Member Briefing September 18, 2023
Activity Little Changed in September Empire State Manufacturing Survey
Manufacturing activity held steady in New York State, according to the September survey. After dropping sharply last month, the general business conditions index reversed course and climbed twenty-one points to 1.9.
- The new orders index shot up twenty-five points to 5.1, and the shipments index also rose twenty-five points to 12.4, pointing to an increase in orders and shipments.
- The unfilled orders index remained below zero at -5.2, a sign that unfilled orders continued to decline. Similarly, the inventories index came in at -6.2, indicating that inventories contracted again. The delivery times index ticked up to 2.1, suggesting little change in delivery times.
- The index for number of employees came in at -2.7, indicating a slight decline in employment levels.
- The prices paid index held steady at 25.8, pointing to little change in the pace of input price increases, while the prices received index rose seven points to 19.6, signaling a modest pickup in the pace of selling price increases.
- New orders and shipments are expected to increase significantly in the months ahead, and employment is expected to grow.
- The capital spending index edged down to 10.3, suggesting that capital spending plans remained somewhat weak.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- U.S. to Sanction 150 Entities in Campaign Against Transit-Country Trade With Russia - WSJ
- Ukraine Says It Has Retaken Strategic Village Near Bakhmut - Reuters
- Russia Raises Interest Rates to 13% Amid Inflation Concerns - Reuters
- First Grain Ships Arrive in Ukraine Using New Black Sea Route - BBC
- Ukrainian Commander Cays He'd be Dead if He Fought Exactly How the US and its Allies Taught Him - Insider
- Ukraine Retakes Village Near Bakhmut in Boost to Counteroffensive - WSJ
- Zelensky to Visit US This Week, Meet with Biden, Congress Attend UN General Assembly- BBC
- Russia Will Deploy Captured Ukrainian-Made BMPs ... Against Ukraine - Forbes
- Ukraine Says It Eliminated Advanced Russian Air-Defense System in Crimea - WSJ
- Interactive Map: Assessed Control of Terrain in Ukraine – Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Manufacturing Activity Ticked Up in August Though it is Unlikely to Continue
While most data continue to point to a U.S. industrial sector that is stalling or in contraction, the August industrial production data surprised to the upside, with total output rising 0.4%. That, however, comes after downward revisions to the prior month (now up 0.7% from a previously reported 1.0% rise) and is somewhat explained by a pop in the volatile mining industry. Mining output rose 1.4% last month (due to a +3% gain in oil & gas extraction specifically), and was responsible for half of the overall gain in output. But gains were fairly broad based in August. Manufacturing, which is by far the biggest component of industrial production representing nearly three-quarters of output, was up a modest 0.1%.
But manufacturing activity was held back by autos output specifically. Motor vehicles & parts production slid 5% in August and when excluding autos from the manufacturing data, production rose 0.6% or by the highest in seven months. Manufacturing production thus saw somewhat of a reprieve in August with the largest gains coming from aerospace & miscellaneous transportation equipment (+3.3%), machinery (+2.0%), primary metals (+1.6%), miscellaneous (+1.5%) and printing & support (+1.3%) output. Wells Fargo analysists, however, are cautious to expect this will be sustained as unfavorable conditions will limit a recovery in manufacturing for some time.
NAM Survey: Manufacturer Optimism Declines
The National Association of Manufacturers Q3 2023 Manufacturers’ Outlook Survey shows manufacturers’ with the lowest level of optimism among NAM members since Q2 2020. The sector continues to confront a tight labor market, unbalanced federal regulations and critical policy debates in Congress. The NAM conducted the survey from August 17 to August 31, 2023.
- Only 65.1% of respondents felt positive in their company’s outlook, edging down from 67.0% in the second quarter.
- It was the fourth straight reading below the historical average (74.9%).
- Concern about an unfavorable business climate was the highest in six years (Q2 2017).
- The survey found that 69.1% of small manufacturers, and 63.2% of all respondents, would hire more workers or increase compensation if the regulatory burden decreased.
- More than 70% of manufacturers would purchase more capital equipment if the regulatory burden on manufacturers decreased, with 48.6% increasing compensation, 48.6% hiring more workers, 42.5% expanding their U.S. facilities and 38.4% investing in research.
- The top challenges facing manufacturers include attracting and retaining a quality workforce (72.1%), weaker domestic economy (60.7%), rising health care/insurance costs (60.1%), unfavorable business climate (56.7%), increased raw material costs (45.5%) and supply chain challenges (37.8%).
