Member Briefing April 11, 2024
CPI = 3.5%, Hotter Than Expected and Dampening Talk of Rate Cuts
The consumer price index accelerated at a faster-than-expected pace in March, pushing inflation higher and likely dashing hopes that the Federal Reserve will be able to cut interest rates anytime soon. The CPI, a broad measure of goods and services costs across the economy, rose 0.4% for the month, putting the 12-month inflation rate at 3.5%, or 0.3 percentage point higher than in February, the Labor Department’s Bureau of Labor Statistics reported Wednesday. Economists surveyed by Dow Jones had been looking for a 0.3% gain and a 3.4% year-over-year level.
Core CPI, which excludes food and energy, also accelerated 0.4% on a monthly basis while rising 3.8% from a year ago.
Energy rose 1.1% after climbing 2.3% in February, while shelter costs, which make up about one-third of the weighting in the CPI, were higher by 0.4% on the month and up 5.7% from a year ago. Expectations for shelter-related costs to decelerate through the year have been central to the Fed’s thesis that inflation will cool enough to allow for interest rate cuts.
Food prices increased just 0.1% on the month and were up 2.2% on a year-over-year basis. There were some big gains within the food category, however. The measure for meat, fish, poultry and eggs climbed 0.9%, pushed by a 4.6% jump in egg prices. Butter fell 5% and cereal and bakery products declined by 0.9%. Food away from home increased 0.3%.
Elsewhere, used vehicle prices fell 1.1% and medical care services prices rose 0.6%.
Commodities Rally Reflects a Better Economy, but Also Poses Inflation Risks
A surge in prices for the raw materials that power manufacturing and transportation shows investors betting on a prolonged expansion—and a potential rebound in inflation. An index of global commodities prices, the S&P GSCI, has advanced 12% this year, outpacing the S&P 500’s 9.1% climb. Copper and oil have gained more than 10% and 17%, respectively. Even gold is posting fresh records, rising 13% to $2,332 a troy ounce. The rally is rooted in expectations that economic growth will increase demand from the U.S. and China, analysts said. A pair of reports last week showing recoveries in both countries’ manufacturing sectors helped spark a fresh wave of buying. That extended an upswing that has boosted shares of energy and materials companies while threatening to lift the price of gasoline just ahead of summer driving season.
The rally reverses an 18-month-long slide from the highs reached after Russia’s invasion of Ukraine sent prices of oil, natural gas, grains and industrial metals skyrocketing. A gloomy U.S. economic outlook including an expected recession, higher interest rates and a Chinese economy struggling to recover from Covid-era lockdowns all dragged on futures in the subsequent months.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- France, Egypt, Jordan Jointly Call for ‘Unconditional’ Gaza Cease-Fire – Politico
- Hamas Says it Does Not Have 40 Israeli Hostages to Trade in Cease-Fire Deal – The Hill
- Facial Recognition Part of Israel’s Arsenal in Gaza War – Marketplace
- Israeli Airstrike Kills Three Sons of Hamas Political Leader
- As Palestinians Trickle Back to Khan Younis, They Find Destruction - WSJ
- A First Glimpse of Khan Younis, a Gaza City Now Lying in Ruins - NPR
- UN Security Council Refers Palestinian Application to Become Full UN Member to Committee - Reuters
- ‘There Is No Joy:’ Palestinians Mark Eid in Destroyed Mosques and Homes - CNN
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
Ukraine
- Ukraine and Russia: The Latest News – The Guardian
- The Russian Glide Bombs Changing the Face of the War in Ukraine – The Independent
- Ukraine, UK Ink Deal on Arms Production – WIONews
- Switzerland to Host Ukraine Peace Summit on June 15-16 -Russia Will Not Attend - Reuters
- EU Court Removes Russian Oligarchs Fridman, Aven from Sanctions List – Politico
- Russian Billionaire Wins Legal Case Against EU Sanctions - WSJ
- Zelenskyy Warns Russia has Penetrated US Politics, Invites Trump to Ukraine – Politico
