This Week’s Economic Update, March 21, 2022

Share Post:

I do not typically promote products in my Update.  However, if you are a sugar addict, I would suggest a limited offering from Crumbl Cookies.  It is a sugar cookie, embedded with Lucky Charms marshmallows, covered in a marshmallow icing, with more Lucky Charms marshmallows on top.  Just looking at it gave me a spike in glucose levels.  I calculated I would need to run over 14 miles to work off the calorie content of that one cookie. I politely passed.

There was good news, bad news and some confusing news in the past week.  The confusing news was from the Empire State Manufacturing Index.  In February the index was showing a slight increase of 3.1%.  The March report tanked, falling 11.8%.  In looking at the report details it is hard to see what caused the drop.  At first the thought was possibly weather related since a number of snow events hit the East coast.  However, the dates that the report covered did not coincide with any of the storms.  New orders did decline, but only modestly.  Unfilled orders increased which may indicate a supply chain impact.  Inventories expanded which was the result of fewer new orders.  Comments by the businesses surveyed were actually positive, actually more optimistic than in February.  In the end it is hard to figure out why it posted its worst performance since May of 2020.

The bad news was related to the inflation reports. It appears that the price increases will be here for a while at least for now.  The Producer Price Index rose month over month by .8%.  This was primarily impacted by the quick rise in gasoline prices.  This did not reflect the run up in prices after Russia invaded Ukraine, so the March numbers are going to look ugly also. More about the PPI in the good news later on.

Pulling out the gas and auto sales, consumer sales fell by .4% in February.  This was after a torrid January when the consumer sales rose 5.2% month over month.  While it would have been hard to top that January number, if the consumer was still healthy, it still would be positive.  Early signs are that the consumer is finally getting shell shocked by the inflation levels as well as being frustrated with the lack of inventory/supply choices.  The next key number will be in March when we will hopefully see a surge in travel for Spring Break.  If the surge did not occur, we can conclude the consumer is voting with their feet on the economy and definitely holding back.

The last bit of bad news, which might be couched as good news, is an increase in retail inventories, including vehicles.  While an increase of 1.1%, admittedly is slight, it is one of those green shoots of Spring.  There is a caveat here because most all the new auto inventory is actually not complete.  They are on the lot, but most of the accessories are not working due to a shortage of chips.  The increase in inventory might be because the production lines are churning out increased levels or it could be due to the consumer cutting back.  Time will tell.

The first of the good news was the Philadelphia Fed Manufacturing Index.  For March the index soared from 16 to 27.4, one of the highest levels since 2019.  Every aspect of the report was over the top good.  After a pause in January, new housing starts were up 6.8% month over month.  This was in spite of higher interest rates, supply shortages and price increases.  The level of multifamily starts was crucial in this increase.  While the overall PPI was high, the Core PPI, which takes out the energy only rose by .2% month over month.  That is the lowest number in quite a while.  One area that dropped 4% in the past month was in green vegetables.  Other food stuffs rose but at a very small level.  This is great news for anyone buying groceries, finally. 

The last bit of good news, US Manufacturing Production rose by 1.2% for the month of February.  Match this with the US Capacity Utilization rising from 77.3 to 77.6%, and it appears manufacturing is looking up.  As long as the inventory levels stay low, manufacturing should continue to be strong.

The past week was a roller coaster for oil.  We reached as low as $95 on Thursday before ending the week at $105.  Looking at the supplies, crude oil in the US piled up over the last 7 days.  The gasoline supplies are a bit behind but only because refinery output has been flat.  Once the refineries start pushing the crude through, the levels should rise.  One indication that the spike in oil prices may not be long term was the news from virtually every airline.  Delta and others indicated that they are fully exposed in the market for jet fuel supplies.  Not a one of them hedged or locked in purchases at prices prior to the most recent rise, including after Russia entered the Ukraine.  That was either an incredibly stupid move or as a group, they believe the current prices are not going to hold.

Have a great week.



Weekly insights that impact risk.

Stay on top of risk management trends and forecasts.

We keep your data private and do not share your data with third parties. Privacy Policy