Member Briefing December 14, 2022
CPI = 7.1, U.S. Inflation Eased in November
The Labor Department on Tuesday said that its consumer-price index climbed 7.1% in November from a year ago, down sharply from 7.7% in October—building on a trend of moderating price increases since June’s 9.1% peak. Core CPI, which excludes volatile energy and food prices, rose 6% in November from a year ago, easing from a 6.3% gain in October. September’s 6.6% increase was the biggest jump since August 1982.
Prices softened significantly on a month-to-month basis. The CPI increased 0.1% in November from the prior month, compared with 0.4% in October. Core CPI rose 0.2% in November, down from 0.3% in October and 0.6% in August and September. The CPI measures what consumers pay for goods and services. See inflation numbers in key categories below.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Russia Rejects Zelenskiy Call for Troop Pullout, Saying Ukraine Must Accept 'Realities' - Reuters
- Russian Laureate Told to Turn Down Nobel Peace Prize - BBC
- EU Strikes Deal With Hungary, Reducing Funding Freeze to Get Ukraine Aid Approved - Politico
- Belarus to Allow Ukraine Grain Transit With No Preconditions, U.N. Says - Reuters
- To End the War in Ukraine, Follow Estonia, Not France - WSJ
- Russia Could Run Out Of Reliable Rockets, Artillery Shells Early Next Year, Pentagon Says – Defense One
- Kremlin Labels Christmas Withdrawal From Ukraine ‘Out of the Question’ – The Hill
- Deal on EU gas price cap on knife edge as ministers meet in Brussels - Politico
- ‘The Merchant of Death Is Back in Action’ - Politico
- Explosions at Russian Air Bases May Change Several Nations’ Calculations – Defense One
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Consumers see inflation easing considerably in the next year, New York Fed survey shows
Consumers grew more optimistic about inflation in November amid expectations that both food and energy price increases would be less severe in the coming year, according to a New York Federal Reserve survey released Monday. The central bank’s Survey of Consumer Expectations indicated that respondents see one-year inflation running at a 5.2% pace, down 0.7 percentage point from the October reading.
In addition to the brightened short-term outlook, the inflation-rate projection for three years from now edged lower to 3%, down 0.1 percentage point from the previous month. A relatively new data series reflecting the five-year outlook declined by the same level, to 2.3%. The survey also indicated that wages are expected to grow 2.8% for the 12-month period, a 0.2 percentage point monthly decline and tied for the lowest level also going back to August 2021.
Smaller 50-Basis Point Rate Increase Expected at FOMC Meeting, Eyes on Updated Forecasts
The Federal Open Market Committee is widely expected to raise rates by 50 basis points and bring its benchmark target rate to a range of 4.25% to 4.5%, the highest since 2007. Fresh quarterly economic projections released after the meeting will also shed light on how much further policymakers expect rates to go. Economists surveyed by Bloomberg see that median estimate peaking at 4.9% after Powell said they will need to lift rates higher than previously anticipated. That implies the FOMC stepping down to 25 basis-point moves in February and March and then putting policy on pause.
Consumer-price data released Tuesday suggest the worst of US inflation may have passed, making it easier for officials to downshift to a smaller rate increase this week. But Powell could use his press conference to remind the public that officials are not going to let up until inflation is clearly on a path back down to 2%. The decision, as well as the forecasts, will be announced at 2 p.m. in Washington.
U.S. COVID – ‘Tripledemic’ of COVID-19, Flu and RSV Prompts Return of Some Mask Recommendations
Several health officials are recommending people dust off their masks as respiratory viruses are pushing many hospitals to their limit, but a lot of Americans seem unwilling to do so. The New York City Department of Health and Mental Hygiene on Friday issued a health advisory recommending everyone regardless of vaccination status wear a mask in indoor public settings and crowded outdoor spaces.
The move comes as COVID-19, flu and respiratory syncytial virus, or RSV, is sickening millions of Americans and putting increased pressure on health care systems. Some are referring to the circulation of the three viruses as a “tripledemic.” “Flu’s here, it started early, and with COVID and RSV also circulating, it’s a perfect storm for a terrible holiday season,” Sandra Fryhofer of the American Medical Association said on a call with reporters last week.
China’s Rapid Covid Reversal Sparks Whiplash as Cases Surge
Beijing's COVID-19 gloom deepened on Sunday with many shops and other businesses closed, and an expert warned of many thousands of new coronavirus cases as anger over China's previous COVID policies gave way to worry about coping with infection. China dropped most of its strict COVID curbs on Wednesday after unprecedented protests against them last month, but cities that were already battling with their most severe outbreaks, like Beijing, saw a sharp decrease in economic activity after rules such as regular testing were scrapped.
Anecdotal evidence suggests that many businesses have been forced to close as infected workers quarantine at home while many other people are deciding not to go out because of the higher risk of infection.
