US ECONOMY & POLITICS

U.S. Services Growth Improves as ISM’s March Gauge Climbs to 58.3 – Bloomberg, 4/5/2022

• Growth at U.S. service providers picked up in March as employment and orders strengthened, indicating the economy is on solid footing despite high inflation.
• The Institute for Supply Management’s gauge of services increased to 58.3 last month from 56.5 in February, according to data released Tuesday. Readings above 50 signal expansion. The gain was the first in four months.
• The group’s index of new orders advanced for the first time since October, while a measure of employment jumped by the most since January 2021 as Covid-19 cases declined.
• A gauge of business activity — which parallels the ISM’s measure of factory production – also expanded at a faster pace.
• The ISM’s measure of order backlogs rose to a four-month high while inventory sentiment dropped, indicating that service providers indicate their stockpiles are too low against a backdrop of resilient demand.
• Such supply and demand imbalances are fueling inflation.
• A measure of prices paid rose to 83.8, near the highest in the group’s data back to 1997.

U.S. Trade Deficit Narrowed Slightly in February – Wall Street Journal, 4/5/2022

• The U.S. trade deficit narrowed slightly in February, shrinking 0.1% for the month but remaining close to a record, as both exports and imports climbed on the cusp of war in Ukraine.
• The deficit in trade of goods and services slipped to a seasonally adjusted $89.19 billion in February, the Commerce Department said Tuesday, compared with an $89.23 billion gap in January, which was the all-time monthly record for the trade gap.
• Imports rose 1.3% to $317.8 billion, while exports grew 1.8% to $228.6 billion in February. Though the deficit declined from January’s record level, it was the second-largest monthly deficit on record.
• U.S. exports of industrial supplies, including fuel and coal, increased by $1.7 billion in February while pharmaceutical exports such as Covid-19 vaccines rose by $1.3 billion.
• U.S. travel, which is considered an export of services, rose $1.2 billion as international travelers returned to American cities and resorts.
• Meanwhile imports rose too. Imports of crude oil climbed $1.9 billion while other chemicals increased $1.2 billion.
• Imports of vehicles declined amid tight supply and a world-wide chip shortage.

Transportation equipment, machinery pull down U.S. factory orders in February – Reuters, 4/5/2022

• New orders for U.S.-made goods fell in February, likely because of persistent shortages of materials and a shift in spending back to services, but manufacturing remains supported by low inventories at businesses.
• The Commerce Department said on Monday that factory orders fell 0.5% in February.
• Data for January was revised slightly higher to show orders rising 1.5% instead of 1.4% as previously reported.
• February’s decrease in factory orders was in line with economists’ expectations.
• The decline in factory orders in February was led by a 5.3% tumble in transportation equipment.
• Orders for motor vehicles and parts fell 0.6%, likely reflecting an ongoing global semiconductor shortage, which has hampered production.
• Shipments of manufactured goods rose 0.6% after advancing 1.4% in January.
• Inventories at factories climbed 0.6%. Unfilled orders gained 0.4% after increasing 0.9% in the prior month.
• The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, slipped 0.2% instead of 0.3% as previously reported last month.
• Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, rose 0.3% in February instead of the previously reported 0.5%.

Brainard Says Fed to Shrink Balance Sheet Rapidly as Soon as May – Bloomberg, 4/5/2022

• Federal Reserve Governor Lael Brainard called the task of reducing inflation pressures “paramount” and said the central bank will raise interest rates steadily while starting balance sheet reduction as soon as next month.
• The Federal Open Market Committee “will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting,” Brainard said on Tuesday in remarks prepared for a speech to the Minneapolis Fed.
• “Given that the recovery has been considerably stronger and faster than in the previous cycle, I expect the balance sheet to shrink considerably more rapidly than in the previous recovery, with significantly larger caps and a much shorter period to phase in the maximum caps compared with 2017–19,” she added. Officials next meet May 3-4.
• Brainard’s comments suggest she is somewhere near the median estimate of seven rate increases this year, but also prepared to go faster if inflation doesn’t subside.

