Demonstrators rally in support of abortion rights at the US Supreme Court in Washington, DC, April 15, 2023.
Andrew Caballero-Reynolds | AFP | Getty Images
The Supreme Court on Friday ordered the abortion pill mifepristone to remain broadly available as litigation plays out in a lower court.
The high court’s decision came in response to an emergency request by the Department of Justice to block lower court rulings that would severely limit access to the medication even in some states where abortion remains legal.
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The case will now be heard in the U.S. 5th Circuit Court of Appeals. The appeals court has scheduled oral arguments for Wed., May 17 at 1 p.m. CT.
Mifepristone has become the flashpoint in the legal battle over abortion since the Supreme Court last summer overturned Roe v. Wade, the landmark 1973 decision that guaranteed abortion nationwide as a constitutional right.
Mifepristone, used in combination with another drug called misoprostol, is the most common method to terminate a pregnancy in the U.S., accounting for about half of all abortions.
President Joe Biden said the court’s decision keeps mifepristone available to women and FDA approved to terminate early pregnancies. Biden said his administration will fight to protect access to mifepristone in the ongoing legal battle in the 5th Circuit Court of Appeals.
“I continue to stand by [the Food and Drug Administration’s] evidence-based approval of mifepristone, and my administration will continue to defend FDA’s independent, expert authority to review, approve, and regulate a wide range of prescription drugs,” the president said.
Planned Parenthood President Alexis McGill Johnson said the reproductive health-care provider is relieved by the Supreme Court’s decision.
But McGill Johnson warned that access to mifepristone remains in jeopardy as the legal battle plays out in the appeals court.
“While mifepristone’s approval remains intact and it stays on the market for now, patients and health care providers shouldn’t be at the mercy of the court system,” McGill Johnson said. “Medication abortion is very much still under threat — as is abortion and access to other sexual and reproductive health care.”
Justices Samuel Alito and Clarence Thomas, both conservatives, opposed the court’s majority decision to grant the emergency request from the DOJ and Danco Laboratories, the distributor of the brand-name version of the drug, Mifeprex.
The DOJ and Danco, in their emergency requests, told the Supreme Court the restrictions imposed by the lower courts would effectively take mifepristone off the market for months as the FDA adjusted the medication’s labelling to comply with the orders. This would deny women access to an FDA-approved drug that is a safe alternative to surgical abortions, they argued.
Alito rejected that argument in his dissent. The justice said the FDA could simply use its enforcement discretion as the litigation played out and allow Danco to continue distributing mifepristone.
The court’s majority decision to maintain the status quo means mifepristone remains available by mail delivery, and women can obtain the prescription medicationwithout having to visit a doctor in person.
However, in the dozen states that have effectively banned abortion over the past year, the drug will remain largely unavailable. Other states also have restrictions in place that are much tighter than FDA regulations.
The national legal battle over mifepristone began with a lawsuit filed by a coalition of doctors who oppose abortion, the Alliance for Hippocratic Medicine. Those doctors sought to force the FDA to pull the medication from the U.S. entirely.
Earlier this month, U.S. District Judge Matthew Kacsmaryk ruled in favor of the antiabortion doctors and issued a sweeping order that would have halted sales of mifepristone nationwide.
Days later, the U.S. Fifth Circuit Court of Appeals blocked part of Kacsmaryk’s order and allowed Mifeprex to remain on the market. But the appeals court judges imposed restrictions on the medication that would severely limit access.
The appeals court blocked mail delivery of the drug, imposed doctors’ visits as a condition to get the medication, and reduced the length of time when women can take the pill to the seventh week of pregnancy.
The appeals court judges also suspended the 2019 approval of the generic version of mifepristone. The company that sells the generic version, GenBioPro, told the high court the majority of the nation’s supply of the medication would “disappear overnight” if the appeals court ruling went into effect.
GenBioPro said it supplies two-thirds of the mifepristone used in abortions in the U.S.
Employees prepare orders at ‘Wok to Walk’ restaurant in the Soho district in London, UK, on Friday, Sept. 30, 2022. UK retailers are facing a mortgage time bomb, with rising interest rates set to have twice the impact on consumer finances as the recent surge in utility bills, according to a Deutsche Bank analyst. Photographer: Jose Sarmento Matos/Bloomberg via Getty Images
Bloomberg | Bloomberg | Getty Images
For workers struggling with the soaring cost of living, the idea that rising wages are concerning has always seemed laughable. But they had some policymakers and economists worried last year.
Minutes from the U.S. Federal Reserve’s March 2022 meeting showed unease that “substantial” wage increases would fuel higher prices.
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In the U.K. the discussion was even more blunt, with Treasury officials publicly saying there was an inflationary risk from workers expecting wages to keep up with price rises. Bank of England Governor Andrew Bailey even went so far as to call for “restraint in pay bargaining” (and Germany’s finance minister made a similar plea).
The experts were worried about a so-called wage-price spiral. This occurs when workers expect inflation to keep rising, so demand — and achieve — higher salaries to keep up with price rises. Businesses then raise the prices of goods and services to cover higher labor costs, at the same time as workers have more disposable income to increase demand. This creates an inflationary loop, or in the language of economists, “second-round effects.”
This is argued to have happened in the 1970s, when inflation hit 23% in the U.K. and 14% in the U.S. in 1980.
But while concerns this time around aren’t totally gone, what’s being discussed more frequently now is the fact that a wage-price spiral has not occurred in the 18 months or so that inflation has been running red-hot in much of the world.
The European Central Bank’s March minutes, released Thursday, say wages have “had only a limited influence on inflation over the past two years.” Treasury Secretary Janet Yellen has also said she doesn’t see a wage-price spiral in the U.S.
And at the International Monetary Fund’s spring meetings session, the group’s chief economist, Pierre-Olivier Gourinchas, told CNBC it’s not something he is worried about in relation to the global economic growth outlook.
“What we’ve seen in the last year is prices rising very rapidly, but wages have not increased nearly as much, and that’s why we have a cost of living crisis,” Gourinchas said, after noting that core inflation remained high in many countries and in some cases was increasing.
“We should expect wages to catch up eventually and people’s real income to recover,” he said. Real income refers to wages adjusted for inflation, reflecting changes in purchasing power.
But the increase doesn’t present a risk because “the corporate sector has been sitting on pretty comfortable margins,” Gourinchas continued. Businesses’ revenues “have risen faster than costs, and so margins have room to absorb rising labor costs.”
The ECB’s March minutes say their analysis found the “increase in [corporate] profits had been significantly more dynamic than that in wages.”
