Tag Archives: Economy

Mastercard, Visa and Many Other Companies Cut Ties with Russia

Matthew 24:6 “And you will hear of wars and rumors of wars. See that you are not alarmed, for this must take place, but the end is not yet.”

Important Takeaways:

  • Mastercard and Visa cut off Russian banks from their networks: Exodus of foreign firms plunges Russia’s economy into freefall as ruble hits record low and Moscow residents continue scramble for hard currency
  • Visa and Mastercard have blocked multiple Russian banks from their network
  • It means that many Russians awoke Tuesday unable to use their bank cards
  • Everyday Russians have been making runs on banks to withdraw cash
  • The ruble has plunged in value amid punishing Western sanctions
  • Scores of companies are pulling out of Russia in response to Ukraine invasion
    • Other Companies cutting ties with Russia:
      • Adidas
      • BP
      • Dell
      • DHL
      • Disney
      • Ericsson
      • FedEx
      • GM
      • Harley-Davidson
      • HSBC
      • MasterCard
      • Nokia
      • Shell
      • Sony
      • Uber
      • UPS
      • Visa
      • Volvo
      • Warner Bros.

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The Breadbasket of Europe Russia/Ukraine War Escalates Cost at the Store

Rev 6:6 NAS And I heard something like a voice in the center of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not damage the oil and the wine.”

Important Takeaways:

  • Russia’s invasion of Ukraine will likely ratchet American food prices even higher, experts say
  • Russia’s invasion of Ukraine could push U.S. food prices even higher, as the region is one of the world’s largest producers of wheat and some vegetable oils. And the disruptions could drag on for months or even years, as crop production in the area could be halted and take a long time to restart.
  • This week’s events “are proof that this will be a multiyear issue,” said Michael Swanson, Wells Fargo’s chief agricultural economist. “It’s my assumption that Ukrainian crops won’t get planted, or not anywhere near what they typically plant. And the Russian crops will be planted but will be embargoed in many markets. This is not something that will be resolved in weeks or months.”
  • “There will be a disruption; there is already a blockade on Black Sea ports,” she said. “In the near term this should have an impact on European Union wheat shipments, then it will have an impact on the U.S.”
  • Ukraine is the world’s fourth-largest exporter of both corn and wheat. It is also the world’s largest exporter of sunflower seed oil, an important component of the world’s vegetable oil supply. Together, Russia and Ukraine supply 29 percent of all wheat exports and 75 percent of global exports of sunflower oil, said Kelly Goughary, senior research analyst Gro-Intelligence, an agriculture data platform.

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Aftermath of Tonga U.N. official says 80% of population were affected by the recent eruption

Important Takeaways:

  • Tonga needs over $90 million to start repairs from volcano
  • A U.N. official says 80% of Tonga’s 105,000 people were affected by the undersea volcanic eruption and ensuing tsunami that lashed the Pacific island nation on Jan. 15
  • Cyclone season is still in full swing, and there are almost weekly earthquakes in the region, the latest a magnitude 5.0 quake only a few hours earlier just 47 kilometers (30 miles) from the capital,
  • 14 U.N. agencies and the international community are supporting Tonga’s relief and recovery efforts, providing almost 40 tons of water and sanitation supplies, reconnecting Tonga with the rest of the world through emergency telecommunications services and logistics, and providing food, school materials and psychological support.
  • The $90.4 million in estimated losses doesn’t take into account future losses from tourism, agriculture or commerce.

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Study shows America is too dependent on China for Pharmaceuticals

Rev 6:6 NAS And I heard something like a voice in the center of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not damage the oil and the wine.”

Important Takeaways:

  • Gary Cohn, then chief economic advisor to President Trump, argued against a trade war with China by invoking a Department of Commerce study that found that 97 percent of all antibiotics in the United States came from China. “If you’re the Chinese and you want to really just destroy us, just stop sending us antibiotics,” he said.
  • If we are dependent on China for thousands of ingredients and raw materials to make our medicine, China could use this dependence as a weapon against us.

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Kellogg reaches tentative deal with union after 2 months of strike

(Reuters) -Kellogg Co said on Thursday it has reached an agreement with the union on a new five-year contract for its employees at a few breakfast-cereal plants in the United States, potentially bringing a near two-month long strike to an end.

The tentative agreement, reached after multiple rounds of talks with the union, includes wage increases and benefits for all employees and better terms for temporary employees.

