Member Briefing October 4, 2022
U.S. Manufacturing Nearly Brakes; Price Pressures Easing
U.S. manufacturing activity grew at its slowest pace in nearly 2-1/2 years in September as new orders contracted amid aggressive interest rate increases from the Federal Reserve to cool demand and tame inflation. The Institute for Supply Management (ISM) survey on Monday also showed a measure of manufacturing employment contracted last month for the fourth time this year. A gauge of inflation at the factory gate decelerated for a sixth straight month.
- The ISM's manufacturing PMI dropped to 50.9 this month, the lowest reading since May 2020, from 52.8 in August.
- The ISM's measure of supplier deliveries fell to 52.4, the lowest reading since December 2019, from 55.1 in August. A reading above 50% indicates slower deliveries to factories
- The ISM survey's forward-looking new orders sub-index fell to 47.1 last month, also the lowest reading since May 2020, from 51.3 in August. It was the third time this year that the index has contracted.
- A measure of prices paid by manufacturers dropped to 51.7, the lowest reading since June 2020, from 52.5 in August. The slowdown is largely driven by retreating commodity prices.
- The ISM survey's measure of factory employment dropped to 48.7 from 54.2 in August. The index has contracted four times this year.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukrainian Forces Burst Through Russian Lines in Major Advance in South - Reuters
- Russia Says Annexed Zones’ Borders Not Set as Ukraine Gains - Bloomberg
- Russian Oil Exports Are Still Booming and EU is Still Reliant on Russia – American Shipper
- Kremlin Prefers 'Balance' after Putin Ally Suggests Using Nuclear Bomb in Ukraine - Reuters
- Two Putin Allies Ridicule Russia's War Machine in Public - Reuters
- US Would ‘take out’ Russian Troops and Equipment if Putin Uses Nuclear Weapons, Says Patraeus – The Guardian
- U.S. to Send Mobile Rocket Launchers to Ukraine in $625 Mln Aid Package, officials - Reuters
- Watch: Putin Celebrates Treaties to Annex Occupied Ukrainian Regions - WSJ
- Inside Russia’s “Filtration Camps” in Eastern Ukraine – The New Yorker
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
New York Labor Commissioner Backs an Increase to Minimum Wage Upstate
The minimum wage north of Westchester County could increase by $1 to $14.20 by the end of the year under an order issued by New York Labor Commissioner Roberta Reardon on Friday. Final approval for the wage increase must still be considered through the rule-making process and is subject to a public comment period. If given final approval, the increase would take effect on Dec. 31.
The proposed wage increase falls short of $15 in New York City and Westchester County, as well as on Long Island. Reardon pointed to a statutorily mandated economic analysis by the state Division of Budget that found there was pressure for wages to increase amid a labor shortage driven by the COVID-19 pandemic. A wage increase would affect about 200,000 workers, 44% of whom are full-time employees. About 25% support children under the age of 18.
U.N. Calls On Fed, Other Central Banks to Halt Interest-Rate Increases
In its annual report on the global economic outlook, the United Nations Conference on Trade and Development said the Fed risks causing significant harm to developing countries if it persists with rapid rate rises. The agency estimated that a percentage point rise in the Fed’s key interest rate lowers economic output in other rich countries by 0.5%, and economic output in poor countries by 0.8% over the subsequent three years. UNCTAD estimated that the Fed’s rate increases so far this year would reduce poor countries’ economic output by $360 billion over three years.
The warning comes amid growing unease about the haste with which the Fed and its counterparts are raising borrowing costs to contain surging inflation. India’s central bank Friday said that the global economy was facing a third major shock after the Covid-19 pandemic and Russia’s invasion of Ukraine, in the form of aggressive rate increases by central banks in rich countries.
US COVID – CDC: 'High' COVID-19 Community Levels Return to Parts of Upstate New York
After months of low numbers, parts of upstate New York are once again seeing an uptick in COVID-19 community levels, according to new data released Friday from the Centers for Disease Control and Prevention. As of Friday, nine of the state’s 62 counties — all north of New York City — are now classified by the CDC as having “high” COVID-19 levels. They are all in Central New York and the Capital Region and include the cities of Syracuse and Albany.
