NY Fed Global Supply Chain Pressure Index: May 2022 Update
The NY Fed’s Global Supply Chain Pressure Index (GSCPI), is designed to capture supply chain disruptions using a range of indicators. Yesterday they launched the GSCPI as a standalone product, with new readings to be published each month.
Between December 2021 and March 2022, the index registered an easing of global supply chain pressures, though they remained at very high levels historically. However, the April 2022 reading suggests a worsening of conditions as renewed strains emerge in global supply chains. The worsening of global supply chain pressures in April was predominantly driven by the Chinese “delivery times” component, the increase in airfreight costs from the United States to Asia, and the euro area “delivery times” component. These developments could be associated with the stringent COVID-19-related lockdown measures adopted in China, as well as the consequences of the Ukraine-Russia conflict for supply chains in Europe.
Invasion of Ukraine Headlines
- Ukraine and Russia: the Latest News – Reuters
- Finland, Sweden Apply for NATO Membership, Breaking Decades of Neutrality – WSJ
- Putin Says Russia Has ‘No Problems’ with Finland, Sweden in NATO – Politico
- Russia Says Nearly 700 More Mariupol Fighters Surrender – Reuters
- Russian Soldier Pleads Guilty at Ukraine war Crimes Trial – Politico
- How Ukraine is Winning the Drone-Jamming War – The Economist
- What Will it Take to Get Hungary to Ban Russian Oil? – Politico
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
US Housing Starts, Building Permits Stall as Mortgage Rates Bite
US new-home home construction slipped in April amid ongoing supply-side challenges and the steepest climb in mortgage rates in decades. Residential starts decreased 0.2% last month to a 1.72 million annualized rate after a downwardly revised 1.73 million pace in the prior month, according to government data released Wednesday. The median estimate in a Bloomberg survey of economists called for a 1.76 million pace.
Builders are contending with high material prices amid decades-high inflation, along with continued difficulty securing lots and labor. That, combined with concerns that the steep surge in borrowing costs will squeeze would-be buyers out of the market, pushed a measure of homebuilder sentiment this month to the lowest level since June 2020.
What Does a Strong Dollar Mean for the U.S. and World Economies?
The U.S. dollar is at its strongest relative to the euro and yen in 20 years. As is often the case with market forces, that is good news for some and bad news for others. The dollar is strong right now for a few reasons. After years of easy money, the Federal Reserve is raising interest rates. Higher interest rates mean higher returns for investors, and money goes where money grows. So that’s been bidding up the price of the dollar.
For the U.S., there is at least one clear benefit. “It actually helps us with the inflation problem because the stronger the dollar is, the lower import prices are,” said Vassili Serebriakov, an FX strategist at UBS. For the rest of the world, it’s a mixed bag. The U.S. is buying more of the world’s goods, which helps. On the other hand, the things the world buys are getting more expensive. Commodities like oil and nickel are all priced in dollars, so if a country needs to buy a bunch of oil or nickel, they will have to pay extra to convert their currency into dollars to buy it.
US COVID – How Big is the Latest U.S. Coronavirus Wave? No One Really Knows.
Americans are navigating murky waters in the latest wave of the pandemic, with highly transmissible subvariants of omicron spreading as governments drop measures to contain the virus and reveal less data about infections. With public health authorities shifting their focus to COVID-related hospitalizations, people are largely on their own to gauge risk amid what could be a stealth surge. Experts say Americans can assume infections in their communities are five to ten times higher than official counts.
Read more at the Washington Post -(Subscription
NYS Vaccine and COVID Update –
Vaccine Stats as of May 13:
One Vaccine Dose
- 90.3% of all New Yorkers – 16,593,794
- In the Hudson Valley 1,729,212
- 77.1% of all New Yorkers – 14,871,669
- In the Hudson Valley – 1,518,700
- All New Yorkers – 8,275,376
- In the Hudson Valley – 1,000,229
The Governor updated COVID data through May 13. There were 25 COVID related deaths for a total reported of 71,111
- Patients Currently in Hospital statewide: 2,340
- Patients Currently in ICU Statewide: 248
7 Day Average Positivity Rate – Cases per 100K population
- Statewide 7.09% – 49.26 positive cases per 100,00 population
- Mid-Hudson: 7.87% – 51.22 positive cases per 100,00 population
CEO Confidence in the Economy Falls
CEO confidence took a dive in the second quarter, according to a survey out this morning by The Conference Board in collaboration with The Business Council. The measure now stands at 42, down from 57 in the first quarter—the lowest reading since the first quarter of 2020. Inflation was the big driver of the drop. A majority of CEOs now see a scenario where inflation moderates, but only after interest rate hikes lead to a mild recession.
