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Member Briefing April 29, 2024

April 29, 2024

Posted By: Harold King in Daily Briefing,

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GDP = 1.6%. The U.S. Economy Grew Far Less Than Projected in the First-Quarter While Inflation Increased

The US economy grew at its slowest pace in nearly two years last quarter as inflation topped Wall Street estimates. The Bureau of Economic Analysis's advance estimate of first quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 1.6% during the period, missing the 2.5% growth expected by economists surveyed by Bloomberg. The reading came in significantly lower than fourth quarter GDP, which was revised up to 3.4%. Meanwhile, the "core" Personal Consumption Expenditures index, which excludes the volatile food and energy categories, grew by 3.7% in the first quarter, above estimates of 3.4% and significantly higher than 2% gain in the prior quarter.

Consumer spending increased 2.5% in the period, down from a 3.3% gain in the fourth quarter and below the 3% Wall Street estimate. Fixed investment and government spending at the state and local level helped keep GDP positive on the quarter, while a decline in private inventory investment and an increase in imports subtracted. Net exports subtracted 0.86 percentage points from the growth rate while consumer spending contributed 1.68 percentage points.

Read more at Yahoo Finance

Made In America - New Kearney Report Says US Investments are Strong but There are Still Challenges.

The 2024 Kearney Reshoring Index, released on April 25, finds a US market increasingly importing goods made closer to home and less on goods from low-cost countries and regions (LCCRs) continuing trends that have been set in motion over the past few years. The report Made in America: Here to stay?, focuses primarily on import and export flows between the US and 14 Asian LCCRs, including mainland China, as well as import trends with Canada and Mexico.

The Index shows that American, Canadian, and Mexican nearshored and reshored industrial production efforts continue to take market share away from Asian manufacturers, including mainland China. US imports from 14 Asian LCCRs declined from $1.022 billion in 2022 to $878 billion in 2023, while domestic manufacturing gross output (MGO) stayed essentially flat.
While the majority of the drop in Asian LCCR imports was caused by 20% reduction in Chinese imports, for the first time since the inaugural 2013 Reshoring Index, some Asian LCCRs other than mainland China, including Vietnam and Malaysia, also saw a dip in imports.
The report found that imports from Canada have steadily increased since the pandemic, keeping pace with Asian LCCR imports. South-of-the-border trends detailed in Kearney’s 2023 report also continued and expanded in the new Index.
Last year, for the first time since 2013, Mexico surpassed mainland China as the largest exporter to the US. Mexican manufactured goods imported into the US grew by 32%, from $320 billion to $422 billion, since the pre-COVID period.

Read more at Material Handling & Logistics

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Policy and Politics

New EPA Rules Drastically Limit Emissions From Power Plants That Burn Fossil Fuels

The Environmental Protection Agency on Thursday outlined a set of new rules that require fossil fuel-based power plants to cut pollution and greenhouse gas emissions by 2032 or be shut down, a significant climate policy push by the Biden administration climate that will likely be challenged in court. Under the rules, coal plants that intend to stay open beyond 2039 and new gas-powered plants will need to either cut or capture and store 90% of their carbon dioxide emissions from their smokestacks by 2032.

Thursday’s announcement will likely be challenged in court. In 2017, the EPA under the Trump Administration rolled back Obama-era carbon emissions rules for power plants after they were blocked by the Supreme Court a year earlier. In a 2022 ruling, the Supreme Court restricted the EPA’s ability to curb emissions from power plants. National Rural Electric Cooperative Association CEO Jim Matheson criticized the rules announced on Thursday, telling the Associated Press they were “unlawful, unrealistic and unachievable.”

Read more at Forbes

NAM says rule ‘Unachievable’ without permitting reform

DiNapoli: New York Renewable Energy Projects Take Years to Become Operational

Renewable energy projects in New York have been taking more than three years to receive siting permits due to application delays, according to an audit released Thursday by state Comptroller Tom DiNapoli's office. The audit of the Office of Renewable Energy Siting (ORES), which was created in 2020, found permit applications were often delayed due to missing or insufficient documentation.

