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Member Briefing August 26, 2024

August 26, 2024

Posted By: Harold King in Daily Briefing,

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S&P: Manufacturing Contracts Again in August

S&P Global said on Thursday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, edged down to 54.1 this month, a still healthy level among the highest measured over the past two years. That followed a final reading of 54.3 in July. The survey's flash manufacturing PMI retreated to an 8-month low, falling to 48.0 this month from 49.6 in July. Economists polled by Reuters had forecast the index for the sector, which accounts for 10.3% of the economy, to remain unchanged.

Average prices charged for goods and services rose at the slowest rate since January and are now at levels that S&P Global viewed as consistent with the Federal Reserve's 2% inflation target. The survey's measure of new orders received by private businesses edged up to 52.3 from 52.2 in July. Its measure of prices paid by businesses for inputs was unchanged at 58.0, but the survey's gauge of prices charged slipped to 52.8 from 53.1 in July. Private sector employment fell, with a decline in the service sector accompanied by the manufacturing sector adding the fewest jobs since January.

Read more at Reuters

Fed’s Powell Declares ‘Time Has Come’ for Rate Cuts

Federal Reserve Chair Jerome Powell gave his strongest signal yet that interest-rate cuts are coming soon, saying the central bank intends to act to stave off a further weakening of the U.S. labor market. “We do not seek or welcome further cooling in labor market conditions,” Powell said in a speech at the central bank’s annual gathering in the Grand Teton National Park on Friday. “The time has come for policy to adjust.”

Powell’s comments Friday all but bring to a conclusion the Fed’s historic inflation-fighting campaign, one that Powell amplified from the same stage two years ago when he signaled his readiness to accept a recession as the price of lowering inflation. Fed officials’ next policy meeting is scheduled for Sept. 17-18. They are widely expected to lower the benchmark federal-funds rate at that meeting.

Read more at Forbes

Existing Home Sales – and Prices - Increase in July

Sales of existing homes rose in July as house hunters returned to the market with mortgage rates at their lowest levels since February. Existing home sales advanced 1.3% from June to a seasonally adjusted annual rate of 3.95 million, the National Association of Realtors said Thursday, stopping a four-month sales decline that began in March. Economists polled by Bloomberg expected existing sales to hit a pace of 3.94 million in July.

On a yearly basis, sales of previously owned homes dropped 2.5% in July. The median home price climbed 4.2% in July to $422,600, the 13th straight month of annual price increases. A combination of limited inventory, rising prices, and high mortgage rates continue to weigh on housing activity. “Despite the modest gain, home sales are still sluggish,” NAR chief economist Lawrence Yun said in a statement. “But consumers are definitely seeing more choices, and affordability is improving due to lower interest rates.”

Read more at YahooFinance

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Policy and Politics

US Appeals Court Scraps Biden Tipped Wages Rule

A U.S. appeals court on Friday struck down a rule adopted by President Joe Biden's administration designed to raise pay for tipped workers, citing a recent U.S. Supreme Court ruling that curtailed federal agencies' ability to issue regulations. A three-judge panel of the New Orleans-based 5th U.S. Circuit Court of Appeals sided, opens new tab unanimously with two restaurant industry trade groups in finding that the U.S. Department of Labor's 2021 rule was contrary to federal labor law.

The rule required employers to pay tipped workers the federal minimum wage of $7.25 an hour, and not the lower $2.13 minimum wage for tipped work, for non-tipped tasks that take up more than 20% of their time or 30 consecutive minutes. The rule replaced a regulation adopted during Republican former President Donald Trump's administration that said workers could be paid the tipped minimum wage if they primarily performed tipped duties. "Because the Final Rule is contrary to the Fair Labor Standards Act’s clear statutory text, it is not in accordance with law," U.S. Circuit Judge Jennifer Walker Elrod wrote for a panel that included two Republican-appointed judges and one Democratic appointee.

Read More at Reuters

US Accuses Software Firm Of Driving Rent Hikes

The US has sued a leading software company that collects and sells rental data, accusing it of subverting competition between landlords and feeding the country's housing crisis. The Department of Justice (DOJ) has claimed RealPage's software algorithm meant rival landlords were sharing what would otherwise be private information, allegedly allowing them to illegally co-ordinate and raise rents. "Everybody knows the rent is too damn high and we allege this is one of the reasons why," Attorney General Merrick Garland said at a press conference announcing the lawsuit.

