Member Briefing September 14, 2022

September 14, 2022

Posted By: Harold King in Daily Briefing,

CPI = 8.3, Stocks Tank, Rates Rise as Fed Increases More Likely

The Consumer Price Index (CPI) in August reflected an 8.3% increase over last year and a 0.1% increase over the prior month, the Bureau of Labor Statistics reported Tuesday. Economists had expected prices to rise 8.1% over last year and fall 0.1% over last month, according to estimates from Bloomberg.

The S&P 500 tumbled 4.32%, while the Dow Jones Industrial Average declined 3.94%, or about 1276 points. The Nasdaq Composite slid 5.16% as rate-sensitive technology stocks took a heavy beating. The yield on the 10 year treasury climbed 65 basis points to 3.422%. The reading also likely affirms that Federal Reserve officials will raise interest rates by 75 basis points at their policy-setting meeting Sept. 20-21 and again at its November meeting.

War in Ukraine Headlines

U.S. Incomes Were Flat Last Year, Census Figures Show

Median household income was essentially unchanged last year on an inflation-adjusted basis from the previous year and was recorded as about $70,800, the U.S. Census Bureau said Tuesday in its annual report on the nation’s financial well-being. The lack of any significant growth for 2021 follows a decrease in incomes recorded in 2020, the first year of the pandemic.

The Census Bureau said the overall median household income for 2021 wasn’t statistically different from the 2020 estimate of about $71,200. Median household income in 2021 was highest in the West ($79,430) and Northeast ($77,472), followed by the Midwest ($71,129) and the South ($63,368), according to the bureau’s report.

White House “Urgently Discussing” Contingency Plans Amid Rail Shutdown Threat

The White House is urgently discussing contingency plans as the threat of a rail shut down looms, with agencies across the federal government working through how they could potentially use federal authority to keep critical supply chains operational as labor talks continue to sit at an impasse. The work has ramped up in recent days as officials have grown increasingly concerned about a labor strike if freight-rail labor negotiations fail to produce an agreement ahead of Friday’s deadline.

While officials have been closely watching the developments — and have gotten directly involved in an effort to find a resolution — for several weeks, the accelerated efforts to plan for a worst case scenario underscore the stakes of an outcome that would lead to massive supply chain disruptions, and dual-pronged political and economic risk.

US COVID – Concerns about COVID in the Workplace

According to a recent Gallup poll, one-third of adults are concerned about COVID-19 exposure in the workplace, a proportion that is relatively unchanged since November 2021. The percentage of people “not concerned at all” has increased from 23% in 2020 to a record high of 39%. The recent survey also shows significant gaps in results by gender—41% of working women are concerned about on-the-job exposure compared with 26% of working men.

Gaps also exist in political party affiliation—51% of Democrats expressed at least moderate concern compared with 14% of Republicans. Two-thirds of workers said they expect new COVID-19 cases to increase during the colder months, although the poll was conducted prior to the approval of updated booster doses.

Inside the Inflation Report

The annual inflation rate in the US eased for a second straight month to 8.3% in August of 2022, the lowest in 4 months, from 8.5% in July but above market forecasts of 8.1%. Compared to the previous month, consumer prices were up 0.1%, following a flat reading in July and compared to forecasts of a 0.1% drop.

Energy prices fell 5% for the month, led by a 10.6% slide in the gasoline index.
The food index increased 0.8% in August
Shelter costs, which make up about one-third of the weighting in the CPI, jumped 0.7% and are up 6.2% from a year ago.
Medical care services also showed a big gain, rising 0.8% on the month and up 5.6% from August 2021.
New vehicle prices also climbed, increasing 0.8% U
Used vehicles fell 0.1%.

EU Stonewalls Over von der Leyen’s Role in Pfizer Vaccine Deal

With every passing day, the negotiations held between the European Commission and Pfizer over the EU’s largest COVID-19 vaccine contract look less like business as usual and more like a whodunnit. The plot thickened further after the European Court of Auditors published a report today, accusing the Commission of refusing to disclose any details of Commission President Ursula von der Leyen’s personal role in the talks.

The budget watchdog found that the EU chief threw out the existing rulebook to hash out a preliminary deal with the U.S. multinational, paving the way for a contract for up to 1.8 billion coronavirus vaccine doses to be signed in May 2021. For all the other vaccine deals struck by the EU between 2020 and 2021, a joint team comprising officials from the Commission and seven member countries conducted exploratory talks. The outcome was then taken to a Vaccine Steering Board made up of representatives from all 27 EU member states who signed off on it.

“New Paltz University” – Name Change in the Works

In the coming weeks, the State University of New York College at New Paltz will see a change in its legal designation. It will no longer have a “college” status, but rather be known as a “university.” President Darrell Wheeler told the College Council on Monday the designation to New Paltz University is reflective of its advancements.

“It doesn’t change anything about the demands for us for research. It’s not moving us to be a research center. It’s just accepting now meet the new bar of recognition, which actually is a plus for us because it says you’ve done such great work in advancing your mission that you can have this designation,” he said.

