Member Briefing April 25 2024
Durable Goods Orders Continue to Reflect Hesitant Demand
Orders for new durable goods ticked up 2.6% in March, but as has been the case in recent months, almost all the headline change can be attributed to orders for aircraft specifically. Aircraft orders, which leaped 30% in March for nondefense orders, are notoriously volatile on a month-to-month basis, and the size of the expenditure causes it to have a large bearing on overall orders activity (chart). In stripping the broader transportation category from the estimate, orders were up a more modest 0.2% last month, which is roughly in line with a typical monthly gain.
The underlying order details were somewhat mixed as the data continue to indicate a hesitant demand environment. Core capital goods orders (excluding defense and aircraft) rose 0.2% but were down slightly for Q1 as a whole. All major orders categories other than primary metals saw an uptick in orders last month, but most gains were fairly modest and some, like computers & electronics and electrical equipment, came after sizable drops in February. Orders activity remains depressed on a year-ago basis, with computers & electronics and nondefense aircraft being the only major categories to post an annual gain in March.
Mid-Atlantic Manufacturing Woes Continue in April
Fifth District manufacturing activity remained slow in April, according to the most recent survey from the Federal Reserve Bank of Richmond. The composite manufacturing index increased from -11 in March to -7 in April. Of its three component indexes, shipments increased from -14 to -10, new orders increased from -17 to -9, and employment fell from 0 to -2. Firms were more optimistic about local business conditions, as the index increased from -1 to 6. The index for future local business conditions also increased, from 12 in March to 16 in April. The future indexes for shipments and new orders rose notably in April, suggesting that firms expect improvements in these areas over the next six months.
Firms continued to report declining backlogs and vendor lead times in April, as those indexes increased but remained negative. The capacity utilization index rose from -21 to -5. The average growth rate of prices paid decreased in April, while the average growth rate of prices received edged up slightly. Firms expect little change in these growth rates over the next 12 months.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Israel Gears Up for Rafah Civilian Evacuation Ahead of Promised Assault - Reuters
- Israel’s Hunt for One Elusive Militant Brings Gaza Tactics to West Bank - WSJ
- 'We Need a Miracle' - Israeli and Palestinian Economies Battered by War - BBC
- Hamas Releases Video of Wounded American-Israeli Hostage – NBC
- Seventy Israeli Hostages Have Been Killed, Says Captive – The Telegraph
- Israel Says Rafah Assault Looms; Massive Gaza Airstrikes End Weeks of Relative Calm – Reuters
- Germany Will Resume Working with UN Relief Agency for Palestinians After a Review - AP
- 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
- US to Send New Ukraine Aid this Week - BBC
- The US Quietly Shipped Long-Range ATACMS Missiles to Ukraine – Reuters
- Russia’s Deputy Defense Minister Arrested on Bribery Charges – Politico
- Russian Ministry Sees 2024 GDP at 2.8%, But With Higher Inflation, Weaker Rouble – Reuters
- Think Tank: Putin is Not Running Out of Money to Fund War in Ukraine - Yahoo
- Russia to Push Ukraine Further Back if Kyiv Gets Long Range U.S. Missiles, Says Kremlin – Reuters
- UK Wants NATO Defense Target Upped to 2.5 Percent – 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
- Thailand Downplays Risk as Myanmar Sends Troops to Key Border Town – Nikkei Asia
- Ecuador Gives President More Powers to Fight Drug Gangs - WSJ
- Better US-China Ties But Still Deep Disagreements as Blinken Starts Visit – Reuters
- Lawrence Wong, Singapore's Next PM, Seeks Growth in 'Troubled World' – Nikkei Asia
- Angry Farmers in a Once-Lush Mexican State Target Avocado Orchards that Suck Up Too Much Water - AP
- EU to China: Open Your Public Markets or We’ll Close Ours – Politico
- US Business Activity Cools in April; Inflation Measures Mixed – Yahoo
- Germany Detains Lawmaker’s Assistant in Fourth Suspected China Spying Arrest This Week - WSJ
Policy and Politics
FTC Bars Employers From Imposing Noncompete Contracts
The Federal Trade Commission voted 3-2 on Tuesday to ban essentially all noncompete agreements that employers frequently impose on workers, leaving an earlier draft of the ban mostly unchanged other than to allow existing noncompete agreements with senior executives to remain while banning future ones for top corporate officials. The party-line vote hinted at the legal challenges certain to follow — already the U.S. Chamber of Commerce has said it could file one as soon as Wednesday.