COVID Update – Boosters are Available Who Will Pay for Them?
Everyone over the age of 6 months should get the latest COVID-19 booster, a federal expert panel recommended Tuesday after hearing an estimate that universal vaccination could prevent 100,000 more hospitalizations each year than if only the elderly were vaccinated. The Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices (ACIP) voted 13-1 for the motion after months of debate about whether to limit its recommendation to high-risk groups.
When the ACIP recommends a vaccine for children, the government is legally obligated to guarantee kids free coverage, and the same holds for commercial insurance coverage of adult vaccines. For the 25 to 30 million uninsured adults, the federal government created the Bridge Access Program. It will pay for rural and community health centers, as well as Walgreens, CVS, and some independent pharmacies, to provide COVID shots for free. Manufacturers have agreed to donate some of the doses, CDC officials said.
NYS COVID Update
The Governor updated COVID data for the week ending September 15th.
- Weekly: 74
- Total Reported to CDC: 80,220
- Average Daily Patients in Hospital statewide: 1,372
- Average Daily Patients in ICU Statewide: 137
7 Day Average Cases per 100K population
- 15.0 positive cases per 100,00 population, Statewide
- 16.0 positive cases per 100,00 population, Mid-Hudson
Haven’t Been Paying Attention to the UAW Strike? What You Need to Know
The United Auto Workers contracts expired at 11:59 pm ET on Thursday. The contracts covered 145,000 UAW members at the three companies: General Motors, Ford and Stellantis, which builds vehicles under the Jeep, Ram, Dodge and Chrysler brands for North America. With no deal reached by the contract expiration, the union said it has started targeted strikes against three facilities – one at each company.
All three companies say they are now offering a 20% raise during the life of the contract with a 10% raise at the start. The union started with a demand for an immediate 20%, and four additional raises of 5% each over the course of a four-year deal. And all the automakers issued statements saying they want to reach tentative labor deals to end the strikes as soon as possible.
Lawmakers Fear Stumbling Into a Shutdown
A chaotic week on Capitol Hill yielded no serious progress as Congress stares down a spending deadline at the end of the month with lawmakers acknowledging a government shutdown is not only possible at this point, but may soon be inevitable. That’s particularly true if the political dynamics at play between House Speaker Kevin McCarthy, the hardliners in his conference and the US Senate don’t change fast.
The Senate, which has bipartisan agreement on a series of spending bills passed out of committee, faced a procedural snag on the floor Thursday, and House Republicans are still struggling to find consensus among themselves on a defense spending bill and have turned their focus to trying to pass a short-term funding bill with just GOP votes. Meanwhile, McCarthy faces threats for his ouster if he brings a short-term spending bill to the floor that doesn’t acquiesce to demands from his right flank.
US Producer Prices Rise Most in More Than a Year on Energy Costs
The producer price index for final demand rose 0.7% last month, the largest gain since June 2022, the Labor Department said on Thursday. Data for July was revised slightly up to show the PPI advancing 0.4% instead of the previously reported 0.3%. The report followed news on Wednesday that consumer prices increased by the most in 14 months in August on higher gasoline prices.
Wholesale goods prices jumped 2.0% last month, with a 20.0% surge in gasoline accounting for 60% of the increase. Goods prices rose 0.3% in July. Food prices fell 0.5% last month. Excluding the volatile food and energy components, the so-called core goods prices nudged up 0.1% after being unchanged in July. The cost of services increased 0.2% after rising 0.5% in July. They were lifted by a 1.1% increase in residential real estate services. The cost of moving goods by road increased as did machinery, equipment, parts and supplies wholesaling.
Panama Canal Drought Conditions Seen Extending Into 2024
The Panama Canal expects extreme drought conditions to persist through next year, continuing to limit the number of vessels that can pass through the vital interoceanic waterway, the administrator said Tuesday. Panama Canal Administrator Ricaurte Vásquez said the waterway will consider further restricting the flow of vessels through the canal if necessary. He attributed conditions to the El Niño weather pattern, which has resulted in lower water levels in the lakes that feed the canal.
In July, the canal limited the number of vessels passing daily through the waterway to 32 from 36 to conserve the water necessary to operate the canal. Vásquez said the main concern was to keep water levels high enough for vessels with a draft of 44 feet to transit the canal. Recently, the canal reached a peak of 163 vessels waiting to transit, which Vásquez said was unusually high. On Tuesday, he said there were 116 vessels in the queue.
