Member Briefing April 6, 2023
U.S. S&P Global March Manufacturing PMI at 49.2
The March S&P Global US Manufacturing PMI™ hit a 5-month high coming in at 49.2, up 1.9 from the final February figure, but still indicates deteriorating conditions in the health of the US manufacturing sector. The March reading is slightly worse than the Investing.com forecast of 49.3 and marks the fifth consecutive month in contraction territory, a streak we have not seen since 2009.
“The US manufacturing sector continued to signal concerning trends during March. Although output rose for the first time since last October, growth was fractional, and largely supported by ramping up production following an unprecedented reduction in supply chain pressures. The timely delivery of inputs allowed firms to work through backlogs, but sparse demand amid pressure on customer spending due to higher interest rates and inflation spoke to challenges ahead for goods producers.” Wrote Siân Jones, Senior Economist at S&P Global Market Intelligence in the press release.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- US Pledges $2.6 Billion More in Weapons Aid to Ukraine - Reuters
- ‘He’s a War Criminal’: Elite Putin Security Officer Defects - AP
- Russia Picks Alleged War Criminal to Host UNSC Meeting - Reuters
- A Wartime NATO Struggles to Replace its Chief - Politico
- Russia Says It Is Boosting Military Production as Campaign in Ukraine Stalls - WSJ
- Zelenskyy Visits Poland to Thank Ally and Meet Ukrainians - AP
- ‘No Doubt’ WSJ Reporter is Wrongfully Detained by Russia, US Says - FT
- U.S. Keeps Critical HIMARS Ammo Supply Line Flowing to Ukraine - Newsweek
- EU Lashes Out at China for Support of Russia in Ukraine War - AP
- Russia’s Aircraft Need Maintenance They Can No Longer Get - WSJ
- Russia and Ukraine Use Drones to Bring Death in Battle for Bakhmut - NYT
- 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
U.S. Services Sector Slows; Price Pressures Abating
The U.S. services sector slowed more than expected in March as demand cooled, while a measure of prices paid by services businesses fell to the lowest in nearly three years, giving the Federal Reserve a boost in the fight against inflation. The Institute for Supply Management (ISM) said its non-manufacturing PMI fell to 51.2 last month from 55.1 in February. A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy.
Thirteen services industries reported growth, including arts, entertainment and recreation, accommodation and food services, public administration and mining as well as utilities, construction and information. Finance and insurance, wholesale trade and retail trade were among the five industries reporting a decline. The services sector is being supported by consumers switching spending from goods, which are typically bought on credit.
U.S. Trade Deficit Widens in February as Goods Exports Fall
The trade deficit increased 2.7% to $70.5 billion, the Commerce Department said on Wednesday. Data for January was revised to show the trade gap widening to $68.7 billion instead of $68.3 billion as previously reported. Exports fell 2.7% to $251.2 billion, likely reflecting slowing global demand as well as the U.S. dollar's past appreciation, which is making U.S.-made goods less competitive on international markets. Goods exports plunged 4.8% to $169.2 billion, weighed down by declines in natural gas and nonmonetary gold. Exports of motor vehicles, parts and engines fell $1.9 billion, while those of consumer goods decreased $1.4 billion.
There were also decreases in exports of capital goods. But exports of services increased $1.7 billion to $82.0 billion, boosted by travel. Imports fell 1.5% to $321.7 billion, with goods declining 2.2% to $262.2 billion. Domestic demand is slowing amid higher borrowing costs aimed at taming inflation, which has seen businesses less enthusiastic about boosting inventory of goods.
COVID News – Report: FDA to Authorize Another Updated COVID-19 Booster Shot for Some
Federal regulators reportedly plan to authorize another omicron-specific booster shot for certain Americans in the coming weeks. The shot will be offered to people who are at least 65 or have weakened immune systems who are at least four months out from their last updated booster shot, according to The Washington Post. The Food and Drug Administration will announce the plan in the next few weeks, and the Centers for Disease Control and Prevention will swiftly endorse it, several officials told the Post.
The authorization will not make a strong recommendation but instead will give certain populations the option to get another shot. The officials said the expectation is that recipients will consult with their health care providers about whether to get the shot. The government’s large stockpile of COVID-19 shots means the updated booster will be free regardless of insurance coverage.
Where Did Americans Move in 2022? North American Moving Survey has The Answer
In 2022, Americans were on the move, but where to? Most found themselves leaving high cost of living areas in favor of warmer climates and more reasonable housing conditions. The chosen states for inbound moving migration predominantly reside in the south. Since 2014, Illinois has been the top state for outbound moves, according to the Moving Migration Report. Other leading outbound states include New Jersey and Pennsylvania, both of which have remained on the list for more than a decade, as have California and New York.