Like the Chamber, the FTC's two Republicans, who voted against the ban, argued Tuesday that their principal concern is with the limits of commission authority rather than the merits of forbidding noncompete agreements, which block workers from leaving a job to work for their employers' rivals. The commission's Democrats, however, said the ban was both legally permitted and required to safeguard the roughly one in five workers estimated to be subject to a noncompete agreement in their employment contracts.
More Than 4 Million More Workers Will Start Getting Paid Overtime Under Controversial New Rule
More than 4 million additional salaried workers will be required to receive overtime pay after the Department of Labor announced new eligibility rules Tuesday—a change that was met with cheers from labor groups but has already raised the specter of legal challenges from critics. Under current law, salaried workers making more than $35,568 annually are exempt from mandated overtime pay unless their jobs don’t include “executive, administrative, or professional” duties—but the Department of Labor’s long-expected final rule will increase that salary threshold to nearly $43,888 on July 1, and then again to $58,656 on Jan. 1. The new rule will also increase the threshold for an exemption for so-called highly compensated employees—generally automatically considered exempt from mandatory overtime requirements regardless of job duties—from $107,532 to $151,164.
Several business organizations raised concerns Tuesday, with the National Retail Federation claiming the change could cause employers to “reexamine compensation packages for workers nationwide” and potentially cut back job perks, like flexibility or remote working.
The Biggest Issues Left Out of the State Budget and Where They Stand
At a record-setting $237 billion, this year's finalized budget contained a lot. From a housing package years in the making to stalled legislation that will allow New York City to lower its speed limits to 20 miles per hour, the spending plan touched on a wide variety of policy and spending items. But even with a budget this large, not everything that lawmakers, the governor and advocates wanted made it over the finish line. For some, exclusions were themselves a victory. For others, the lack of budget action for key priorities represented a sore defeat.
Plenty of items never entered into the budget discussions, while several higher-profile issues were discussed as part of the spending plan but ultimately didn't make it in. While some are likely dead this year after the budgetary exclusion, other policies may still get a chance to pass during the time remaining in the scheduled legislative session, which is set to end at the beginning of June. City & State takes a look at the biggest issues left out of the budget and where they stand in the Legislative process.
Health and Wellness
Bird Flu Virus Remnants Found In U.S. Milk Supply—FDA Says Milk Remains Safe
The Food and Drug Administration announced Tuesday that samples of pasteurized milk from around the U.S. tested positive for remnants of the H5N1 bird flu—a finding that comes about a month after the infection began spreading in dairy cows across multiple states, though the agency says the U.S. milk supply remains safe. The FDA said the remnants of the virus found in the milk poses no threat to consumers, noting the pasteurization process kills or inactivates harmful bacteria and viruses by heating milk to a certain temperature for a specific amount of time.
The FDA and Department of Agriculture also said the U.S.’s milk supply is safe because of the diversion or destruction of milk from sick cows. Though the positive samples are not an immediate cause of concern for humans, the development does indicate the bird flu outbreak among dairy cows is likely persisting. Cases of the bird flu have been found in domestic livestock in Idaho, New Mexico, Texas, South Dakota, Kansas, Michigan, Ohio and North Carolina, according to USDA data. The FDA has been testing milk from store shelves, milk processing systems and affected animals and is conducting a large sample to better understand its current findings.
Election 2024
- Five Takeaways from the Pennsylvania Primaries – The Hill
- Biden’s Gains Against Trump Vanish on Deep Economic Pessimism, Poll Shows - Bloomberg
- US 2024 Presidential Election: Dates, Candidates and Latest Issues – Reuters
- Donate on Repeat: Biden Pulls Ahead in Small-Dollar Fundraising - WSJ
- Haley Attracts More than 150K Votes in Pennsylvania GOP Primary, Weeks After Dropping Bid – The Hill
- 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
Shipping’s Global Demand Downturn Is Proving Persistent
Kuehne + Nagel International saw slightly improving ocean and air transport demand during the first months of 2024, but the freight forwarder said the overall shipping environment remains challenging. The Switzerland-based logistics company said it intensified cost-efficiency measures during the first quarter and that its previously announced reporting structure reshuffle will allow for further gains and profitable growth. Earnings in the company’s sea logistics business fell by 44% even though volumes in the segment expanded slightly over last year’s first quarter on improving demand in trans-Pacific and Americas trade routes.