RealPage did not immediately comment but it has previously called similar claims false and misleading. "RealPage allows landlords to manipulate, distort, and subvert market forces," the DOJ alleged in the complaint. It took aim at a RealPage offering that recommends rents to its property owner customers, suggesting that many agree to "auto accept" the proposals from RealPage. It claimed the firm dominated the market for commercial revenue management software, citing the firm's own estimates that it controlled about 80% of the market. RealPage in June said it served a much smaller fraction of the rental market than has been claimed and that landlords, not RealPage, set prices.

Read more at The BBC

NYSERDA Signals Flexibility On State's Electrification Deadlines, But Stresses Need For Progress

As concerns persist about New York’s ability to meet its ambitious climate goals, including reaching 70% electricity from renewable sources by 2030, state energy leaders said Monday that progress is the priority, and the state is open to tweaking its mandated deadlines to meet the benchmarks, if necessary. Doreen Harris, president and CEO of the New York State Energy Research & Development Authority, told Spectrum News 1 on Monday the state is focused on meeting the green energy requirements under the 2019 Climate Act, reiterating a July report from the department that the 2030 goal specifically could be moved if necessary.

Also now on the table: funding from a pilot program announced last week to help low-income families electrify their homes. The New York State Public Service Commission approved the implementation of the Energy Affordability Guarantee pilot program, through funding approved as part of the 2025 state budget. The pilot program will provide approximately 1,000 program participants with tailored bill assistance to ensure they pay no more than six percent of their annual household income toward electricity costs. It also comes on the heels of the Public Service Commission announcing last week that it is ordering utility companies to to develop a framework to proactively plan for the increased grid loads and infrastructure challenges that will come from electrification.

Read more at New York State of Politics

Health and Wellness

The FDA Approved New Covid Vaccines. Should You Get One?

The Food and Drug Administration on Thursday gave Moderna—as well as Pfizer and its partner BioNTech—the green light to roll out their new shots in the coming days, both of which target an offshoot of Omicron known as the KP. 2 strain. The two shots will be available to anyone over 6 months of age, a move that comes as Covid hospitalizations continue to climb and remain higher than they were at this time last year, according to data from the Centers for Disease Control and Prevention. The CDC recommends people get one of the new vaccines by the end of October. Both will be available at local clinics and pharmacies.

Doctors say everyone who is eligible should get a shot. But older people who have skipped other recent vaccine updates should especially consider it. Ready to get vaccinated as soon as shots become available? Doctors say timing is everything. “Unless you’re very concerned about acquiring Covid right now, my recommendation would be to get it in September or October,” said Dr. William Schaffner, a professor of preventive medicine at the Vanderbilt University School of Medicine. “That will provide the best protection throughout the winter season.”

Read more at The WSJ

NYS COVID Update

The Governor updated COVID data for the week ending August 23^rd.

Deaths:

Weekly: 46
Total Reported to CDC: 83,800

Hospitalizations:

Average Daily Patients in Hospital statewide: 1,190
Patients in ICU Beds: 115

7 Day Average Cases per 100K population

9.4 positive cases per 100,00 population, Statewide
11.7 positive cases per 100,00 population, Mid-Hudson

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Election 2024

Industry News

Boeing Reclaims Top Spot In Top 100 Aerospace Companies By Revenue

A list of the top 100 aerospace companies compiled by Counterpoint Market Intelligence on behalf of FlightGlobal puts Boeing at the top in terms of revenue. The top 10 entries include some familiar names, including Boeing’s rival Airbus, as well as GE Aerospace, among others. According to a list published by FlightGlobal, Boeing has emerged as the number one aerospace company in terms of sales revenue in 2023. The US plane maker has had some challenges in recent years, but it manages to outshine its rivals in overall sales.

The US plane maker made $77.8 billion in 2023, compared to $76.6 billion in 2019. European aircraft manufacturer Airbus made $70.8 billion last year as opposed to $78.9 billion in 2019 and sits behind Boeing on the list at number 2. One of the takeaways from the list is that there are indications that commercial aviation is recovering, at least in terms of revenue. A breakdown of revenues of both Boeing and Airbus reveals some interesting trends as well. In terms of commercial sales alone, Airbus is the clear winner, with $51 billion in revenues, while Boeing managed to get a little under $34 billion. However, Boeing’s growth of 30.3% in its commercial sales was almost twice as much as that of Airbus in 2023

Read more at Simple Flying

ON Semiconductor Looks to Bolster Supply Chain to Shield Against Rise of Chinese Chip Makers

ON Semiconductor, the Phoenix-based maker of semiconductor components, (and Council Member with a Fab in East fishkill) is diversifying its supply chain in response to customers’ concerns that China would promote use of its local chip suppliers. The maker of power chips and sensors used in electric vehicles recently shared plans for a new $2 billion plant in the Czech Republic and is boosting its manufacturing capacity in South Korea, in part to improve the resilience of its supply chain.