The latest agreement allows for all temporary employees with four or more years of service to move to permanent positions with better pay and benefits.

Union members had previously opposed Kellogg’s two-tier employment system that did not offer temporary workers, who make up 30% of its workforce, a pathway to become permanent staff.

Employees at Kellogg’s cereal plants including Michigan, Nebraska, Pennsylvania and Tennessee went on strike on Oct. 5 after their contracts expired, as negotiations over payment and benefits stalled due to differences between the company and about 1,400 union members.

The new deal, which will be voted on by Kellogg employees on Dec. 5, will also offer permanent employees with better post-retirement benefits.

During lengthy negotiations with union members, Kellogg had hired permanent replacements for some of its plant workers on strike, and also warned of a dent to its annual profit due to the disruption.

Kellogg is one of the several major U.S. companies that has faced worker strikes in the recent past as the labor market tightens and inflation reaches record highs.

Last month, farm equipment maker Deere & Co reached an agreement with workers after a six week strike.

(Reporting by Maria Ponnezhath in Bengaluru; Editing by Arun Koyyur and Shinjini Ganguli)

 

U.S. economy gaining steam as manufacturing forges ahead; shortages still a constraint

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. manufacturing activity picked up in November amid strong demand for goods, keeping inflation high as factories continued to struggle with pandemic-related shortages of raw materials.

Signs that the economy was gathering momentum halfway through the fourth quarter were underscored by other data on Wednesday showing private employers maintained a strong pace of hiring last month. But there are fears that the Omicron variant of COVID-19 could hurt demand for services as well as keep the unemployed at home, and hold back job growth and the economy.

“Manufacturing should continue to contribute positively to GDP growth over the next year as businesses replenish inventories and supply-chain issues improve,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “There are risks, including the potential for businesses overbooking orders now and the Omicron variant magnifying price and supply chain issues.”

The Institute for Supply Management (ISM) said its index of national factory activity increased to a reading of 61.1 last month from 60.8 in October.

A reading above 50 indicates expansion in manufacturing, which accounts for 12% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 61.0.

“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement,” said Timothy Fiore, ISM chair of the manufacturing business survey committee.

Global economies’ simultaneous recovery from the COVID-19 pandemic, fueled by trillions of dollars in relief money from governments, has strained supply chains, leaving factories waiting longer to receive raw materials.

The Federal Reserve’s Beige Book on Wednesday described economic activity as growing at “a modest to moderate pace” during October and early November, but noted that “growth was constrained by supply chain disruptions and labor shortages.”

All of the six largest manufacturing industries in the ISM survey, including computer and electronic products as well as transportation equipment, reported moderate to strong growth.

Makers of computer and electronic products said “international component shortages continue to cause delays in completing customer orders.” Transport equipment manufacturers reported “large volume drops due to chip shortage.” Furniture producers said “business is strong but meeting customer demand is difficult due to a shortage of raw materials and labor.”

But there are some glimmers of hope. Prices for steel plate and hot-rolled coil appear to be nearing a plateau, according to manufacturers of fabricated metal products. Supply of plastic resins is improving, accounts from electrical equipment, appliances and components, as well as plastics and rubber products manufacturers suggested.

The ISM survey’s measure of supplier deliveries slipped to 72.2 from 75.6 in October. A reading above 50% indicates slower deliveries.

The long delivery times kept inflation at the factory gate bubbling. The survey’s measure of prices paid by manufacturers fell to a still-high 82.4 from 85.7 in October.

Factories are easily passing the increased production costs to consumers and there are no signs yet of resistance.

Fed Chair Jerome Powell told lawmakers on Tuesday that “the risk of higher inflation has increased,” adding that the U.S. central bank should consider accelerating the pace of winding down its large-scale bond purchases at its next policy meeting in two weeks.

The Fed’s preferred inflation measure surged by the most in nearly 31 years on an annual basis in October.

Stocks on Wall Street rebounded after Tuesday’s sell-off. The dollar was steady against a basket of currencies. Prices for longer-dated U.S. Treasury prices rose.

STRONG ORDERS

The ISM survey’s forward-looking new orders sub-index climbed to 61.5 last month from 59.8 in October. Customer inventories remained depressed.

With demand robust, factories hired more workers. A measure of manufacturing employment rose to a seven-month high.