There has also been increased discussion about how those corporate profits are contributing to inflation.
In a recent note, economists at ING looked at Germany, where inflation is increasingly a demand-side issue. While cautioning that so-called “greedflation” cannot be proven and there are variations by sector, they wrote that there are signs companies have been hiking prices ahead of the rise in their input costs, and that “from the second half of 2021 onward, a significant share of the increase in prices can be explained by higher corporate profits.” They call this a profit-price spiral.
The president of the Netherlands’ central bank, Klaas Knot, in December urged companies to raise wages for workers and said that 5%-7% pay rises in sectors that could afford it, combined with government energy bill support, would help balance the effects of inflation rather than fueling it.
Kristin Makszin, assistant professor of political economy at Leiden University, agrees. She told CNBC that while both wages and prices are rising, we can’t ignore external factors driving up wages (including the tight labor market) and prices (such as supply shortages).
“Since the Global Financial Crisis, wages have not recovered,” she said. In the U.S. for example, an annual wage increase of around 3.5% would be considered positive, accounting for 2% inflation and 1.5% productivity growth, but it has lagged behind this, Makszin said.
“It’s not that a wage-price spiral couldn’t happen, but it’s low on the list of concerns versus the factors we know are problematic,” she said. These include a potential downward low-wage-productivity spiral — when wages aren’t sufficient to get people back into the workforce or areas where they are needed, dampening productivity and therefore economic growth.
A key mechanism that would fuel a wage-price spiral, workers’ bargaining power, has been weakened because unions have less power than in the 1970s, Makszin added.
But with a tight labor market, people can just refuse to work — and that’s an area policymakers need to address, she said. “In sectors like U.S. hospitality, wages have increased dramatically, but that was correcting for many decades of low-paid work when labor was replaceable … it could be viewed as compensating for long-term wage stagnation,” she continued.
The country that is the “most vulnerable developed market economy” when it comes to a wage-price spiral is the U.K., according to Alberto Gallo, chief investment officer at Andromeda Capital Management.
Figures published this week showed U.K. wage growth slowed less than expected in the three months to March 2023, rising by 6.9% in the private sector and 5.3% in the public sector. Meanwhile, inflation remains above 10%, ahead of 7.8% in Germany and 5.3% in the U.S.
The risk, Gallo said, is from a mix of structural factors that contribute to stagflation. While low- and middle-income households are struggling with the soaring cost of food and other basics and higher rates are eroding people’s purchasing power in a highly-leveraged housing market, the central bank is actually keeping real rates — interest rates adjusted for inflation — at the most negative level in developed markets.
Meanwhile, the British pound is weak — and 50% of the country’s goods are imported — and foreign labor has been restrained by Brexit.
“We’re coming from a period where real wages have been stagnant for a long time and high inflation is finally pushing workers into strong renegotiations,” Gallo said. “But if you let interest rates go down against inflation and in effect weaken, you have an inflation spiral. Core goods [inflation] has come down but core services are not coming down,” Gallo said.
Richard Portes, professor of economics at London Business School, told CNBC there is “no serious risk” of a wage-price spiral in the U.K., U.S., or major European countries, however. He also cited reduced union power in the private sector as a notable change from the 1970s.
“If you look at core inflation in the U.S., rentals, housing, have been driving that. That’s got nothing to do with wages — with rentals, it’s more sensitive to interest rate rises,” he added.
There is evidence — including from the IMF — that wage-price spirals aren’t common. The IMF research found very few examples in advanced economies since the 1960s of “sustained acceleration” in wages and prices, with both instead stabilizing, keeping real wage growth “broadly unchanged.” As with so much in economics, the idea that wage-price spirals even exist has also been challenged.
For Kamil Kovar, an economist at Moody’s Analytics, the scenario was always seen as a risk, not necessarily likely. But he, too, said that as time progresses it has become clear that it is not happening.
Wages are likely to increase fairly rapidly for Europe, but there’s “so much scope for wages to catch up with prices, to get to a spiral situation we would need something totally different to happen,” he said. The ECB expects real wage growth of around 5% this year.
Real wages in Europe are so much lower than before the pandemic they could increase another 10% without going into a “danger zone,” Kovar said; while in the U.S. they are roughly equal but exiting the risky zone.
When comparing the current situation to the 1970s, Kovar said there were some similarities such as an energy shock; back then it was in oil, whereas this time it is bigger and broader, impacting electricity and gas too. There has also been a more rapid drop in energy prices as this shock has subsided.
And again, he noted the ongoing growth in corporate profits and the absence of powerful unions as yet more factors for why this time it’s different.
“It’s an example of how we are slaves to our historical parallels,” he said. “We potentially overreact even if the underlying situation is different.”
Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company, and Adam Crisafulli, Vital Knowledge Media president and founder, join ‘Closing Bell: Overtime’ to discuss how investors can approach the volatile market after a week of big earnings.
Homes in Centreville, Maryland, US, on Tuesday, April 4, 2023.
Nathan Howard | Bloomberg | Getty Images
Sales of previously owned homes declined 2.4% in March compared with February, according to a monthly report from the National Association of Realtors.
At a seasonally adjusted, annualized rate, that amounts to 4.4 million units. Sales were 22% lower than March of last year.
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The weakness is likely due to a sharp jump in mortgage interest rates. With home prices still historically high, today’s buyers are increasingly sensitive to even daily moves in mortgage rates. The March sales were likely based on contracts signed in January and February, when rates were volatile.
The average rate on the popular 30-year fixed mortgage started January around 6.45%, and briefly dropped below 6% by the end of the month, according to Mortgage News Daily. But things turned around sharply in March, with the rate jumping straight back up to 6.45% in the first week of March and then continuing higher to end the month at 6.85%.
“Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” said Lawrence Yun, chief economist for the NAR. “Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market.”
Supply did increase slightly, but it is still historically low. At the end of March, there were 980,000 homes for sale, an increase of 1% from February and 5.4% from March 2022. At the current sales pace, that represents just a 2.6-month supply. A six-month supply is considered a balanced market between buyer and seller.
Inventory is now 41% lower than pre-Covid pandemic levels in 2019. New listings were down 17% from March 2022. The reason supply is higher is simply because homes are staying on the market longer, an average 29 days compared with 17 days a year ago.
That tight supply is keeping home prices from cooling quite as much as some had predicted. The median price of an existing home sold in March was $375,700, down 0.9% year over year. That is, however, the weakest read since January 2012. Regionally, prices rose everywhere but in the West, where homes are most expensive.