Its air logistics unit also saw a similar trend, with earnings in the unit dropping 39% while volumes rose slightly as it carried more perishable goods. Global logistics providers are contending with a market fraught with headwinds as economic growth in much of the world remains patchy and companies in Western countries remain focused on tight inventory controls. At the same time, disruptions around the world have buffeted transport operations and sent shipping costs higher. Russian airspace remains closed due to the war in Ukraine and attacks on commercial vessels in the Red Sea have forced ocean carriers to add thousands of miles onto journeys to avoid the area.
Carrier, the Century-Old Inventor of the Air Conditioner, is Moving On to the Home Heat Pump
Carrier Global, the nearly 100-year-old manufacturer whose founder, Willis Carrier, invented air conditioning, is being transformed by the growing market for heat pumps and other HVAC climate technologies, which have outsold fossil fuel furnaces for two years in a row. “HVAC is at an inflection point right now,” said Hakan Yilmaz, Carrier’s chief technology and sustainability officer.
The cooling side of HVAC, in particular, is expected to triple by 2050, because 2.8 billion people live in hot climate zones and only about 8% have access to HVAC today. Carrier made its biggest bet yet on the heat pump boom when it acquired Germany’s Viessmann Climate Solutions for roughly $13 billion last April. In addition to proprietary heat pump technology, Viessmann offers renewable energy capabilities and home battery storage, as well as smart home system controls and applications that can be integrated to drive energy efficiency.
Boeing Burns Through $4 Billion of Cash and Scales Back 737 MAX Production
Boeing burned through nearly $4 billion in the most recent quarter as fallout from the Alaska Airlines midair accident exacted a financial toll. The jet maker reported a $355 million loss as revenue fell 8% from a year ago in quarterly results that were slightly better than expected. Under pressure from airlines and regulators to clean up its operations, Boeing has slowed its factories and has stopped providing most financial targets. For the March quarter, the company reported an adjusted loss of $1.13 per share on revenue of $16.6 billion. On that basis, analysts had predicted an adjusted loss of $1.63 per share on revenue of $16.2 billion.
“Near term, yes, we are in a tough moment,” outgoing Chief Executive Dave Calhoun said in a message to employees. “Lower deliveries can be difficult for our customers and for our financials. But safety and quality must and will come above all else.” Boeing is building fewer of its 737 MAX jets as the company weeds out quality problems at the Renton, Wash., factory that makes the planes.
Boeing is Supporting Spirit Aero Financially
Boeing Co. continues an effort to acquire Spirit AeroSystems, but until a deal is completed the jet builder is advancing payments to the supplier, to resolve ongoing complications in their working relationship. According to Spirit Aero, Boeing has advanced $425 million to the Wichita-based manufacturer of aircraft structures, and is offering help to manage higher levels of inventory and reduced cash flows as production rates for the 737 MAX lag. With Boeing’s cooperation, Spirit will keep up the production rate indicated by the terms of its supply contract with Boeing.
Spirit AeroSystems manufactures fuselage structures for the Boeing 737 MAX and 787 Dreamliner series, and aerostructures for other jet builders too, including Airbus and Bombardier. Since mid-January, Boeing has reduced its completion rate for the narrow-body 737 MAX. The reduced rate of aircraft assembly has stressed Boeing’s suppliers and customers. Negotiations for Boeing to acquire Spirit Aero are ongoing, but complicated by the latter’s supplier relationship with Airbus.
Read more at American Machinist
Stellantis to Lay Off an Unspecified Number of Factory Workers in the Coming Months
Jeep maker Stellantis is planning to lay off an unspecified number of workers at its U.S. factories in the coming months to deal with a rapidly changing global auto market, the company said Tuesday. The statement comes as the company faces increased capital spending to make the transition from gasoline vehicles to electric autos. It also has reported declining U.S. sales in the first quarter, and it has higher costs due to a new contract agreement reached last year with the United Auto Workers union. Stellantis has about 43,000 factory workers.
