Member Briefing September 12, 2022
Model: Inflation Showed Signs of Easing in Several Industries in August
Looking ahead to a government inflation report to be released on Tuesday, many Wall Street analysts estimate the Labor Department’s overall consumer-price index was unchanged or dropped in August from July. If so, it would mark the second straight month of slower inflation since annual inflation surged to a four-decade high in June.
“We are experiencing a slowdown driven by the decline in fuel prices, but there is still significant upward pressure in such important categories as food, household items and healthcare products,” said Alberto Cavallo, a Harvard Business School professor who in 2008 created a “billion price” index that tracked dollar amounts of online consumer transactions. “We are not out of the woods yet.”
War in Ukraine Headlines
- Ukraine and Russia: the Latest News – The Guardian
- Zelenskiy Says Next Three Months Critical as Ukrainian Advance Continues – The Guardian
- Russia Sends Reinforcements to Kharkiv as Ukrainians Advance – CNN
- Ukraine Troops Raise Flag Over Railway Hub as Advance Threatens to Turn into Rout – Reuters
- Ukrainian Flag Raised Over Balakliya After Surprise Ukrainian Counter-Offensive in Kharkiv Oblast – Yahoo
- U.S. Announces More Than $2.6 Billion in Ukraine-Related Military Assistance – WSJ
- Ukraine, Neighbors, to Get Big New Aid, Blinken Says in Kyiv – AP
- Last Reactor at Ukraine’s Zaporizhzhia Nuclear Plant Stopped – NPR
- Russian Billionaire Mikhail Fridman Offers $1 Billion to Ukraine in Hope of Sanctions Relief – WSJ
- Putin: Russia May Halt Energy Exports if West Caps Prices – AP
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
U.S. Debt: Annualized Interest Surges More Than $22B In A Single Month
The Treasury added $341B of debt in August. This was the largest increase in debt since January and is more than 10 times larger than the increase in July. Another major occurrence was the increase in short-term debt. The Treasury increased Bills by $210B, the largest increase since June 2020. This is a move that runs counter to the recent months where the Treasury has been actively decreasing short-term holdings.
Treasury has extended the average maturity of the debt to record highs. Current average maturity is 6.19 years, up from 5.76 just before Covid hit. The average maturity was at 5.15 at the depths of debt issuance in 2020, which was primarily short-term in nature.
Powell Vows to Raise Rates to Fight Inflation ‘Until the Job is Done’
Federal Reserve Chair Jerome Powell in an appearance Thursday emphasized the importance of getting inflation down now before the public gets too used to higher prices and comes to expect them as the norm. In his latest comments underlining his commitment to the inflation fight, Powell said expectations play an important role and were a critical reason why inflation was so persistent in the 1970s and ’80s.
“History cautions strongly against prematurely loosening policy,” the central bank leader said in a Q&A presented by the Cato Institute, a libertarian think tank based in Washington, D.C. “I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done.” The event was Powell’s last scheduled public appearance before the Fed’s next meeting on Sept. 20-21.
US COVID – Cases, Hospitalizations and Deaths Continue to Fall
The US CDC is reporting 94.8 million cumulative cases of COVID-19 and 1,043,171 deaths. Average daily incidence continues to decline, down to 74,803 on September 6 from 88,286 on August 30—the lowest average since the beginning of May. Average daily mortality continues to decline, down to 336 on September 6 from a recent high of 495 on August 12. Both new hospital admissions and current hospitalizations continue to decline, down 6.6% and 7.4%, respectively, over the past week. Both trends peaked around the last week of July, similar to trends in daily incidence.
The BA.5 sublineage is projected to account for 88.6% of sequenced specimens in the US. While BA.5 remains the overwhelmingly dominant Omicron subvariant, the prevalence of the BA.4.6 sublineage is increasing. BA.4.6 remains the #2 subvariant nationwide, now accounting for 8.4% of sequenced cases, while BA.4 now accounts for 2.8% of cases.
NYS COVID Update
The Governor updated COVID data through September 2nd.