That median price also indicates that more homes are selling on the lower end of the market. Sales of homes priced over $1 million were down 29% from March 2022, but sales of homes priced between $250,000 and $500,000 declined by a smaller 14%.
“Affordability is not only an issue for first-time homebuyers, but also for many repeat buyers who still need to take on a mortgage,” said Danielle Hale, chief economist for Realtor.com, noting that a recent survey by the home listing site showed that 82% of potential sellers needing to sell and buy felt “locked in” by their existing low mortgage rate.
“This suggests that both existing home supply and demand will be sensitive to mortgage rate changes,” added Hale.
Cash continues to be king in the market, with all-cash transactions making up 27% of March sales, down slightly from 28% in February, but still higher than historical norms. Investors made up 17% of buyers, lower than the 25% share seen last summer. First-time buyers made up 28% of sales, down from 30% the year before. Historically that share is closer to 40%.
“High home prices and higher mortgage rates are clearly presenting challenges,” Yun said on the first-time buyer share.
Correction: Sales of homes priced between $250,000 and $500,000 declined by 14%. An earlier version misstated the range.
The banking turmoil of March, which saw the collapse of several regional U.S. lenders, will lead to a credit crunch for “small-town America,” according to veteran strategist David Roche.
Earnings reports last week indicated that billions of dollars of deposit outflows from small and mid-sized lenders, executed amid the panic, were redirected to Wall Street giants — with JPMorgan Chase, Wells Fargo and Citigroup reporting massive inflows.
“I think we’ve learned that the big banks are seen as a safe haven, and the deposits which flow out of the small and regional banks flow into them (big banks), but we’ve got to remember in a lot of key sectors, the smaller banks account for over 50% of lending,” Roche, president of Independent Strategy, told CNBC’s “Squawk Box Europe” on Thursday.
“So I think, on balance, the net result is going to be a further tightening of credit policy, of readiness to lend, and a contraction of credit to the economy, particularly to the real economy — things like services, hospitality, construction and indeed small and medium-sized enterprises — and we’ve got to remember that those sectors, the kind of small America, small-town America, account for 35 or 40% of output.”
Central banks in Europe, the U.S. and the U.K. sprang into action to reassure that they would provide liquidity backstops, to prevent a domino effect and calm the markets.
Roche, who correctly predicted the development of the Asian crisis in 1997 and the 2008 global financial crisis, argued that, alongside their efforts to rein in sky-high inflation, central banks are “trying to do two things at once.”
“They’re trying to keep liquidity high, so that the problems of deposit withdrawals and other problems relating to mark-to-market of assets in banks do not cause more crises, more threats of systemic risk,” he said.
“At the same time, they’re trying to tighten monetary policy, so, in a sense, you’ve got a schizophrenic personality of every central bank, which is doing with the right hand one thing and doing with the left hand the other thing.”
He predicted that this eventually results in credit tightening, with fear transmitting to major commercial banks that receive fleeing assets and “don’t want to be caught up in a systemic crisis” and will be more cautious on lending.
Roche does not anticipate a full-scale recession for the U.S. economy, although he is convinced that credit conditions are going to tighten. He recommended investors should take a conservative approach against this backdrop, parking cash in money market funds and taking a “neutral to underweight” position on stocks, which he said were at the “top of the crest” of their latest wave.
“We will probably go down from here, because we will not get rapid cuts in interest rates from central banks,” he said.
Investors assume long positions by buying assets whose value they expect to increase over time. Short positions are held when investors sell securities they do not own, with the expectation of purchasing them at a later date at a lower price.
Despite commodities not yielding much this year, Roche is sticking to long calls on grains, including soya, corn and wheat.
“Beyond the geopolitical risks which are still there, the supply and demand balances for those products looking out five years is very good,” he said.
Sue Trinh, co-head of global macro strategy at Manulife Investment Management, discusses the outlook for the banking sector, saying that there are few indicators for a widespread banking crisis.
David Roche, president of Independent Strategy, discusses how recent turmoil in the banking sector may feed through to tighter credit conditions in the real economy, and how investors should position.
Nitin Chexal of Palladius Capital Management says the U.S. economy is generally “robust” and “very healthy,” though there are short-term headwinds to deal with.
The United States is the only advanced economy that does not guarantee paid time off.
“You have entire cultures like France … where pretty much everybody takes August off, and it’s just part of the culture there,” said Shawn Fremstad, director of law and political economy at the Center for Economic and Policy Research. “You don’t really see that here in the United States.”
France provides a minimum of 30 paid vacation days per year. What’s more, many European countries have paid holidays as well, giving workers there even more paid days off.
“When I came to France, I noticed that vacation is a way of life,” said Fatima Cadet-Diaby, an American who has been living in Paris for nearly seven years. “People are constantly talking about their vacations.”
More vacation time could also equate to overall economic gains in the U.S.
Even though a majority of Americans do have some kind of paid time off, nearly half of workers report not using all of those days. About half worry they might fall behind on their work if they take time off, with close to 20% thinking it could hurt their career growth and 16% saying they fear losing their job, according to data from the Pew Research Center.
“There’s a certain fear we don’t have any legal protections and people have been fired for taking vacation time,” said John de Graaf, author of the book “Take Back Your Time.”
Watch the video above to learn more about why American’s aren’t going on vacation even though they have the days off and what we can learn from our counterparts in France.
House Speaker Kevin McCarthy (R-CA) speaks at a rally marking the 100th day of Republican control of the House in Washington D.C. on April 17, 2023.
Nathan Posner | Anadolu Agency | Getty Images
WASHINGTON — House Speaker Kevin McCarthy, R-Calif., on Wednesday released his plan to raise the debt ceiling by $1.5 trillion for about a year while attempting to repeal major components of President Joe Biden’s agenda.
McCarthy said the bill, called the Limit, Save, Grow Act of 2023, would save American taxpayers more than $4.5 trillion by limiting discretionary spending, retrieving unspent pandemic-related funds, eliminating Biden’s student loan forgiveness plan and cutting funds earmarked for the Internal Revenue Service.
The cuts would be in exchange for a one-year debt ceiling increase. McCarthy called on Biden and Senate Majority Leader Chuck Schumer, D-N.Y., to “sit down, negotiate and address this crisis” but he did not mention whether the bill has enough support to pass. Biden has refused to negotiate over the debt limit. Extraordinary measures to avoid the first-ever U.S. sovereign debt default are on track to run out this summer.
“Now that we’ve introduced a clear plan for a responsible debt limit increase, they have no more excuse and refuse to negotiate,” McCarthy said.