This is the first time since May that this many upstate counties have seen a “high” rating. With a "high" level, the CDC recommends wearing masks in indoor public areas and on public transportation. There are currently no local mask requirements in the affected areas, outside of the statewide requirement for them in state-regulated care settings.
Lawmakers Go Home to Fight for Control of the House
With business in the Capitol done until after the election, House lawmakers headed back to their districts ready to campaign in earnest for the next month, with Democrats seeking to protect their fragile majority and Republicans eager to retake control of a chamber they lost four years ago.
Democrats currently hold 220 seats and Republicans have 212, with three vacancies, meaning Republicans need a net gain of a handful of seats to flip the House in their favor. Nonpartisan election analysts see Republicans likely to win the majority. GOP lawmakers are confident of a strong showing on Nov. 8, while Democrats are holding out hope of defying conventional wisdom, with the economy, law and order and former President Donald Trump’s political influence and future on voters’ minds.
Republicans Edge Democrats in Survey of Favorability
Republicans’ favorability rating clocked in 5 percentage points higher than Democrats, according to a new Gallup poll, bucking a historical trend in which Democrats typically have the edge.The survey found 44 percent of respondents now hold a favorable view of the Republican Party, compared to 39 percent for the Democratic Party. Democrats’ favorability in the new survey is the worst for the party since March 2015 and 12 percentage points lower than their historical average.
Except for brief stints, including Democrats in Nov. 2012 and Republicans in Jan. 2020, neither party’s favorability rating has reached a majority over the past decade. The polling comes as Americans express anxiety about high inflation that recently hit a 40-year high.
New York State Health Department’s Attempts to Confront Three Simultaneous Disease Outbreaks
Despite being bolstered by more public health funding per capita than most states, New York public health officials are trying to cope with the threat of three simultaneous disease outbreaks. Last December Omicron emerged causing cases to increase ten-fold in one month and forcing the department of health to put its post-Covid strategy plans on hold. In May, monkeypox began to spread, spurring officials to scramble to find and distribute vaccines. And in July, a patient in New York tested positive for polio, triggering frantic attempts to pinpoint how a once-nearly-eradicated virus was spreading.
The converging health emergencies in New York come amid a broader leadership shakeup over the last year that includes a new commissioner, several new agency heads and a department reorganization following its handling of Covid-19 under former Gov. Andrew Cuomo. Dozens of staffers left the office after Cuomo resigned.
Inflation to Put U.S. Auto Industry in Low Gear
Major automakers are expected to report modest declines in U.S. new vehicle sales on Monday but analysts and investors are concerned that a darkening economic picture, not inventory shortages, will lead to a drop in future car sales. Thus far, a shortage of cars due to supply disruptions, combined with a preference for personal transport, has seen consumers willing to shell out more money, largely protecting profits at automakers and auto dealers who have pulled back on discounts.
But used-car dealer CarMax Inc (KMX.N) rang the alarm bells on Thursday, suggesting consumers were beginning to pull back from big-ticket purchases due to decades-high inflation. read more Analysts now warn demand may lose steam in the coming quarters as rising interest rates discourage consumers from paying more money for cars and trucks in the coming months.
OPEC+ to Weigh Production Cut to Bolster Oil Prices
The Organization of the Petroleum Exporting Countries and Moscow-led allies, collectively known as OPEC+, is considering a cut of more than 1 million barrels a day, delegates in the group said. Oil prices had shot up over $100 a barrel and stayed there for months but Brent crude, the global oil benchmark, is now down 23% this quarter, falling to $87.96 a barrel last week, and its swiftest decline since 2020.
Falling oil prices are often a pressure-release valve for the global economy, reducing costs as demand falls in a cycle that repeats itself. OPEC+ often holds itself out as a regulator of the oil market, aiming to keep supply and demand balanced, but a production cut would support prices at a time when they are at historically high levels.
Tensions Rise in West Coast Port Labor Battle
Tensions are rising in West Coast port labor battles as unions and port management trade accusations about worker productivity and the awarding of job assignments. The International Longshore and Warehouse Union has been accused of using slowdown tactics that have reduced cargo handling, according to a report in trade publication JOC.
