US ECONOMY & POLITICS

U.S. Factory Output Falls in Fresh Supply-Chain Warning – Bloomberg, 10/18/2021

• Production at U.S. factories fell by the most in seven months in September, in part reflecting a sharp pullback in the manufacturing of motor vehicles as well as broader backlogged supply chains and materials shortages.
• The 0.7% decrease for manufacturers followed a revised 0.4% decline in August, Federal Reserve data showed Monday.
• Total industrial production, which also includes mining and utility output, fell 1.3% last month.
• The median estimate in a Bloomberg survey of economists called for a 0.1% monthly increase in both factory production and industrial output. Stocks fell and Treasury yields were up after market open.
• The report showed motor vehicles and parts output fell 7.2% last month, the sharpest drop since April, after a 3.2% decrease in August, as a global shortage of semiconductors continues to weigh on production.
• Utility output decreased 3.6% in September; oil and gas well drilling dropped 1.2%
• Production of business equipment rose 0.4% after a 0.6% decline in the prior month
• Manufacturing capacity utilization, a measure of plant use, decreased to 75.9%, while total industrial capacity dropped to 75.2%

U.S. homebuilder confidence unexpectedly rises in October, survey shows – Reuters, 10/18/2021

• Confidence among U.S. single-family homebuilders rose by the most in nearly a year in October as customer traffic improved for a second straight month, although builders remain concerned that the shortages that are driving up materials prices will hurt home affordability.
• The National Association of Home Builders/Wells Fargo Housing Market Index rose 4 points – the most since November 2020 – to 80 this month. The reading topped the median estimate of economists in a Reuters poll of 76 and the increase pushed the index to a three-month high.
• The current conditions index rose 5 points to 87, the highest since June; the index measuring sales expectations for the next six months rose 3 points to 84, the highest since last December; and the customer traffic index improved by 4 points – the most since February – to 65.

Supply-Chain Bottlenecks, Elevated Inflation to Last Well Into Next Year, Survey Finds – Wall Street Journal, 10/18/2021

• Uncomfortably high inflation will grip the U.S. economy well into 2022, as constrained supply chains keep upward pressure on prices and, increasingly, curb output, according to economists surveyed this month by The Wall Street Journal.
• Economists on average see inflation at 5.25% in December, just slightly less than the rate that has prevailed since June.
• Assuming a similar level in October and November, that would mark the longest inflation has been above 5% since early 1991.
• Consumer-price inflation will drop to 3.4% by June of next year, then 2.6% by the end of 2022, according to respondents’ average estimates. That is still above the average 1.8% that prevailed in the decade before the pandemic.
• Economists slashed growth forecasts this year, to an average 3.1% annualized in the third quarter from 7% in the July survey.
• They also lowered projected fourth-quarter growth to 4.8% from 5.4%.
• Nearly three in five economists surveyed see the Fed raising rates by the end of next year, including 16% who see the first increase happening by the Fed’s June meeting.

Democrats Face a Deadline on Benefits and Climate Bill Consensus – Wall Street Journal, 10/18/2021

• Democrats still tussling over how to scale back their ambitions to expand the country’s social benefits and overhaul its climate-change policy face dwindling time to reach an agreement as both the House and Senate return to Washington this week.
• One major element related to climate change—a $150 billion program aimed at pushing utilities to draw more power from clean-energy sources—could be cut from the bill, according to people familiar with the negotiations, as it has drawn objections from the centrist Democrat Sen. Joe Manchin of West Virginia.
• “I’m convinced we’re going to get it done,” Mr. Biden said during a speech at Capitol Child Development Center in Hartford, Conn., on Friday. “We’re not going to get $3.5 trillion. We’ll get less than that, but we’re going to get it. And we’re going to come back and get the rest.”
• More broadly, Democrats are feuding over how to squeeze their priorities into a smaller price tag. Mr. Manchin has said the bill shouldn’t spend more than $1.5 trillion, even if its cost is offset by other revenue, while Mr. Biden has told House Democrats the package might spend around $2 trillion.

College Enrollments Sink in the Midwest, Causing Budget Trouble for Schools – Bloomberg, 10/18/2021

• The pandemic accelerated a trend that college deans and finance chiefs throughout the U.S. Midwest have been dreading: There are fewer 18-year-olds to fill classrooms, dorms and dining halls.
• That means less revenue, increasing the likelihood of budget cuts affecting staff, the curriculum and sports programs, while schools are forced to offer bigger financial incentives to attract students.
• Tumbling birth rates across the region will also become a bigger problem for many mid-size public colleges, compounding the devastation wrought by Covid-19.
• Last fall, enrollments in the Midwest slid 4.7%, almost double the drop for the entire U.S., according to the National Student Clearinghouse Research Center.
• While the pandemic was the primary reason for the 2020 declines, falling birth rates are expected to be the main culprit going forward. Births tumbled 17% nationally from 2007 through 2020, according to Nathan Grawe, an economics professor at Carleton College who studies demographic trends.