Strengthening labor market conditions were reinforced by the ADP National employment report on Wednesday showing private payrolls increased by 534,000 jobs in November after rising 570,000 in October. That was broadly in line with expectations.

This, combined with consumers’ robust perceptions of the labor market last month suggest job growth accelerated further in November. First-time applications for unemployment benefits declined between mid-October and mid-November.

But a shortage of workers caused by the pandemic is hindering faster job growth. There were 10.4 million job openings at the end of September.

Workers have remained home even as companies have been boosting wages, school reopened for in-person learning and generous federal government-funded benefits ended.

“Overall, the risk remains that renewed health concerns will keep workers, especially those with caregiving responsibilities, from returning to the labor force, preventing a return to pre-pandemic strength,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.

According to a Reuters survey of economists nonfarm payrolls probably increased by 550,000 jobs in November. The economy created 531,000 jobs in October.

The Labor Department is scheduled to publish its closely watched employment report for November on Friday.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. retail sales surge as Americans kick off holiday shopping, brighten economic outlook

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales surged in October as Americans eagerly started their holiday shopping early to avoid empty shelves amid shortages of some goods because of the ongoing pandemic, giving the economy a lift at the start of the fourth quarter.

The solid report from the Commerce Department on Tuesday suggested high inflation was not yet dampening spending, even as worries about the rising cost of living sent consumer sentiment tumbling to a 10-year low in early November. Rising household wealth, thanks to a strong stock market and house prices, as well as massive savings and wage gains appear to be cushioning consumers against the highest annual inflation in three decades.

“It’s more important to look at what consumers do than what they say,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “They are concerned about higher inflation, but they are still in good shape and are continuing to spend.”

Retail sales jumped 1.7% last month, the largest gain since March, after rising 0.8% in September. It was the third straight monthly advance and topped economists’ expectations for a 1.4% increase. Sales soared 16.3% year-on-year in October and are 21.4% above their pre-pandemic level.

Several of the top U.S. retailers this week have noted an earlier start to holiday shopping. While this could lead to declines in November and December, economists and retailers expect holiday sales this year will be the best in a while.

“Today’s numbers show that consumers are getting a jump on their holiday shopping,” said Matthew Shay, president of the National Retail Federation in Washington. “We continue to urge consumers to shop early and shop safely, and we fully expect this holiday season to be one for the record books.”

Retail sales are mostly made up of goods, with services, including healthcare, education and hotel accommodation, making up the remaining portion of consumer spending. The nearly two-year long COVID-19 pandemic has caused an acute shortage of labor, delaying deliveries of raw materials to factories as well as shipments of finished goods to markets.

October’s broad increase in sales partly reflected higher prices as monthly consumer inflation surged 0.9% in October, which boosted the annual rate to 6.2%.

Stocks on Wall Street were trading higher on the data and also as Walmart forecast a strong holiday quarter. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

BROAD GAINS

Sales were led by motor vehicles, with receipts at auto dealerships advancing 1.8% after gaining 1.2% in September. The rise reflected the first increase in unit sales in six months, as well as higher prices. The tight supply of automobiles because of a global semiconductor shortage is driving up prices.

Sales at service stations increased 3.9%, boosted by more expensive gasoline. Online retail sales rebounded 4.0%. Receipts at building material stores advanced 2.8%. There were also increases in receipts at furniture outlets as well as sporting goods, hobby, musical instrument and book stores. Sales at electronics and appliance stores rebounded 3.8%.

But sales at clothing stores fell 0.7%. Sales at restaurants and bars were unchanged despite an ebb in COVID-19 infections, driven by the Delta variant. Restaurants and bars are the only services category in the retail sales report. These sales were up 29.3% from last October.

Economists speculated that either high inflation was forcing consumers to cut back on eating out or that spending had permanently shifted in favor of goods.

“If services spending has largely recovered, strong goods demand increasingly looks to be a structural shift in consumer preferences, rather than a temporary COVID-related outcome,” said Andrew Hollenhorst, chief U.S. economist at Citigroup in New York.

Excluding automobiles, gasoline, building materials and food services, retail sales shot up 1.6% last month after rising 0.5% in September. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Adjusting for inflation, retail sales are up at a roughly 5% annualized rate from the third-quarter average.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity rose at a tepid 1.7% rate last quarter. Economists at JPMorgan boosted their fourth-quarter GDP growth estimate to a 5% rate from a 4% pace. Goldman Sachs raised its estimate by 0.5 percentage point to a 5.0% rate. The economy grew at a 2% rate in the third quarter.

