Member Briefing September 21, 2022
Manufacturers’ Outlook Is Mixed in Q3 Survey
The National Association of Manufacturers Q3 2022 Manufacturers’ Outlook Survey shows mixed results around a challenging economic environment, inflation, supply chains and the workforce. The NAM conducted the survey Aug. 16–30, 2022. Key Findings:
- 78.3% of manufacturing leaders listed supply chain disruptions as a primary business challenge with only 10.8% believing improvement will occur by the end of the year.
- Attracting and retaining a quality workforce (76.1%), increased raw material costs (76.1%) and transportation and logistics costs (65.9%) were not far behind supply chain challenges as the biggest problems faced by manufacturers.
- More than three-quarters of manufacturers felt that rising material costs were a top business challenge and 40.4% said that inflationary pressures were worse today than six months ago. In addition, 53.7% noting that higher prices were making it harder to compete and remain profitable.
- The top sources of inflation were increased raw material prices (95.2%), freight and transportation costs (85.4%), wages and salaries (81.7%), energy costs (54.4%) and health care and other benefits costs (49.0%), with 21% also citing the war in Ukraine and global instability.
War in Ukraine Headlines
- Ukraine and Russia: the Latest News – The Guardian
- Russia Triggers Plan to Formally Annex Occupied Ukrainian Regions – Reuters
- Ukraine, West brush off Russian Referendum Plans for Occupied Regions – Reuters
- Russian Troops Boxed in by Ukrainian Forces and Dnieper River, Barge Carrying Supplies to Russian Troops Sinks – Fox News
- The EU is Trying to Cut Off Billions in Funding for One of Putin’s Last Remaining European Allies – Fortune
- Bipartisan Pair of Senators Propose New Russia sanctions – The Hill
- Ukraine Warns of ‘Nuclear Terrorism’ After Strike Near Plant – AP
- Europe Pays up to Grab Russian Diesel Ahead of Difficult Winter – Reuters
- Biden to Rally Leaders Against Russia’s ‘Naked Aggression’ in UN Speech – The Hill
- Germany’s Decision to Burn Coal this Winter ‘a Hard Pill to Swallow,’ Climate Envoy Says – Fortune
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Fed’s Third Straight 0.75-Point Interest-Rate Rise Is Anticipated
The Federal Reserve is expected to approve its third consecutive interest-rate increase of 0.75 percentage point on Wednesday, while signaling plans to raise and hold its benchmark rate above 4% in coming months to battle inflation.
Investors see a small chance of a larger rate rise of a full percentage point, or 100 basis points, at the Fed’s policy meeting Tuesday and Wednesday. A few analysts have said last week’s report showing high inflation could force central-bank officials to debate the merits of the larger move. But others think surprising the public with a larger rate rise could fuel questions over the central bank’s broader strategy and tactics.
Climbing Housing Costs Could Prop Up Inflation for a While
Economists expect housing inflation to strengthen further before cooling off in the coming months, but are unsure of when relief will appear. This creates another challenge for the Federal Reserve as it raises interest rates to reduce price pressures. Overall annual inflation eased to 8.3% in August from 8.5% in July, according to the Labor Department’s consumer-price index. That reflected declines from the month before in prices for items such as gasoline, airfares and used cars, and slower price increases in other categories, such as groceries.
Housing was an outlier. Not only are shelter costs rising, they are climbing at an accelerating pace, accounting for a growing share of the overall inflation rate—about 25% of August’s rate, up from about 20% in February.
US COVID – Bivalent Vaccine Update
The US Department of Health and Human Services last week released a video advertisement to encourage people to get updated SARS-CoV-2 vaccine booster shots. The ad specifically highlights those who are aged 50 and older, and shares the importance of getting the updated, bivalent vaccines, which are expected to provide additional protection against currently circulating SARS-CoV-2 Omicron subvariants.
More than 200 million people are eligible for the new vaccines, however, demand has dropped considerably with each new round of shots. More than half of people eligible for previous boosters never got them. Nevertheless, several pharmacies and hospitals in California, Hawaii, and Washington, DC, have reported running out of doses of the updated Moderna booster but expect additional supplies soon.
Seemed Like a Good Idea at the Time – New York spent $250M on Tech to Fight COVID that No One Uses
When New York became the U.S. epicenter of the Covid-19 pandemic in March 2020, then-Gov. Andrew Cuomo scoured the globe for life-saving equipment as the daily death toll in the state approached 800. The state acquired 8,555 ventilators at a cost of $166 million and 1,179 X-ray machines for $86.4 million, state officials told POLITICO this month. And now they’re stacked in warehouses across New York with no plans to distribute them or put them to any immediate use; Covid treatments have largely moved away from ventilators, and hospitals say they have plenty available to deal with their immediate needs.
New York is already starting to dispose of 700,000 gallons of expired hand sanitizer made in 2020 by people serving time at New York prisons in 2020 — a process that will take 44 weeks to complete by shipping a whopping 168 trailer loads 130 miles from Utica to Rochester at a cost of $2.3 million. Good-government groups said states, particularly New York, need to audit their spending because procurement rules were suspended and governors were able to dish out contracts with little oversight.
Adams Planning to End Vaccine Mandates on Private-Sector, Student Athletes
Mayor Eric Adams is planning to end a vaccine mandate for private-sector workers, and the administration is also planning to dispense with a similar requirement for students who participate in extracurricular activities, four people with knowledge of the matter told POLITICO.
