFS added another 25,900 vehicles to its year-to-date tally of vehicles lost to the chip shortage. About 23,300 of those vehicles were cut at North American assembly plants, with European factories accounting for the rest.