DiNapoli said. “ORES needs to increase transparency around permitting timelines to allow the state to better assess its progress in meeting its renewable energy goals.” ORES was designed to streamline and expedite the environmental review and permitting of major renewable energy projects and associated transmission facilities to help the state meet the 2019 climate law's goals and timelines, which aims to achieve 70% renewably sourced electricity by 2030 and a zero-emission electric grid by 2040. DiNapoli’s audit reviewed 15 projects and found 14 took nearly four years to obtain a site permit, with the majority of time being spent on the permit application.

Read more at NY State of Politics

Battles Over Natural Gas, Climate Measures to Continue at Capitol

The NY HEAT Act, as the legislation is known, would give the Public Service Commission the “authority and direction to align gas utility regulation and gas system planning” with the goals from the Climate Leadership and Community Protection Act passed in 2019. “NY HEAT was the most important thing that the Legislature could have done this session to move forward on climate and clean energy and it failed to get anything done for what is now the third year in a row,” Christopher Casey, utility regulatory director for the National Resources Defense Council in New York, said.

Others, including state Sen. George Borrello, a western New York Republican, celebrated the exclusion of the climate measure from the budget, asserting that it would have pushed the state detrimentally away from natural gas. “This measure would have accelerated the dismantling of our natural gas infrastructure, which would have cost us jobs, raised rates and deprived New Yorkers of our most affordable, reliable energy source,” Borrello said in a statement. The New York Propane Gas Association also celebrated the exclusion of the NY HEAT Act from the final budget. “We stand firm in our position that New York needs a just transition to cleaner energy in the future; but at what cost? State lawmakers have now made it clear that the state cannot forego good-paying union jobs while increasing all New Yorkers' utility bills. That concept is a lose-lose,” the association said in a statement.

Read more at The Times Union

Health and Wellness

Many Mental-Health Conditions Have Bodily Triggers

Evidence is accumulating that an array of infections can, in some cases, trigger conditions such as obsessive-compulsive disorder, tics, anxiety, depression and even psychosis. And infections are one small piece of the puzzle. It is increasingly clear that inflammatory disorders and metabolic conditions can also have sizeable effects on mental health, though psychiatrists rarely look for them. All this is symptomatic of large problems in psychiatry.

A revised understanding could have profound consequences for the millions of people with mental-health conditions that are currently poorly treated. For example, over 90% of patients with bipolar disorder will have recurrent illness during their lives; and in children with obsessive-compulsive disorder (ocd) over 46% do not achieve remission. Some 50-60% of patients with depression eventually respond after trying many different drugs. For some in the profession, a deeper understanding of the biology of mental health, tied to clear biological fingerprints of the kind that might come from a laboratory test, will lead to more accurate diagnoses and better targeted treatments.

Read more at The Economist

NYS COVID Update

The Governor updated COVID data for the week ending April 26th.

Deaths:

Weekly: 14
Total Reported to CDC: 83,237

Hospitalizations:

Average Daily Patients in Hospital statewide: 459
Patients in ICU Beds: 35

7 Day Average Cases per 100K population

2.2 positive cases per 100,00 population, Statewide
2.8 positive cases per 100,00 population, Mid-Hudson

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Industry News

New Deep-Water Channel Allows First Ship to Pass Key Bridge Wreckage in Baltimore

The first cargo ship passed through a newly opened deep-water channel in Baltimore on Thursday after being stuck in the harbor since the Francis Scott Key Bridge collapsed four weeks ago, halting most maritime traffic through the city’s port. The new channel will remain open until Monday or Tuesday and then close again until roughly May 10. During the closure, crews will work to remove steel spans from the deck of the Dali and refloat the ship, which will then be guided back into the port, officials said earlier this week.

The Balsa 94, a bulk carrier sailing under a Panama flag, passed through the new 35-foot (12-meter) channel headed for Saint John, New Brunswick, Canada. Two more commercial ships followed later Thursday, including a vehicle carrier headed to Panama. Their long-awaited voyages marked an important step in the ongoing cleanup and recovery effort as crews have been working around the clock to clear thousands of tons of mangled steel and concrete from the entrance to Baltimore’s harbor. Five vessels that have been stranded for weeks are expected to finally leave Baltimore through the new, temporary channel. Other ships are scheduled to enter the port, which normally processes more cars and farm equipment than any other in the country.