- 68% of CEOs surveyed by The Conference Board expect the Fed’s war on inflation will eventually trigger a recession.
- 80% of the CEOs reported some problems attracting qualified workers, down only slightly from 83% in the first quarter.
- 63% of the CEOs still expect to grow their workforce, down only slightly from 66% in the first quarter.
- 38% of CEOs expect to increase capital budgets in the year ahead, down from 48% in the first quarter.
Dow Slides More Than 1,100 Points in Worst Day Since 2020
The Dow Jones Industrial Average closed Wednesday down 1164.52 points, or 3.6%, to 31490.07, its lowest closing level since March 2021. The S&P 500 dropped 4%, or 165.17 points, to 3923.68, while the tech-focused Nasdaq Composite slid 4.7%, or 566.37 points, to 11418.15. The Dow and S&P recorded their worst percentage declines since June 11, 2020. The moves marked a U-turn from a day earlier, when technology shares led a rebound in markets.
Major retailers said their profits were hurt by rising costs, sluggish sales and supply-chain disruptions. Shares of Target sank 25%, or $53.67, to $161.61 after the company posted quarterly earnings that missed analysts’ expectations, its worst one-day performance since Black Monday in 1987. The results are prompting Wall Street to wrestle anew with the idea that the global economy could be headed for a recession. Though that debate is far from settled, it has rattled stocks and other risky assets throughout the year, with the latest data illustrating the degree to which inflation has hit U.S. consumers.
UK inflation hits 40-year high of 9.0%
Consumer price inflation hit 9% in April, the Office for National Statistics said on Wednesday, surpassing the peaks of the early 1990s recession that many Britons remember for sky-high interest rates and widespread mortgage defaults. Last month, the International Monetary Fund forecast Britain in 2023 faced slower economic growth and more persistent inflation than any other major economy.
Britain has the highest inflation of Europe’s big economies and almost certainly in the Group of Seven, with Canada and Japan yet to report April data. Neither are likely to match Britain’s price growth which also looks set to be longer-lasting. Soaring energy bills were the biggest inflation driver, reflecting April’s increase in regulated energy tariffs.
Japan’s Economy Shrank in First Quarter
Japan’s economy contracted in the first three months of this year, when restrictions related to a resurgence of Covid-19 infections held back consumer spending. The world’s third-largest economy after the U.S. and China contracted 0.2% in the three months to March from the previous quarter, government data showed Wednesday. The economy shrank 1% on an annualized basis, showing what would happen if the first quarter’s pace continued for a full year.
While economists expect a rebound in the current April-June quarter, the outlook for this year is cloudy because of factors including Russia’s invasion of Ukraine, the rise in energy prices and the weakness of the yen, which is near a 20-year low against the dollar.
Lowe’s First-Quarter Sales Drop
Lowe’s posted a drop in first-quarter sales, citing cooler weather that delayed some home projects, a day after rival Home Depot Inc. said sales rose in the same conditions. Lowe’s said comparable sales, which strips out effects of store openings and closings, fell 4% in the period. Revenue took a hit as 75% of its customers take on projects themselves rather than hire contractors, according to Chief Executive Marvin Ellison. Sales have improved in May as the weather warmed up, Mr. Ellison said in a statement.
The company backed its outlook for the year, even amid an increasingly uncertain macroeconomic backdrop. For the period ended April 29, Lowe’s reported a slight increase in profit to $2.33 billion. Per-share earnings rose to $3.51 from $3.21 a year ago partly due to a reduced share count. Lower operating expenses helped improve profit margin. Analysts surveyed by FactSet had been expecting earnings of $3.22 a share.
