Member Briefing April 27, 2023

Posted By: Harold King Daily Briefing,

Durable-Goods Orders Get Boeing Boost, But “Softer Than the Headline Number.”

New orders for durable goods rose 3.2% in March, to $276.41 billion from February’s $267.77 billion, according to data from the U.S. Census Bureau. Excluding transportation equipment, new durable goods orders increased 0.3% in the same period, to $179.01 billion from $178.49 billion. Nondefense aircraft and parts orders, which are often highly volatile from month to month, spiked 78.4%. “Overall, these data indicate softer growth than the headline number would suggest, with manufacturers experiencing a more challenging economic environment amid an uncertain outlook,” said NAM Chief Economist Chad Moutray.

Orders for computers and electronic products rose (1.9%), as did electrical equipment, appliances and components (0.8%), fabricated metal goods (0.1%), machinery (0.1%) and primary metals (0.1%). Demand inched down for other durable goods (down 0.3%) and motor vehicles and parts (down 0.1%).  Durable goods shipments rose 1.1%, to $276.95 billion from $274.02 billion. On a year-over-year basis, durable goods shipments have risen 4.9% since March 2022, or 1.2% excluding transportation equipment.

Read more at the Census Bureau

War in Ukraine Headlines


Chip Rules “Economic Policy, Not Social Policy” Commerce Secretary Says

Marketplace’s Kai Ryssdal interviewed Secretary Raimondo about the $280 billion CHIPS and Science Act. The Commerce Department is responsible for distributing billions to make the U.S. a global leader in semiconductor production. The department released rules this year for chipmakers to access federal funding.

On those Rules that mandate affordable child care for workers at large firms, discourage stock buybacks and bar new high-tech investments in China Riamondo said: “First of all, I think that’s all economic policy, not social policy.… So we need women in order to hit the mission here. Interestingly, I find this fascinating, I have taken some criticism from politicians and some academic economists who have criticized this as quote-unquote social policy. I have heard no complaints from anyone in industry. It’s really interesting. I’ve talked to all the companies in the chips ecosystem and the supply chain. They say, yeah, makes perfect sense.”

Read/Listen to the interview at Marketplace

U.S. Consumer Confidence Dips to Lowest Since July as Outlook Dims

U.S. consumer confidence dropped to a nine-month low in April as worries about the future mounted, further heightening the risk that the economy could fall into recession this year. The consumer confidence survey from the Conference Board on Tuesday also suggested that Americans were getting ready to hunker down as dark clouds gather, with the share of them planning to buy major household appliances over the next six months falling to the lowest level since 2011.

The Conference Board said its consumer confidence index fell to 101.3, the lowest reading since July 2022, from 104.0 in March. Economists polled by Reuters had expected the index to be unchanged at 104.0 in April. The drop reflected a deterioration in expectations for consumers under 55 years and households earning $50,000 and over annually, suggesting a broadening in concerns about the economy beyond low income households.

Read more at Bloomberg

COVID News – How Common is reinfection and What is the Risk?

Reinfection so far seems to be relatively rare in studies that tested people for the virus over time. The latest data from various countries suggest rates ranging from 5%2 to 15%3, although this proportion is expected to increase as time passes. When reinfection does occur, the good news is that the immune system seems primed to respond. In a preprint posted in March 4, researchers examined reinfections in US National Basketball Association players, staff and their families. They found that people who became reinfected cleared the virus faster — in about five days, on average, compared with about seven days for a first infection.

Other studies have shown that people who experience mild symptoms with their first infection will probably have a mild subsequent infection. And two large studies suggest that reinfections tend to be less risky than the initial one. In one study, researchers compared two groups of unvaccinated people in Qatar — around 6,000 who had been infected once and 1,300 who had been reinfected. The odds of severe, critical or fatal disease at reinfection were almost 90% lower than that for a primary infection.

Read more at Nature

NYS Budget Negotiations: Tuition Hike Off, SUNY and CUNY Could see Funding Boost

A proposal to increase tuition for New York students in the state's public college and university systems is off the table in the budget negotiations. But lawmakers and Gov. Kathy Hochul acknowledge more funding for the system is needed as they seek to close out the budget in the coming days. It was not clear Tuesday evening how much money may go toward the two public higher education systems in the state; a budget is now more than three weeks late in New York.

Hochul had initially proposed this year a plan to hike tuition at the State University of New York and the City University of New York by linking it to the higher education price index. But the measure found little support among Democrats who control the state Legislature. In-state students at SUNY and CUNY will not have a tuition increase in the budget. But a tentative agreement could lead to tuition increases for out-of-state students, sources familiar with the plan said this week.

Read more at New York State of Politics

House Passes GOP's Plan to Raise Debt Limit

A Republican bill to raise the debt limit and slash government funding passed the House on Wednesday, after 11th hour changes won over a group of holdouts within the GOP caucus.The final tally was 217-215. Four Republicans joined Democrats in voting against their party’s signature piece of legislation. The vote was a victory for embattled House Speaker Kevin McCarthy, R-Calif., capping off a 24-hour sprint that saw party leaders work past 2 a.m. ET on Wednesday morning to amend the bill.