McCarthy did not say when he would bring the bill to a vote in the House. It still wasn’t clear whether he had support within his own caucus to pass the bill. “I never give up, we’ll get them,” he told NBC News on Wednesday.
Even if the House GOP passes it, the Democratic-controlled Senate would likely kill the measure.
McCarthy’s announcement comes after days of speculation about the GOP proposal to temporarily raise the debt limit for certain cutbacks, such as a stall on non-defense discretionary spending.
The House speaker also doubled down on proposals for stricter work requirements for adults without dependents, the repeal of “Biden’s army of 87,000 IRS agents” and the president’s student loan forgiveness program, which could be killed by the Supreme Court. Justices are expected to rule on the student loan program by early summer.
McCarthy also argued the measures will protect Social Security and Medicare by driving more people into the workforce to pay for it. Yet Democrats say it will hurt millions.
“Speaker McCarthy’s proposal is not about jobs,” Rep. Frank Pallone, D-N.J., ranking member of the House Energy and Commerce Committee, said after McCarthy’s announcement. “It is a Trojan Horse intended to use red tape and onerous paperwork to kick millions of people off their health insurance because Republicans do not believe in our nation’s social safety net. Republicans are creating a debt crisis to justify these cruel plans.”
Republicans’ narrow majority in the House means McCarthy can only afford to lose a handful of GOP votes given Democrats’ opposition.
“Let me be clear, this proposal is dead on arrival,” Pallone said on Wednesday.
The White House has maintained it will not negotiate on the debt ceiling and that Congress should pass a clean increase and address any budgetary concerns separately. White House press secretary Karine Jean-Pierre on Wednesday said the administration was aware of McCarthy’s plans to release a proposal but condemned it as playing politics around something that is Congress’s “duty.”
Biden also took on McCarthy’s strategy Wednesday. “MAGA Republicans in Congress are threatening to default on the national debt, the debt that took 230 years to accumulate overall, unless we do what they say,” the president said in a speech in Maryland.
Gerry Fowler, head of European equity strategy at UBS, discusses the radical rotations in stock markets and how investors can position themselves in the current climate of economic uncertainty.
Ben Gutteridge, director of model portfolio services at Invesco, discusses the outlook for bank stocks ahead of earnings season and balancing bond and equity investments in the current market.
The banking sector turmoil that led to the collapse of several lenders was not a systemic crisis and has now subsided, according to Tim Adams, CEO of the Institute of International Finance.
The fall of Silicon Valley Bank in early March — the largest banking failure since the global financial crisis — triggered a wave of market panic that swept through the sector in Europe and the U.S.
Markets have since stabilized, leading many to conclude that the problems were unique to the stricken banks and do not pose a systemic risk. However, the ripple effect has dented the economic outlook in many advanced economies.
Speaking to CNBC on the sidelines of the International Monetary Fund Spring Meetings in Washington D.C. on Tuesday, Adams said the March chaos was a “period of market turmoil or turbulence,” but dismissed the notion that it was a “crisis.”
“We have over 4,000 banks in the United States, we have about 10,000 banks globally that are part of SWIFT and 35,000 financial institutions around the world — 99.999% of them opened their doors over the past month and had no problems whatsoever — [it’s] really just a few isolated idiosyncratic institutions,” Adams told CNBC’s Joumanna Bercetche.
“So I think it is not a crisis, I think it was market turbulence, it has subsided, it has stabilized, but we need to be vigilant and we need to watch for other stresses in the system.”
The IIF is a global trade body for the financial services industry, with around 400 members in more than 60 countries. Adams said the primary concern among members was the downside risk to growth, particularly in advanced economies.
The IMF on Tuesday lowered its five-year global growth forecast to around 3%, marking the lowest medium-term forecast in an IMF World Economic Outlook report since 1990.
The D.C.-based institution’s Chief Economist Pierre-Olivier Gourinchas told CNBC on Tuesday that the turmoil in the banking sector had weakened the growth outlook, especially in the face of rapid monetary policy tightening from central banks that have sharply increased lenders’ funding costs and increased vulnerabilities.
“There are risks, there are geopolitical risks which we can talk about, but the downside risks are real and we just don’t know how deep they are,” Adams said.
“The Fed’s going to probably tighten again, we have other central banks in Europe and the U.K. tightening, so there are risks to the downside.”
Regulators in the U.S. and Europe took swift action to quash contagion risk in the face of the various banking collapses last month. However, U.S. Treasury Secretary Janet Yellen asserted on Tuesday that the banking system remains well capitalized, with ample liquidity.
Adams suggested many of the regulators he had spoken to, including those involved in developing the Dodd Frank and Basel III frameworks in the aftermath of the financial crisis, did not believe major regulatory changes were necessary this time around.
“It’s a very different system than [what] was prevailing in 2007, 2008. I do think we need to better understand what went wrong at certain institutions like SVB, I think we do need to ask what happened to supervision, but I don’t think we’re going to see regulatory changes,” he added.
Pills of Misoprostol, used to terminate early pregnancies, are displayed in a pharmacy in Provo, Utah, May 12, 2022.
George Frey | Reuters
New York and California are stockpiling massive quantities of an alternative abortion medication in case a federal judge’s order suspending the Food and Drug Administration’s approval of the main drug mifepristone goes into effect later this week.
New York Gov. Kathy Hochul on Tuesday ordered the state health department to immediately start purchasing 150,000 doses of misoprostol, a five-year supply of the pill. Hochul’s announcement comes a day after Gov. Gavin Newsom said California has secured 2 million pills of misoprostol.
Medication abortions are the most common way to terminate a pregnancy the U.S. Patients typically use a two drug-regimen in which mifepristone is taken first, followed by misoprostol. The second pill is used as a standalone abortion medication in parts of the world.
Misoprostol is FDA approved to treat gastric ulcers, so it will remain on the market if U.S. District Judge Matthew Kacsmaryk’s order suspending mifepristone takes effect at 12 a.m. central time on Saturday.
“One judge in Amarillo, Texas thinks he knows better than thousands of doctors and scientists and experts. And not to mention the countless women who’ve used this medication safely for decades,” Hochul said during a press conference with Planned Parenthood’s New York chapter Tuesday.
“This isn’t just an attack on abortion, it’s an attack on democracy. Courts have never before revoked a science backed decision made by the FDA,” the governor said.
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Hochul said she is working with New York’s legislature to require private insurers to cover misoprostol when it is prescribed off-label for abortions.
