Ulbrich Economic Update - Number 35 (April 2023)

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April 2023 Economic Update Executive Summary

Silicon Valley Bank and Signature Bank Closed with Federal Reserve System (The FED) logo

The Americas

THE FEDERAL RESERVE RAISED INTEREST RATES BY A QUARTER POINT IN MARCH but indicated it was on the verge of pausing further increases amid recent turmoil in financial markets spurred by the collapse of two U.S. banks. Other March data showed: U.S. employers added 236,000 jobs, pushing the unemployment rate down back to 3.5%. U.S. manufacturing slumped to the lowest level in nearly three years as new orders plunged, and activity could decline further amid tightening credit conditions. Consumer confidence improved somewhat, but remains below the average level seen in 2022.

February data showed: Industrial production held steady as manufacturing and utility gains offset a drop in mining output. Durable goods orders fell 1% after plunging 5% in January. Excluding transportation equipment, durable goods orders were unchanged. Factory orders fell for a second straight month amid ebbing demand for civilian aircraft. The leading economic indicators fell 0.3%, the eleventh consecutive monthly decline. The consumer price index posted the smallest annual increase since September 2021 at 6%, marking the eighth consecutive month of cooling price pressures. Producer prices fell 0.1% but on a YOY basis, prices rose 4.6%, slowing from January’s 5.7% gain. Retail sales fell 0.4% after a surge in January, suggesting consumer spending is challenged by high inflation. The trade deficit widened 2.7% to $70bn.

European Flags


EUROZONE BUSINESS ACTIVITY EXPANDED FASTER THAN EXPECTED IN MARCH, driven by growth in the services sector and indicating a rebound from last year’s energy crisis remains on track. The flash S&P Composite PMI pointed to an easing of supply constraints, lower input price pressure and faster jobs growth. OPEC+ announced a surprise oil production cut of more than 1mn barrels a day, abandoning previous assurances that it would hold supply steady and posing a new risk for the global economy.

Steel Industry Updates

CLEVELAND-CLIFFS AND U.S. STEEL ARE RAMPING UP PRODUCTION OF ELECTRICAL STEEL to capture a fast-growing market for a material critical to powering electric vehicles that is already in short supply. Demand for the highest-quality electrical steel is projected to far exceed supply by 2027 unless more production capacity is added. North American Stainless (NAS) announced a $244mn expansion at its Ghent, Kentucky, facility. The expansion will boost NAS’ total capacity by 200,000 tons annually—a 20% growth.

Auto loan problem

Automotive Trends

THE UAW ELECTED REFORM CANDIDATE SHAWN FAIN AS ITS NEXT LEADER, marking an upheaval in the union’s top ranks and creating a wild card for automakers ahead of contract talks in Detroit. Ford Motor Co. is investing in a $4.5bn nickel processing facility in Indonesia to secure a supply of key minerals used in electric vehicle batteries. Americans have taken on significantly more debt to buy vehicles, especially Gen Z and Millennials, who the Federal Reserve believes may have borrowed beyond their means.

Energy Sector News

DIABLO CANYON NUCLEAR POWER PLANT WAS GRANTED AN EXEMPTION, allowing the California nuclear power plant to continue operating while it pursues permission to keep operating past 2025. More electricity was generated for the first time from renewable sources in the U.S. last year than from coal. Finland canceled a troubled project with Russia’s Rosatom to build a nuclear reactor and hired Westinghouse to design, license and supply a new fuel type for its plant in Loviisa after its current contracts expire.

Medial Ai

Medical Insights

THE COLLAPSE OF SILICON VALLEY BANK, a storied lender and financier of startups including some MedTech companies, appears to have had a minimal effect on established firms in the sector. Medtronic is working with U.S.-based computer chip maker NVIDIA on a platform for artificial intelligence applications to run on its medical devices. The companies plan to incorporate NVIDIA’s healthcare platforms into Medtronic’s GI Genius endoscopy device to start. Elon Musk's brain implant company Neuralink has approached Barrow Neurological Institute as a potential clinical trials partner as Neuralink prepares to test its devices on humans.

Aerospace Developments

BOEING PLANS TO SELL 121 DREAMLINER 787 JETS TO TWO SAUDI ARABIAN AIRLINES, including 72 to the newly launched Riyadh Air. At $37bn combined, this would represent the fifth largest commercial order by value in Boeing's history. Delivery of the first F-35 with upgraded hardware, crucial for the fighter jet’s advanced capabilities, may be delayed for another year — 16 months later than originally planned. SpaceX received 25% more funds last year than in 2021 and overtook Boeing as NASA's second most-awarded contractor. The California Institute of Technology operates NASA's Jet Propulsion Lab research facility and was first.

Glencore Rusal No Contract Renewal

Metals & Commodities

GLENCORE WILL NOT RENEW ITS ALUMINUM CONTRACT WITH RUSAL. Glencore said it will complete its current $16 billion aluminum ingot contract but under its new policy of shunning business from Russia, Rusal can expect no renewal. Citigroup warned clients about the risks of Russia weaponizing its exports of materials such as aluminum, palladium and nuclear fuels, potentially leading to price rises for these critical commodities. China's lithium prices continue to plunge, down 34% in March.

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