Throughout the 2022 Moving Migration Report, we see that the increasing cost of living is a consistent reason that people provide for their move. Many people are actively seeking affordable housing which they can’t find while living in their current residence. Additional driving factors for moving to another state include the desire to have a higher quality of life with access to nature and family. With the expanded opportunities for remote work, many are exploring lower-cost living options because they are no longer bound to one location.
New York State Budget Still in Limbo After Talks Between Leaders Stall
State budget talks remained stalled Tuesday despite a two-hour meeting between top leaders, who refuse to move on the spending plan until they settle issues including New York’s controversial bail laws. “We just talked about the totality of what a budget would take, and so there’s no agreement on any of that,” state Assembly Speaker Carl Heastie (D-Bronx) told reporters at the state Capitol on Tuesday, after meeting with Gov. Kathy Hochul and state Senate Majority Leader Andrea Stewart-Cousins (D-Yonkers). “That’s really it,” the Bronx powerbroker said.
Hochul is continuing to pressure the pols on such issues as bail reform, as she seeks to make it easier for judges to jail criminal suspects based on the perceived danger of them threatening public safety or getting accused of other crimes. Critics claim efforts by the newly elected Hochul are political theater by someone who won the closest gubernatorial contest in a generation in November.
Retailers’ Inventories Grew More Slowly in March Prompting Return to ‘Just in Time’
First, the congested supply chain made it hard for retailers to get the supplies they needed. Then, retailers had too much inventory on hand because they overordered. Now many companies have managed to whittle down their inventories to levels that are a bit more normal. Last month, inventory levels grew at a slower pace than in January and February, according to the Logistics Managers’ Index.
Retailers have worked hard to get rid of products that aren’t as popular right now, said Brian Yarbrough, consumer research analyst at Edward Jones. “There was a lot of discounting, there were a lot of promotions to move product and get inventories more in line with where they need to be,” he said. Now that inventories are in better shape, many of those promotions are over — at least for now. But if the economy stays strong, Yarbrough said we’ll see leaner shelves and more full-priced items.
A Playbook for Future-Proofing Your Supply Chain
The effectiveness of supply chain operations has historically been at the mercy of outside forces. The pandemic was the ultimate outside force and it redefined expectations. Now, it's imperative organizations get ahead of any issue to ensure agreements and deliveries are met — despite events outside of their control. Manufacturers rank supply chain challenges as a top concern in 2023 as they battle stubbornly high prices. This constant market volatility leaves more than half of logistics managers to not expect normalcy in their supply chain until at least 2024. And 29% said it might not happen until after 2025 — if ever again.
Supply chain disruptions, in some fashion, are here to stay. It’s just the manner of those disruptions that is constantly changing. How can organizations get ahead of disruption and future-proof their supply chain, with little idea as to what’s on the horizon? Here’s a playbook you can lean on to step up your strategy and mitigate future threats.
Tai Says US, Allies Working to Counter Unfair Chinese Competition
U.S. Trade Representative Katherine Tai said the United States and its allies are working to counter unfair Chinese competition, addressing issues that they previously have not with respect to their relationship with China. Tai told reporters that the U.S. and its partners are focusing on China’s rise on the world stage and its control of many areas of the international economy. She said the plan is designed to ensure that the U.S. is not alone in taking on China economically.
Some examples of the efforts that the U.S. and its allies are engaged in include the Global Arrangement on Sustainable Steel and Aluminum — which the U.S. is negotiating with the European Union to address China’s state subsidies that U.S. officials have said cause overproduction of metals and lower prices for U.S. manufacturers, Bloomberg reported. The U.S. is also working to develop the Indo-Pacific Economic Framework for Prosperity, which President Biden announced last year would set trade rules in the region with 13 Asian countries.
Lithium Prices Are Down, Cheaper Batteries and EVs Could Follow
Prices for lithium are down more than 30% this year, ending the two-year run that pushed up the value of the key battery material by a factor of 12, according to Benchmark Mineral Intelligence. The drop takes prices back to more sustainable levels after their epic run, traders say. The falling prices are due to slowing demand for electric vehicles, particularly in China, and volatile markets that are making traders cautious. Prices for other metals that go into batteries, such as cobalt and nickel, are also sliding.
Lower prices for battery materials could provide some relief for auto makers and consumers after commodities helped lift battery prices about 7% last year. Last year’s battery-price increase bucked a decadelong trend that made electric cars cheaper because batteries are their most expensive component. Prices for battery cathodes are down about 30% this year. It typically takes months for moves in metal prices to ripple through to car costs because buyers negotiate long-term price contracts.