The World Health Organization and the American College of Obstetricians and Gynecologists recommend misoprostol as a standalone abortion medication when the two-drug regimen is not available. But misoprostol is not as effective when it is used on its own, according to obstetricians and gynecologists.
The FDA has approved the two-drug abortion regimen through the 10th week of pregnancy. Mifepristone stops the pregnancy from developing further by blocking a hormone called progesterone. Misoprostol induces contractions that empty the uterus.
Patients take 200 milligrams of mifepristone by mouth on day one, and then take 800 micrograms of misoprostol in the cheek pouch 24 to 48 hours later, according to the FDA’s label.
Tatjana Puhan, deputy chief investment officer at Tobam, discusses the outlook for stock markets and investors’ reaction to recent developments, including the banking crisis.
Only two months ago, SL Green & Co. chief executive Marc Holliday was sounding happy. The head of New York’s biggest commercial landlord firm told Wall Street analysts that traffic to the company’s buildings was picking up, and more than 1 million square feet of space was either recently leased or in negotiations. The company’s debt was down, it had finished the structure for its 1 Madison Avenue tower in Manhattan, and local officials had just completed an extension of commuter rail service from Long Island to Green’s flagship tower near Grand Central Station.
“We are full guns blazing,” Holliday said on the quarterly earnings call, with workers headed back to offices after a pandemic that rocked developers as more people worked from home, raising the question of how much office space companies really need any more. “We can hopefully …continue on a path to what we think will be a pivot year for us in 2023.”
Then Silicon Valley Bank failed, and Wall Street panicked.
Shares of developers, and the banks that lend to them, dropped sharply, and bank shares have stayed low. Analysts raised concerns that developers might default on a big chunk of $3.1 trillion of U.S. commercial real estate loans Goldman Sachs says are outstanding. Almost a quarter of mortgages on office buildings must be refinanced in 2023, according to Mortgage Bankers’ Association data, with higher interest rates than the 3 percent paper that stuffs banks’ portfolios now. Other analysts wondered how landlords could find new tenants as old leases expire this year, with office vacancy rates at record highs.
How much an office crash could hurt the economy
There are reasons to think the road ahead will be rocky for the real estate industry and banks that depend on it. And the stakes, according to Goldman, are high, especially if there is a recession: a credit squeeze equal to as much as half a percentage point of growth in the overall economy. But credit in commercial real estate has performed well until now, and it’s far from clear that U.S. credit issues spreading outward from real estate is likely.
“There’s a lot of headaches about calamity in commercial real estate,” said Kevin Fagan, director of commercial real estate analysis at Moody’s Analytics. “There likely will be issues but it’s more of a typical down cycle.”
The vacancy rate for office buildings rose to a record high 18.2% by late 2022, according to brokerage giant Cushman & Wakefield, topping 20 percent in key markets like Manhattan, Silicon Valley and even Atlanta.
But this year’s refinancing cliff is the real rub, says Scott Rechler, CEO of RXR, a closely-held Manhattan development firm. Loans that come due will have to be financed at higher interest rates, which will mean higher payments even as vacancy rates rise or remain high. Higher vacancies mean some buildings are worth less, so banks are less willing to touch them without tougher terms. That’s especially true for older, so-called Class B buildings that are losing out to newer buildings as tenants renew leases, he said. And the shortage of recent sales makes it hard for banks to decide how much more cash collateral to demand.
“No one knows what is a fair price,” Rechler said. “Buyers and sellers have different views.”
What the Fed has said about commercial real estate
Federal Reserve officials up to and including Chair Jerome Powell have stressed that the collapse of Silicon Valley Bank and Signature Bank were outliers whose failures had nothing to do with real estate – Silicon Valley Bank had barely 1 percent of assets in commercial real estate. Other banks’ exposure to the sector is well under control.
“We’re well aware of the concentrations people have in commercial real estate,” Powell said at a March22 press conference. “I really don’t think it’s comparable to this. The banking system is strong, it is sound, it is resilient, it’s well capitalized.”
The commercial real estate market is a bigger issue than a few banks which mismanaged risk in bond portfolios, and the deterioration in conditions for Class B office space will have wide-reaching economic impacts, including the tax base of municipalities across the country where empty offices remain a significant source of concern.
But there are reasons to believe lending issues in commercial real estate will be contained, Fagan said.
The first is that the office sector is only one part of commercial real estate, albeit a large one, and the others are in unusually good shape.
Vacancy rates in warehouse and industrial space nationally are low, according to Cushman and Wakefield. The national retail vacancy rates, despite the migration of shoppers to online shopping, is only 5.7%. And hotels are garnering record revenue per available room as both occupancy and prices surged post-Covid, according to research firm STR. Banks’ commercial real estate lending also includes apartment complexes, with rental vacancies rates at 5.8 percent in Federal Reserve data.
“Market conditions are fine today, but what develops over the next two to three years could be pretty challenging for some properties,” said Ken Leon, who follows REITs for CFRA Research.
Still, most debt coming due in the next two years looks like it can be refinanced, Fagan said.
That’s one of the reasons Rechler has been drawing attention to the issues. It shouldn’t sneak up on the market or economy, and it should be manageable with the loans spread out across their own maturity ladder.
About three-fourths of commercial real estate debt generates enough income to pass banks’ recent refinancing standards without major changes, Fagan said. Banks have been extending credit using a rule of thumb that a property’s operating income will be at least 8% of the loan every year, though other experts claim a 10% test is being applied to some newer loans.
To date, banks have had virtually no losses on commercial real estate, and companies are showing little need to default either on loans to banks or rent payments to office building owners. Even as companies lay off workers, the concentration of job losses among big tech employers, in Manhattan, at least, means that tenants have no trouble paying their rent, S.L. Green said.
Bank commercial mortgage books
Take Pittsburgh-based PNC Financial, or Cincinnati-based Fifth Third, two of the biggest regional banks.
At PNC, the $36 billion in commercial mortgages on the books of the bank is a small fraction of its $557 billion in total assets, including $321.9 billion in loans. Only about $9 billion of loans are secured by office buildings. At Fifth Third, commercial real estate represents $10.3 billion of $207.5 billion in assets, including $119.3 billion in loans.
And those loans are being paid as agreed. Only 0.6% of PNC’s loans are past due, with delinquencies lower among commercial loans. The proportion of delinquent loans fell by almost a third during 2022, the bank said in federal filings. At Fifth Third, only $10 million of commercial real estate loans were delinquent at year-end.