Onsemi is stepping up its capital spending to expand its existing manufacturing locations as part of its long-term financial plan. The company saves about 40% in capex and two years of development time when it expands a manufacturing location rather than setting up a new one, Chief Financial Officer Thad Trent said. The company’s maneuver reflects the challenge to offset the potential risk of losing ground in a dependable Chinese market. It also illustrates the hurdle many chip makers face as the Chinese government pushes local automotive-parts makers to use chip suppliers based there instead of suppliers based abroad to create a self-sufficient chip industry.

Read more at The WSJ

Rolls-Royce Shares Soar To All-Time High On Reinstated Dividend, Raised Profit Guidance

Shares of Rolls-Royce jumped more than 11% to hit an all-time high on Thursday after the company reinstated its dividend and raised its profit forecast on the back of strong first-half results. The British aerospace and defense company reported underlying profit of £1.1 billion ($1.4 billion) in the first half of the year, and said it expects that figure to rise to between £2.1 billion and £2.3 billion for 2024. That’s up from the £1.7 billion to £2.0 billion forecast in its 2023 full-year results and ahead of market expectations.

The firm, which supplies aviation giants Boeing and Airbus, also said it would resume dividends for full-year 2024, starting at a 30% pay-out ratio of underlying profit after tax. It comes after pay-outs were suspended in 2020, when flying halted during the pandemic. CEO Tufan Erginbilgic, who took the helm in 2023 to revitalize the company, said the strong results were a sign that the company’s plans, optimization and cost efficiency programs were taking shape. “Our transformation of Rolls-Royce into a high-performing, competitive, resilient, and growing business is proceeding with pace and intensity. We are expanding the earnings and cash potential of the business in a challenging supply chain environment, which we are proactively managing,” he said in a statement.

Read more at CNBC

BMW Overtakes Tesla In European EV Sales For First Time, Report Says

BMW led the European battery electric vehicle (BEV) market for the first time, beating U.S. automaker Tesla, according to market research firm JATO Dynamics. The German auto giant sold 14,869 BEV cars in July, about 300 more than Tesla last month. The data underscored traditional automakers' success in the market after trailing pure electric-vehicle manufacturers, driven by government policies and brand royalty.

Tesla, the world's most valuable automaker, remains the dominant player, but traditional automakers such as BMW and Volvo are gaining ground due to uncertainties surrounding EV subsidies and incentives. CEO Elon Musk's polarizing persona has also been influencing sentiment toward Tesla, according to some reports. BMW reported a 35% jump in sales last month from a year earlier, while Tesla saw registrations fall 16%, the report said.

Read more at YahooFinance

China’s BYD Surges Past Honda And Nissan’s Sales For The First Time

China’s leading EV maker, BYD, sold more vehicles than Honda and Nissan for the first time in the second quarter. BYD is now the world’s seventh-largest automaker. With low-cost EVs hitting key global markets, BYD is quickly catching up to Ford. According to MarkLines (via Nikkei), BYD’s new vehicle sales climbed 40% between April and June to 980,000. The growth was enough to overtake Japan’s Honda and Nissan for the first time to become the seventh-largest automaker globally.

A big part of BYD’s surging sales numbers is its incredibly affordable electric cars. BYD continues slashing prices while releasing lower-cost EV models. Its cheapest EV, the Seagull, starts at just $9,700 (69,800 yuan) in China. Meanwhile, much of BYD’s success this year is thanks to growing overseas sales. BYD sold 105,000 vehicles outside of China, roughly tripling from last year. After launching in key markets like Mexico, Brazil, Japan, Europe, Thailand, and other Southeast Asian countries, BYD is already a leading EV brand. Although global auto leaders like Volkswagen and Toyota’s sales numbers fell in Q2, BYD continued to see more demand. Toyota is the only Japanese automaker that sold more vehicles than BYD in Q2.