A Closer Look at the CPI Numbers
Consumer prices rose less than expected in November, the second-straight month inflation pressures moderated more than anticipated by economists. The Headline numbers are above, but here are some of the numbers by category
- The energy index declined 1.6% for the month after a 1.8% rise in October. The downshift was driven in part by a 2% slide in the gasoline category of the measure after gas prices rose 4% in October.
- The shelter category of CPI — which accounts for 30% of overall CPI and 40% of the core reading — was the dominant contributor to the monthly all-items increase. The cost of shelter rose 7.1% over the last year, comprising nearly half of the total increase in core CPI.
- Food prices climbed 0.5% after rising 0.6% in October. The cost of food consumed at home increased 0.5%, driven by rises in prices of fruits and vegetables, cereals and nonalcoholic beverages. But meat, fish and eggs cost less last month.
- Used cars and trucks dropped 2.9% and were down for a fifth straight month.
- Prices for new motor vehicles and household furnishings were unchanged.
- Healthcare costs decreased 0.5%.
- Prices for airline tickets fell 3.0%.
Survey: CEOs Looking Forward to an Economic Recovery by the End of 2023
After two months of decreasing optimism, CEOs are once again looking to a brighter future by the end of 2023 and reflect that in their outlook for Chief Executive’s latest CEO Confidence Index. The leading indicator now stands at 5.9 on our 10-point scale, up almost 4 percent from the November reading. The Index, which measures CEOs’ assessment of U.S. business conditions for the 12 months to come, hit a decade low in July on fears of recession and concerns of inflation, including the current administration’s ability to contain it, and has struggled to regain ground since.
CEO confidence in current business conditions also ticked up 2.3 percent in December, up to 6.13, after a 4 percent drop in November. Many of the 199 CEOs polled December 6 to 8 credit their gain in confidence to continued improvement in equity markets, forecasts of reduced interest rates, hopes for falling inflation and a quieter political environment with a balance of party power.
House Races to Pass Short-Term Funding Bill to Delay Shutdown Deadline
The House is racing to pass a one-week government funding bill to buy time for negotiations into a broader budget package as a shutdown deadline looms on Friday. House negotiators on Tuesday afternoon released text of the continuing resolution (CR), which will allow the government to remain funded through Dec. 23.
“Both sides have priorities,” Rep. Rosa DeLauro (D-Conn.), head of the House Appropriations Committee said. “This is legislation … that cannot get passed without bicameral, bipartisan support in order for the president to sign it.” The legislation is expected to pass quickly in the Democratic-led House, and Senate leaders are hopeful for the same outcome in the upper chamber. The bill will need at least 60 votes in the evenly split Senate to secure passage.
DiNapoli: Nearly 14% of New Yorkers Live in Poverty
Almost 2.7 million New Yorkers, or 13.9% of the state’s population, lived in poverty in 2021, compared to 12.8% of all Americans, according to the first in a series of reports released today by State Comptroller Thomas P. DiNapoli examining “New Yorkers in Need.” While poverty rates in the state declined prior to the pandemic, they were higher in 2021 than in 2019. New York ranked 13th among all states and had a higher rate of people in poverty than neighboring states and most large states.
The Official Poverty Measure (OPM) is determined by the U.S. Census Bureau based on survey data of income and family size and composition, compared to thresholds that reflect the dollar amount required to meet the needs for different sized families. Income is defined before taxes, not including non-cash benefits such as Medicaid or food stamps. In 2021, the threshold, updated for inflation, was $13,788 for one person and $27,740 for a household of four.
Read more at the Comptroller’s Website
Empire Center EV Report: Zero Emission Vehicle Mandate Will Hurt Upstate
New York has adopted a statutory goal that 100 percent of new passenger car and truck sales be zero-emissions vehicles (ZEVs) by 2035. Ultimately, the only way to accomplish this goal will be to prohibit sales of new internal combustion engine (ICE) vehicles, whether gasoline, diesel, or even plug-in electric hybrid. The ZEV mandate will harm moderate- to low-income auto owners by driving price increases in the used ICE market, and will hit most heavily in upstate New York, where lower percentages of people own electric vehicles. In addition, an increase in out-of-state new vehicle purchases and a “gray market” in the importation of lightly used vehicles are likely to undermine the state’s ZEV sales goals.
Critically, the mandate is not necessary in the long run. New York’s light-vehicle transportation sector has a minuscule effect on global climate. Also, consumers are increasingly choosing electric vehicles without government mandates, and under reasonable assumptions will – just through market choices – achieve the state’s 2050 Climate Leadership and Community Protection Act goals for greenhouse gas emissions reductions, at least for the light-duty vehicle transportations sector’ share, by 2051.