Target Says High Costs, Inventory Woes Hit Profits
Target on Wednesday reported quarterly earnings that fell far short of Wall Street’s expectations, as the retailer coped with pricey freight costs, higher markdowns and lower-than-expected sales of discretionary items from TVs to bicycles.
- Earnings per share: $2.19 adjusted vs. $3.07 expected
- Revenue: $25.17 billion vs. $24.49 billion expected
The base effect hurt the national retailer as a year ago, shoppers had extra dollars in their pockets from stimulus checks and reflected a sense of optimism with their purchases as they got their first Covid-19 vaccines.
U.S. to Allow 35,000 More Guest Workers as Summer Nears
The United States will grant employers as many as 35,000 further H-2B visas for seasonal guest workers starting jobs between April 1 and Sept. 30, according to a government statement posted online on Wednesday.
The expansion of the H-2B visas, used to employ landscapers, housekeepers, hotel employees and construction and carnival workers, among others, forthe busy summer vacation season comes amid record job growth and a U.S. labor crunch despite worries over some economic headwinds. Officials in January had granted an additional 20,000 visas – also for H-2B workers who tend to be temporary and in non-agricultural jobs – amid reduced labor force participation.
‘Apocalyptic’ Food Prices Will be Disastrous for World’s Poor, Says BOE Governor
Defending Threadneedle Street before an announcement on Wednesday of the sharpest annual increase in four decades, Andrew Bailey told MPs that while he was unhappy about the level of price rises, 80% of the inflation target overshoot was caused by factors outside the Bank’s control.
Bailey said the Bank could not have been expected to predict a war in Ukraine, which he warned would have consequences for the UK and the developing world. Countries such as Egypt and Tunisia rely heavily on exports of Ukraine’s wheat and cooking oil, and the governor said his concerns about food supplies had been heightened after speaking to Kyiv’s finance minister at last month’s IMF meeting in Washington.
Executive Pay Hit a Record High for the Sixth Year in a Row
Executive pay at the largest companies in the U.S. hit a sixth straight annual record in 2021, as the median pay packet for leaders at S&P 500 companies rose roughly 12% to $14.7 million. Roughly two-thirds of CEO compensation comes in the form of stock or stock-option awards, the Journal says, with the top 25 highest-paid CEOs claiming 78% of total compensation in equity.
In 2021, the highest-paid CEO was Peter Kern, who took over as chief executive of online travel company Expedia Group in April 2020. Kern was awarded $296 million in compensation last year, almost entirely in stock options, which won’t begin vesting until 2024. The rest of the top five earning spots were rounded out by technology, entertainment, and banking executives.
New York Appeals Court Dismisses AG James’ Suit Against Amazon
An appeals court in New York dismissed New York Attorney General Letitia James’ lawsuit against Amazon over its coronavirus safety protocols and a former employee who led the successful union organizing effort on Staten Island.
The appellate court said in its ruling Tuesday that federal labor law preempted state labor law, and the National Labor Relations Board “should serve as the forum” for disputes arising from conduct that’s protected or prohibited by federal labor law, not the states. It also said the lawsuit’s efforts to require the retailer to comply with New York’s COVID-19 workplace guidelines was dismissed as moot because the restriction in place at the time have since been lifted.
School Districts Are Struggling to Spend Emergency Covid-19 Funds
Districts have yet to spend 93% of $122 billion sunk into the K-12 education system last year as part of the $1.9 trillion American Rescue Plan, according to data compiled by the U.S. Department of Education. The money is meant to address learning loss, mental-health problems and other issues in schools caused by the pandemic. Districts are spending the money on teachers, counselors, technology, after-school programs and upgrades to school facilities.
If local districts don’t spend or direct the funds by September 2024, the money will disappear from their budgets. Some school officials and observers are concerned by the coming deadline and the large portion of the funds that remain unspent. The short-term nature of the money has made it harder to use, school officials said, because any new staff may have to be laid off when the money expires. Workforce shortages and supply-chain issues have also posed challenges, officials said.
Read more at the WSJ