Member Briefing August 21, 2024
Decline in Manufacturing Drags Conference Board’s LEI Through Pandemic-Era Low
The Leading Economic Index (LEI) declined 0.6% in July, bringing the streak to 29 consecutive months that the index has gone without an increase. The decline brings the index level to 100.4, declining below the prior cycle low previously reached in April 2020 (chart). The index level is now at its lowest point since 2016. The Coincident Index came in flat on the month at 112.5. The index, a gauge of how the economy is currently performing, has been consistently increasing on trend since it began recovering from the 2020 recession.
Digging into the components of the LEI, most components contributed negatively to the monthly decline. The largest drags were the usual suspects: the ISM new orders subindex subtracted 0.17 percentage points, consumer expectations subtracted 0.13 percentage points and the interest rate spread subtracted 0.14 percentage points. Building permits surprised to the downside in July, falling 4% to a 1,396K pace. Recent labor market weakness from the July jobs report did not leave the LEI unscathed, as average weekly hours worked in the manufacturing industry also subtracted 0.12 percentage points. There were only two components that contributed positively in July, with the Leading Credit Index leading the charge and adding 0.11 percentage points. The S&P 500 also modestly contributed 0.09 percentage points.
Fed Rate Cut Looming as Jerome Powell Heads to Jackson Hole
The Federal Reserve is expected to cut its benchmark interest rate in September as inflation nears the central bank's 2 percent target, the Associated Press reports, citing officials from the Fed. Fed Chair Jerome Powell is expected to provide hints about the Fed's view of the economy during a speech at the annual conference of central bankers on Friday in Jackson Hole, Wyoming. The Fed chair is due to talk at 10 a.m. ET on Friday. The Fed says simply that he will discuss the economic outlook. Any public remarks by the Fed chief are potentially market-moving. But the backdrop here raises the stakes.
Wall Street traders now expect three quarter-point Fed cuts in September, November and December, the AP reported—with December possibly seeing a half-point cut. Some officials have not ruled out a half-point Fed rate cut in September if there are signs of a further slowdown in hiring. Economists say that even if hiring remains solid, the Fed is set to cut rates this year, given the steady progress that's been made on inflation.
Tariffs Are on the Table for U.S. Importers, Whatever the Election Outcome
Consumer giant Newell Brands now makes those products, and more, at its own plants in the U.S. and Mexico. Many of its other products are made in factories in Vietnam, Indonesia and Thailand. Chris Peterson, Newell’s chief executive, said the company’s shift reduces its dependence on China at a time when both the Democratic and Republican parties “are getting more protectionist in terms of trade policy.” Tariffs are becoming an entrenched tool tying together geopolitics and trade, and they are playing a bigger role in long-term manufacturing and sourcing decisions. Nowhere are they hitting harder than in China, where importers and exporters are navigating an increasingly complicated regime of levies on goods ranging from semiconductors to mattresses.
The new era of tariffs kicked off under the Trump administration with duties on imports from a swath of countries and a focus on Chinese products ranging from truck chassis to consumer goods. The Biden administration kept most of the tariffs in place, and then added further duties on Chinese steel, semiconductors and electric vehicles, citing national security concerns and an industrial policy aimed at reviving American manufacturing. The two candidates in this year’s presidential election look set to continue the trend, as trade, manufacturing and the tools to tie them together take a prominent role in the campaign.