The Limit, Save and Grow Act has little to no chance of becoming law, which could help to explain why Republicans were ultimately willing to overlook McCarthy’s last minute, backroom deals. Instead of viewing the provisions in the 320-page bill as future laws, per se, House Republicans view the plan more as a symbolic opening bid in the negotiations McCarthy will hold with President Joe Biden later this year over the debt limit and federal funding.

Read more at CNBC

Plunging Tax Receipts Are Raising Fears About the Debt Ceiling

The federal government is pulling in less tax revenue than expected, prompting concerns the early numbers could leave far less time for Congress to strike a deal to avoid a default on the national debt. Before tax figures started rolling in after last week’s filing deadline, Congress appeared to have until sometime in late July or August to pass legislation to raise or suspend the debt limit. But some experts have warned that a major shortfall in tax revenue means the U.S. government could run out of cash as early as June.

The U.S. government has collected 35 percent less in tax revenue this year than at the same time in 2022, according to a recent analysis released by Moody’s Analytics economists Mark Zandi and Bernard Yaros.  Zandi noted in an interview that it’s “not a surprise” the receipts are coming in at lower levels than last year — when the government saw a budget surplus of more than $300 billion in April 2022, according to estimates from the Congressional Budget Office (CBO). But he added receipts are “coming even weaker than” anticipated.

Read more at The Hill

Hudson Valley Unemployment Rate at 2.9% in March, Labor Force Drops Slightly

The March 2023 unemployment rate for the Hudson Valley Region is 2.9 percent.  That is down from 3.3 percent in February 2023 and also down from 3.3 percent in March 2022.  In March 2023, there were 33,700 unemployed in the region, down from 38,100 in February 2023 and down from 38,300 in March 2022.  Year-over-year in March 2023, labor force decreased by 2,200 or -0.2 percent, to 1,165,000.

Statewide the unemployment rate in March was 4.0 percent, down from 4.7percent in March 2022.  Within the region Rockland County had the lowest rate at 2.6 percent, Sullivan County the highest at 3.2.

Read more at from the NY DOL

Industrial Security Vendors Partner to Share Intelligence About Critical Infrastructure Threats

Some of the largest operational technology cybersecurity vendors are building an open-sourced, opt-in threat intelligence sharing portal to provide early warnings about threats to critical infrastructure. The platform called Emerging THreat Open Sharing, or ETHOS, is designed to break down information gaps that occur because organizations don’t have access to the same information about the latest hacks or vulnerabilities that could affect the entire energy sector, pipeline operators or other industrial sectors.

The idea has the approval of the Cybersecurity and Infrastructure Security Agency. Eric Goldstein, executive assistant director for cybersecurity at CISA, said in a statement that the “scale of threats facing critical infrastructure operators, and in particular Operational Technology networks, requires an approach to information sharing grounded in collaboration and interoperability.”

Read more at Cyberscoop

Earnings: Google, Microsoft Top Estimates

Microsoft issued fiscal third-quarter results and quarterly guidance Tuesday that exceeded analysts’ predictions. The company reported earnings of $2.45 per share, vs. $2.23 per share as expected by analysts, according to Refinitiv on revenue of $52.86 billion, vs. $51.02 billion as expected.  For the fiscal fourth quarter, Microsoft finance chief Amy Hood called for $54.85 billion to $55.85 billion in revenue, during a conference call with analysts. “As with any significant platform shift, it starts with innovation, and we’re excited about the early feedback and demand signals from the AI capabilities we’ve announced to date,” she said. “We will continue to invest in our cloud infrastructure, particularly AI-related spend, as we scale to the growing demand driven by customer transformation. And we expect the resulting revenue to grow over time.” CNBC

Alphabet reported a slight dip in first-quarter ad sales from a year earlier to $54.55 billion, which nonetheless beat analyst estimates of $53.71 billion. Excluding items, Alphabet reported earnings per share of $1.17, beating an average estimate of $1.07 per share. Alphabet's revenue for the quarter ended March 31 stood at $69.79 billion compared with estimates of $68.95 billion, according to Refinitiv data. It reported net profit of $15.05 billion for the first three months of the year compared with $16.44 billion a year earlier. The company said on Tuesday it would buy back $70 billion in stock based on the better than expected. Reuters

Boeing said Wednesday revenue rose 28% to $17.9 billion in the first quarter from the same period the previous year, beating analysts’ estimates. Boeing’s quarterly loss narrowed to $425 million, or 69 cents a share, from $1.2 billion, or $2.06 a share, a year ago. Earnings were dragged down by a $245 million charge related to its military refueling tanker. For the entire year, Boeing has said it expects to report $3 billion to $5 billion in free cash flow, or money left over after expenses and investment spending. The company has said it plans to deliver 400-450 of its 737s for the year. Boeing said it delivered 130 commercial aircraft in the quarter ended March 31 before the emergence this month of a supplier’s manufacturing 737 MAX slip-up. The company said Wednesday it plans to increase production to 38 of the jets a month later this year, up from the current rate of 31. YahooFinance

The U.S. Economy Could Get Worse Before it Gets Better

The US economy is likely to get worse before it gets better, according to forecasting by EY. The combination of persistently elevated prices, high interest rates and now tightening credit conditions will weigh on business investment, consumer spending and the transactions markets in the coming months. Even though we do not see evidence of broad-based economic imbalances, recessions are often nonlinear psychological events.