US Announces Breakthrough on Fusion Energy
Scientists at a federal facility have created more energy from nuclear fusion reactions than they used to start the process, Energy Secretary Jennifer Granholm confirmed on Tuesday. “This is one of the most impressive scientific feats of the 21st century,” Granholm said at a press conference, adding that researchers have been working on the effort for 60 years. “Today’s announcement by Lawrence Livermore National Lab is incredibly exciting,” Rep. Frank Lucas (Okla.), the top Republican on the House Science, Space and Technology Committee, said in a statement.
Nuclear fusion refers to fusing atoms together to produce energy. The type of nuclear energy that is commonly used today does the opposite, deriving energy from splitting atoms apart. For decades, scientists have sought to advance nuclear fusion as a clean energy source that doesn’t produce the radioactive waste that occurs when atoms are split apart. YThe experiment consisted of using laser technology to fuse atoms together to create energy. It used 2.05 megajoules of energy input and had an output of 3.15 megajoules.
Europe Strikes Deal to Tax Imports Based on Greenhouse-Gas Emissions
The European Union reached an agreement to impose a tax on imports based on the greenhouse gases emitted to make them, inserting climate-change regulation for the first time into the rules of global trade. The EU is expected to adopt it in the coming weeks as part of a sweeping package of legislation that would step up the bloc’s efforts to limit global warming.
The plan, known as the carbon border adjustment mechanism, would be the world’s first tax on the carbon content of imported goods. It has rattled supply chains around the globe and angered the EU’s trading partners, particularly in the developing world where manufacturers tend to emit relatively large amounts of carbon dioxide. It has also unsettled manufacturers in the U.S. who are concerned the measure would create a new web of red tape to export to Europe. Europe’s border tax has also spurred officials in other countries to consider a similar approach. The U.K. is discussing it, as is Canada. Democrats in Congress have introduced legislation to impose a carbon tax at U.S. borders.
Machine Tool Orders Dropping as 2022 Ends
U.S. machining operations ordered $457.7 million worth of new machine tools during October, a drop of -11.6% from September and -19.7% lower than the October 2021 result, according to the latest U.S. Manufacturing Technology Orders Report published by AMT – the Association For Manufacturing Technology. Through ten months of ordering activity, January through October, U.S. machine tool orders totaled $4.67 billion, on par (+0.1%) with the comparable 2021 total.
AMT noted that all of the industrial sectors that contribute to the demand that drives new orders have resumed independent trends, in contrast with the past two years when all segments were either reducing orders (2020) or increasing orders (2021) at the same time. “For example, job shops are placing fewer orders for machinery as they return to their core customers such as aerospace and automotive,” the group stated.
Stellantis Idling Jeep Assembly Plant
Automaker Stellantis will idle its Belvidere, Ill., assembly plant indefinitely by February 28, 2023, citing higher operating costs and disruptions due to supply-chain complications, though United Auto Workers union representatives claimed the Chrysler parent company plans to close the operation. The Belvidere plant, in north central Illinois, assembles the Jeep Cherokee crossover SUV. It has 1,350 workers currently, though it employed more than 5,000 as recently as 2019. In a statement, Stellantis said it is looking for opportunities to repurpose Belvidere plant but offered no details of that effort.
Stellantis said the transition to electric-vehicle production, and the costs related to that shift, are the specific cause for the idling. Last year the automaker pledged to invest $35 billion worldwide for electric vehicle and software development through 2025.
Colder Weather Ahead for December, Rest of Winter Milder: NOAA
The latest 8-14 day outlook from NOAA shows the arrival of below normal temperatures for late December. However, the uptick in heating demand could be a short-lived. NOAA forecasts for December 2022 through February 2023 suggest a 50% to 80% likelihood of higher-than-average temperatures in Texas, and the Eastern Seaboard.
Even though natural gas production growth will likely outpace domestic natural gas demand growth in winter 2022-2023, forecasts anticipate that continued growth in net exports, including LNG exports, will place additional pressure on natural gas prices this winter. Henry Hub natural gas futures contracts are averaging $6.82/mmbtu for winter 2022-2023, up 30% from last winter’s settled price.
Leased “Surge Bots” Robots Help at Holidays
Leased robots, which have grown in popularity across the industry in recent years, can be added to existing fleets of warehouse, distribution and fulfillment center robots at any time to support an anticipated jump in demand, robot vendors say. The robots are increasingly being used for picking up and sorting packages, receiving and unloading them, moving heavy payloads and replenishing stock shelves, among other automated tasks, they say.
Sally Miller, chief information officer of DHL’s North American supply-chain business, a unit of Deutsche Post AG , said she is planning to deploy “a good number” of temporary robots at several of the company’s retail-focused sites. The Locus Robotics robots—which the manufacturer calls “surge bots”—will be used for picking up orders and fulfillment, Ms. Miller said. All told, DHL expects to have some 2,000 robots working in its facilities by the end of the year, she said.