Global Headlines
Middle East
- Israel And Hamas: The Latest News – The Guardian
- Hamas Accuses US Of ‘Buying Time For Israel’ In Gaza Ceasefire Talks - Axios
- Fighting Intensifies Between Israel And Hezbollah Despite Diplomatic Drive – The Guardian
- Blinken Crisscrosses The Middle East On Mission To Broker Gaza Ceasefire Deal - Reuters
- Six Hostages' Bodies Retrieved, Israel's Military Says - BBC
- US Intelligence Officials Blame Iran For Hacks Targeting Trump, Biden-Harris Campaigns - VOA
- Iran Says It Will Not Take ‘Hasty Action’ Against Israel For Killing Of Hamas Political Leader - CNN
- EU Red Sea Mission Escorts 300 Vessels In Region – Arab News
- 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
- Zelenskyy Calls Out US, UK, France Over Slow Weapons Deliveries - Politico
- Russia Hits Energy Infrastructure In Airstrikes On Ukraine - Reuters
- Russia Hunts Down Deserters to Backfill Its Massive War Losses - WSJ
- Ukraine's Capture Of Hundreds Of Russian Conscripts In Kursk Region Undermines Putin's War Rhetoric – France 24
- Ukraine Blows Up $200M Worth Of Russian Fuel With Drone Strike on Depot - Newsweek
- Ukraine Gives Final Approval For Minimum Grain Export Prices - Reuters
- NATO Member Lithuania Building $1 Billion Military Base Near Border With Russia Ally Belarus - Newsweek
- 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
- 'We're Going Nowhere' - Thai Opposition Figure Says Court Interventions Must Stop -VOA
- Cracks Are Showing in Iran’s ‘Axis of Resistance’ Strategy - WSJ
- As Chinese Students Forgo US University Degrees, The Impact On Brainpower Transcends Borders - SCMP
- Mpox Not New Covid And Can Be Stopped, Expert Says - BBC
- Brussels edges closer to slapping definitive tariffs on Chinese electric vehicles - EuroNews
- Kim Jong Un Wants to Block all North Koreans From Escaping. It Isn’t Working. - WSJ
- Venezuela Oil Spill Spreads Across 28 Miles of Coastline - Bloomberg
- US Sanctions Former Haitian President for Drug Trafficking - Newsweek
- France's Caretaker Government Freezes 2025 Spending At Current Levels - Reuters
Policy and Politics
Federal Judge Blocks F.T.C.’s Noncompete Rule
A federal judge in Texas on Tuesday barred a Federal Trade Commission rule from taking effect that would ban agreements commonly signed by workers not to join their employers’ rivals or launch competing businesses. US District Judge Ada Brown in Dallas said the FTC, which enforces federal antitrust laws, does not have the authority to ban practices it deems unfair methods of competition by adopting broad rules.
Brown had temporarily blocked the rule in July while she considered a bid by the US Chamber of Commerce, the country’s largest business lobby, and tax service firm Ryan to strike it down entirely. The rule was set to take effect Sept. 4. Brown in her ruling said that even if the FTC had the power to adopt the rule, the agency had not justified banning virtually all noncompete agreements. “The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition … instead of targeting specific, harmful non-competes, renders the Rule arbitrary and capricious,” wrote Brown.
Here's What Court’s New Move On Biden SAVE Plan Could Mean For Other Student Loan Forgiveness
The 8th Circuit Court of Appeals declined to clarify a recent ruling that blocked President Joe Biden’s SAVE student loan plan—which is a newly launched income-driven repayment plan that lowers the percent of monthly income borrowers pay—leading some to worry that other student loan forgiveness may also be blocked by the unclear ruling. The court Monday shot down a request from the Education Department to clarify its Aug. 9 ruling, which effectively blocked the SAVE Plan from moving forward after Republican-led states sued to block the entirety of the SAVE Plan.
The court was broad in the Aug. 9 ruling, saying the government is barred from providing “any further forgiveness of principal or interest” for loans covered by income-driven repayment rules or the Federal Family Education Loan (FFEL) program, prompting questions of how it could affect other loan programs. The Education Department's request said the injunction could be understood to ban other forgiveness, including forgiveness offered through income-based repayment plans, public loan forgiveness or previously existing income-contingent repayment plans that are not being challenged—and sought clarification on whether those were still protected. In response to the request, the court issued a one sentence response that read: “The motion to clarify is denied,” furthering the concern around non-SAVE payment plans.