The finger-pointing comes at a time when labor negotiations between the ILWU and the Pacific Maritime Association are about to enter a fourth month. Dockworkers have been working without a contract since July. According to the report, the slowdown resulted in reduced productivity at the Oakland and Seattle-Tacoma ports, but according to the CNBC Supply Chain Heat Map, operations at these ports have been in line with the ports’ recent productivity and there have been no significant cargo handling issues recorded.
West Coast Ports Sink to Lowest Share of US Imports Since Early 1980s
The West Coast was the destination of choice for Asian exports in the initial stage of the COVID buying boom — before container-ship queues stymied the ports. Since then, volumes have been redirected to the East and Gulf Coasts due to fears of both California congestion and West Coast port labor strife. There has been a major shift in cargo flows. East and Gulf coast ports now boast significantly more imports than West Coast ports.
Data from McCown Container Volume Observer released Thursday confirms that U.S. imports remain near all-time highs. Imports to the top 10 ports totaled 2,165,939 TEUs in August, the fifth-highest monthly tally on record. August was flat year on year (y/y) and up 3% versus July. The West Coast ports’ share of the total sank to 45%. That’s a nine-point swing from February 2021, when the West Coast boasted a 54% share.
GlobalFoundries’ East Fishkill Employees to Transition to Onsemi When Sale Becomes Effective
Over 1,000 employees of Council of Industry member Global Foundries U.S. 2 LLC at the former IBM East Fishkill facility are expected to transition to new owner Onsemi when the sale is complete on December 31, 2022. Assistant Dutchess County Executive Ronald Hicks, Jr. said the county has been working with ONSemi on the transition of the employees.
County officials recently toured one of the areas in which ONSemi is expanding. The new space is located in two buildings previously unutilized by Global Foundries, and ONSemi plans to use the 100,000 square feet for testing and “post fab” production. “The ONsemi takeover and this expansion have bolstered confidence in the fab’s future and long-term growth in the county’s tech industry,” said Think Dutchess President Sarah Lee.
Was The Forecast For Hurricane Ian Bad? Depends On Your Perspective
Hurricane Ian was the fifth strongest storm to make landfall in the U.S. and was a particularly challenging storm to forecast. Was the forecast for Hurricane Ian bad? The answer really depends on your perspective. First, let’s deal with the meteorological and scientific answer. Hurricane experts point out that over the entire time, the most highly-impacted area around Lee County was always within the cone of uncertainty.
Most people interpret the cone incorrectly and assume the storm is forecasted to go down the center of the cone. However, the official National Hurricane Center definition says, “The cone represents the probable track of the center of a tropical cyclone.” Essentially, this says there is a chance the storm can track anywhere within the cone. And the ultimate region of impact was always in the cone. The answer to the question posed about the accuracy may be very different for someone adversely impacted or did not follow the storm closely. The reality for many people is they receive a forecast from their App or favorite TV source and then act on that static information. At the end of the day, this question remains. Is our weather jargon and public interpretation properly aligned for risk messaging?
Tesla Reports Record Deliveries, Logistical Challenges
Tesla Inc. on Sunday announced lower-than-expected electric vehicle deliveries in the third quarter, as logistical challenges overshadowed its record deliveries. The top electric car maker said "it is becoming increasingly challenging to secure vehicle transportation capacity and at a reasonable cost," but some analysts were also concerned about demand for high-ticket items due to the weakening global economy.
Tesla delivered 343,830 electric vehicles, a record for the world's most valuable automaker, but less than the 359,162 analysts on average had expected, according to Refinitiv. A year earlier Tesla delivered 241,300 units. The latest deliveries fell short of Tesla's production of 365,923 vehicles, which is rare for the automaker which has seen its deliveries higher or similar to production in many of recent quarters.
Nobel Prize Awarded to Svante Pääbo for Discoveries in Evolution
The Nobel Prize in Physiology or Medicine was awarded to Sweden-born geneticist Svante Pääbo, recognizing him for discoveries related to the genomes of extinct human groups that shed light on the genetic characteristics unique to present-day humans.
The committee said Dr. Pääbo overcame challenges in recovering and analyzing ancient DNA to sequence the genome of the Neanderthal, an extinct relative of present-day humans. He also discovered a previously unknown human relative, called the Denisova. He is based at the Max Planck Institute for Evolutionary Anthropology in Germany. Sequencing those genomes provided a crucial reference point for scientists in understanding the genetic divergence that make Homo sapiens unique.