Read more at The AP

Consumer Spending Surges in Spite of Inflation

Despite real income growth being strong, real spending is stronger, forcing consumers to dip into savings. In the short run, that's problematic as it keeps pressure on inflation, particularly services prices. But the reach is not sustainable indefinitely amid mounting personal interest expense. it is difficult to look at last week’s personal income and spending report and find indications of a consumer that is chastened by higher financing costs. Even as the path lower for inflation continues to be disrupted, paychecks outpaced price gains with personal income rising 0.5% in March. Real disposable personal income rose 0.2% last month.

Consumers have demonstrated in this cycle that they will continue to spend even when real income is down, but at times like these when real income can be a driver, spending is particularly robust. Nominal spending rose 0.8% for each of the past two months—a feat not surpassed since November 2021. On an inflation adjusted basis, real spending started the year on a dour note falling 0.3%, but since then it has risen 0.5% in back-to-back months.

Read more at Wells Fargo

Republic First Bank Seized By Regulators—First Bank Collapse Of 2024

Troubled Philadelphia-based regional bank Republic First Bancorp was seized by Pennsylvania regulators Friday, marking the first regional banking failure this year following a series of high-profile collapses in 2023—though the bank is far smaller than those that collapsed last year and its nearly three dozen branches are set to reopen under a new name. The Pennsylvania Department of Banking and Securities seized Republic First on Friday, amid speculation of a potential seizure and after the bank had looked for a potential buyer, the Federal Deposit Insurance Corp. announced.

Republic First had roughly $6 billion in assets and another $4 billion in deposits in January, according to the FDIC. Fulton Bank reached an agreement with regulators to take over Republic First’s 32 branches in Pennsylvania, New York and New Jersey, which will reopen under the Fulton Bank name, with the Pennsylvania-based bank assuming “substantially all of [Republic First’s] deposits and purchase substantially all of the assets,” the FDIC said in a statement.

Read more at CNN

Truck Tonnage Index Decreased 2% in March

American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index declined 2% in March after increasing 4% in February. In March, the index equaled 113.4 (2015=100) compared with 115.7 in February. “Tonnage in March suggests that truck freight volumes remain lackluster, and it is clear the truck freight recession continued through the first quarter,” said ATA Chief Economist Bob Costello, in a statement. The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 114.4 in March, 4.7% higher than in February. ATA’s For-Hire Truck Tonnage Index is dominated by contract freight as opposed to spot market freight.

“In the first three months of 2024, ATA’s tonnage index contracted 0.8% from the previous quarter and declined 2.4% from a year earlier, highlighting ongoing challenges the industry is navigating.” Compared with March 2023, the index fell 1%, which was the thirteenth straight year-over-year decline, but the second smallest over that period. In February, the index was down 1.7% from a year earlier.

Read more at Material Handling & Logistics

Justice Department Ends Mercedes-Benz Emissions Probe Without Filing Charges

The Justice Department has concluded an eight-year-long probe into Mercedes-Benz relating to diesel emissions without filing charges, multiple outlets reported Saturday, nearly four years after the German automaker reached a $1.5 billion settlement to settle separate allegations that it cheated on emissions tests. Representatives for Mercedes-Benz Group AG confirmed to Bloomberg the DOJ had ended its investigation and had not brought charges against the company, which German outlet Handelsblatt first reported.

The investigation began in April 2016, when the department requested Mercedes-Benz vehicle maker Daimler “review its certification and admissions process related to exhaust emissions” in the U.S.—months after Volkswagen was found to be cheating on emissions tests, a scandal later dubbed “Dieselgate.” The investigation stemmed from a class action lawsuit that alleged some of the automaker’s vehicles violated emissions standards, according to Bloomberg. Mercedes-Benz said it “agreed to cooperate fully” with the investigation, and reportedly said the claims in the lawsuit were “baseless.”