Congestion Pricing Replacement Plan Could Come By Year’s End, Hochul Says
A replacement plan for the paused congestion pricing program will be announced by the end of the year, likely after Election Day. Gov. Kathy Hochul, in an interview with POLITICO on Monday, said she wants to roll out a plan in the coming months in order to get state lawmakers on board. Hochul in June announced an “indefinite pause” to the unpopular congestion pricing toll program, which would have charged drivers $15 when entering Manhattan below 60th Street. Money from the tolls would have been leveraged to borrow $15 billion for the Metropolitan Transportation Authority’s capital plan to fund infrastructure upgrades on New York City’s rundown mass transit system.
The New York Post reported Sunday that Hochul was weighing a potential compromise that would exempt municipal workers and reduce the tolls. Two people on Monday to POLITICO confirmed the idea has been floated, but no broader progress on an alternative revenue plan has been made this summer. Hochul’s fellow Democrats in the state Legislature in June rejected last-minute replacement revenue plans for congestion pricing, including a $1 billion bond proposal and an increase in the payroll mobility tax.
Health and Wellness
The Silent Rhythm of Workplace Stress
A recent 18-year prospective study published in the Journal of the American Heart Association sheds light on why professionals might be at risk. The research, led by Canadian researchers and published last week in the Journal of the American Heart Association, examined the relationship between psychosocial stressors at work and AFib incidence among nearly 6,000 white-collar workers. The findings are striking:
- Workers exposed to high job strain (high demands combined with low control) had an 83% increased risk of developing AFib.
- Those experiencing an effort-reward imbalance at work (high effort with low recognition or compensation) faced a 44% higher risk.
- Individuals exposed to both these stressors had nearly double the risk of AFib compared to their less-stressed counterparts
What exactly is AFib? It's the most common form of heart arrhythmia, affecting about 1 in 4 middle-aged adults in their lifetime. During AFib, the heart's upper chambers beat chaotically and irregularly, out of coordination with the lower chambers. This can lead to blood clots, stroke, heart failure, and other heart-related complications.
Election 2024
- Obamas Headline Day 2 Amid Growing Protest Violence - The Hill
- Dems Give A Thunderous Ovation To The President They Dethroned - Politico
- Biden Says Pro-Palestinian Protestors ‘Have A Point’ In DNC Speech - Forbes
- Kamala Harris Suffers Third Pennsylvania Polling Blow in a Week - Newsweek
- UAW President Uses DNC Speech To Threaten Stellantis, Praise Harris – Automotive News
- Robert F. Kennedy Jr. Could Be Blocked From New York’s Ballot, Again - NYT
- Democrats Approve Party Platform—Written Before Harris Became Nominee - Forbes
- Kamala Harris Wants to Ban Price Gouging. What Do Economists Say? - WSJ
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
Global Semiconductor Manufacturing Industry Strengthens In Q2, SEMI Reports
The global semiconductor manufacturing industry in the second quarter of 2024 continued to show signs of improvement with significant growth of IC sales, stabilizing capital expenditure, and an increase in installed wafer fab capacity, according to a recent report published by SEMI in collaboration with TechInsights. While the slower recovery in some end markets impacted the pace of growth in the first half of this year, the surge in demand for AI chips and high bandwidth memory (HBM) created strong tailwinds driving industry expansion.
Seasonality and weaker-than-expected consumer demand impacted electronics sales in the first half of 2024 resulting in a 0.8% decrease year-on-year, according to the report. Starting the third quarter of 2024, electronics sales are forecast to see a rebound, growing 4% year-on-year and 9% relative to the prior second quarter. IC sales showed robust 27% year-on-year growth in the second quarter of 2024 and are expected to surge 29% in the third quarter, surpassing the record levels seen in 2021 as the AI-fueled demand continues to boost IC sales growth. Improved demand also led to a 2.6% year-on-year decrease in IC inventory levels in the first half of 2024. Semiconductor capital expenditures were conservative in the first half of 2024, resulting in a 9.8% decrease year-on-year.