- Daily: 11
- Total Reported to CDC: 73,826
- Patients Currently in Hospital statewide: 2,179
- Patients Currently in ICU Statewide: 234
7 Day Average Positivity Rate – Cases per 100K population
- Statewide 5.94% – 17.64 positive cases per 100,00 population
- Mid-Hudson: 3.93% – 16.15 positive cases per 100,00 population
4 Things to Know About the Bivalent Booster Campaign Rollout
The fall campaign for updated Covid-19 boosters is ramping up ahead of the flu season, with pharmacies adding appointments for the newly authorized shots that officials believe will offer greater protection against currently circulating variants.
The latest efforts come as CDC-reviewed modeling projections show that if Americans take the updated Covid shots at the same rate as the annual flu shot, as many as 9,000 lives could be spared and 100,000 hospitalizations could be avoided. And the White House last week said that future national strategies to bolster Covid-19 immunity will fall in line with the annual flu campaign.
Industrial Producer Prices up by 4.0% in the Euro Area and by 3.7% in the EU
In July 2022, industrial producer prices rose by 4.0% in the euro area and by 3.7% in the EU, compared with June 2022, according to estimates from Eurostat, the statistical office of the European Union. In June 2022, prices increased by 1.3% in the euro area and by 1.5% in the EU. In July 2022, compared with July 2021, industrial producer prices increased by 37.9% in the euro area and by 37.8% in the EU.
Industrial producer prices in the euro area in July 2022, compared with June 2022, increased by 9.0% in the energy sector, by 1.2% for non-durable consumer goods, by 0.9% for durable consumer goods, by 0.8% for capital goods and by 0.1% for intermediate goods. Prices in total industry excluding energy increased by 0.6%. In the EU, industrial producer prices increased by 8.2% in the energy sector, by 1.1% for non-durable consumer goods, by 0.9% for durable consumer goods, by 0.8% for capital goods and by 0.1% for intermediate goods. Prices in total industry excluding energy increased by 0.6%.
ECB Goes Big With .75 % Rate Hike as Lagarde Hints More to Come
The European Central Bank on Thursday announced a 75 basis point interest rate rise, taking its benchmark deposit rate to 0.75%. “This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to the ECB’s 2% medium-term target,” it said in a statement.
It added it “expects to raise interest rates further, because inflation remains far too high and is likely to stay above target for an extended period.”
As Britain Mourns the Death of Queen Elizabeth II its Energy Cost Capping Scheme Will Move Forward
Britain will go ahead with plans to introduce an energy price guarantee from Oct. 1, Prime Minister Liz Truss’s spokesman said on Friday, despite the period of national mourning triggered by the death of Queen Elizabeth. Truss on Thursday capped soaring consumer energy bills for two years to cushion the economic shock of war in Ukraine with measures likely to cost the country upwards of 100 billion pounds ($115 billion), giving little detail on how it would be paid for.
“The public should be reassured that the energy price guarantee will be in place for households from the first of October as planned,” the spokesman told reporters. A spokesman said that the initial implementation of the guarantee was through private contracts with suppliers, rather than through legislation.
Labor Board Proposes New Joint Employer Rule
The National Labor Relations Board is proposing a rule that would count an employer as a company that controls, “whether directly, indirectly or both,” the work requirements, wages or hiring of a worker. “Contracting as a whole could face legal jeopardy in the context of this rule,” said US Chamber of Commerce’s Glenn Spencer.
That raises the possibility that a company that hires a contractor to run a cafeteria or clean the office could be considered a joint employer of the contractors’ workers. Or it could mean that a fast food or hotel chain requiring workers to cook food or clean rooms a certain way could be considered an employer even if those workers are hired and paid by franchisees.
Over $100 Million Announced for Southern Tier Battery Manufacturing Hub
The Southern Tier has always been known for its manufacturing roots, but like many regions, jobs and factories have left the area and there hasn’t been a lot of good news, really, for decades. Now, thanks to a $67.3 million grant and an additional $50 million from the state, the birthplace of IBM could be returning to its industrial roots.
