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This Week In The Economy: Booster Shots For Elderly, At-Risk Americans, Fed Divided Over Future Interest Rate Policy, German Manufacturing’s Bottleneck Recession, Diverging Global Monetary Policy

This Week In The Economy: Booster Shots For Elderly, At-Risk Americans, Fed Divided Over Future Interest Rate Policy, German Manufacturing’s Bottleneck Recession, Diverging Global Monetary Policy

This Week In The Economy: Booster Shots For Elderly, At-Risk Americans, Fed Divided Over Future Interest Rate Policy, German Manufacturing’s Bottleneck Recession, Diverging Global Monetary Policy

US CDC, FDA Authorize Pfizer Vaccine Booster Shots For Elderly, At-Risk Populations

The U.S. Food and Drug Administration this week amended its emergency use authorization for the Pfizer-BioNTech COVID-19 vaccine to allow for a single booster dose, to be administered at least six months after completion of the primary series in:

  • individuals 65 years of age and older;
  • individuals 18 through 64 years of age at high risk of severe COVID-19; and
  • individuals 18 through 64 years of age whose frequent institutional or occupational exposure to the coronavirus puts them at high risk of serious complications of COVID-19 including severe COVID-19.

This authorization applies only to the Pfizer vaccine.

The Centers for Disease Control’s Advisory Committee on Immunization Practices’ (ACIP) met this week but only recommended a booster shot for the elderly and those with pre-existing conditions. However, CDC Director Rochelle Walensky went one step further, and endorsed the FDA’s decision to include those who are at risk because of their jobs (i.e. healthcare workers) to the list.

“I believe we can best serve the nation’s public health needs by providing booster doses for the elderly, those in long-term care facilities, people with underlying medical conditions, and for adults at high risk of disease from occupational and institutional exposures to COVID-19,” she said in a statement.

“This aligns with the FDA’s booster authorization and makes these groups eligible for a booster shot. Today, ACIP only reviewed data for the Pfizer-BioNTech vaccine. We will address, with the same sense of urgency, recommendations for the Moderna and J&J vaccines as soon as those data are available,” Walensky added.

Also this week, Pfizer announced the results from a Covid-19 vaccine Phase 2/3 trial showing “a favorable safety profile and robust neutralizing antibody responses” in children aged 5 to 11 years. The two-dose regimen was administered 21 days apart, and is a smaller dose than that administered for people 12 and older.

The pharmaceutical company said it plans to submit its data to the FDA, European Medicines Agency (EMA) and other regulators as soon as possible. For the U.S., the data will be part of Pfizer’s near-term request for Emergency Use Authorization by the FDA for this age group.

“A request to the EMA to update the EU Conditional Marketing Authorization is also planned,” it said, adding that “Topline readouts for the other two age cohorts from the trial — children 2–5 years of age and children 6 months to 2 years of age — are expected as soon as the fourth quarter of this year.”

On the sidelines of the United Nations General Assembly this week, the U.S. and European Union announced a joint agenda to ramp up global vaccination efforts. The U.S. will donate over 1.1 billion doses, and the EU will donate over 500 million doses, with a priority on sharing through COVAX and improving vaccination rates in low and lower-middle income countries.

They will also:

    Support and coordinate with relevant organizations for vaccine delivery, cold chain, logistics, and immunization programs to translate doses in vials into shots in arms.
  • Support vaccine and therapeutic manufacturing and distribution and overcome supply chain challenges.
  • Support the establishment of a Financial Intermediary Fund by the end of 2021 and will support its sustainable capitalization.
  • Coordinate investments in regional manufacturing capacity with low and lower-middle income countries, and align efforts to bolster local vaccine manufacturing capacity in Africa and forge ahead on discussions on expanding the production of COVID-19 vaccines and treatments and ensure their equitable access.

As part of this effort, the U.S. government this week expanded its agreement with Pfizer to provide an additional 500 million doses of its COVID-19 vaccine at a not-for-profit price for donation to low- and lower-middle-income countries and the organizations that support them.

The government will allocate doses of the vaccine to 92 low- and lower-middle-income countries as defined by COVAX and the member states of the African Union. Deliveries of the initial 500 million doses began in August 2021, and the total one billion doses under the expanded agreement are expected to be delivered by the end of September 2022.

On the domestic front, alarm bells are sounding over the accelerating rate of hospitalizations caused by COVID-19, and the growing burden on the healthcare system.