EUROPE & WORLD

China’s Third-Quarter Economic Growth Slows Sharply to 4.9% – Wall Street Journal, 10/18/2021

• China’s economy grew 4.9% in the third quarter from a year earlier, slowing sharply from the previous quarter’s 7.9% growth rate, as power shortages and supply-chain problems added to the impact from Beijing’s efforts to rein in the real estate and technology sectors.
• When compared with the second quarter, China’s GDP inched up just 0.2% in the three months ended Sept. 30, according to data released Monday by the National Bureau of Statistics. In the second quarter, China’s GDP rose 1.3% from the prior quarter.
• In a reflection of the worries around China’s property market, which has traditionally been a key growth driver for the broader economy, new construction starts as measured by contracted floor area fell 4.5% in the first nine months of the year, widening from a 3.2% decline recorded in the January-to-August period, according to official data released Monday.
• Industrial output, a measure of factory production, rose just 3.1% in September from a year earlier, the statistics bureau said Monday, slowing from August’s 5.3% year-over-year growth pace and falling short of economists’ expectation for a 3.8% expansion.
• Fixed-asset investment also fell short of expectations, increasing 7.3% in the first three quarters of the year, the statistics bureau said—a slowdown from the 8.9% growth pace recorded in the January-to-August period.
• On the plus side, retail sales, a key gauge of domestic consumption, rose 4.4% in September from a year earlier, rebounding from August’s lackluster 2.5% year-over-year increase and topping the 3.4% rate expected by economists.
• China’s headline jobless figure, the surveyed urban unemployment rate, fell to 4.9% in September from 5.1% in August.

Chinese Property Slump Extends into September – Wall Street Journal, 10/18/2021

• China’s giant housing market slowed substantially in September, official data showed, as the country’s debt-saddled developers cut spending and demand from home buyers waned.
• Investments made by property developers fell 3.5% in September compared with last year, according to data released by China’s National Bureau of Statistics on Monday.
• Home sales by value fell 16.9% in September from a year earlier, while the floor area of new construction projects that were started in the month fell 13.5%. Both measures had already dropped sharply year-over-year in August, falling 19.7% and 17%, respectively.

China’s Xi Flexes Power With Plan to Rewrite Communist Party History – Wall Street Journal, 10/18/2021

• Chinese leader Xi Jinping is preparing to officially stamp his personal imprint on the Communist Party’s historical record, a sign of his strengthening grip on power in the face of simmering uncertainties over the country’s economy and tensions with Western powers.
• At a closed-door conclave in Beijing next month, Mr. Xi and other senior officials will review a draft resolution that lays out an authoritative accounting of the party’s “major achievements and historical experiences” since its founding 100 years ago, state media said, citing a decision reached Monday by the party’s 25-member Politburo.
• The resolution would be the third such document enacted by the party, putting Mr. Xi on a par with Mao Zedong and Deng Xiaoping as leaders who commanded the preponderant authority needed to formally reinterpret modern Chinese history.
• The resolution’s passage at the conclave, scheduled for Nov. 8-11, would project a sense of unity around Mr. Xi’s leadership as he prepares for a twice-a-decade party congress next year, where he is expected to secure a third term as party leader, defying the two-term precedent set by his predecessor.

Foxconn Unveils First Electric-Vehicle Prototypes – Wall Street Journal, 10/18/2021

• Foxconn Technology, the world’s largest contract electronics manufacturer, introduced three electric-vehicle models Monday, marking one of the iPhone assembler’s most aggressive forays yet into the EV industry.
• The prototypes are the first cars that Foxconn has designed, together with a Taiwanese car maker. Rather than selling them as Foxconn-branded vehicles, they will be sold under other car brands, with Foxconn offering the basic vehicle structure and building the cars, the company said.
• Foxconn’s EV prototypes arrive as Apple is also looking to produce its own car. Analysts have said that Foxconn’s existing relationship with Apple and supply chain know-how could give it an edge in securing Apple’s vehicle manufacturing business.

Factmonster – TODAY in HISTORY

• Ferdinand II of Aragón married Isabella of Castile, uniting Spain and making it a dominant world power. (1469)
• The boundary between Maryland and Pennsylvania, the Mason-Dixon line, was agreed upon. (1767)
• The United States took possession of Alaska from Russia. (1867)
• Inventor Thomas Alva Edison died in West Orange, N.J., at age 84. (1931)
• The U.S. Olympic Committee suspended two black athletes for giving a “black power” salute during a victory ceremony at the Mexico City games. (1968)