Hurricane Ian Could Have Damaged More Than a Million Homes
RedStone Resource
September 30, 2022
Inside This Edition
China’s Yuan Hits Lowest Levels Against the Dollar Since 2008
Currencies around the world are generally falling against the dollar as the US Federal Reserve hikes interest rates. The Chinese yuan has lost 10.7% against the dollar since the beginning of the year. But other currencies are losing even faster, the British pound is down 21% against the dollar and the Japanese yen is at 24-year lows.
Slight Improvement in Consumer Confidence
The Conference Board’s Measure of Consumer Confidence came in at 108.0, up from 103.6 in August. This was the second consecutive month that jobs, good wage growth, and some declining gasoline prices helped to improve sentiment.
Global Supply Chain Pressures Decelerating, But Still Historically High
The New York Federal Reserve’s Global Supply Chain Pressures Index decelerated further at the end of August (latest available), the index came in at 1.47, which is down from its peak of 4.31 in December of 2021.
ECONOMIC BRIEFING
Hurricane Ian Could Have Damaged More Than a Million Homes
There is always a risk in running a story too early after a major, catastrophic event like Hurricane Ian. Official estimates of damage and structural surveys are still ongoing and could be for weeks. But the damage is historic, and the recovery effort could change many economic fundamentals across the country in the coming months. Early estimates suggest that more than 1.04 million homes were in the direct cone of impact of the hurricane as it came ashore as a Category 4 hurricane (just 5 mph from a Category 5). Estimates on cost damages are wildly different, but the range currently is running from $68 billion to $258 billion in personal property damages alone. That would not include the roads and bridges that were damaged, renovating and restoring waterways, ports, and other infrastructure.
As is always the case in an event like this one, the impact on the global supply chain could be significant. Lumber, plywood, and all types of construction materials will be in higher demand – just as the housing market was beginning to slow down and core construction materials were becoming more available for builders. This could reverse that trend and might create some additional tailwinds for US macroeconomic growth, especially in the construction and manufacturing sector.
But there is a downside. It could also slow down efforts to cool inflation and could keep the Federal Reserve guessing on how aggressive to be on interest rates, and if they tighten further because inflation remains hot, it might create additional threats for the rest of the country and impact housing activity in the process.
China’s Yuan Hits Lowest Levels Against the Dollar Since 2008
Currencies around the world are generally falling against the dollar as the US Federal Reserve hikes interest rates. The Chinese yuan has lost 10.7% against the dollar since the beginning of the year. But other currencies are losing even faster, the British pound is down 21% against the dollar and the Japanese yen is at 24-year lows.
The US supply chain is mixed between those sectors that are sitting on overstocked inventory to sales ratios, and those that are still well understocked. This strength in the dollar obviously helps any firms importing, but it is creating a hardship on those companies trying to export. That will hit some countries hard as they try to purchase critical staples like food, medicine, and energy, much of which is sourced heavily from the US. And this situation comes at a time when many areas of the world are facing drought or war-induced shortages of critical supplies.
The Federal Reserve is expected to hike rates two more times before the end of the year. In all, it has forecasted to take another 75 basis points in the next meeting and 50 basis points just before the end of the year.
TRANSPORTATION BRIEFING
Slight Improvement in Consumer Confidence
The Conference Board’s Measure of Consumer Confidence came in at 108.0, up from 103.6 in August. This was the second consecutive month that jobs, good wage growth, and some declining gasoline prices helped to improve sentiment. Consumers are coming to grips with the fact that the Federal Reserve is going to push them out of the housing market, and as a result, many showed interest in returning to durable goods purchases and big-ticket items like automobiles. For perspective, the current consumer confidence levels are stronger than those seen prior to 2017 but are still weaker than confidence levels (which ranged above 120 points) from 2017 to the start of the pandemic.
Jobs are still plentiful and that helps boost confidence. But there is still concern that inflationary pressures are impacting segments of the population. Statistics show that 3 in 5 Americans are living paycheck-to-paycheck and 70% are seeking extra work (overtime or secondary jobs) to make ends meet. A Bank of America survey showed that 71% of workers say that their pay is not keeping up with inflation. More than 20% are dipping into emergency savings to pay bills and 6% have gone to their 401K in hardship withdrawals.
Global Supply Chain Pressures Decelerating, But Still Historically High
The New York Federal Reserve’s Global Supply Chain Pressures Index decelerated further at the end of August (latest available), the index came in at 1.47, which is down from its peak of 4.31 in December of 2021. A reading below zero indicates that supply chain pressures are low and a typical range over the past 23 years has averaged -0.27. Said another way, the supply chain pressures index is currently 5 times higher than it was over the ten-year average.
The index measures everything from supplier deliveries around the world to available capacity and uses the distance from “normal” each of them is running. Right now, a larger percentage of the 22 metrics are running much more strained than normal, which is why the index is high. Again, it has been decelerating quickly – which indicates that pressures are easing at a faster rate. But they remain historically high which is something that we see as China and parts of Europe continue to go through environmental and geopolitical disruptions.