Or take Wells Fargo, the nation’s largest commercial real estate lender, where credit metrics are excellent. Last year, Wells Fargo’s chargeoffs for commercial loans were .01 of 1 percent of the bank’s portfolio, according to the bank’s annual report. Writeoffs on consumer loans were 39 times higher. The bank’s internal assessment of each commercial mortgage’s loan’s quality improved in 2022, with the amount of debt classified as “criticized,” or with a higher-than-average risk of default even if borrowers haven’t missed payments, dropping by $1.8 billion to $11.3 billion
“Delinquencies are still lower than pre-pandemic,” said Alexander Yokum, banking analyst at CFRA Research. “Any credit metric is still stronger than pre-pandemic.”
Wall Street is worried
The riposte from Wall Street is that the good news on loan performance can’t last – especially if there is a broader recession.
In a March 24 report, JPMorganChase bank analyst Kabir Caprihan warned that 21% of office loans are destined to go bad, with lenders losing an average of 41% of the loan principal on the failures. That produces potential writedowns of 8.6%, Caprihan said, with banks losing $38 billion on office mortgages. But it is far from certain that so many projects would fail, or why value declines would be so steep.
RXR’s Rechler says that market softness is showing in refinancings already, in ways banks’ public reports don’t yet reveal. The real damage is showing up less in late loans than in the declining value of bonds backed by commercial mortgages, he said.
One sign of the tightening: RXR itself, which is financially strong, has advanced $1 billion to other developers whose banks are making them post more collateral as part of refinancing applications. Rechler dismissed rating agencies’ relatively sanguine view of commercial mortgage backed securities, arguing that markets for new CMBS issues have locked up in recent weeks and ratings agencies missed early signs of housing-market problems before 2008’s financial crisis.
The commercial mortgage-backed bond market is relatively small, so its short-term issues are not major drivers of the economy. Issuance of new bonds is down sharply – but that began last year, when fourth-quarter deal volume fell 88 percent, without causing a recession.
CMBS issuance
Loan type
Q1 2022
Q1 2023
Conduit
$7.9B
$2.3B
SASB
$19.1B
$2.7B
Large loan
$442.6M
$13.1M
CRE CLO
$15.3B
$1.5B
Total
$42.8B
$6.5B
Source: Trepp
“The statistics don’t reflect where it’s going to come out as regulators take a harder look,” Rechler said. “You’re going to have to rebalance loans on even good properties.”
Wells Fargo has tightened standards, saying it is demanding that payments on refinanced loans take up a smaller percentage of a building’s projected rent and that only “limited” exceptions will be made to the bank’s credit standards on new loans.
Without a deep recession, though, it’s not clear how banks’ and insurance companies’ relatively diversified loan portfolios get into serious trouble.
The primary way real estate could cause problems for the economy is if an extended decline in the value of commercial mortgages made deposits flow out of banks, forcing them to crimp lending not just to developers but to all customers. In extreme cases, that could threaten the banks themselves. But if developers continue to pay their loans on time and manage refinancing risk, MBS owners and banks will simply get paid as loans mature.
Markets are split on whether any version of this will happen. The S&P United State REIT Index, which dropped almost 11% in the two weeks after Silicon Valley Bank failed, has recovered most of its losses, down 2% over the past month and remains barely positive for the year. But the KBW Regional Banking Index is down 14% in the last month, even though deposit loss has slowed to a trickle.
The solution will lie in a combination of factors. The amount of loans that come up for refinancing drops sharply after this year, and new construction is already slowing as it does in most real estate downturns, and loan to value ratios in the industry are lower than in 2006 or 2007, before the last recession.
“We feel like there’s going to be pain in the next year,” Fagan said. “2025 is where we see our pivot toward a [recovery] for office.”
Abortion rights advocates gather in front of the J Marvin Jones Federal Building and Courthouse in Amarillo, Texas, on March 15, 2023.
Moises Avila | AFP | Getty Images
A federal judge in Texas on Friday suspended the Food and Drug Administration’s approval of the abortion pill mifepristone nationwide, but delayed the ruling from taking effect for a week to give the Biden administration time to appeal.
But minutes after the Texas decision was announced, a federal judge in Washington state issued a preliminary injunction that said essentially the opposite.
The seemingly conflicting federal court rulings out of Texas and Washington state means the Supreme Court may ultimately weigh in on the legality of mifepristone in the U.S., which was approved by the FDA more than two decades ago in 2000.
Used in combination with another drug called misoprostol, mifepristone is the most common method to terminate a pregnancy in the U.S., accounting for about half of all abortions.
U.S. Judge Matthew Kacsmaryk of the U.S. Northern District of Texas held a key hearing in the case weeks ago in Amarillo, but the news of the decision that could upend access to the key abortion drug only came down late on a Friday when many Americans were off for religious observances.
Kacsmaryk endorsed nearly all of the plaintiffs’ arguments about their right to sue, which called for the removal of the FDA’s approval of the drug. He argued mifepristone has serious safety issues, sidelining the FDA’s long-standing determination that the drug is safe and effective.
“The Court does not second-guess FDA’s decision-making lightly,” Kacsmaryk wrote. “But here, FDA acquiesced on its legitimate safety concerns — in violation of its statutory duty — based on plainly unsound reasoning and studies that did not support its conclusions.”
But in a dramatic turn, Judge Thomas Owen Rice of the U.S. District for the Eastern District of Washington essentially countered the Texas decision, when he barred the FDA from “altering the status quo and rights as it relates to the availability of mifepristone” in the 17 states and D.C. that sued to keep pill on the market there.
Boxes of the medication Mifepristone used to induce a medical abortion are prepared for patients at Planned Parenthood health center in Birmingham, Alabama, March 14, 2022.
Evelyn Hockstein | Reuters
U.S. Attorney General Merrick Garland said Kacsmaryk’s ruling in Texas “overturns the FDA’s expert judgment, rendered over two decades ago, that mifepristone is safe and effective.” Garland said the Justice Department will appeal the Texas ruling and defend the FDA approval.
The case will go to the U.S. 5th Circuit Court of Appeals. If the Biden administration fails to convince that court to overturn Kacsmaryk’s ruling, access to mifepristone would be in jeopardy across the U.S.
But the ruling out of Washington state may protect access at least in Arizona, Colorado, Connecticut, Delaware, Illinois, Michigan, Nevada, New Mexico, Oregon, Rhode Island, Vermont, Hawaii, Maine, Maryland, Minnesota, Pennsylvania, Washington state and D.C.
Kacsmaryk’s decision will not affect access to misoprostol, which is commonly used as a standalone abortion drug in other parts of the world. Some abortion providers have said they plan to use misoprostol as an alternative to the two-drug regimen if mifepristone is pulled from the market.
