Member Briefing September 28, 2022

Posted By: Harold King Daily Briefing,

US Manufactured Goods Orders Fall for Second Straight Month

Orders for big-ticket U.S.-manufactured goods slipped in August, the second consecutive monthly decline. Durable goods orders fell 0.2% to $272.7 billion last month, after a 0.1% decline in July, the Commerce Department reported. The result was far better than analysts had expected. A huge double-digit drop in non-defense aircraft pushed the total down, while a massive 31.2% jump in military aircraft pushed the other way, the data showed.

Soaring U.S. inflation and supply chain snarls have challenged industry and consumers, causing a pullback in spending and investment. But the report showed resilient demand, with rising orders for vehicles, computers, and electrical equipment and appliances, which posted a 1.0% increase, according to the report. Oren Klachkin of Oxford Economics noted "Right now manufacturing carries enough momentum to withstand stress from downward pressures," but he cautioned, "the confluence of highly elevated inflation, higher interest rates, weakening demand and downbeat sentiment will cause durable goods activity to struggle next year."

Read more at IndustryWeek

War in Ukraine Headlines

Economic Growth Could Grind to a Halt and Spark Global Recession Next Year, OECD Says

During the first half of 2022, inflation in many countries skyrocketed to levels unseen since the 1980s, the Organization for Economic Co-operation and Development (OECD) said on Monday in its latest economic outlook report. Fixing the problem might require engineering a dramatic economic slowdown in many countries. Global economic activity will remain “subdued” for the rest of the year before declining in 2023, according to the OECD. As a result, the organization downgraded its global economic growth forecast for next year to 2.2% from the 2.8% it had predicted in its previous forecast in June.

The two drivers behind the expected slowdown are the costs associated with the Ukraine War—which the OECD said will lead to a $2.8 trillion drop in global GDP next year—and central banks worldwide tightening their monetary policies in an effort to reduce inflation, measures that could tip several major economies into prolonged recession.

Read more at Fortune

World Bank Cuts China Growth Forecast as Covid-19, Real-Estate Crunch Take Toll

The World Bank said it expects developing economies in East Asia to grow faster than China this year for the first time since 1990, as the world’s second-largest economy struggles with a real-estate crunch and the government’s zero-tolerance approach to Covid-19. The bank said the outlook for the region is threatened, however, by the risk that central banks including the U.S. Federal Reserve raise interest rates more aggressively than investors anticipate to contain galloping inflation. That could hurt global growth and fuel financial stress in heavily indebted emerging markets, it said.

The World Bank said in its latest assessment of the developing economies of East Asia and the Pacific that it expects China to expand 2.8% in 2022. That is down from a 4.3% forecast in June, and makes the World Bank gloomier on China’s prospects this year than the International Monetary Fund, which forecasts 3.3% growth, and some private-sector forecasts from banks including Goldman Sachs Group and Standard Chartered.

Read more at the WSJ

US COVID – Dr. Ashish Jha on the Next Phase of Pandemic Response

This winter, we might be facing both a difficult flu season and another surge of COVID-19. How can manufacturers help protect workers and all Americans from illness, hospitalization or worse? Dr. Ashish Jha, the White House COVID-19 response coordinator, gave a comprehensive answer at an NAM gathering of manufacturing leaders last week. Though both COVID-19 infections and deaths are down, Jha noted that if we keep steady at today’s numbers, we’ll be seeing 100,000 to 150,000 deaths per year—three to five times worse than the average flu season.

We’ve had two seasons in a row with “little to no flu”—in large part thanks to COVID-19 mitigation measures like masking and avoiding large gatherings. This year, however, people have largely stopped masking and are back to congregating in person. And there is reason to expect a COVID-19 wave anyway, as infections spiked during both the past two winters. Jha praised manufacturers’ and the NAM’s efforts to encourage workers to get vaccinated and urged manufacturers to continue their efforts this season, including by offering paid time off for workers getting vaccinated.

Read more at the NAM

Kathy Hochul and Lee Zeldin Debate Debates

Figuring out a debate schedule is a perennial issue for just about any major office. And as always, the incumbent has less need to debate than the challenger. This year was no different, as Zeldin wanted two debates downstate, one in the Buffalo or Rochester area, one in the Capital Region and one more elsewhere. Initially, the governor said she would debate her Republican challenger, but didn’t say where or when. It provided the Zeldin campaign with fodder to paint Hochul as fearful to debate.