Eli Lilly Says Weight-Loss Drug Sharply Reduces Diabetes Progression
Eli Lilly LLY 4.43%increase; green up pointing triangle said preliminary data from a late-stage study showed that its weight-loss drug significantly reduced the risk of progression to type 2 diabetes among adults with prediabetes and obesity or overweight. The pharmaceutical company said Tuesday that top-line data from the three-year treatment evaluating the efficacy and safety of a weekly dose of tirzepatide, the ingredient of the company’s injection Zepbound, and diabetes drug Mounjaro, showed a reduced risk of progression to type 2 diabetes by 94%.
The drug also led to significant weight reduction at an average of between 15% and nearly 23%, depending on the dosage, compared with the 2.1% reduction in patients who received a placebo. However, the company also warned that during the 17-week off-treatment follow-up period, those patients who had discontinued the treatment began to regain weight and had some increase in the progression to type 2 diabetes, resulting in an 88% reduction in the risk of progression to type 2 diabetes compared with the placebo.
Harley-Davidson Changes DEI Policy Following Activist Pressure
Harley-Davidson is the latest major company to make changes to its diversity policy after online pressure started by conservative activist Robby Starbuck. The motorcycle maker said Monday that it will no longer participate in a scoring system by the Human Rights Campaign, an advocacy group that gives companies scores based on LGBTQ+ inclusion in their workplace. Harley-Davidson said it would review all its sponsorships, saying that it will focus on retaining its “loyal riding community.” And it will no longer have spending goals to buy from suppliers owned by minorities or women.
Harley-Davidson said that it had already ended its DEI policy in April after an internal stakeholder review of its policies earlier this year. Starbuck began targeting Harley-Davidson on July 23 on X, saying the company has supported LGBTQ+ causes and shown “a total commitment to DEI policies.” “We are saddened by the negativity on social media over the last few weeks,” Harley-Davidson said in the statement Monday, which didn’t mention Starbuck. A Harley-Davidson spokesman didn’t provide additional details beyond the statement.Starbuck launched similar campaigns against farm supplies seller Tractor Supply and tractor maker Deere. Both companies changed their DEI policies. Starbuck says he doesn’t invest in the companies he targets.
Australia, US Look To Joint Production Of Hypersonic Missile, US Lawmaker Says
Joint production of hypersonic missiles by Australia and the United States could reduce strain on the U.S. defence industrial base and boost deterrence in the Indo-Pacific region, U.S. Republican lawmaker Michael McCaul said in Sydney on Friday. In an interview, the chair of the U.S. House Foreign Affairs Committee said the Australian manufacture of the cutting-edge weapons provided an example of how streamlined licensing of sensitive U.S. defence technology, and licence exemptions on 70% of defence exports to Australia from Sept. 1, would help the U.S. compete with China in developing advanced weapons.
Hypersonic missiles, which travel in the upper atmosphere more than five times faster than sound, were tested by China in 2021, prompting a technology race with the United States. Their recent use by Russia in the Ukraine war, sparked concern among members of NATO. Australia is testing a Hypersonic Attack Cruise Missile (HACM) with the United States, which it will consider as its first such weapon for fighter jets, the defence and foreign ministers of the two countries said after talks last week.
UAW Workers At Stellantis Prepare To Strike Over Reopening Of Illinois Plant
The UAW says union locals representing tens of thousands of workers are prepared to file grievances over Stellantis' failure to keep its product commitments in Belvidere, Illinois, and is threatening the possibility of a national strike against the owner of Jeep, Ram, Chrysler, Dodge and Fiat. The grievance states that the company has informed the union "it will not launch the Belvidere Consolidated Mopar Mega Hub in 2024, it will not begin stamping operations for the Belvidere Mega Hub in 2025 and it will not begin production of a midsize truck in Belvidere in 2027," according to a news release. That, the union said, would equate to a violation of last year's collective bargaining agreement between the union and the company.
The union noted that it won the right to strike over product and investment commitments as well as a deal to reopen the idled Belvidere Assembly Plant in its agreement with Stellantis. The status of Belvidere had been a major issue during the talks, and an agreement to restart the plant was seen as a major union victory. The UAW struck Stellantis as well as Ford Motor Co. and General Motors during contract talks last year.