- Zelenskyy Blasts Scholz’s Reason for not Sending German Taurus Missiles - Politico
- Interactive Map: Assessed Control of Terrain in Ukraine – Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Other Headlines
- China's Xi Says Nobody Can Stop 'Family Reunion' With Taiwan - Reuters
- Canada May Face Another ‘Catastrophic’ Wildfire Season—After Historic Blazes Covered U.S. In Smoke - Forbes
- Explosion at Enel Hydroelectric Plant Kills at Least Three - WSJ
- Seems Very Precise: Two Years Left to “Save the World,” U.N. Climate Chief Warns
- Microsoft to Invest $2.9bn in Japan Data Centers Amid AI Boom – Nikkei Asia
- Hunger, Disease Spread Amid Southern Africa Drought – New Humanitarian
- Fitch Cuts China's Ratings Outlook on Growth Risks - Reuters
- WFP Chief McCain Calls on World Not to Forget Sudan, Other Countries Amid Focus on Gaza – The Hill
- U.S. Seeks to 'Integrate' Japan Into Defense Industrial Base – Nikkei Asia
Policy and Politics
Still No State Budget. Another Extender Expected Today as Housing and Medicaid Talks Continue
It’s been more than a week since the April 1 deadline and it seems we will have to wait a bit longer. New York state Senate Majority Leader Andrea Stewart-Cousins updated reporters on where negotiations stand Tuesday and described things as being at the "beginning of the end" but with no session scheduled Wednesday, lawmakers will return Thursday to pass another extender, signaling the process won't be wrapped up fully for at least several days. “We expect the extender to be passed on Thursday and we will continue to work until it is done,” she said.
As for what is holding things up, it’s no surprise that housing tops the list. From building incentives to tenant protections, dozens of ideas are on the table. Stewart-Cousins emphasized that the complexity of a deal that brings together all stakeholders is a challenge. Also ongoing are conversations about Medicaid, with disagreements over how to boost revenue to avoid cuts. “We had put tax increases on the table, and as you know the governor has said that is not something she would entertain,” she said. As for retail theft, Stewart-Cousins assured small business owners that the issue was a priority but did not elaborate on what that could mean when it comes to increased penalties.
Japan’s Kishida State Visit: US, Japan Push for Closer Ties to Counter China
President Biden huddled with Japanese Prime Minister Fumio Kishida as the two leaders sought to strengthen their security ties in the Pacific as a counterweight to China. With Biden welcoming Kishida to the White House on Wednesday, the two countries outlined plans to upgrade U.S.-Japanese military cooperation amid concerns about North Korea’s nuclear program and China’s effort to extend its influence across the Pacific.
In a joint news conference, Kishida said he and Biden had “nurtured a friendship and a trust” and the nations were “at the forefront in maintaining and strengthening a free and open international order based on the rule of law.” U.S. officials said ahead of the meeting that the U.S. and Japan would bolster their military ties—changing the U.S. military-force structure in Japan and working more closely with a new joint Japanese command. The two countries also will look for ways in which they can co-produce weapons and tap in to Japan’s industrial strength.
Johnson Sits Down With Greene Amid GOP Infighting of FISA, Foreign Aid
Rep. Marjorie Taylor Greene (R-Ga.) met with Speaker Mike Johnson (R-La.) Wednesday after a bubbling feud in recent weeks over government funding and Ukraine aid. Greene warned Johnson that she would push for his ouster, but he pushed back that it would create “chaos in the House.” Greene left the meeting saying the two did not reach a deal that would help avert an ouster. The razor-thin GOP House majority has been reeling since the chaotic appointing and then ousting of former Rep. Kevin McCarthy (R-Calif.). Johnson emerged as a late compromise candidate, but his efforts to work with the majority Democrat Senate and the Democrat-controlled White House and others have soured Greene and other allies.
