Ulbrich Economic Update - Number 30 (November 2022)

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November 2022 Economic Update Executive Summary

Financial growth of US economy

The Americas

THE U.S. ECONOMY GREW AT A 2.6% ANNUAL RATE IN THE 3RD QTR despite a slowdown in consumer spending amid high inflation and rising interest rates. Other October data showed: Manufacturing activity fell, but the forward-looking ISM new orders sub-index rose, indicating resiliency among U.S. consumers. Employers added 261,000 jobs, reflecting continued resilience in the labor market. The jobless rate rose to 3.7%. Consumer sentiment ebbed amid rising concerns about inflation and a possible 2023 recession.

September data showed: Durable goods orders gained 0.4%, lifted by a 2.1% jump in orders for transportation equipment. Factory orders rose 0.3%, driven by a 21.9% rebound in civilian aircraft orders. Motor vehicle orders dipped 0.1%. Orders for machinery and primary metal products slipped. The trade deficit widened sharply in September, as a strong dollar and softening global demand weighed on exports. Import prices dropped for a third-straight month, falling 1.2%. U.S. suppliers raised prices, increasing the PPI by 0.4%. The consumer price index rose 8.2% in the year through September. Used car prices fell 1.1%, while new car prices and car parts increased sharply. Retail sales were flat as households cut back on purchases of motor vehicles and other big-ticket items.


FACTORY ACTIVITY AROUND THE WORLD IS SLOWING, signaling a lagging economy that is curtailed by inflation and rising interest rates. Manufacturing powerhouses in Asia, such as Taiwan and South Korea, saw some of the biggest declines. Composite PMI for the eurozone in October declined, the fourth-consecutive month to indicate contraction. Manufacturing suffered the largest drop in activity, particularly in energy-intensive sectors such as chemicals and plastics. A mild start to the winter heating season and high natural gas storage levels boosted hopes that Europe can get through the winter without rationing.

Melting iron ore steel production

Metals & Commodities

IRON ORE PRICES FELL FURTHER after Chinese President Xi offered no prospect of changes to policies that have ravaged China’s steel demand over the past year. Prices for lithium hydroxide, which is used in batteries with high nickel content, are up nearly 150% this year. Metal traders are pushing the London Metal Exchange to stop accepting Russian metal, fearing its warehouses will become a stockpile for unwanted material that distorts global prices for commodities such as aluminum, nickel and copper.

Steel Industry Updates

STAINLESS STEEL RAW MATERIAL SURCHARGES STOPPED FALLING IN OCTOBER, ending four months of declines. Steady demand maintained firm base prices. September service center stainless shipments of 134,700 tons were down 10% from a year ago. U.S. Steel reported 3rd Qtr net earnings of $490mn, down from $2bn it netted a year ago. The Electric Arc Furnace unit, which includes the Big River Steel mill, produced about 28% less product. Total USS steel product shipments fell 425,000 tons from a year ago.

Electric automotive design concept

Automotive Trends

GENERAL MOTORS’ 3RD QTR NET INCOME WAS $3.3BN VS. $2.4BN A YEAR EARLIER. GM said 90% of its operating profit came from North America, mostly from trucks and SUVs. Toyota is considering a reboot of its electric-car strategy to better compete in a booming market it has been slow to enter. The world's top automakers are planning to spend nearly $1.2 trillion through 2030 to develop and produce millions of EVs, along with the batteries and raw materials to support that production.

Medical Insights

DEXCOM AND ABBOTT HAVE ‘MASSIVE OPPORTUNITY’ WITH A NEW CGM COVERAGE PROPOSAL issued by the Centers for Medicare/Medicaid Services (CMS). The proposal reads very favorably for the leading CGM manufacturers that are targeting the massive, highly under-penetrated Type 2 market opportunity. Johnson & Johnson struck a deal to buy heart pump maker Abiomed Inc for $16.6bn in cash, as it looks to boost growth in its medical devices unit. Abiomed’s Impella heart pumps are the smallest in the world.

Lockheed Martin F-35

Aerospace Developments

LOCKHEED MARTIN REPORTED BETTER-THAN-EXPECTED QUARTERLY REVENUE, helped by higher sales in its Aeronautics unit, as demand for arms increased after Russia's invasion of Ukraine. Sales at Aeronautics, which makes the F-35, rose 7.6% from a year ago to $7.1bn. American Airlines posted 3rd Qtr earnings of $483mn vs. $169mn a year ago. Revenue surged 50% to $13.46bn. Aerospace executives said the shortage of parts from chips to windshields that has held back plane production will run into at least 2023. Manufacturers are ordering material as far as 2 years in advance, a break with just-in-time models used previously.

Fusion Reactor

Energy Sector News

WESTINGHOUSE ELECTRIC IS BEING BOUGHT BY A PRIVATE EQUITY-BACKED CONSORTIUM. Westinghouse technology is in nearly half the world's existing nuclear reactors. It may benefit from a push to replace suppliers to the 30+ Western reactors that operate on Russian technology. Natural-gas prices have fallen more than 40% since hitting highs in late August, reducing the risk of budget-busting heating bills this winter for millions of Americans and potentially easing a major cost pressure for manufacturers. France is falling behind in its plans to return the country’s fleet of nuclear reactors to full power this winter after a rash of outages.

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