Biden to Propose Change to Affordable Care Act to Extend Subsidies for Families – Wall Street Journal, 4/5/2022

• Some people unable to afford health insurance for their families would be able to get Affordable Care Act subsidies under a proposal by the Biden administration aimed at shoring up the Obama-era law.
• The proposed change, expected to be announced Tuesday, would recalculate what is considered affordable for a family with employer-based health insurance.
• Currently, workers can’t get ACA subsidies to lower their premiums if they get affordable health-insurance coverage from an employer. But the definition of affordable is determined by the cost of the coverage for the employee and not for the employee’s spouse or children.
• About five million people are affected by the so-called family glitch, and under the proposed change they will have more options for insurance coverage, according to the Kaiser Family Foundation.
• Additionally, an estimated 200,000 uninsured people are expected to gain coverage under the proposed change by the Treasury Department, federal officials said. The proposed rule would go into effect Jan. 1, 2023.

EUROPE & WORLD

EU Proposes Ban on Russian Coal Imports, Ships After Atrocities – Bloomberg, 4/5/2022

• The European Union is proposing to ban coal imports from Russia in a direct response to reports that Russian forces committed apparent war crimes in Ukraine, European Commission President Ursula von der Leyen said Tuesday.
• The European Commission is also proposing to ban most Russian trucks and ships from entering the bloc, von der Leyen said, with exceptions allowed for agricultural products, humanitarian aid and energy.
• The action on coal — which von der Leyen said would amount to 4 billion euros ($4.4 billion) a year — would allow for a three-month wind-down before a ban on new contracts, according to two people familiar with the matter.
• The EU will also push ahead with a debate on targeting Russian oil, including perhaps an escrow account to freeze extra profits, von der Leyen said.
• Year-ahead futures for coal delivered to northwest Europe jumped as much as 7.9% to $205 a ton.
• Russia supplies about half of the continent’s thermal coal, used to fuel its power stations and generate electricity.

Shanghai Covid Cases Top 13,000 as Millions Locked Down – Bloomberg, 4/5/2022

• Shanghai reported more than 13,000 daily Covid-19 cases for the first time, as a sweeping lockdown of its 25 million residents and mass testing uncovered an extensive spread of the highly infectious omicron variant.
• The outbreak in the Chinese financial hub pushed the national total to 16,412 local infections for Monday, the highest one-day figure recorded in the world’s second-largest economy during the pandemic — clouding its growth outlook and threatening to disrupt the global supply chain.
• The ballooning number in Shanghai, despite a city-wide lockdown, underscores the challenge the nation faces in returning to President Xi Jinping’s Covid Zero goal.
• China is the last country in the world to still be taking such a hard line with the virus, after other places that pursued elimination, including Singapore, Australia and New Zealand, started to open up once vaccination reached key levels.

Samsung Elec likely to report highest Q1 profit since 2018 on chips – Reuters, 4/5/2022

• Samsung Electronics is likely to post its highest first-quarter profit since 2018, analysts’ estimates showed, driven by brisk profits on memory chips as solid demand helped to keep prices firmer than expected.
• Operating profit for the world’s biggest smartphone and memory chip maker likely hit 13.3 trillion won ($10.9 billion) in the quarter ended in March, according to a Refinitiv SmartEstimate from 13 analysts, which is weighted toward those who are more consistently accurate.
• That would be up 41% from 9.38 trillion won a year earlier and the highest profit for its comparatively sluggish first quarter since 2018.
• Samsung’s Q1 chip profit is likely to reach 7.6 trillion won, more than double the previous year’s 3.37 trillion won, according to an average forecast of six analysts.
• Samsung’s mobile business profit is estimated at 4.04 trillion won according to an average forecast of six analysts, slightly down from the previous year’s 4.39 trillion won but above its mobile profits during the same period in 2017-2020.

Ryanair expects summer fares to be 5-10% higher than in 2019 – Reuters, 4/5/2022

• Ryanair expects average air fares during this year’s summer peak season to be 5-10% higher than pre-pandemic prices in the same period of 2019, Group Chief Executive Michael O’Leary was quoted as saying on Tuesday.
• Lower capacity and increased passenger demand are already driving fares higher for those booking flights from June onwards, O’Leary told the Irish Independent newspaper, citing “very strong” forward bookings.
• The Irish low-cost airline, Europe’s largest by passenger numbers, on Monday reported that its passenger numbers topped pre-pandemic levels for the first time last month.

Factmonster – TODAY in HISTORY

• George Washington cast the first presidential veto. (1792)
• Julius and Ethel Rosenberg were sentenced to death for giving away atomic secrets to the Russians. (1951)
• Winston Churchill resigned as prime minister of Britain. (1955)
• Libya gave over two suspects in the Lockerbie, Scotland Pan Am bombing. (1999)