A coalition of physicians opposed to abortion, called the Alliance for Hippocratic Medicine, sued the FDA in November over its approval of mifepristone. The group argued that the FDA abused its authority by approving mifepristone through an accelerated process for new drugs that help patients with serious or life-threatening illnesses more than what is otherwise available on the market.
Kacsmaryk embraced the group’s claims Friday, arguing that pregnancy is not an illness and mifepristone does not provide a meaningful therapeutic benefit over surgical abortion.
The anti-abortion physicians were represented by attorneys from the Alliance Defending Freedom, an organization that worked with Mississippi lawmakers to draft the law at the center of Dobbs v. Jackson Women’s Health Organization. That case ultimately resulted in the Supreme Court overturning Roe v. Wade.
Kacsmaryk joined the court in 2019 after his appointment by former President Donald Trump. Kacsmaryk’s nomination was unanimously opposed by Senate Democrats as well as Republican Susan Collins of Maine, who supports abortion rights.
His nomination was also opposed by abortion and LGBTQ rights organizations such as Planned Parenthood and the Human Rights Campaign.
The FDA called the case “extraordinary and unprecedented” in its January response to the lawsuit. The agency’s lawyers said they could not find any previous example of a court second-guessing an FDA decision to approve a drug.
The agency also said mifepristone was not approved under an accelerated pathway. It took more than four years from the filing of the initial application until the pill was approved.
The FDA approved mifepristone as a safe and effective method to terminate an early pregnancy based on extensive scientific evidence, the agency’s lawyers wrote. Decades of experience among thousands of women have confirmed that the drug regimen is the safest option for many patients compared with surgical abortion or childbirth, the lawyers argued.
The FDA warned that pulling mifepristone from the U.S. market would put the health of women at risk if they cannot get access to the pill to safely end pregnancies. It would also weaken the FDA’s federal drug approval powers and hinder drug development by creating regulatory uncertainty in the marketplace, the government’s lawyers have said.
“If longstanding FDA drug approvals were so easily enjoined, even decades after being issued, pharmaceutical companies would be unable to confidently rely on FDA approval decisions to develop the pharmaceutical-drug infrastructure that Americans depend on to treat a variety of health conditions,” the Biden administration lawyers wrote.
Mifepristone has been subject to FDA restrictions since its approval in 2000 to monitor the pill’s safety and efficacy. These restrictions have been subject to criticism and litigation from medical associations such as the American College of Obstetricians and Gynecologists and more recently from attorneys general in Democratic- led states.
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The FDA has gradually eased the restrictions on mifepristone over the years as more evidence has come in. The agency dropped previous rules that required in-person visits with medical professionals, allowing the pill’s delivery by mail. The FDA recently allowed certified retail pharmacies to dispense mifepristone when the patient has a prescription from a health-care provider that’s approved under the agency’s monitoring program.
Misoprostol, the drug that’s used with mifepristone, is recommended as a stand-alone method to terminate a pregnancy by the World Health Organization. But the FDA has not approved misoprostol as an abortion medication on its own.
The American College of Obstetricians and Gynecologists recommends misoprostol as an alternative for early abortions if mifepristone is not available, though it’s not as effective as the two-drug regimen, according to the organization.
“If you have these features in your home already, you should definitely flaunt them in your listing description,” said Amanda Pendleton, Zillow’s home trends expert. “That is going to set you ahead of the competition.”
The real estate website evaluated 271 design terms and features included in almost 2 million home sales in 2022. Those that came out on top may add up to about $17,400 on a typical U.S. home.
Two chef-friendly features topped the list of those that helped sell homes for more — steam ovens, which helped push prices up 5.3% over similar homes without them, and pizza ovens, which increased prices by 3.7%.
Other features that rounded out the top 10 included professional appliances, which had price premiums of 3.6%; terrazzo, 2.6%; “she sheds,” 2.5%; soapstone, 2.5%; quartz, 2.4%; a modern farmhouse, 2.4%; hurricane or storm shutters, 2.3%; and mid-century design, 2.3%,
Zillow also looked at which features helped sell homes faster than expected.
Doorbell cameras topped that list, helping to sell homes 5.1 days faster. That was followed by soapstone, with a 3.8 day advantage; open shelving, 3.5; heat pumps, 3; fenced yards , 2.9; mid-century, 2.8; hardwood, 2.4; walkability, 2.4; shiplap walling or siding, 2.3; and gas furnaces, 2.3.
To be sure, homeowners should not necessarily add these features with the idea they will see sale premiums, Pendleton said.
Moreover, some more unique features — like she sheds, spaces dedicated specifically to female home dwellers and their hobbies — may make it so it takes a bit longer to find a buyer who appreciates the amenities.
However, the features are signals of perceived qualify a buyer associates with a nice home right now.
“These personalized features kind of add that wow factor to a home,” Pendleton said.
The current housing market is “anything but traditional,” Pendleton notes.
For buyers, there’s not as many listings to choose from as homeowners do not want to give up their ultra-low interest rates, she noted.
“Homes that are well priced and well marketed are going to find a buyer very quickly today,” Pendleton said.
Existing homeowners are now more likely to be thinking of different ways to re-envision their space, according to Jessica Lautz, deputy chief economist at the National Association of Realtors.
Personalized features kind of add that wow factor to a home.
Amanda Pendleton
home trends expert at Zillow
“There are a lot of people who want to remodel because they are locked into low interest rates and have no intention of leaving their property,” Lautz said.
At the top of homeowners’ wish lists are ways to maximize the square footage of their home, Lautz said, such as basement remodels or attic or closet conversions. Adding home offices is also very popular as people continue to live hybrid lifestyles.
Some improvements also stand to provide a 100% or more return when a home is put on the market.
The top of that list includes hardwood floor refinishing, according to Lautz, which not only makes a home look more beautiful but also makes it more marketable.
“It brings a lot of joy, and it has a lot of bang for the buck when you go to sell your home,” Lautz said.
Putting in new wood flooring or upgrading the home’s insulation also tend to provide returns of 100% or more, she said.
Zillow’s research found certain features may actually hurt a home’s resale value. That includes tile countertops or laminate flooring or countertops. Walk-in closets may also negatively impact a home’s value, as buyers may prefer to use the space for other purposes.
NEW YORK, NEW YORK – MARCH 15: Traders work on the floor of the New York Stock Exchange during morning trading on March 15, 2023 in New York City.