The economic picture was further brightened by a separate report from the Federal Reserve on Tuesday showing manufacturing output surged 1.2% last month to its highest level since March 2019, after falling 0.7% in September.

“The economy has thrown off whatever lethargy it might have had in the summer, and it is growing quite strongly,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania.

Businesses are also making steady progress replenishing depleted inventories, which should help to keep factories humming and support the economy. Business inventories increased 0.7% in September, a third report from the Commerce Department showed.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

‘Sheriff Joe’ Biden to name coordinator to oversee $1 trillion in infrastructure bill

By Andrea Shalal

WASHINGTON (Reuters) -U.S. President Joe Biden said he would appoint a coordinator next week to oversee spending under a $1 trillion infrastructure bill, a role similar to one he held under former President Barack Obama that earned him the nickname “Sheriff Joe.”

Biden told reporters he had called his Cabinet members together to hammer home the need to ensure that the funding, and $1.75 trillion in a separate social and climate measure still working its way through Congress, were used wisely.

“One of our biggest responsibilities is to make sure the money is used efficiently and effectively,” he said at the start of a meeting. “If we do it right, we know what it’ll mean … we’ll create millions of new jobs and grow the economy.”

Biden said he would sign the infrastructure measure on Monday at a bipartisan ceremony, potentially outside, and expressed confidence that it would improve U.S. competitiveness versus China and other countries, while easing inflation that has spiked in recent months.

White House spokesperson Jen Psaki said the person who would oversee implementation of the newly passed U.S. infrastructure bill would come from outside the administration, but gave no further details.

Biden often talks about his role overseeing implementation of a $787 billion stimulus act while serving as vice president under Obama, a measure that he said resulted in less than .2% waste and fraud.

“Friends started calling me Sheriff Joe … because I made it a point every day to stay on top of how exactly the money was spent, what projects were being built, and what projects were not being built, and how it was functioning,” he said.

Biden earlier this year named former long-term economic adviser Gene Sperling to oversee implementation of $1.9 trillion COVID-19 relief package, and named Jeff Zients, a former Obama official, to head his administration’s overall COVID-19 response.

(Reporting by Andrea ShalalEditing by Chris Reese and Jonathan Oatis)

Relentless shortages, high prices hamper U.S. manufacturing

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. manufacturing activity slowed in October, with all industries reporting record-long lead times for raw materials, indicating that stretched supply chains continued to constrain economic activity early in the fourth quarter.

The Institute for Supply Management (ISM) survey on Monday also hinted at some moderation in demand amid surging prices, with a measure of new orders dropping to a 16-month low. Still, demand remains strong amid depressed retail inventories, which should keep manufacturing humming.

According to the ISM, “companies and suppliers continue to deal with an unprecedented number of hurdles to meet increasing demand.” The government reported last week that the economy grew at its slowest pace in more than a year in the third quarter because of widespread shortages tied to the COVID-19 pandemic.

“Stress in U.S. supply chains isn’t abating, lending downside risk to our forecast for GDP growth in the near term and a clear upside risk to the forecast for inflation,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

The ISM’s index of national factory activity slipped to a reading of 60.8 last month from 61.1 in September. A reading above 50 indicates expansion in manufacturing, which accounts for 12% of the U.S. economy. Economists polled by Reuters had forecast the index would fall to 60.5.

The ISM reported 26 commodities in short supply in October.

The economy is struggling with shortages across industries as global supply chains remain clogged. Supply constraints were worsened by a wave of coronavirus infections driven by the Delta variant over the summer, especially in Southeast Asia. Congestion at ports in China and the United States were also causing delays in getting materials to factories and retailers.

The motor vehicle industry has been the hardest hit. Transportation equipment manufacturers in the ISM survey reported they had diverted chips “to our higher-margin vehicles and stopped or limited the lower-margin vehicle production schedules.”

Other industries are also hurting. According to the ISM survey, manufacturers of computer and electronic products reported “extreme delays” and that “getting anything from China is near impossible.” Food manufacturers said “rolling blackouts in China starting to hurt shipments even more.”

Makers of electrical equipment, appliances and components said though demand continued to be strong, production continued “to be held back by supply chain issues.”