At the site of buildings that once employed thousands, a new workforce will begin manufacturing batteries and training companies from across the country to produce them in the U.S. Students at BU have already begun training in the field under Nobel Prize winner Dr. Stan Whittingham, who’s known as the godfather of lithium-ion batteries.
Automakers Work to Strengthen EV Battery Supply Chains
As demand for electric vehicles grows in the US, Tesla and Toyota are building domestic EV battery production facilities to abbreviate the supply chain and avoid shortages. Meanwhile, Ford and GM are adding more suppliers for raw materials such as nickel, graphite and lithium.
Industry observers warn that global graphite demand could soon outstrip supply, and Tesla CEO Elon Musk is among a number of executives sounding the alarm on lithium processing constraints. At the same time, companies are striving to shift sourcing and production to North America in order to qualify for the Biden administration’s EV tax credits under the Inflation Reduction Act.
Supply Chain- Beating the Inflation, Shortage Double Whammy
It seems that by now no company is unscathed by the double trouble of inflation and supply shortages. Emerging winners are taking a strategic approach to procurement to keep costs below inflation. In some areas, they are even generating P&L gains while assuring supply security and quality. At the other end, for some companies, inflation and supply shortages are eroding earnings.
Past experience offers valuable lessons: Top-performing companies that accelerated out of the last period of high inflation were those that made productivity improvement a top priority. We expect leaders to repeat this pattern as inflation ticks up again. What’s different this time is that the capabilities that enabled procurement organizations to generate year-over-year cost reductions in the past are not enough in the face of today’s turbulent conditions.
U.S. Jobless Claims Fall for Fourth Straight Week
Initial jobless claims fell to a seasonally adjusted 222,000 last week from a revised 228,000 the previous week, the Labor Department said Thursday. Claims have been ticking down in August after moving up earlier in the summer. The latest claims data is consistent with other recent gauges that show the U.S. job market is strong, but cooling from earlier this year, when layoffs were even lower and hiring more robust.
The four-week moving average, which smooths out weekly volatility, fell by 7,500 to 233,000. So far in 2022, weekly initial claims are averaging around 214,000, about the same level as the 2019 weekly average of around 218,000. Continuing claims, a proxy for the number of people who have been unemployed and have received benefits for more than one week increased to 1.47 million in the week ended Aug. 27 from 1.44 million the previous week. Continuing claims are reported with a one-week lag.
Data Shows Unprecedented Decline in Human Development
A report published by the U.N. Development Program finds the COVID-19 pandemic, climate change, economic uncertainty and other crises have halted progress in human development and reversed gains made over the past three decades. Data from 191 countries show 90% failed to achieve a better, healthier, more secure life for their people in 2020 and 2021. For the first time in 32 years, the UNDP’s Human Development Index, which measures a nation’s progress, finds human development has declined for two years running.
U.N. Development Program administrator Achim Steiner said that is unprecedented. The Human Development Index captures a picture of a nation’s health, education, and standard of living. This year’s rankings show some countries are beginning to get back on their feet, while others remain mired in deepening crises. The report finds Latin America, the Caribbean, sub-Saharan Africa, and South Asia have been particularly hard hit.
Democrats, Environmentalists Warm to Nuclear Power for Quicker Transition to a Green Energy Future
Nuclear power, once shunned by many Democrats and environmentalists, is gaining acceptance among the party and activists as a clean alternative to fossil fuels amid soaring energy costs and a sluggish transition to renewables. Proponents argue that the carbon-free energy source is clean and affordable, can be generated around the clock and is already prevalent. Wind and solar power, meanwhile, are intermittent and hamstrung by limited battery storage capabilities.
Included in the recent reconciliation legi slation were nuclear production tax credits for existing facilities and incentives to build smaller, safer and more affordable reactors. Last year’s bipartisan infrastructure deal allocated $6 billion to help the U.S.’s 54 aging nuclear facilities.