Read more at electrek

Teamsters Union Serves CN Rail With 72-Hour Strike Notice As CPKC Stoppage Continues

The Teamsters union has served Canadian National Railway (CN) with a 72-hour strike notice, hours after saying it was taking down picket lines and workers were returning to the job. The notice says that the union does not believe any of the ongoing issues between the railway and the Teamsters to be "insurmountable" and that it remains open to negotiating with the company in order to prevent any "further work stoppage." The strike notice comes after months of increasingly fraught contract talks between the Teamsters and Canada's two biggest railways, CN and Canadian Pacific Kansas City (CPKC).

Pressure from industry groups and provincial governments to resolve the conflict has been mounting for weeks. The companies haul a combined $1 billion in goods each day, according to the Railway Association of Canada. Many shipments were pre-emptively stopped to avoid stranding cargo. Industries affected by the work stoppage include agriculture, mining, energy, retail, automaking and construction. U.S. railways also have had to turn away Canada-bound shipments. Shippers south of the border also rely on Canada's two main railways, whose tracks run to the Gulf of Mexico and, in CPKC's case, to several Mexican ports.

Read more at The CBC

NASA Taps SpaceX to Return Starliner Astronauts, Dealing Blow to Boeing

Two astronauts parked at the International Space Station since early June will return with SpaceX instead of on the Boeing vehicle that brought them there. NASA Administrator Bill Nelson announced the decision at a briefing on Saturday, which means astronauts Barry Wilmore and Sunita Williams will remain in orbit until early next year, when a SpaceX craft is scheduled to return with them on board.

The decision is a setback for Boeing, which has spent years developing the Starliner vehicle that transported the astronauts to the space station on June 6. During its flight to the station, several thrusters temporarily failed and engineers identified additional helium leaks within its propulsion system. In the weeks since, NASA and Boeing have tussled over those problems, trying to determine whether they would pose any threats if the vehicle left the station carrying astronauts Barry Wilmore and Sunita Williams. The decision to have SpaceX bring Wilmore and Williams back means both will spend about eight months in all at the ISS. Officials at the agency had initially planned for an eight-day mission focused on testing out Starliner, and at one point talked about getting them back to Earth in mid-June.

Read more at The WSJ

Why Ford Believes Its $1.9 Billion Shift In EV Strategy Is The Right Choice For The Company, Investors

Ford Motor’s profit engine for decades has been large trucks and SUVs in the U.S. So it might surprise investors that the automaker believes its new path to profitability for electric vehicles will first be led by smaller, more affordable vehicles. The new plan is an “insurance policy” for the automaker to be able to expand its growingly popular hybrid models and create more affordable EVs that it believes will deliver a more capital-efficient, profitable electric vehicle business for the company and investors, according to Marin Gjaja, Ford’s operating officer for its Model e EV unit.

“We’re quite convinced that the highest adoption rates for electric vehicles will be in the affordable segment on the lower size-end of the range,” he told CNBC on Thursday. “We have to play there in order to compete with the entrants that are coming. We believe smaller, more affordable vehicles are the way to go for EV in volume. Why? Because the math is completely different than [internal combustion engine (ICE) vehicles],” Farley told investors last month. “In ICE, a business we’ve been in for 120 years, the bigger the vehicle, the higher the margin. But it’s exactly the opposite for EVs.”

Read More at CNBC

Why The B-52 Has Eight Engines

Today, all commercial passenger airliners have only two engines (the B-747 and Airbus A380 are out of production), so why does the B-52 Stratofortress not have four, not six, but eight engines? While there are many examples of six-engine aircraft (including those from WW2 times), there are few examples of military aircraft with eight jet engines. With the B-52Hs about to be upgraded to the B-52J, the B-52 will continue to be the backbone of the US strategic bomber fleet and will continue to be the only example of a US Air Force eight-engined jet aircraft for many years to come.

Part of the reason the B-52 has so many engines is that it is a very old design. The B-52 was designed in the late 1940s and first flown in 1952. Back then, jet engines were still in a comparatively early stage of development and were underpowered and unreliable. Eight jet engines were needed to enable the aircraft to be the intercontinental high-altitude strategic bomber the Air Force required. Over the years, there have been proposals to re-engine the Stratofortress and reduce it to just four engines. But this has never happened, partly because it would cause problems as the G and H model's shorter tail fins and smaller rudder might not have copped with the asymmetric thrust had an engine flamed out.

Read more at Simple Flying

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