“These actions will help improve productivity and ensure the company’s long-term sustainability in a rapidly changing global market,” the Stellantis statement said. The company wouldn’t give details of when the indefinite layoffs would start or state specific reasons for them, but the trade publication Automotive News reported Monday that Stellantis had laid off 199 full-time workers at its Ram pickup truck factory in Sterling Heights, Michigan, north of Detroit.
America’s Biggest Civil Helicopter Maker Is Plotting Its Next Act: Drones
The country's largest non-military chopper maker by numbers sold is branching into smaller fare. Robinson Helicopter has acquired Ascent AeroSystems, a maker of small drones based in the Boston suburb of Wilmington, for an undisclosed price. Robinson CEO David Smith plans to quickly scale up the ability to manufacture hundreds of Ascent drones a month at the 51-year-old company’s Los Angeles-area factory.
He’s eyeing a large potential customer: the Pentagon, which launched an ambitious initiative called Replicator last August to build thousands of autonomous systems in the next two years, aiming to counter China’s homefield advantage of larger numbers of troops and weapons in a potential war over Taiwan. Smith and Ascent CEO Peter Fuchs told Forbes they hope that Robinson’s decades of manufacturing experience will appeal to Defense Department officials against the backdrop of a domestic drone industry in which most companies are producing at low volumes.
US Solar Manufacturers Target China-Linked Imports in New Plea to Biden
Domestic solar manufacturers are asking the Biden administration to investigate a record influx of Chinese-linked solar parts imported from four Southeast Asian countries that they argue is hurting the U.S. industry. Growing the U.S. solar industry and its supply chain is a key part of the Biden administration’s climate agenda. But domestic manufacturers continue to struggle in the face of competition from cheaper imports from Asia, prompting these companies to fight back in a series of trade petitions.
The new trade petitions filed Wednesday ask the Biden administration to levy new penalties on solar components from those countries — a prospect likely to spark uncertainty at a time when U.S. solar installations are soaring, thanks in part to Democrats’ climate law. It could also complicate President Joe Biden’s goal of rapidly expanding the country’s supply of solar-generated electricity, given U.S. solar installers’ continued reliance on inexpensive Asian imports.
New York Cancels Three Offshore Wind Projects
These provisionally awarded projects included the 1,404 MW Attentive Energy One, developed by TotalEnergies, Rise Light & Power, and Corio Generation, the 1,314 MW Community Offshore Wind, developed by RWE Offshore Renewables and National Grid Ventures, and the 1,314 MW Excelsior Wind, developed by Vineyard Offshore. NYSERDA also provisionally awarded USD 300 million of New York State grant funding to GE Vernova and LM Wind Power for nacelle and blade manufacturing in New York’s Capital Region, which was associated with the provisionally awarded projects.
Subsequent to the provisional award announcement, material modifications to projects bid into New York’s third offshore wind solicitation caused technical and commercial complexities between provisional awardees and their partners, resulting in the provisionally awarded parties’ inability to come to terms, NYSERDA said. With regards to the up to USD 300 million in grant funding that was provisionally awarded to GE Vernova and LM Wind Power, these funds will be made available through a future competitive solicitation to continue the development of the offshore wind supply chain in New York, NYSERDA said.
Biden Administration Limits Arctic Drilling, To Auction Federal Land Leases for Wind Projects
The Biden administration has placed new restrictions on traditional energy exploration and production in large portions of Alaska’s Arctic. A rule handed down last Friday by the U.S. Department of the Interior’s Bureau of Land Management puts new limits on fossil fuel production in the National Petroleum Reserve-Alaska, a 22.8 million–acre site that holds large reserves of oil and natural gas. The rule limits future oil-and-gas leases and industrial development and “codifies a ban on new leasing across a further 10.6 million acres of the reserve, about 40% of its total area,” according to the agency.
Wednesday the administration announced it will hold up to a dozen auctions of offshore wind development rights through 2028, including four before the end of this year. The schedule will help companies, states and others plan for projects that require massive amounts of investment and infrastructure, the Interior Department said in a statement. The administration is determined to support the nascent U.S. offshore wind industry at a time when projects have been plagued by rising costs tied to inflation, interest rates and supply chain constraints.
Read More at Law360 and Reuters