EY anticipates tightening credit conditions will represent a drag on the US economy worth around 0.5% of GDP over the next 18 months. As a result, we now anticipate real GDP growth will be closer to 0.9% in 2023 and around 1.2% in 2024. With the Fed adopting a dual-track approach distinguishing monetary policy tools from macro-prudential tools, EY anticipates a final 25bps rate hike in May. This would bring the terminal fed funds rate range to 5.00%–5.25% in line with the Federal Open Market Committee (FOMC) statement that “some additional policy firming may be appropriate.”

Read more at The World Economic Forum

Stellantis to Cut 3,500 Hourly U.S. Jobs Through Buyout, Retirement Offers, UAW Local Says

The maker of Jeep SUVs, Ram pickup trucks and other vehicles is looking to reduce its U.S. hourly workforce by as many as 3,500 employees through buyouts, according to a letter posted by a United Auto Workers local on Facebook. Stellantis NV spokeswoman Jodi Tinson said she wouldn't respond Tuesday to the details in the letter dated Monday from Doug McIntosh, president of Local 1264, which represents workers at the automaker's stamping plant in Sterling Heights.

The UAW's newly elected president, Shawn Fain, last week discussed a "fractured" relationship with Stellantis regarding its approach to electrification and following the indefinite idling in February of the Belvidere Assembly Plant in Illinois, which affected 1,350 workers. His remarks reflected the ongoing tension expressed by Fain and other UAW leaders with the Detroit Three automakers, including calling them the "enemies" and that the UAW must "punch them in the mouth."

Read more at Detroit News

Airbus Unveils First US-Built Military Helicopters

Airbus Helicopters unveiled its first U.S.-built H125 military helicopter, to be manufactured at the Airbus Helicopters Inc. plant in Columbus, Miss. Designated as the AH-125 and MH-125 helicopters, they will be outfitted with options for combat and “parapublic” functions with the U.S. military branches and allied nations defense forces.

The AH-125 Ares will be configured as the armed variant of the helicopter, with U.S.-based MAG Aerospace contracted to manage weapons installation design, engineering, certification and manufacturing. The military version of the helicopter will have various weapons options, including a .50-caliber (12.7 mm) gun and unguided rockets, and precision-guided weapons. The MH-125 Ares will be configured as a multi-role helicopter capable of light-enforcement operations, such as those conducted by law enforcement and government agencies. Currently more than 100 H125 helicopters are being used by U.S. Customs and Border Protection.

Read more at American Machinist

Airline Recovery Boosts Jet Engine Makers

Global airline passenger traffic this year is set to surpass 2019 levels despite recessionary fears, providing a boon for jet-engine makers. General Electric Co. and Raytheon Technologies Corp., the two biggest makers of plane engines, on Tuesday disclosed stronger quarterly financial results, reflecting the continued recovery in air travel and China’s relaxation of pandemic-driven restrictions.

Airlines preparing for a busy summer travel season are driving sales of spare parts at GE, Raytheon and other suppliers. Aircraft manufacturers Boeing Co. and Airbus SE are also delivering more jets following a surge in orders.  “The recovery has strengthened as the world is eager to travel,” said GE Chief Executive Larry Culp on an investor call Tuesday.

Read more at The WSJ

EXIM Bank Lowers Fees on its Working Capital Guarantee Program

The Export-Import Bank of the United States (EXIM) is lowering prices on lender fees for the Working Capital Guarantee Program (WCGP), which will facilitate U.S. exports by making the trade finance program more affordable for small businesses that need working capital to compete globally. EXIM has done this to incentivize more participation in the WCGP by lenders with lower levels of DA (Document Against Acceptance). Lenders with lower levels of DA tend to be smaller community banks who work primarily with small businesses.

Increased participation by these lenders will help small businesses and allow the lenders to gain experience in the WCGP and increase their level of DA. The updated pricing structure also makes the WCGP more competitive for financial institutions of all sizes, including banks that have not received higher levels of Delegated Authority (DA), which grants pre-qualified lenders the ability to approve loans up to a specified amount without the prior consent of EXIM.

Read more at The EXIM Bank

The U.S. Military Has an Explosive Problem

Military suppliers consolidated at the Cold War’s end, under pressure to reduce defense costs and streamline the nation’s industrial base. Over the past three decades, the number of fixed wing aircraft suppliers in the U.S. has declined from eight to three. During the same period, major surface ship producers fell from eight to two, and today, only three American companies supply over 90% of the Pentagon’s missile stockpile.

Lower-tier defense firms are often the sole maker of vital parts—such as black powder—and a single crisis can bring production to a standstill. Today that’s emerging as a gnawing problem for the U.S., whether in supplying weapons and ammunition to Ukraine or in restocking reserves to prepare for a potential confrontation with China in the new era of great-power competition, according to U.S. military officials, defense experts and congressional staffers.

Read more at The WSJ