“We didn’t walk out with a deal. I explained to him that, and he acknowledged, that as a Republican member of the House, I pretty much have the best view of how the base feels and what Republican voters want,” Greene told reporters outside of Johnson’s office. The Georgia lawmaker has expressed increasing frustration over Johnson’s handling of several issues, including government funding and aid for Ukraine in its war against Russia.
Health and Wellness
6 Ways Workplace Leaders Can Bridge Generational Divides in Mental Health Support
In today’s diverse workforce, Chief Human Resources Officers (CHROs), HR, and People leaders encounter unparalleled challenges. With five generations contributing—Gen Z, Millennials, Gen X, Baby Boomers, and the Silent Generation—this blend is a new phenomenon in our modern economy. Creating a workplace culture that emphasizes support, understanding, and empathy demands that HR and People leaders consistently recognize the unique perspectives of each generation, including the intimate challenges they face.
Managing this fifth-generation diversity necessitates a heightened awareness of each generation’s distinct personality traits and perspectives on mental health. HR and People leaders must adeptly navigate and accommodate these differences. In fostering a workplace that embraces equality and inclusivity across generations, it’s crucial to grasp each cohort’s diverse and sometimes conflicting characteristics. Each generation brings its own set of strengths, weaknesses, and expectations regarding mental health support into the workplace. Here are six things to consider.
Election 2024
- Democrats Exploring Options for Joe Biden to Make Ohio Ballot – Columbus Dispatch
- Arizona Ruling on Abortion Roils Senate Race – The Hill
- Trump Backed a Federal Abortion Ban as President. Now, He Says He Wouldn't Sign One - NPR
- Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
The Baltimore Bridge Disaster, Two Weeks On: What You Need to Know
The Dali cargo ship’s fatal collision with Baltimore’s Francis Scott Key Bridge two weeks ago made headlines around the world, leaving the public and businesses baffled at how something like this could happen and wondering how to stop it from happening again. Ever since the initial shock of the bridge collapse left businesses scrambling, experts have emphasized one message: visibility and flexibility are key. The seemingly endless bombardment of supply chain issues of the past five years marks a new reality in the logistics landscape.
Among U.S. ports, the Port of Baltimore ranks ninth for total foreign cargo value, handling $80.8 billion last year, according to Maryland Governor Wes Moore. Manufacturing is closely intertwined with both global and domestic supply chains, and the ramifications of this port closure are still unfolding. On the business side, the biggest news is the expected repercussions on the auto industry. Port of Baltimore records indicate it has handled more cars and light trucks than any other domestic port for the past 13 years. Farm vehicles and machinery are other big areas of impact due to the port’s roll on/roll off capabilities. Here’s what we know two weeks later and how it may impact you.
DOJ Opens Formal Investigation of U.S. Steel Takeover
The Justice Department has opened up an in-depth antitrust investigation of Nippon Steel’s $14.1 billion takeover of U.S. Steel, according to two people with direct knowledge of the matter. The move escalates U.S. government scrutiny of the controversial deal, which has drawn fire from lawmakers, labor unions and others who argue the storied U.S. industrial titan should not be owned by a foreign company — even one based in Japan, one of America’s closest allies. It also follows a preliminary antitrust review previously reported by POLITICO.
Ostensibly, the antitrust scrutiny is separate from concerns about U.S. Steel’s potential foreign ownership, and is instead focused in part on a large manufacturing plant in Calvert, Alabama, jointly owned by Nippon Steel and Luxembourg-based ArcelorMittal. That plant competes directly with U.S. Steel, particularly for automotive customers. DOJ attorneys have been talking with industry participants, asking questions about how the joint venture would compete with a combined Nippon Steel and U.S. Steel, said the people, who were granted anonymity to discuss a confidential matter.