Read more at The Detroit Free Press
Natron Energy to Invest $1.4 Billion in New Sodium-Ion Battery Gigafactory
Battery manufacturer Natron Energy has announced a $1.4 billion investment to establish a 1.2 million square-foot sodium-ion battery gigafactory in Edgecombe County, North Carolina. Once fully operational, the facility is expected to create 1,062 jobs and produce 24GW of sodium-ion batteries annually. Subject to final approval from the Economic Development Partnership of North Carolina’s Board of Directors, Natron will receive around $30 million from the North Carolina Megasite Readiness Program. In addition, the factory at the Kingsboro megasite will be facilitated in part by a Job Development Investment Grant.
The giga-scale facility will represent a 40x scale-up of the company’s current production capacity. The sodium-ion batteries are UL listed and will be delivered to industrial power space end markets. The factory will join many other battery manufacturing facilities recently announced in the Southeastern U.S. as part of the ‘Battery Belt.’ “This flagship manufacturing facility will dramatically accelerate our efforts to deliver sodium-ion batteries to customers who are hungry for safe, reliable and environmentally responsible energy storage solutions,” said Natron Energy Founder and co-CEO Colin Wessells.
Rockwell Lowers Forecast In Face Of ‘Some Pause In Capital Spend’
As an indicator of manufacturing capital spending, Rockwell Automation Inc.’s order books are flashing bright yellow. Speaking to analysts and investors earlier this month, Chairman and CEO Blake Moret said orders from Rockwell’s distributors and machine-builder clients came in slower than expected in the three months that ended on June 30. That led his team to lower its outlook for the current quarter—the fourth in Rockwell’s fiscal year—and the company’s full fiscal year.
“The dominant theme for the first part of this year was the inventory issue at distributors and machine builders,” Moret said on a conference call. “As that dissipates, we’re seeing some pause in capital spend in manufacturing.” As has been the case for the past year, Rockwell did book quarter-over-quarter orders growth. But project delays—Moret emphasized such push-outs haven’t translated to all-out cancellations—have spread from some clients in the automotive and food-and-beverage sectors in early 2024 to more industries, including semiconductors, life sciences, and energy.
Unemployment Rate Up in New York State and Hudson Valley
The New York State Department of Labor today released preliminary local area unemployment rates for July 2024. Rates are calculated using methods prescribed by the U.S. Bureau of Labor Statistics. The State’s area unemployment rates rely in part on the results of the Current Population Survey, which contacts approximately 3,100 households in New York State each month. New York State’s seasonally adjusted unemployment rate increased from 4.2% to 4.3% in July 2024.
The July 2024 unemployment rate for the Hudson Valley Region is 3.9 percent. That is up from 3.5 percent in June 2024 and up from 3.4 percent in July 2023. In July 2024, there were 47,100 unemployed in the region, up from 41,700 in June 2024 and up from 40,600 in July 2023. Year-over-year in July 2024, labor force decreased by 14,600 or 1.2 percent, to 1,196,700. Regional Unemployment rates ranged from a low of 3.7% in the Capital Region to 6.1% in New York City.
Union Pacific Warns Of 'Devastating Consequences' From Canada Rail Strike
U.S. railroad operator Union Pacific has warned that a potential rail strike in Canada will have "devastating consequences" on the North American economy. More than 2,500 Union Pacific cars per day would not move across the border, CEO Jim Vena said in a letter to Canadian Labor Minister Steve MacKinnon on late Monday. Roughly 30% of freight rail operations in Canada cross the northern border annually, the Association of American Railroads said on Tuesday. In the first half of the year, rail transport accounted for about 14% of the total bilateral trade of $382.4 billion between the U.S. Canada, according to the U.S. Department of Transportation.
Railroad operators Canadian Pacific Kansas City and Canadian National Railway are bracing for a work stoppage by Teamsters union members, which could start as early as Thursday as talks to negotiate a new labor contract are yet to reach an agreement. The union's demands included better wages and benefits, provisions for fatigue management and improved crew scheduling.