The coming end of the mandates is the latest move by New York elected officials to roll back pandemic policies put in place by their predecessors. And while the shift in policy will come as welcome news to businesses, some parents and GOP lawmakers, who blasted the measures — it could also inflame relations with labor unions and fired city workers.
The Home Price Correction is Spreading—This Interactive Map shows if Your Local Housing Market is Impacted
While it’s clear this ongoing housing downturn—spurred by the Fed’s inflation fight—will see a sharp decline in housing activity, it’s less clear how it will impact home prices.
To better understand what’s going on with home prices, Fortune looked at monthly home values as measured by the Zillow Home Value Index (ZHVI). In total, we looked at data for 896 regional U.S. housing markets. Let’s take a look at the Zillow data.
JPMorgan CEO Dimon to Warn Congress of Economic ‘Storm Clouds’ in Testimony
JPMorgan Chase & Co (JPM.N) Chief Executive Jamie Dimon plans to tell Congress that the U.S. economy faces “storm clouds,” according to prepared testimony.
Dimon, who is due to testify alongside major U.S. bank CEOs at congressional hearings Wednesday and Thursday, will outline the competing forces buffeting the nation’s economy. Strong consumer spending and a robust job market suggest resilience, but snarled supply chains, the war in Ukraine, high inflation and the Federal Reserve’s efforts to contain it all signal tougher times ahead, he added.
Food Supply Stays Tight as Disappointing U.S. Harvest Adds to Global Challenges
A lackluster U.S. harvest this year is setting back efforts to relieve a global food supply that has been constrained by Russia’s war in Ukraine, agriculture-industry executives said. “When it comes to the global food-supply situation, I think things are going to continue to be tight for the time being,” said Werner Baumann, Bayer’s chief executive.
Senior executives from companies such as Bayer AG, Corteva Inc., Archer Daniels Midland Co. and Bunge Ltd. said worldwide crop supplies remain tight, and some said at least two more years of good harvests in North and South America are needed to ease the pressure. Persistent drought conditions in the U.S. and agricultural countries in South America, along with uncertainty over crop production in Ukraine, are making that harder, they said.
Inflation to Add $1B to Ford’s Q3 Supplier Costs
Ford Motor Co. executives on Sept. 19 said they will pay suppliers $1 billion more than previously expected during the third quarter after concluding some recent negotiations. The company also is pushing some vehicle deliveries into the fourth quarter because of ongoing parts shortages but its leaders are sticking to their full-year pre-tax earnings forecast.
The inflation update from Michigan-based Ford comes after CEO Jim Farley and CFO John Lawler in July added $1 billion to their forecast for 2022 inflationary factors aside from commodity costs, pushing it to $3 billion. In a short statement Sept. 19, the company did not provide more details about this latest increase.
Housing Starts: ‘Collapse in Single-Family Permits is the Real Story’
A steep drop in building permits in August overshadowed the better-than-expected rise in new residential construction and offered fresh evidence of a housing slowdown. “In short, ignore the headline starts numbers,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote. “The collapse in single-family permits is the real story, and it has much further to go.”
Residential starts — including both single- and multi-family units — increased 12.2% last month to a 1.575 million annualized rate from 1.404 million in July, according to government data released Tuesday. The consensus expectation by Econoday was 1.440 million. But applications to build declined 10% to an annualized rate of 1.517 million units in August from 1.685 million in July. “As a general rule, when starts and permits move in opposite directions, trust the permits numbers, which lead and usually are less noisy,” Shepherdson added. “The surge in headline starts was concentrated in a 31% leap in the multi-family component, lagging prior gains in permits.”
Beijing Sanctions a Top Boeing Exec for Selling Arms to Taiwan
Sanctions were announced on Friday against Ted Colbert, CEO of Boeing Defense, Space, and Security, and Gregory Hayes, chairman and CEO of Raytheon Technologies, in retaliation for Boeing and Raytheon selling $1.09 billion in weapons to Taiwan. As part of the purchases, Taiwan bought $355 million worth of Boeing’s Harpoon missiles and $85 million worth of Raytheon’s Sidewinder missiles. The U.S. government had announced the arms sales last week and said they were necessary for Taiwan to “maintain a sufficient self-defense capability” amid rising military pressures from Beijing.
Beijing explained the reasoning for the sanctions on Friday. “China firmly opposes and strongly condemns the sales,” Mao Ning, spokesperson for China’s Ministry of Foreign Affairs, said at a press conference. “The arms sales gravely undermine China’s sovereignty and security interests, and severely harm China-U.S. relations and peace and stability in the Taiwan Strait.”.
NASA Mars Lander Captures Strikes by 4 Incoming Space Rocks
A NASA lander on Mars has captured the vibrations and sounds of four meteoroids striking the planet’s surface. Scientists reported Monday that Mars InSight detected seismic and acoustic waves from a series of impacts in 2020 and 2021. A satellite orbiting the red planet confirmed the impact locations, as far as 180 miles (290 kilometers) from the lander.
Scientists are delighted by the detections — a first for another planet. The first confirmed meteoroid exploded into at least three pieces, each leaving its own crater. An 11-second audio snippet of this strike includes three “bloops,” as NASA calls them, one of sounding like metal flapping loudly in the wind here on Earth.