The ISM survey’s measure of supplier deliveries increased to a reading of 75.6 last month from 73.4 in September. A reading above 50% indicates slower deliveries. Economists and businesses expect supply chains could remain tight through 2022.

Longer waits for materials meant high inflation at the factory gate persisted. The survey’s measure of prices paid by manufacturers accelerated to 85.7 from a reading of 81.2 in September. Prices increased for 48 commodities last month, with only prices for wood falling.

These higher costs are being passed on to consumers which, together with surging wage growth, is raising concerns that high inflation could be more persistent rather than transitory as Federal Reserve Chair Jerome Powell has repeatedly argued. The government reported on Friday that wage growth in the third quarter was the strongest on record.

The ISM survey’s forward-looking new orders sub-index dropped to 59.8 last month, the lowest reading since June 2020, from 66.7 in September. With customer inventories remaining depressed, a rebound is likely.

Fourteen out of 18 industries reported growth in new orders, including furniture and related products, primary metals and machinery, as well as computer and electronic products manufacturers. Only the nonmetallic mineral products and plastics and rubber products industries reported a decline in orders.

U.S. stocks were mixed. The dollar slipped against a basket of currencies. U.S. Treasury yields rose.

GLIMMERS OF HOPE

Subsiding coronavirus cases could, however, encourage more consumption of services and curb demand for goods. Though a measure of unfinished work dipped last month, order backlogs remain significantly high.

Factories hired more workers, with a measure of employment increasing to a reading of 52 from 50.2 in September. Employment rose in the computer and electronic products, fabricated metal products and chemical products industries.

Though manufacturers companies said they were still struggling to find workers, there were signs improvement.

According to the ISM, “an increasing percentage of comments noted improvements regarding employment, compared to less than 5% in September.” It also noted that “an overwhelming majority of panelists indicate their companies are hiring or attempting to hire.”

This, combined with a massive improvement in consumers’ perceptions of the labor market last month, suggest employment gains picked up in October after the economy created the fewest jobs in nine months in September.

Worker shortages, however, remain a constraint. There were 10.4 million unfilled jobs at the end of August. The Labor Department is scheduled to publish its closely watched employment report for October on Friday.

A separate report from the Commerce Department on Monday showed construction spending dropped 0.5% in September amid broad declines in outlays on both private and public projects, which were partly blamed on Hurricane Ida in late August. Construction spending edged up 0.1% in August.

Still, the composition of construction spending was not as weak as the government had assumed in its advance third-quarter GDP estimate last week. That led some economists to anticipate that third-quarter GDP growth could be revised higher to about a 2.2% rate from the published 2.0% pace when the government releases its second estimate later this month.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

U.S. economy slows sharply in third quarter; weekly jobless claims at new 19-month low

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. economy grew at its slowest pace in more than a year in the third quarter as COVID-19 infections flared up, further straining global supply chains and causing shortages of goods like automobiles that almost stifled consumer spending.

Gross domestic product increased at a 2.0% annualized rate last quarter, the Commerce Department said in its advance GDP estimate on Thursday. That was slowest since the second quarter of 2020, when the economy suffered a historic contraction in the wake of stringent mandatory measures to contain the first wave of coronavirus cases.

The economy grew at a 6.7% rate in the second quarter. The Delta variant of the coronavirus worsened labor shortages at factories, mines and ports, gumming up the supply chain. Economists polled by Reuters had forecast GDP rising at a 2.7% rate last quarter.

Strong inflation, fueled by the economy-wide shortages and pandemic relief money from the government over the course of the public health crisis, cut into growth. Ebbing fiscal stimulus and Hurricane Ida, which devastated U.S. offshore energy production in late August, also weighed on the economy.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 1.6% rate after a robust 12% growth pace in the April-June quarter. Though automobiles accounted for a chunk of the stagnation, the Delta variant also curbed spending on services like air travel and dining out.

But there are signs that economic activity picked up as the turbulent quarter ended. The summer wave of COVID-19 infections has subsided, with cases declining significantly in recent weeks. Vaccinations have also picked up. The improving public health situation helped to lift consumer confidence this month.

Fewer Americans are filing new claims for unemployment benefits. That improving trend in labor market conditions was confirmed by a separate report from the Labor Department on Thursday showing initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 281,000 last week, the lowest level since mid-March 2020.

It was the third straight week that claims remained below the 300,000 threshold. Economists polled by Reuters had forecast 290,000 applications in the latest week.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)