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October 2022 Economic Update Executive Summary
THE FEDERAL RESERVE RAISED ITS TARGET INTEREST RATE BY 0.75% IN SEPTEMBER and signaled more large increases to come. Other September data showed: Manufacturing activity grew at its slowest pace in nearly 2-1/2 years as new orders contracted amid aggressive interest rate increases from the Federal Reserve. Employers added 263,000 jobs as a tight labor market gradually loosens. The jobless rate fell to 3.5%.Consumer sentiment ticked up to a five-month high, but consumers show signs of uncertainty over the trajectory of the economy.
Durable goods orders fell for the second-straight month in August. Other August data showed: New orders for U.S.-manufactured goods were unchanged amid a drop in demand for transportation equipment, but solid gains elsewhere pointed to underlying strength in manufacturing. The trade deficit narrowed to $67.4bn, the lowest level since May 2021. Import prices declined 1%, pulled down by falling costs for petroleum products and a strong dollar, which over time could help to lower inflation. Producer prices dipped 0.1% after slipping 0.4% in July. The consumer price index gained 0.1% as a 10.6% decline in gasoline prices was offset by increases in rents, food and healthcare. Retail sales rose 0.3%, outpacing inflation and reversing July’s 0.4% decline.
FACTORY PRODUCTION IN EUROPE IS FALTERING as the economic war between Russia and the West chips away at the Continent’s economic foundations. The eurozone’s annual rate of inflation hit 10% in September as concern about making it through the winter without power cuts keeps energy prices elevated. The European Central Bank raised interest rates 0.75%, matching the bank’s largest-ever increase, with a “substantial slowdown” expected in the eurozone economy ahead of a winter energy crisis. Ocean carriers are canceling dozens of sailings on the world’s busiest routes during what is normally their peak season, as inflation weighs on global trade and consumer spending. Trans-Pacific shipping rates have plummeted roughly 75% from year-ago levels.
Steel Industry Updates
STAINLESS PRICES HAVE DROPPED FOR FOUR-STRAIGHT MONTHS due to declining surcharges. Base prices are stable and may increase in January of 2023. August service center stainless steel inventories were up 58% from a year ago. Service center stainless shipments YTD through August were down 1.1% vs. 2021. Nucor Corp. will invest $425mn and add 50 jobs at its Berkeley County, SC, sheet and beam mill. Nucor’s latest expansion will add a galvanizing line to expand the manufacturing of corrosion-resistant products.
Metals & Commodities
URANIUM PRICES SURGED TO THEIR HIGHEST LEVEL SINCE RUSSIA’S INVASION OF UKRAINE. The material known as “yellowcake” has jumped 7% since mid-August to breach $50/lb. Global demand for nickel, according to Brazilian miner Vale, will increase to 6.2mn tonnes/year by 2030, up 1.9mn tonnes from 4.3mn tpy in 2022 (+44%). Aluminum prices fell to their lowest level since March 2021 after another substantial U.S. interest rate hike that will likely suppress economic growth.
AUTOMAKERS ARE BEING ASKED TO SHOULDER MORE OF THE BURDEN SUPPLIERS HAVE FACED due to spiking energy, labor and raw material costs. Suppliers contacted by Reuters said they have raised prices on parts in the range of 7% to 20%. U.S. new vehicle sales in September were expected to reach 958,948 units, a 5.4% increase from a year ago. Sales for the 3rd Qtr are projected to reach 2.9mn units, a 4.2% decrease from 2021. Global sales of electric vehicles are forecast to hit $384bn in 2022.
Energy Sector News
CHINA OWNS THE VAST MAJORITY OF THE WORLD’S SOLAR PANEL SUPPLY CHAIN, controlling at least 75% of every single key stage of solar photovoltaic panel manufacturing and processing. A new federal-state initiative will help secure funding for an East Coast offshore wind supply chain and support a fleet of specialized vessels. U.S. utility customers, faced with some of their largest bills in years, are set to pay even more this winter as natural-gas prices have more than doubled this year.
MEDTECH COMPANIES ARE INCREASINGLY POSITIVE ABOUT MACRO TRENDS amid the easing of supply and inflation in some areas and improvement of staffing shortages. After hearing from 20 medical device companies in August and September, RBC Capital Markets analysts reported picking up on a positive shift in tone in the industry. Sony has entered the nascent over-the-counter hearing aid market, forming a partnership with WS Audiology to jointly develop and supply products for sale in the U.S.
NASA’S DART SPACECRAFT SMASHED INTO AN ASTEROID in an effort to deflect the distant space rock, the dramatic climax of a mission to test whether the technique could one day be used to protect Earth. Pratt & Whitney’s large commercial jet engine deliveries may slip into the 1st Qtr as it struggles with parts and labor shortages. Nearly three-fourths of aerospace equipment makers cited castings as the largest source of shortages. Raytheon was awarded a $985mn contract to develop prototypes for the hypersonic attack cruise missile. Hypersonic weapons travel in the upper atmosphere at speeds more than five times the speed of sound.
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