$8M Grant Will Double Auto Capacity at Port of Baltimore’s Only Unaffected Terminal
During a visit Friday to the scene of the Francis Scott Key Bridge collapse, President Joe Biden announced $8 million in federal funding to double the automotive shipping capacity at the Port of Baltimore’s only unaffected terminal. The funding for the expedited paving of 10 acres of new parking lots “will allow Sparrows Point to take on more ships,” the president said.
It’s critical near-term capacity for the Port of Baltimore, the nation’s busiest seaport for automotives, light trucks and other roll-on/roll-off cargo. The port’s shipping channel is expected to fully reopen by the end of May, according to an Army Corps of Engineers timeline. Tradepoint expects to welcome six scheduled and nine redirected ships carrying 10,000 automobiles in the meantime. Five acres at the terminal have been set aside for storage of the mangled bridge material, according to the company.
Read more at Trucking Drive
Machine Tool Orders Up in February, But Down Significantly from a Year Ago
U.S. machine shops and other operators of machining and cutting technology purchased $343.3 million worth of new capital equipment during February, +2.3% more than during January but well below (-26.5%) the total for February 2023. The number of units sold fell from 1,572 machines for January to 1,480 ordered during February. The two-month total for 2024 U.S. manufacturing technology orders is $679.6 million, which is -16.9% lower than last year’s January-February result. The figures are supplied by AMT - the Assn. for Manufacturing Technology in its latest U.S. Manufacturing Technology Orders report. AMT acknowledged that 2024 orders are below forecast expectations, but also appear weak in comparison to the very strong level of activity during Q1 2023.
Of note, AMT pointed to continuing decreased order volumes from contract machining operations (job shops), which represent the largest segment of the market for manufacturing technology. February marked only the second time since September 2021 for those buyers to decrease their orders while overall activity was increasing. Meanwhile, larger manufacturing businesses in market segments like the aerospace and energy sectors have continued to increase their capital investments.
Read more at American Machinist
LTL and Truckload Rates Hold Steady
The second quarter (Q2) 2024 release of the TD Cowen/AFS Freight Index expects LTL and truckload rates to remain steady, consistent with trends established since Q2 of last year. In parcel, the index shows the effect of fuel surcharge increases and other accessorial changes to drive net rate growth in Q1 and Q2 2024, despite limited overall demand. “While truckload and LTL markets are largely a continuation of established trends, parcel carriers have unleashed a wave of key pricing changes to raise revenue,” says Tom Nightingale, CEO of AFS, in a statement. “After significant discounting to compete for falling package volumes last year, UPS and FedEx have deployed accessorial charges as more covert tools to increase yields, with changes to fuel, demand and delivery area surcharges targeted to boost revenue.”
Since the 2024 GRI announcements, UPS and FedEx have increased fuel surcharges three times, boosted demand surcharges and expanded the delivery area surcharge (DAS) to more ZIP codes.
Read more at Material Handling & Logistics
Small Businesses are Under Siege from Cyberattacks
Cyberattacks against businesses have been on the rise for years, and most of the companies that get targeted are not big, multinational corporations with armies of tech workers. Most are small. In fact, more than 40% of small businesses fell victim to a cyberattack last year. And a lot of those businesses don’t have a big IT team or a financial cushion to deal with an attack.
One report out of the U.K. found that more than half of the country’s small businesses that were hit with a cyberattack didn’t survive. The reason: The costs of a cyberattack can be staggering. If a data breach happens, a small business can expect to pay, on average, about $3 million, according to a study from IBM. But the real cost is much higher.
Aetna, Other Insurers Will Start Covering Weight Loss Drug Wegovy for Heart Conditions
CVS Health's Aetna, Elevance Health and Kaiser Permanente will pay for Wegovy to reduce heart attack risk in patients with cardiovascular conditions who meet certain body weight criteria and are enrolled in Medicare drug coverage. Elevance, which operates many Blue Cross and Blue Shield health plans, said it also will extend coverage to patients insured by a commercial plan.