UAW Ends Strike at Stellantis Engine Parts Plant

Striking Kokomo Casting Plant union workers in Indiana ratified an agreement with Stellantis on Monday, ending a standoff after local contract negotiations broke down late last week. A prolonged strike at the plant likely would have threatened Stellantis production throughout North America.

“Stellantis is pleased that members of UAW Local 1166 at the Kokomo, Indiana, Casting Plant have ratified a new local agreement,” the company said in a statement Tuesday. “Operations at the plant resumed with third shift on Monday, Sept. 12.”

Gas Prices May Spike Again This Winter As Europe Cuts Off Russian Oil, Yellen Says

Gas prices could jump again this winter following a monthslong decline in the United States, Treasury Secretary Janet Yellen warned Sunday, as the European Union plans to largely stop buying Russian oil in December as a gesture of disapproval of the war in Ukraine.

The average cost for a gallon of gas in the United States dipped to below $3.75 on Saturday, the lowest since March 2, just one week after Russia invaded Ukraine earlier this year. Earlier this month, finance ministers from the G7—a coalition of wealthy nations, including the United States—agreed to a price cap on Russian crude oil and petroleum products, but are reportedly still trying to bring other countries on board. A White House official told CNBC the price cap is expected to go into effect before 2023.

Competing to Win – NAM Offers Up a Policy Roadmap

The National Association of Manufacturers launched its new campaign to boost manufacturing competitiveness anchored by its policy roadmap, “Competing to Win.” Amid rising prices, snarled supply chains and geopolitical turmoil, the NAM’s plan features ideas that policymakers can pursue immediately.

The plan includes 12 areas of action from taxes, workforce development, immigration, infrastructure and supply chain. Stay tuned for more details about the NAM’s campaign to take this agenda directly to policymakers, candidates and voters this fall.

Energy Dept. Issues Plan for Industrial Decarbonization

The U.S. Department of Energy on Wednesday published an industrial decarbonization road map, laying out a comprehensive strategy to reduce emissions associated with five sectors: chemical manufacturing, petroleum refining, iron and steel, cement production, and the food and beverage industry.

Heavy industry is the source of about 30% of primary energy-related carbon dioxide emissions in the United States, the department says. Its approach will focus on energy efficiency improvements, electrification, the use of low-carbon fuels, and carbon capture utilization and storage, or CCUS. Alongside the new road map, DOE announced a $104 million funding opportunity for industrial decarbonization technologies. The American Council for an Energy-Efficient Economy called the road map a “landmark plan” to help companies address emissions at scale.

Amazon Is Refining Delivery Operations as It Resets Logistics Network

Amazon.com Inc. appears to be fine-tuning its distribution strategy as it pauses its warehouse expansion across the U.S., consolidating operations in some areas while pulling back growth plans in secondary markets, according to logistics experts. The e-commerce giant has canceled, closed and delayed facilities at each stage of its order fulfillment process, while continuing to move forward with large distribution centers that funnel goods into its home-delivery network. Amazon has shut down, called off or pushed back the openings of 66 delivery stations, fulfillment centers and other facilities as of this week, according to data from supply-chain consulting firm MWPVL International Inc.

Fourteen of the 15 buildings Amazon has closed have been delivery stations, the smaller facilities where the company prepares online orders for delivery to customers’ homes, said Marc Wulfraat, founder and president of MWPVL. Those sites have largely been in areas where the company had multiple facilities close to one another, he said, suggesting Amazon will consolidate the operations in fewer stations.

United Airlines Invests in Embraer Electric Air Taxis

United Airlines placed a $15-million investment in Eve Air Mobility – the “air taxi” business launched by Embraer SA in 2020 – and placed a conditional purchase agreement for 200 four-seat, electric aircraft. The agreement also includes options for 200 more of the electric vertical take-off and landing (eVTOL) aircraft, with the first deliveries as early as 2026. United Airlines is joining a consortium led by Eve that will simulate urban-air-mobility operations in Chicago starting on September 12.

Eve is one of several eVTOL start-ups in development now (by Airbus, Boeing, Honda, Toyota, and others) anticipating demand for air taxi operations for urban or local transportation and delivery services. The Embraer subsidiary is developing not only the electric aircraft but also a global service and support network and air-traffic-management technology.

Slower Manufacturing Rates Weaken Tool Demand

Machine shops and other U.S. manufacturers consumed $173.2 million worth of cutting tools during July 2022, -1.5% from the June consumption total and yet still 6.7% ahead of the July 2021 total. Through seven months of consumption data, U.S. manufacturers’ cutting-tool consumption has totaled $1.2 billion, 7.7% more than last year’s January-July total. Cutting tool consumption is a reliable index to overall manufacturing activity because cutting tools are a primary consumable product in use across multiple industrial sectors.

The data is supplied by the U.S. Cutting Tools Institute and AMT – the Assn. for Manufacturing Technology in their monthly Cutting Tool Market Report, which compiles data for actual purchases of cutting tools by companies representing a majority of the domestic market for cutting tools.