Meanwhile, the vaccination rate continues to plateau.

The CDC reported that as of September 23rd, 469,561,625 total doses of the COVID-19 vaccine have been distributed to states. Of this week’s overall number, 387,821,704 shots have been administered. Of the doses administered, 212,564,346 Americans have received at least one shot (64% of the entire population), and 182,587,334 have been fully vaccinated (55%).

Worldwide, 6,064,353,860 doses have now been administered, but there remains a divide between the haves and have-nots:

Globally, there have now been 230,626,180 confirmed cases of COVID-19, with 4,729,129 fatalities. The U.S. now has 42,984,540 confirmed cases, and there have been 690,152 fatalities.

India has 33,593,492 confirmed cases. Of that number, 306,369 are active and there have been 446,399 fatalities. The data shows 46.7% of India’s population has received at least one jab of the COVID-19 vaccine, and 16.4 are fully vaccinated.

Brazil remains in third place with 21,308,178 cases at time of writing — 395,694 active and 592,964 deaths. The United Kingdom are up to fourth with 7,565,867 cases and 135,803 fatalities.

Russia is in fifth place with 7,376,374 confirmed cases —599,493 active and 202,273 deaths. France is sixth with 6,977,722 cases and 116,371 fatalities.

Turkey is in seventh place with 6,932,453 cases — of that number 458,670 are active and 62,307 dead. Iran is now in eighth place with 5,508,885 cases — 492,217 active and 118,792 deaths.

Argentina is ninth with 5,245,198 cases — 27,882 active and 114,684 deaths. Colombia is tenth with 4,946,811 confirmed cases, 34,292 active and 126,032 fatalities.

Federal Reserve Inching Closer to Rolling Back Asset Purchase Program, Divided Over Interest Rate Policy

The Federal Reserve’s policymaking Federal Open Market Committee met this week, and indicated it may soon be time to slow down the pace of its $120 billion a month bond-buying program.

“With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen,” the FOMC said, noting that the sectors most adversely affected by the pandemic have improved in recent months.

The Committee decided to keep its target short-term interest rate unchanged, saying it will do so until “labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time. “

As for its asset purchase program —buying $80 billion a month of Treasury securities and $40 billion per month of mortgage-backed securities — the FOMC said it has seen significant gains on the jobs and inflation front.

“If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted,” it said.

“While no decisions were made, participants generally view that, so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate,” Fed Chair Jerome Powell told reporters during a press conference after the meeting.

The FOMC also published its quarterly Summary of Economic Projections, which captures Fed officials predictions for economic growth, employment, inflation, and the future path of interest rates.

While there is an unanimous belief that there will be no interest rate hike this year, the picture is less clear for 2022. According to the SEP, the FOMC is evenly split (9–9) between those that believe interest rates should remain unchanged next year, and those who expect to begin raising rates. There is a stronger consensus, however, that monetary policy will begin to tighten in 2023.

Powell said the decision to raise interest rates has “a different and substantially more stringent test.”

“More important than any forecast is the fact that policy will remain accommodative until we have achieved our maximum employment and price stability goals,” he said.

Officials downgraded their expectations for GDP growth this year — +5.9% vs June’s forecast of +7%, but are a bit more upbeat about 2022 (+3.8% vs June’s forecast of +3.3%). Their outlook for the unemployment rate is now 4.8% this year (they predicted 4.5% in June), and see it falling to 3.8% in 2022.

Consumer prices are now projected to increase by 4.2% (up from their 3.4% expectation in June) this year, before slowing down to 2.2% in 2022.

US Data Roundup: U.S. Housing Market Activity Slows Down

The Census Bureau reported this week that new home sales rose by 1.5% in August compared to July, but is 24.3% below August 2020. The median sales price of new houses sold in August 2021 was $390,900. The average sales price was $443,200. The estimated supply of new houses for sale at the end of August was 378,000. This represents a supply of 6.1 months at the current sales rate.

Meanwhile, the National Association for Realtors reported that home resales dropped 2% from July to August. The inventory of unsold homes decreased 1.5% to 1.29 million from July to August — equivalent to 2.6 months of supply. The median existing-home sales price was $356,700, rising at a year-over-year pace of 14.9%.

The NAR blamed higher prices, boosted by limited housing inventory, for the slower pace of housing market activity.

