Chicago Fed National Activity Index Turns Negative in October
The Federal Reserve Bank of Chicago reported that the Chicago Fed National Activity Index (CFNAI) fell to -0.05 in October after rising to 0.17 in September, revised from no change. The August reading of 0.14 was revised from 0.10.
The index’s three-month moving average fell to 0.09 in October after rising to 0.19 in September. The figure remained down from a recent high of 0.48 in December, 2021. During the last 10 years, there has been an 85% correlation between the change in the Chicago Fed Index and quarterly growth in real GDP.
(US Sales Managers see continued pricing power
The most negative aspect of the November data is without doubt the Prices Index, which increased from the October reading of 56 to 56.6 in November, indicating the continuing presence of significant price inflation in producer markets generally. Price inflation has very not yet been vanquished.
NY Fed’s Services Business Leaders Survey
Activity continued to decline in the region’s service sector, according to firms responding to the Federal Reserve Bank of New York’s November 2022 Business Leaders Survey. The survey’s headline business activity index moved up four points but remained below zero at -11.8, its third negative reading in the past four months. The business climate index edged down to -43.6.
Despite the decline in activity, employment continued to expand. The wages index, while elevated, fell to its lowest level in more than a year, pointing to a slowing of wage growth.
The pace of input price increases was little changed, while the pace of selling price increases slowed somewhat.
Looking ahead, firms grew more pessimistic about the six-month outlook.
- NY Fed’s Supplementary questions in the November 2022 Business Leaders Survey and Empire State Manufacturing Survey focused on expected changes in firms’ workforces, factors underlying the changes, and recent trends in wages. Similar but not identical questions were asked in the November 2021 and earlier surveys.
Fewer firms currently need more employees:
They are hoarding employees:
Attracting new employees requires increased compensation:
Which triggers higher comp for existing employees:
Railroad Unions Split Over Labor Contract Members of the conductors union narrowly voted to reject a new wage deal brokered by the White House, while the engineers union narrowly ratified the deal.
(…) Four out of 12 unions have now rejected the proposed contract, while the other eight have ratified the deal. Both sides have agreed to a cooling-off period until early December.
Members of the SMART Transportation Division, which represents about 36,000 rail workers, narrowly rejected the contract proposal, while the Brotherhood of Locomotive Engineers and Trainmen, which has 24,000 members, narrowly ratified it. The groups were the final two unions reporting the ratification of votes in the protracted labor dispute.
Leaders of SMART-TD said they would head back to the negotiating table with the railroads for a revised deal with a Dec. 8 deadline. Without another agreement, workers will be allowed to strike on Dec. 9. (…)
The five-year agreement, which replaces a contract that lapsed, offers railroad workers a 24% increase in wages from 2020 through 2024. It allows for one additional paid day off, on top of existing vacation and paid time off. (…)
- Germany’s IG Metall union agreed to pay increases of 5.2% starting in June 2023, and a further 3.3% in May 2024 for workers in the metals and electronics industries. In addition, employees are to receive EUR 1,500 one-off post-tax payments in each of February 2023 and 2024. The contract runs until September 30, 2024, and compares to the union’s demand of pay increases of between 7-8% over one year for nearly 3.7 million employees. While this settlement is only valid for the state of Baden Wurttemberg, IG Metall’s other six districts have indicated that they want to adopt the settlement in due course.
- In a seperate agreement, verdi union agreed to a pay increase of 6% for union members of RWE (18,000 employees) from February 2023, plus two one-off payments of EUR 1,500 each. The agreement runs from for 13 months from February 2023.
- Taken together, we view these settlements as upside risks to our Euro area wage projection of 4.8% in 2023. While the settlements are below the current rate of inflation, they are above the wage inflation rate of about 3% per year that we see as consistent with the ECB’s 2% inflation target. The ratio of settlements to demands has also increased from its historical average of about 50%, suggesting increased employee bargaining power. (Goldman Sachs)
OPEC+ Eyes Output Boost Ahead of Russian-Oil Limits The move could help heal a rift with the Biden administration and keep energy flowing amid new attempts to blunt Russia’s oil industry over the Ukraine war.
A production increase of up to 500,000 barrels a day is now under discussion for OPEC+’s Dec. 4 meeting, delegates said. The move would come a day before the European Union is set to impose an embargo on Russian oil and the Group of Seven wealthy nations’ plans to launch a price cap on Russian crude sales, potentially taking Moscow’s petroleum supplies off the market.
After The Wall Street Journal and other news organizations reported on the discussions Monday, Saudi energy minister Prince Abdulaziz bin Salman denied the reports and said a production cut was possible instead.
Any output increase would mark a partial reversal of a controversial decision last month to cut production by 2 million barrels a day at the most recent meeting of the Organization of the Petroleum Exporting Countries and their Russia-led allies, a group known collectively as OPEC+. (…)
Talk of a production increase has emerged after the Biden administration told a federal court judge that Saudi Crown Prince Mohammed bin Salman should have sovereign immunity from a U.S. federal lawsuit related to the brutal killing of Saudi journalist Jamal Khashoggi. The immunity decision amounted to a concession to Prince Mohammed, bolstering his standing as the kingdom’s de facto ruler after the Biden administration tried for months to isolate him. (…)
Russia has said it wouldn’t sell oil to any country participating in the price cap, potentially resulting in another effective production cut from Moscow—one of the world’s top three oil producers. (…)
OPEC members have signaled to Western countries that they would step up if Russian output fell.
Talk of a production increase sets up a potential fight between OPEC+’s two heavyweight producers, Saudi Arabia and Russia. The countries have an oil-production alliance that industry officials in both nations have described as a marriage of convenience, and they have clashed before.
Saudi officials have been adamant that their decision to cut production last month wasn’t designed to support Russia’s war in Ukraine. Instead, they say, the cut was intended to get ahead of flagging demand for oil caused by a global economy showing signs of slowing down.
Raising oil production ahead of the price cap and EU embargo could give the Saudis another argument that they are acting in their own interests, and not Russia’s.
Another factor driving discussion around raising output: Two big OPEC members, Iraq and the United Arab Emirates, want to pump more oil, OPEC delegates said. Both countries are pushing the oil-producing group to allow them a higher daily-production ceiling, delegates said, a change that, if granted, could account for more oil production. (…)
U.S. and Chinese Defense Chiefs Meet in Reflection of Easing Tensions The bilateral meeting in Cambodia follows a summit between President Biden and Xi Jinping this month
(…) The meeting suggested that leaders of the world’s two largest economies are engaging again after several months of deep freeze between Washington and Beijing. (…)
On Saturday, Vice President Kamala Harris met with Mr. Xi at another summit in the Thai capital of Bangkok. There, Mr. Xi described his meeting with Mr. Biden as “strategic and constructive,” adding that he hoped the two countries could reduce misunderstanding, according to China’s Foreign Ministry. Ms. Harris said the U.S. didn’t seek confrontation and that both sides should cooperate on global issues, the statement said. (…)
Earlier this month, Mr. Xi approved the dispatching of a delegation of senior policy advisers and business executives to New York to meet with a group of former top U.S. officials. (…)