European Central Bank Raises Key Interest Rate to Record High
The European Central Bank raised interest rates by a quarter percentage point to a record high but signaled that eurozone borrowing costs may have peaked, sending the euro tumbling. In a split decision, ECB officials raised the bank’s deposit rate to 4%, the 10th increase in a row and a vertiginous rise from below zero last year. At a news conference, ECB President Christine Lagarde signaled that Thursday’s rate increase might be the last, although she didn’t rule out further hikes if economic data disappoint.
ECB officials judge that rates “have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution” to reducing inflation to their 2% target, Lagarde said, repeating language used in the bank’s policy statement. The eurozone still has lower interest rates than the U.S., as well as higher inflation and a struggling economy that contrasts with relatively healthy economic growth in the U.S.—all factors that are weighing on the euro. “In all likelihood the ECB is done,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management in Geneva.
EU President: New Maersk Ship is a "Big Deal" for the World
The world’s first methanol-enabled container vessel will carry the name “Laura Mærsk”, the EU Commission President Ursula von der Leyen revealed at a ceremony in Copenhagen on last Thursday. The name was revealed during a ceremony, when the ship’s godmother, President von der Leyen, christened the vessel by breaking a champagne bottle over the bow. Besides the godmother, Maersk Chair Robert Uggla and Maersk Chief Executive Officer Vincent Clerc also spoke at the ceremony.
Laura Maersk is a historic milestone for shipping across the globe. It shows the entrepreneurial spirit that has characterized Maersk since the founding of the company. However, more importantly this vessel is a very real proof point that when we as an industry unite through determined efforts and partnerships, a tangible and optimistic path toward a sustainable future emerges. This new green vessel is the breakthrough we needed, but we still have a long way to go before we make it all the way to zero,” said Vincent Clerc, CEO of Maersk.
Private Sector Job Gains Continued in the Hudson Valley Region in August
In August 2023, the region’s private sector employment count continued to trend upward. Two sectors posted year-over-year gains of at least 5.6 percent. Job growth in the private education and health services sector remained impressive, with 10 consecutive months of year-over-year gains. Year-to-year in August 2023, the sector grew by 5.6 percent to reach 215,100 – its highest August employment count on record.
Over the past year, the private sector jobs count in the Hudson Valley rose by 11,600, or 1.4 percent, to 815,800 in August 2023. Employment gains were largest in private education and health services (+11,500), leisure and hospitality (+6,400) and other services (+1,600). Job losses were greatest in professional and business services (-4,600), trade, transportation and utilities (-1,000), financial activities (-700), information (-700). Manufacturing Employment fell by 600 year on year.
Has China’s Economy Bottomed Out?
After four grim months for China’s economy—in which the property market slumped, exports shrank, prices fell and youth unemployment soared—is the bottom near? Data released so far this month have been mildly encouraging. Consumer prices stopped falling in August (although underlying deflationary pressure remains). Exports improved, compared with the previous month. Credit growth also beat low expectations.
Other figures released on Friday showed faster-than-expected growth in industrial production and retail sales last month. The post-pandemic boom in catering slowed, but car sales picked up. The biggest concern remains the property market, where prices are still falling and sales have yet to stabilise. And what about youth unemployment? It usually improves in August as youngsters who graduated a month or two before finally land a job. Unfortunately, any such improvement this year will remain invisible, because China has stopped publishing the figures. China’s infuriating opacity masks good news as well as bad.
With Contracts Expired Big Three Begin Laying Off UAW Workers
Hours after the strike started, Ford announced it told 600 workers who assemble cars at a plant in Michigan not to report to work that day, citing the "knock-on effects" of the strike. Workers in the paint department at a nearby plant are out on strike, leaving the assembly workers without adequate parts, since the parts require paint before they can be put together into cars, the company said in a statement to ABC News.
GM also said on Friday it plans to idle 2,000 workers at its Fairfax assembly plant in Kansas as soon as early next week due to a "ripple effect" of the strike at its Wentzville assembly plant in Missouri. The strike will mean a shortage of "critical stampings" supplied by Wentzville to Fairfax, GM said. UAW president Shawn Fain responded to the announcements on Saturday. "Their plan won't work," the statement continued. "The UAW will make sure any worker laid off in the Big Three's latest attack will not go without an income. We'll organize one day longer than they can and go the distance to win economic and social justice at the Big Three."