On the supply front, the Census Bureau in a separate report said applications in August for permits to build privately‐owned housing units were 6% above the July rate, and 13.5% above August 2020. However, building permits issued for single-family homes were only up 0.6%.

Actually ground-breaking on construction of private homes was up 3.9% last month, and +17.4% vs. a year ago. Once again, however, single‐family housing starts disappointed — down 2.8% from July.

Completions of privately‐owned housing completions in August were 4.5% below July, but 9.4% above August 2020. Single‐family housing completions in August were 2.8% above July.

Supply Chain Disruptions Negatively Impacting German Economy

The ifo Institute warned this week that Germany’s manufacturing sector “is experiencing a bottleneck recession.”

The ifo Business Climate Index fell from 99.6 points in August to 98.8 points in September. This is the third consecutive fall.

“Companies were less satisfied with their current business. They were also more skeptical about the coming months. Problems in the procurement of raw materials and intermediate products are putting the brakes on the German economy,” ifo said.

The manufacturing sector drives Europe’s largest economy, and the ifo report noted that Companies were noticeably less satisfied with their current business — a level of negative sentiment not seen since the COVID-19 outbreak and resulting lockdowns in March 2020. “Order books are still relatively full, but order intake is leveling off,” ifo said.

Exports are another key pillar of Germany’s GDP growth, and ifo said that when it comes to trade, businesses’ “pessimism concerning the coming months grew somewhat,” with “a large majority of businesses reported supply problems with their orders.”

Central Bank Roundup: Divergence in Global Monetary Policy Begins

The Bank of England’s Monetary Policy Committee met this week and voted unanimously to keep its target interest rate unchanged. The MPC cautioned, however, that “some modest tightening of monetary policy” might be needed in the future to be consistent with meeting the inflation target sustainably in the medium term. “Some developments during the intervening period appear to have strengthened that case, although considerable uncertainties remain,” it added.

The Bank of Japan left its monetary policy unchanged at its meeting this week, noting the “high uncertainties over the consequences of COVID-19 and their impact on domestic and overseas economies. It is also monitoring the effect of the pandemic on businesses’ and households’ medium- to long-term growth expectations, and financial system stability. “For the time being, the Bank will closely monitor the impact of COVID-19 and will not hesitate to take additional easing measures if necessary, and also it expects short- and long-term policy interest rates to remain at their present or lower levels,” the BoJ said.

Brazil’s Central Bank this week announced an increase in its target interest rate to 6.25%. “The Committee judges that this decision reflects its baseline scenario for prospective inflation, a higher-than-usual variance in the balance of risks, and is consistent with the convergence of inflation to its target over the relevant horizon for monetary policy, which includes 2022 and, to a lesser extent, 2023. Without compromising its fundamental objective of ensuring price stability, this decision also implies smoothing of economic fluctuations and fosters full employment,” it said.

Sweden’s Riksbank left interest rates unchanged and maintained its asset purchase program, saying “monetary policy needs to remain expansionary for inflation to be lastingly close to the target going forward.” The central bank said the target interest rate is expected to remain at zero until the third quarter of 2024. The Riksbank also expects its securities purchases to be more or less unchanged during 2022.

Turkey’s Central Bank chose to cut interest rates this week, saying “the tightness in monetary stance has started to have a higher than envisaged contractionary effect on commercial loans ... Accordingly it is judged that a revision in monetary policy stance is needed and the policy rate was decided to be reduced.”

Bank Indonesia’s Board of Governors kept its interest policy unchanged, saying the decision was consistent with the need to maintain exchange rates and financial system stability “amid projected low inflation and efforts to revive economic growth.”

South Africa’s Reserve Bank maintained its target interest rate this week, noting that COVID-19 is “only one of a series of current risks to the economic recovery that include rising inflation, weaker commodity export prices, and the longer term impact of scarring from the pandemic and the July unrest.” However, it predicted an interest rate increase of 25 basis points in the fourth quarter of 2021 and further increases in each quarter of 2022 and 2023.

Norway’s Norges Bank announced a rate hike this week, saying “a normalising economy suggests that there is no longer a need to maintain the current degree of monetary accommodation.” It also cited the need to tamp down on the build-up of financial imbalances as another reason for higher interest rates. The rise in the policy rate will be gradual, the central bank said, given the uncertainty surrounding the effects of higher interest rates. Still, “based on the Committee’s current assessment of the outlook and balance of risks, the policy rate will most likely be raised further in December,” it added.

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