Michael M. Santiago | Getty Images
Short sellers were sitting on more than $7 billion in profit from the mass sell-off of bank shares by the end of March, their largest windfall since the global financial crisis in 2008, according to data firm Ortex.
Short selling is the practice of borrowing an asset and selling it on in the hope of buying it back at a lower price, pocketing the difference and profiting from the decline of its value.
Hedge funds shorting bank stocks were sitting on a total of $7.25 billion in unrealized gains over the course of the month, according to Ortex.
“ORTEX data shows that March was the single most profitable month for short sellers in the banking sector since the 2008 financial crash,” company co-founder Peter Hillerberg said Thursday.
Those with short bets against the failed SVB topped the pile with unrealized profits totaling more than $1.32 billion, according to the data. Fellow California-based bank First Republic netted short sellers almost $848 million as its shares sank 89% over the course of the month.
Credit Suisse’s capitulation made those with short positions against the bank’s Swiss-listed stock around $610 million in unrealized profit in March, Ortex data showed, with a combined $683.6 million generated from shorts on both its Swiss- and U.S.-listed shares.
Deutsche stock yielded an unrealized $39.9 million for short sellers in March.
“The shares on loan in DBK went up by 496% during March, much of this at the end of the month when the price of the stock went up, which caused some of the profits for short sellers to be lost,” Ortex said, adding that it estimates that just over 5% of the bank’s free-float shares are currently shorted.
Bloated warehouse inventories are an expensive pressure eating away at the bottom line of many companies, and for many, the excess supply and associated costs of storage won’t abate this year, according to a new CNBC Supply Chain Survey.
Just over one-third (36%) said they expect inventories to return to normal in the second half of this year, with an equal percentage expecting the gluts to last into 2024 — 21% saying a return to normal can occur in the first half of the year, and another 15% expecting normal activity by the first half of 2024. But uncertainty about inventory management is significant, with almost one-quarter (23%) of supply chain managers saying they are not sure when gluts will be worked off.
“We don’t expect significant decreases in inventory levels within our network in 2023,” said Paul Harris, vice president of operations for WarehouseQuote. “Several of our manufacturing clients are experiencing dead/bloated inventory challenges due to over-ordering in the container grid-lock from prior quarters. A majority have elected to keep the inventory on hand and are opposed to liquidating.
A total of 90 logistics managers representing the American Apparel and Footwear Association, ITS Logistics, WarehouseQuote, and the Council of Supply Chain Management Professionals, or CSCMP, participated in the survey between March 3-21 to provide information on their current inventories and the biggest inflationary pressures they are facing, and often passing on to the consumer.
What’s sitting in warehouses, and what companies are doing about it
Logistics experts tell CNBC that 20% of their excess inventory sitting in warehouses is not seasonable in product nature. Slightly more than half of survey participants said they would keep the items in warehouses. But a little over one-quarter (27%) said they are selling on the secondary market because inventories impact a company’s bottom line through elevated storage prices.
Harris told CNBC many clients with perishable goods are selling them on secondary markets to avoid destroying products. “However, if asecondary market is not an option, they are forced to destroy the product,” he said. “If it’s a consumable, they are donating the goods to take tax deductions.”
Investors are worried about the earnings and margin trends and expect Wall Street to revise estimates lower. The supply chain pressures will be among the factors that weigh on quarterly numbers.
“Inventory carrying costs continue to rise, driven by inflationary pressures and late shipments,” said Mark Baxa, CEO of CSCMP. “This means that with every day that passes, three things are happening … growing sales risk, margin pressure, and D&O [deteriorated and/or obsolete].”
Almost half surveyed said the biggest inflationary pressures they are paying are warehouse costs, followed by the “other” category, which includes rent and labor.
ITS Logistics told CNBC that many clients across industries have been using ocean containers, rail containers and 53-foot trailers for storage because distribution centers were full.
“These charges will start materializing in Q2 or Q3 financial results,” said Paul Brashier, vice president of drayage and intermodal at ITS Logistics.
The survey found 50% of respondents saying the average length of time they are using ocean containers for storage is over four months.
“We are seeing similar trends in our data and ecosystem,” Brashier said.
More inflation costs going to the consumer
Traditionally, warehousing costs and the associated labor costs are passed on to the consumer, increasing or sustaining the price of a product. Nearly half (44%) of survey respondents said they are passing on at least half of their increased costs, if not more, to consumers.
“It’s clear that supply chain challenges and all their associated costs continue to stir inflationary pressures,” said Stephen Lamar, president and CEO of the American Apparel and Footwear Association. “Given ongoing inventory concerns and the fragile nature of our logistics system, there are other pressures and uncertainty.”
His group is calling for West Coast port labor negotiations to be quickly finalized and for the government to “aggressively remove other cost pressures,” a reference to Section 301 tariffs on Chinese imports, which he said continue to make supply chains more expensive.
Manufacturing orders and the economic outlook
Recent data on manufacturing has shown a deterioration in the economy, with the ISM Manufacturing index in contraction level based on March data released this week. The U.S. services sector slipped closer to contraction in March, according to the ISM Services Index, with sharp declines in new orders, exports and price.
Looking at the health of manufacturing orders for the next three months, 40% of logistics managers surveyed said they are not cutting orders, while a little under one-fifth (18%) said they are cutting orders by 30%.
Inventory levels and consumer consumption are two factors influencing manufacturing orders.
These orders help gauge China GDP as it reopens from its strict Covid protocols, since the country relies on manufacturing and trade for its economic growth.
FreightWaves SONAR intelligence shows a slight uptick in ocean freight orders and recovery from the massive drop ahead of Lunar New Year, but the longer trend line remains a decrease in ocean bookings.
The inventory glut is affecting trucking logistics in multiple ways. Not only are trucks moving fewer containers from the ports, they are also moving less from the warehouses to the retail stores. Data from Motive, which tracks trucking visits to North American distribution facilities for the top five retailers by volume, shows a drop in truck visits from warehouses.
“The decline in visits to retail warehouses indicates weakness in consumer demand, but surprisingly may also be a sign of recovery in the supply chain,” said Shoaib Makani, founder and CEO of Motive. “With lead times to replenish inventory reduced from 2021 and 2022 highs, retailers are burning off existing inventories with the confidence that they will be able to replenish quickly.”
Even with orders increasing, the inventory headwinds are a source of concern for logistics experts.
“This survey confirms that we remain in an era of serious supply chain cost-to-serve challenges,” Baxa said. “Warehousing costs are contributing to these challenges that shippers are facing today and on the road ahead.”
FreightWaves and ITS Logistics are CNBC Supply Chain Heat Map data providers.