Hochul did eventually agree to a lone debate on NY1 on Oct. 25, just two weeks before the election. But Zeldin rejected the concession, asserting that voters deserved more than one debate and that it was too close to the election. He also pointed out the need to reach other media markets in the state. Zeldin has already accepted two debate invitations from PIX11 and CBS2.

Read more at City & State

Vulnerable Tampa Bay braces for storm not seen in a century

It’s been more than a century since a major storm like Hurricane Ian has struck the Tampa Bay area, which blossomed from a few hundred thousand people in 1921 to more than 3 million today. Many of these people live in low-lying neighborhoods that are highly susceptible to storm surge and flooding they have rarely before experienced, which some experts say could be worsened by the effects of climate change.

The problem confronting the region is that storms approaching from the south, as Hurricane Ian is on track to do, bulldoze huge volumes of water up into shallow Tampa Bay and are likely to inundate homes and businesses. The adjacent Gulf of Mexico is also shallow. “Strong persistent winds will push a lot of water into the bay and there’s nowhere for it to go, so it just builds up,” said Brian McNoldy, a senior research associate at the University of Miami’s Rosenstiel School of Marine, Atmospheric and Earth Science. “Tampa Bay is very surge-prone because of its orientation.”

New York COVID Cases Up 8% as Some Counties Outside NYC See Non COVID Illnesses Rise

New York's weekly tally of COVID-19 cases ticked up about 8% last week, as many counties outside New York City faced higher coronavirus risk levels and spikes in other viral infections among children nationally prompted public health alerts. New York reported 34,988 COVID-19 cases in the week ending Sunday, up from 32,513 cases the prior week.

Meanwhile, federal health officials recently warned the wave of viral infections in general among children is expected to be worse this year than the last two years, following relaxation of mask mandates and other preventive measures against COVID-19.

Read more at the Democrat & Chronicle

New York State Adopts the CDC’s COVID-19 Quarantine and Isolation Guidance

On Sept. 14, 2022, the New York State Department of Health (NYSDOH) issued updated COVID-19 quarantine and isolation guidance, which effectively replaces the guidance from May 31, 2022. According to the September 14 guidance, the NYSDOH will now follow the Centers for Disease Control and Prevention’s (CDC) guidelines on quarantine and isolation.

Quarantine: Perhaps most significantly, under the CDC guidance, asymptomatic individuals exposed to COVID-19 need not quarantine regardless of vaccination status. Instead, those exposed to COVID-19 should wear a high-quality mask for 10 days and be tested on day 5. Those who test positive should isolate per the isolation rules listed below.

Isolation: The requirement that individuals who test positive for COVID-19 must isolate has not changed under the current guidance. Individuals who test positive are now directed to follow the CDC’s isolation precautions. The NYSDOH’s Isolation webpage directs visitors to the CDC’s Aug. 11, 2022 isolation guidance which establishes the standards set forth below:

Read more at Bond Schoeneck & King

Top Economist Says the ‘Relentless Appreciation of the Dollar’ is Terrible News for the Global Economy

Economists warn that the dollar’s strength can also be a nightmare for the global economy. “What is clear is we have this relentless increase in yields, this relentless appreciation of the dollar. They are both bad news for corporates and for the economy,” Mohamed El-Erian, the president of Queens’ College at the University of Cambridge, told CNBC on Monday.

“The reason why this last leg up in the dollar is happening is because we are the safe haven and one consequence of that is our currency gets stronger,” he said. “The longer and higher the dollar soars above the rest, the greater the risk of more prolonged global stagflation, debt problems in the developing world, more restrictions on the free flow of goods across borders, greater political turmoil in fragile economies and greater geopolitical conflicts,” he wrote in his Washing Post op-ed.

Read more at Fortune

Aircraft Parts Output is Being Grounded by Worker Shortages

A slowing global economy has started to unwind some supply chain shortages that hit manufacturers and contributed to inflation. Demand for shipping and airfreight have softened, chip sales are slowing and used car prices in the United States are falling. But aircraft parts makers are still reeling from deep job cuts undertaken when planes were grounded during the pandemic, a sign of how uneven the supply chain crisis remains.