GM Overtakes Ford as Second-Best Seller of EVs in U.S. But Still Trails Tesla by a Wide Margin
General Motors pulled ahead of Ford Motor to become the country’s second-best seller of all-electric vehicles during the first quarter, trailing only industry leader Tesla. GM on Monday said it sold 20,670 EVs during the first three months of the year. Ford, which was No. 2 last year, on Tuesday reported EV sales of 10,866 over the same time frame. Motor Intelligence reports Ford’s EV sales during the first quarter dropped its ranking to fifth in the U.S. Hyundai Motor, which includes Kia, and Volkswagen also pulled ahead of Ford.
Ford’s drop in rankings and sales was largely due to production down times at two of its North American plants that produce electric vehicles. Sales of its Mustang Mach-E fell 19.7% during the quarter, as it retooled a factory in Mexico to double its production capacity to 210,000 of the EVs per year. Ford also lost about five production weeks of its F-150 Lightning pickup due to a battery fire, which led to factory downtime and a small recall. GM still significantly trails Tesla in EV sales. Motor Intelligence estimates Tesla, which does not report sales by region, sold 161,630 EVs in the U.S. during the first quarter.
Ram Targets 500-Mile Range on Electric 1500 REV Pickup
The Ram 1500 REV goes on sale in 2024 and promises to deliver best-in-class range. Ram targets a range of up to 500 miles, with an available 229-kwh battery. The standard battery is a 168-kwh unit that Ram estimates will deliver up to 350 miles. Ram also promises towing and payload capacities of up to 14,000 and 2,700 pounds, respectively, both expected to be class-leading. The Ford F-150 Lightning and upcoming Chevrolet Silverado EV are only rated up to 10,000 pounds for towing and payloads below 2,000 pounds.
Just the one powertrain configuration has been announced: a dual-motor all-wheel-drive setup good for 654 hp and 620 lb-ft of torque. Each motor is integrated in a module that also combines a transmission and inverter. The front module can be disconnected from the front axle to help boost efficiency, while the rear module can be combined with an electronic-locking differential. One-pedal driving is also possible when full energy regeneration mode is activated.
FedEx Combines Air, Ground, Other Operations to Slash Costs
FedEx will combine almost all of its ground, air and other operations by next year as part of a $4 billion cost cutting plan. The package delivery company said Wednesday that FedEx Express, FedEx Ground, FedEx Services and other FedEx operating companies will be rolled into a single entity by June 2024 in a companywide reorganization. FedEx Freight, the company’s freight transportation services division, will continue as a stand-alone company within Federal Express Corp.
Raj Subramaniam will serve as president and CEO of the combined organization. FedEx said in September that its operating expenses were rising and that it was maneuvering to address those costs, including the closure of over 90 FedEx Office locations and five corporate offices. It also said it would defer on new hires and operate fewer flights. The Memphis, Tennessee, company also announced Wednesday that it’s boosting its annual dividend by 10%, or 44 cents per share, to $5.04 per share for fiscal 2024.
A Belated Reckoning as Climate Act Costs Become Apparent
Four years after passage of the Climate Leadership and Community Protection Act, state officials have finally begun to take a close look at the law’s consumer costs, and they don’t like what they see. Governor Hochul and state Senator Kevin Parker are scrambling to reduce those costs by changing how methane is accounted for under the Climate Act. The Act requires the use of a 20-year timeframe, while Hochul and Parker want to switch to the 100-year standard used by the federal government and 48 other states.
Under the 20-year time frame, each ton of methane emitted is calculated as equivalent to around 80 tons of carbon dioxide (CO2), while on a 100-year basis, each ton of methane is equivalent to only about 25 tons of CO2. Understood this way, it’s easy to see that eliminating the equivalent of 80 tons of CO2 is more costly than eliminating only 20 tons worth. And barring some other creative policymaking, these costs are likely to be passed onto consumers.
The World’s Busiest Airports: Atlanta Tops the List
Atlanta has retained its title as the busiest airport in the world, as more people return to flying all over the globe. There were 93.7 million passengers who passed through Hartsfield-Jackson Atlanta International Airport in 2022, a 24% increase from the prior year, according to figures released Wednesday by Airports Council International World, an industry group.
The number of global travelers increased to nearly 7 billion in 2022, a 54% increase from the prior year, according to ACI World. But 2022 figures came in about 26% less than 2019.Dallas Fort Worth International Airport came in second on the busiest airport list with 73.4 million passengers in 2022, according to ACI World. Denver International Airport was third with 69.3 million travelers, and Chicago O’Hare International Airport came in fourth with 68.3 million. The top four didn’t change from 2021. The last U.S. airport on the list was Los Angeles International Airport, which came in sixth with 65.9 million passengers.