Ulbrich Economic Update - Number 25 (June 2022)

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June 2022 Economic Update Executive Summary

US financial market economy

The Americas

U.S. FACTORY ACTIVITY REBOUNDED IN MAY, as reported by ISM. All of the six biggest manufacturing industries, including machinery and transportation equipment, reported moderate-to-strong growth. Nonfarm employment increased by 390,000 jobs in May, and the unemployment rate remained unchanged at 3.6%. Factory orders rose 0.3% in April. Durable goods orders were up 0.4%, supported by a 0.6% rebound in orders for transportation equipment. Motor vehicle orders slipped 0.2%, but orders for civilian aircraft rose 4.3%. The trade deficit dropped 19.1% in April to $87.1bn, the largest decline in 10 years. Exports of goods and services increased 3.5% to an all-time high of $252.6 billion. Producer prices jumped 11% in April YOY, as energy costs surged 40%. The 11% surge is staggeringly high but the pullback from the record high of 11.5% in March is considered encouraging. Consumer prices eased slightly to an 8.3% annual rate, the first drop in eight months as energy prices moderated. On a monthly basis, the CPI rose 0.3%. Retail sales rose 0.9%, led by receipts at auto dealerships, which rebounded 2.2% after falling 1.6% in March. Consumer confidence eased slightly in May as concerns about high inflation persisted and perceptions of the labor market softened. Existing home sales fell 2.4% and new home sales dived 16.6%. U.S. freight volumes, a barometer for the economy, fell 2.6% in April from March and 0.5% from a year-ago.


CHINA’S ECONOMY IS PAYING THE PRICE FOR THE NATION’S COVID ZERO POLICY, with industrial output and consumer spending sliding to the worst levels since the pandemic began and analysts warning of no quick recovery. Russia’s economy lurched into contraction In April with GDP down 3%, as sanctions began to bite. Consumer inflation rose to 17.83% on an annual basis. Global defense spending reached $2.113 trillion in 2021, a 0.7% increase from 2020 and a 12% hike since 2012. The U.S. held the lead as the biggest defense spender in 2021 with $801bn, constituting 38% of the world’s military spending for that year.

EV for assembly

Automotive Trends

HYUNDAI WILL BUILD A NEW ELECTRIC VEHICLE ASSEMBLY PLANT IN GEORGIA, creating 8,000 new jobs. The plant is part of the $7.4bn the automaker pledged to invest in the U.S. Renault is selling its stake in Avtovaz, the manufacturer of Russia’s Lada cars, for a symbolic two roubles. The exit involves a €2.2bn write-down. China’s car sales fell the most in two years in April, down 36% from a year earlier. Not a single car was sold in Shanghai due to lockdowns. Novelis will build a low-carbon, highly automated greenfield aluminum recycling operation and rolling mill in Alabama. It will have the capacity for 600k tonnes of flat-roll sheet targeted at the automotive and cansheet markets. It will be the first fully-integrated aluminum mill constructed in the U.S. in 40 years.

Offshore Wind Turbines

Energy Sector News

CALIFORNIA HAS AN AMBITIOUS PLAN TO BECOME A POWERHOUSE FOR OFFSHORE WIND. A draft report released in May by the California Energy Commission lays out a comprehensive roadmap for offshore wind turbines, recommending that 3 gigawatts of capacity be added to the Golden State’s coastline by 2030. Mitsubishi Heavy Industries, Japan’s largest reactor maker, said the Ukraine war has created the “best opportunity” for Japan’s nuclear industry to stage a comeback since Fukushima. Siemens Energy announced its long-expected €4bn offer to buy the remaining 33% of Siemens Gamesa, the largest offshore wind turbine maker.

Medical Insights

DEXCOM RELEASED THE G7 CONTINUOUS GLUCOSE MONITOR IN THE U.K LAST QUARTER and will expand the launch across Europe throughout 2022. The company said the G7 will have a “meaningful” release in the U.S. this year. Pfizer’s $11.6bn deal for migraine specialist Biohaven Pharmaceutical has kindled expectations of more buyouts of small, struggling biotechs.

Boeing Starliner Docker
Image Source: NASA

Aerospace Developments

BOEING'S STARLINER SUCCESSFULLY DOCKED WITH THE INTERNATIONAL SPACE STATION, completing an important step for a crucial test flight that would determine whether it's ready for crewed missions. Jet engine maker CFM International is facing industrial delays of 6 to 8 weeks in the wake of supply-chain problems and French labor unrest. Co-owned by GE and France's Safran, CFM is the largest jet engine maker by units sold and powers 3 of 4 recently developed narrowbody jets. Airbus is amassing €10bn as protection against future crises, to prepare for investment in new-generation aircraft or to consider acquisitions.

Steel Industry Updates

THE STAINLESS MARKET IS STEADY WITH SOME REPORTS THAT AVAILABILITY MAY BE LOOSENING as mills reduce backlogs and import volumes increase. Prices of nickel and other inputs have subsided, which will result in lower surcharges in June. U.S. service center inventories at the end of April totaled 519k tons, up 53% from a year ago. Acerinox achieved record 1st Qtr results due to strong stainless steel demand and cost-control measures in place. The order backlog allows continued optimism for the 2nd Qtr.

Uranium and oil on a scale

Metals & Commodities

THE DAILY SPOT PRICE OF URANIUM (U3O8) HAS INCREASED 47% TO JUST OVER $63.50/LB since Russia invaded Ukraine. Concern about future disruption and a desire by buyers to lock in supply is driving the increase. Oil prices rose higher than $120 a barrel at the end of May as concerns over supplies from Russia propelled crude to its highest level in two months.

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