In the United States, aerospace employment is 8.4% below its pre-pandemic level. In the province of Quebec, where Mitchell is located, the industry needs to fill 38,000 jobs in the next decade, according to industry trade group Aero Montreal. The problem is most acute in the highly labor intensive, hard to automate castings industry. In a recent Jefferies survey, nearly three-fourths of aerospace equipment makers cited castings as the largest source of shortages.

Track Ian at Reuters

Small Businesses Get Creative as They Still Struggle With Hiring

The economy is weakening, big companies from Ford Motor Co. to Facebook’s parent are cutting jobs or freezing hiring and inflation is eating into household budgets. Yet for many small-business owners, finding workers is as difficult as ever. The challenges are prompting some entrepreneurs to seek more creative ways to fill labor shortages at a time when they might have expected hiring to get easier.

More than one-third of small businesses said hiring challenges had worsened in the three months ended Sept. 1, according to a Goldman Sachs survey of nearly 1,500 small-business owners. Forty-seven percent of them said finding and retaining qualified employees was the most significant problem small businesses faced, up from 43% in the survey released in June. Nearly 60% of small companies report that worker shortages are affecting their ability to operate at full capacity, according to a September survey of more than 725 small-business owners by Vistage Worldwide Inc., a business coaching and peer advisory firm.

Read more at the WSJ

Lumber Prices Fall Back to Around Their Pre-Covid Levels

Lumber futures ended Monday at $410.80 per thousand board feet, down about one-third from a year ago and more than 70% from their peak in March, when the Federal Reserve began raising interest rates to fight inflation.

Wood prices crashed in the early days of the 2020 lockdown, but they exploded that summer when stuck-at-home Americans remodeled en masse and suburban home sales surged. Two-by-four prices nearly tripled the pre-pandemic record in an early sign of the inflation and broken supply chains that would bedevil the economic reopening. But lumber has led the way down for commodities since the central bank took aim at rising consumer prices and the overheated housing market. For two years, climbing lumber costs lifted home prices. Now home builders say that cheaper wood is giving them wiggle room to offer buyer incentives and to trim prices without crimping their profit margins.

Read more at the WSJ

CBO Says Biden’s Student Loan Cancellation Plan Could Cost $400 billion

President Joe Biden’s student loan cancellation plan will cost an estimated $400 billion over 30 years, according to the Congressional Budget Office. Biden last month announced a plan to forgive $10,000 in federal student loans for borrowers who earn less than $125,000 a year, or have a household income of under $250,000 if filing jointly. Low-income Pell Grant borrowers are eligible for an additional $10,000 cut.

In addition to the costs to forgive that debt, the CBO estimated the cost of Biden’s pause on student loan payments from September through December 2022 will total $20 billion. The CBO is a nonpartisan agency that calculates the costs of federal revenue and spending plans for Congress.

Read more at CNBC

Ford Making Supply Chain Changes to Support EV Push

Ford is restructuring management and realigning its global supply chain to shore up the automaker's transition to electric vehicles, following an estimated $1 billion in unanticipated supplier costs in the third quarter. Chief Financial Officer John Lawler will lead the effort until the new role of chief supply chain officer is filled, with a focus on "reliable sourcing of components, internal development of key technologies and capabilities, and world-class cost and quality execution," the company said.

Earlier this year, Ford said its electric vehicle and internal-combustion engine units would be run as separate entities, in a move aimed at supercharging its EV business 

Read more at Reuters

Do Hydrogen Cars offer a Better Future than Electric?

Sales of battery electric cars (BEVS) are on the rise across Europe and according to the annual Global Electric Vehicle Outlook, more are sold each week now than in the whole of 2012. But despite the increasing popularity, shortages of key components for batteries, including lithium, nickel and cobalt, could threaten supply. So, is it time to focus on hydrogen-based energy?

In contrast to Europe where there are only a handful of hydrogen cars for sale and around 228 refueling stations, Asia is betting on hydrogen. The Japanese government plans to have 800,000 hydrogen vehicles on roads by 2030 while China has set an ambitious target of 1 million by 2035. These early movers are likely to bring down costs, increase volume and develop the supply chain.

Read More at EuroNews