CMS has issued guidance to Medicare Part D plans to cover obesity drugs if they secure approval for additional medically accepted uses. The Centers for Medicare & Medicaid Services said the guidance will apply to Wegovy from Novo Nordisk, which the FDA recently approved to reduce risk of stroke or heart attack in people with cardiovascular disease and a body mass index above a certain threshold. A study showed Wegovy reduced cardiovascular risk by about 20% vs. a placebo.
Electric Supply Chains are ‘Braking’
The electric-vehicle supply chain that’s proven so difficult to ramp up now appears to be contracting. Market leader Tesla just reported its first year-over-year decline in quarterly deliveries since 2020 with 386,810 vehicles globally in the first three months of 2024, down 8.5% from a year earlier. Potentially more troubling is that Tesla’s production also declined, to 433,371 vehicles, down from 440,808 in the first quarter of 2023.
The gap between production and deliveries suggests there may be demand concerns for a company that was racing to scale up its supply chain just a few years ago. Wavering momentum in the market could ease the urgency to expand in the sprawling market for raw materials and batteries. Rivian Automotive says it delivered 13,588 vehicles in the first quarter, a decline from the previous quarter, as the upstart EV producer resets its supply chain.
US, Japan Announce Partnership to Accelerate Nuclear Fusion
The United States and Japan on Wednesday announced a joint partnership to accelerate development and commercialization of nuclear fusion. The partnership was unveiled as Japanese Prime Minister Fumio Kishida was in Washington for a summit with President Joe Biden. U.S. Deputy Secretary of Energy David Turk and Japan's minister of education, sports, science and technology, Masahito Moriyama, met in Washington on Tuesday to discuss fusion.
The partnership will focus on the scientific and technical challenges of delivering commercial fusion and expand work between U.S. and Japanese universities, national laboratories and private companies, the U.S. Department of Energy said. Scientists, governments and companies have been trying for decades to harness fusion, the nuclear reaction that powers the sun, to provide carbon-free electricity. It can be replicated on Earth with heat and pressure using lasers or magnets to fuse two light atoms into a denser one, releasing large amounts of energy.
EPA Finalizes First-Ever National Limits On ‘Forever Chemicals’ In Drinking Water
The Environmental Protection Agency finalized a rule Wednesday establishing limits on PFAS, or “forever chemicals,” in the nation’s drinking water, the first-ever standard addressing the toxic substances in water and the latest move in a series of actions aimed at reducing the public’s exposure to harmful chemicals. PFAS, or per-and polyfluoroalkyl substances, are a group of long-lasting harmful chemicals used in many everyday items, such as non-stick cookware, according to the EPA, and exposure has been linked to illnesses like cancer.
Wednesday’s rule will set maximum concentration levels for two types of two types of PFAS called PFOA and PFOS at 4 parts per trillion, which the agency said are the “lowest levels that are feasible for effective implementation.” The new standard also establishes maximum concentrations of 10 parts per trillion for three other chemicals. Environmental advocacy groups praised the new standard. The American Chemistry Council slammed the rule in a statement, arguing the evidence justifying the proposal “is based on inaccurate and out-of-date information.”
Elon Musk and Jamie Dimon’s AI Predictions and What They Mean for the Future of Humanity
Elon Musk and Jamie Dimon say artificial intelligence will be smarter than humans and transform society. The question now is whether the prognostications of one of the world’s richest people and the head of the nation’s largest bank will come to fruition, or turn out to be overstated. In remarks this week, both Musk and Dimon joined a chorus of business executives making bold predictions about AI’s potential for dramatic change.
Still, some experts say predictions of AI’s transformative powers have been overblown. Gary Marcus, a cognitive scientist who sold an AI startup to Uber in 2016, said generative AI may one day approach a level where it can transform society. But there has to be vast improvements to approach the level of change produced by the internet or even smartphones, he said. “It’s possible as we make new discoveries and build better AI, much better than we have right now, that eventually AI could be transformative for the good,” Marcus said in an interview.