Read more at the AP

American Airlines Cuts Some International Flights into 2025, Citing Boeing Delivery Delays

American Airlines on Friday said Boeing’s 787 Dreamliner delivery delays are forcing it to cut some long-haul flights in the second half of the year and into early 2025, the latest carrier to change its schedule tied to the plane-maker’s production problems. American expects to receive three Dreamliners this year, down from six, it said in a filing Thursday. Boeing said earlier this week that parts shortages will prevent it from ramping up production of the wide-body planes. American will suspend some routes to Europe at the end of the summer. Here’s what’s changing:

Flights from New York’s John F. Kennedy International Airport to Athens will be suspended on Sept. 3. The seasonal route was previously scheduled to end Oct. 26.
Flights from New York to Barcelona will be suspended Sept. 3. The route was previously year-round, and will resume next year.
Flights from Dallas/Fort Worth International to Dublin and to Rome, which were both scheduled as year-round flights, will now be suspended on Oct. 26, and return next year.
Flights from Chicago O’Hare to Paris will end Sept. 3 and resume next year.

Read more at CNBC

Southwest Airlines exits multiple airports as Boeing troubles weigh

Southwest Airlines announced Thursday that the carrier is pulling out of several airports as it contends with financial fallout from Boeing delays. As a result of these efforts, the Texas-based carrier is closing operations at Houston's George Bush Intercontinental Airport in Houston, the Bellingham International Airport in Washington, the Cozumel International Airport in Mexico and the Syracuse Hancock International Airport in New York.

Jordan placed some of the blame on Boeing's manufacturing delays, stating that "the recent news from Boeing regarding further aircraft delivery delays presents significant challenges for both 2024 and 2025." Southwest is the latest carrier to face setbacks due to Boeing. In early March, United Airlines announced it was temporarily pausing pilot hiring due to new aircraft certification and manufacturing delays at Boeing. It also recently asked pilots to take unpaid time off as delays persist.

Read more at Fox Business

Ford Lost $130,000 on Every EV It Sold in the First Quarter

Ford reported a net income of $1.3 billion for the first quarter of 2024, a figure largely bolstered by the success of the company's Ford Pro fleet division and the $3 billion it brought in—more than three times that of the internal-combustion-engine-focused Ford Blue arm. The Blue Oval's battery-electric–oriented Model e division, however, remained a drain on company funds, losing $1.3 billion for the quarter—around twice what it lost during the same period in 2023. The company blamed "industry-wide pricing pressure" in its first-quarter earnings presentation.

To put these numbers in perspective, Ford Pro made approximately $7300 for each of the more than 400,000 vehicles it sold after accounting for expenditures but not interest or taxes (EBIT). Ford Blue pocketed close to $1400 for each of the more than 600,000 vehicles it sold under the same conditions. Model e, on the other hand, lost close to $130,000 per vehicle on the approximately 10,000 EVs it moved in the first quarter of 2024. And that's before putting interest or taxes into the equation.

Read more at Car and Driver

How AI Is Tackling Manufacturing’s Billion-Dollar Parts Problem

AI and machine learning, when applied to existing data, can further assist industrials and manufacturers in reducing costs, reducing risk, and enhancing productivity, contributing to long-term success in their industry. Large production facilities have used traditional data approaches with ERP software for years. In that time, they have statically tracked their inventories, cataloged and named thousands of parts and components spread throughout hundreds of sites–often inconsistently–with various information reflected in their inventory databases.

However, these systems, which were not built with MRO management in mind, are flawed and consistently fall short. They cannot resolve the reams of data about parts and supplies dynamically enough and cannot decipher when duplicates exist. However, the industry environment is changing, and AI-powered MRO optimization is greatly improving inventory visibility and providing a new path to striking the right balance between procurement, operations and finance. When manufacturers incorporate AI-powered MRO optimization, they find that the processes help improve margins, enhance routine maintenance needs, increase service levels, and minimize unplanned downtime—three critical factors that can significantly impact a company's bottom line. With accurate inventory data and forecasting capabilities, industrial production facilities can streamline processes, lower excess inventory, and minimize stockouts.

Read more at Forbes

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