Irma update | Market impacts | Poultry industry | Europe ‘tax equalization’ proposal | Car industry
— Irma weakens. After making landfall in the Florida Keys Sunday morning as a Category 4 storm, Hurricane Irma weakened as it traveled through the state’s west coast, with the latest reports downgrading it to a Category 1 storm with top winds of 85 miles per hour. Estimates for the total damage have dropped to $49 billion from as high as $200 billion. For the Federal Reserve, the storms that have battered the southern United States are making it more difficult to read the economy’s pulse, with William Dudley, president of the New York Fed, warning that it could affect the timing of short-term rate increases.
Source: Goldman Sachs Economics Research, with data from Goldman Sachs Investment Research and National Hurricane Center. *Preliminary estimate: Assumes $85 billion in damage.
— Financial markets rally. The less-severe-than-anticipated developments in Florida and North Korea (no new missile launch) over the weekend spurred a market rally this morning, with the dollar recovering from a 2015 low, while Treasuries and gold weakened. Overnight, the MSCI Asia Pacific Index gained 0.6%, while Japan’s Topix index closed 1.2% higher amid a selloff in the yen. In Europe, the Stoxx 600 Index was 0.9% higher in early trading, while S&P 500 futures added 0.6%.
— Oil markets rally. Amid worries that energy demand would be hit hard by Hurricane Irma and its aftermath, crude prices are trading higher on Saudi oil talk. The world’s largest producer said it discussed the possibility of extending the supply cut between OPEC and non-OPEC members with Venezuela and Kazakhstan (the current pact is due to expire in March 2018).
— Irma in perspective, from Associated Press Science Writer Seth Borenstein:
- “Irma’s assault — so soon after Harvey’s deluge of Houston — marked the first time the U.S. was hit by two Category 4 storms in the same year.”
- “Irma hit the Sunshine State as a big wide beast, though not quite the monster it once was shaping up to be.”
- “Winds dropped to a quite potent 115 mph ... by the time Irma made landfall on Marco Island, on the Florida peninsula, still a major and dangerous hurricane yet not near its 185 mph ... former self when it set a record Tuesday for the most powerful storm in the open Atlantic.”
- “Irma would probably have hit Florida as a Category 5 hurricane if it had missed Cuba.”
- “Irma avoided what could have been its most destructive paths along the Florida peninsula — over Miami and the heavily developed Atlantic seaboard. Still, at about 400 miles ... wide, it raked much of the state.”
- “Florida’s west coast has about $1 trillion in property at risk to a storm, compared to $1.5 trillion on the east.”
- “Irma [may] go down as one of the five costliest hurricanes in U.S. history, but not up with the top three of 2005’s Hurricane Katrina, 2012’s Sandy and this year’s Harvey. Still ... it will be grouped with two other South Florida storms: 1992’s Andrew and 2005’s Wilma.”
— Poultry industry urges end of line-speed limit on bird processing. The U.S. chicken industry has petitioned the Food Safety and Inspection Service (FSIS) to lift the speed limit on bird processing lines for some plants. Processing lines face a 140-bird-per-minute limit, but the National Chicken Council (NCC), in a petition dated Sept. 1 but made public on Friday, asked for an exemption for plants that opt into the New Poultry Inspection System (NPIS), a more rigorous food safety inspection program.
NCC wants participating plants to be given “the flexibility to choose to operate at appropriate line speeds based on their ability to maintain process control,” according to the petition, which was addressed to Carmen Rottenberg, acting deputy undersecretary for food safety. To qualify for the exemption, the petition suggests plants also be required to take part in the Salmonella Initiative Program and establish a system for monitoring and responding to loss of process control.
Faster speeds will not endanger workers and would help maintain efficiency in light of increased inspection, the industry petition noted. It also said the change would incentivize more plants to participate in NPIS and serve to eliminate competitive barriers between the U.S. and international chicken producers. Any speed increases would primarily occur in areas of processing plants largely automated. “There are multiple safeguards in place to ensure plants continue to operate in compliance with federal worker safety requirements, regardless of the line speed at which they operate,” NCC said.
— Europe ‘tax equalization’ push. France, Germany, Italy and Spain want digital multinationals like Google, Amazon and Apple to be taxed in Europe based on their revenues, rather than only profits. The nations’ finance ministers have written to the EU’s president and Commission to produce an “equalization tax” that would make companies pay the equivalent of the corporate tax in the countries where they earn revenue.
— Mega-trend changes in car industry ahead. A growing movement to eventually ban traditional fuel cars has received a boost from China. The country is developing a timetable to end gas and diesel auto sales, but it hasn’t delineated a timeframe like the U.K. and France, which will ban the vehicles by 2040. Chinese-owned carmaker Volvo confirmed in July that all its new car models would have an electric motor from 2019.
Meanwhile, Mercedes-Benz will offer electric versions of all its models by 2022, according to parent company Daimler, which said it would similarly convert its Smart city car brand to become fully electric. Daimler’s R&D chief also announced that spending on R&D needs to increase going forward, while the automaker disclosed a new cost saving plan with a target of €4B.
