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January 2022 Economic Update Executive Summary
RETAIL SALES ROSE 8.5% DURING THE HOLIDAY SHOPPING SEASON FROM NOV. 1 TO DEC. 24, powered by soaring e-commerce sales that jumped 11%. Real U.S. GDP growth strengthened in the 4th Qtr to about 6.5% (annualized), according to the Conference Board. Production at U.S. factories increased 0.7% in November to its highest level in nearly three years. Production at auto plants rose 2.2% but motor vehicle output remains 5.4% below its year-earlier level. Factory orders rose 1.6%, bolstered by businesses replenishing depleted inventories. Annual consumer price inflation rose to 6.8% in November, a 39-year high. The Federal Reserve said it will wind down its bond purchase program faster than initially planned and may raise interest rates three times in 2022. U.S. employers added 199,000 jobs in December, leaving the U.S. economy with about 6.4 million more jobs than at the end of 2020 - more than in any year on record. Consumer confidence improved further, suggesting the economy would continue to expand in 2022, as more consumers indicate plans to buy a house and big-ticket items such as motor vehicles and major household appliances.
CHINA’S ECONOMIC ACTIVITY CONTINUED TO DECELERATE amid a prolonged property slump and sluggish consumption recovery. Japan's factory output jumped 7.2% in November, as easing global supply chain bottlenecks helped output of cars and other motor vehicles surge 43.1% from the previous month, lifting prospects for a strong 4th Qtr economic rebound. The euro zone's economic recovery stuttered in December as a renewed wave of COVID-19 infections curtailed growth in the bloc's dominant service industry. Soaring energy prices drove up German import prices. A YOY jump of 24.7% was largely due to rising natural gas prices.
Steel Industry Updates
ULBRICH ACQUIRED THE PICO RIVERA, CA FACILITY FROM ATI SPECIALTY ROLLED PRODUCTS. ATI will continue supplying Ulbrich with the quality nickel, titanium and specialty alloy products their customers rely on. This acquisition provides a West Coast service center for Ulbrich customers, and the addition of the Pico Rivera product line will broaden the range of stainless steel and specialty metal strip products that Ulbrich offers. Stainless surcharges rose again in December, driven higher by ferrous scrap, nickel and other alloy increases. Silicon, usually a nominal factor in overall surcharges, is tight and prices spiked in recent months, adding 7¢/lb.
Metals & Commodities
LITHIUM PRICES ARE RISING AT THEIR FASTEST PACE IN YEARS, setting off a race to secure supplies and fueling worries about long-term shortages of a vital ingredient in the rechargeable batteries that power everything from electric vehicles to smartphones. Battery prices may even rise for the first time in 2022, as prices for raw materials soared in the second half of 2021. Iron ore prices have collapsed as China’s steel production has fallen sharply due to the government’s crackdown on emissions.
NEW CAR SALES IN THE U.S. ARE EXPECTED TO RISE THIS YEAR, driven by pent-up demand as automakers cut production last year due to supply chain issues and semiconductor shortages. Industry consultant Edmunds estimated that 15.2 million new cars will be sold in 2022, a 1.2% increase from its 2021 vehicle sales estimate. General Motors is no longer the No. 1 automaker in America after being on top for 90 years. Toyota weathered the chip shortage better than its rivals and outsold GM in America by 114,000 vehicles, with sales up by 10% vs. a 13% slide at GM. General Motors will invest $3 billion for two electric-vehicle projects in Michigan.
Energy Sector News
WIND'S SHARE OF U.S. ELECTRICITY GENERATION WAS EXPECTED TO INCREASE TO 10% IN 2021, after record installations in 2020. Total U.S. wind turbine capacity is now at 118 GW. A sharp rise in power prices caused Europe’s largest aluminum smelter, Aluminum Dunkerque, to shut down around 3.7% of its production in early December. Germany pulled the plug on three of its last six nuclear power stations as it moves towards completing its withdrawal from nuclear power by the end of 2022.
THE JAMES WEBB SPACE TELESCOPE LAUNCHED SUCCESSFULLY EARLY XMAS DAY, beginning a 29-day journey to its orbit one million miles from Earth. American Airlines will trim international flights this summer because of Boeing’s delays in delivering new 787 Dreamliners. The United Arab Emirates threatened to pull out of a $23 billion arms deal with the U.S. over issues with security requirements. It may be a negotiation ploy. The Parker Solar Probe, launched in 2018 by NASA, has touched the Sun.
PEOPLE WITH COVID VACCINATIONS HAVE BEEN LESS LIKELY TO DIE OF OTHER CAUSES. A recent report from the CDC has produced a novel and even mysterious reason to be glad for a COVID-19 vaccination. The CDC data show that people vaccinated with the Pfizer or Moderna COVID-19 shots are one-third as likely to die of other causes too. Software maker Oracle Corp is buying electronic medical records company Cerner Corp for $28.3 billion, in a bid to strengthen its presence in the healthcare sector.
Innovation/Emerging Tech to Watch in 2022
MOUNT PINATUBO'S ERUPTION IN 1991 COOLED THE EARTH BY AS MUCH AS 0.5°C FOR FOUR YEARS. Solar geoengineering, also known as solar radiation management, would do the same thing deliberately. Several startups are pursuing direct air capture (DAC) of carbon dioxide. Batteries can only power small aircraft for short flights, but electricity from hydrogen fuel cells might do the trick. Flying taxis or electric vertical take-off and landing (eVTOL) aircraft are getting attention.
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