Member Briefing August 7, 2024
Top Story
U.S. Trade Deficit Recedes From 19-Month High As Oil Exports Rise
The trade deficit fell by 2.5% in June and receded from a 19-month high, owing to higher exports of aircraft and U.S.-produced oil and gas. The deficit dropped to $73.1 billion in June from $75.0 billion in May, government data showed. Still, a bigger trade gap in the second quarter shaved 0.7 percent points off the 2.8% annual rate of growth in the second quarter. Higher deficits subtract from gross domestic product.
Exports rose 1.5% in June to $265.9 billion, just shy of the record high registered earlier in the year. The U.S. shipped more passenger planes, oil and natural gas. Imports inched up 0.6% in June to $339.0 billion. They’ve crept higher this year but are about 3% below a record set in the spring of 2022. The U.S. imported more drugs, computer chips and telecommunications gear in June. Oil imports declined.
Stocks Rebound To Snap Three-Day Losing Run In Broad Relief Rally
Stocks jumped Tuesday, recovering some losses from the previous three trading days as investors took a pause from recession fears and Japanese equities rallied.The Dow Jones Industrial Average rose 294.39 points, or 0.76%, to end at 38,997.66. The S&P 500 advanced 1.04%, closing at 5,240.03. The tech-heavy Nasdaq Composite gained 1.03% to settle at 16,366.85. The major averages snapped a three-day stretch of losses.
All 11 sectors of the broad market index were positive for the day. Several megacap tech stocks also rebounded after a sharp pullback on Monday. Nvidia rose 3.8%, while Meta Platforms advanced 3.9%. Helping sentiment was a rebound in Japanese stocks. The Nikkei 225 posted its best day since October 2008, soaring 10.2%. That surge comes a day after the benchmark suffered its worst session since 1987, losing 12.4%. Volatility will likely remain elevated in the near term as the yen carry trade continues to unwind, said Ross Mayfield, investment strategist at Baird.
US Household Debt Levels Edge Up In Q2, NY Fed Survey Shows
Total U.S. household debt levels edged up in the second quarter but overall delinquency rates stabilized, indicating that borrowers are still in decent enough shape to support the economy, a report from the Federal Reserve Bank of New York said on Tuesday. The bank report, part of its survey of household debt and credit conditions, showed that overall debt levels rose by $109 billion, or 0.6%, in the second quarter to $17.80 trillion. Overall borrowing levels are now $3.7 trillion above where they were at the end of 2019, before the onset of the coronavirus pandemic, the report said.
There was some relief with the report showing that overall delinquency rates remained at 3.2%, unchanged from the first quarter, and still well below the 4.7% rate seen at the end of 2019 before the coronavirus pandemic. However, transitions in delinquent borrowing levels rose slightly in the second quarter for credit cards and auto loans, which both remain elevated although the pace of worsening slowed. Roughly 9.1% of credit card balances and 8.0% of auto loan balances transitioned into delinquency over the past year.
Global Headlines
Middle East
- Israel And Hamas: The Latest News – The Guardian
- Iran Attack Timing And Details Still Unclear, U.S. Officials Say - Axios
- Israeli Airstrike Targeting Hezbollah Kills 4 In Southern Lebanon - VOA
- UN Staff Fired Over Possible Links To 7 October Attack - BBC
- Why Israel Needs More Than Iron Dome to Thwart an Iranian Attack - WSJ
- War Fears And Flight Cancellations In Lebanon Send Travelers And Residents Scrambling - NPR
- Who Are Iran-Armed Proxies That Could Play A Key Role In Retaliatory Strikes Against Israel? - Euronews
- US Working 'Around The Clock' To Avert Escalation In The Middle East – France 24
- Missile Attack By Yemen’s Houthi Rebels Hits Container Ship In First Attack In 2 Weeks - AP
- 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
- EU Countries Approve First 4.2B Payment To Ukraine – Politico
- Ukraine Says It Downs Four Missiles, 15 Russia-Launched Drones - Reuters
- Ukraine Says Russian Missile Attack Hits Kharkiv - VOA
- Ukraine Had A Chance To Blow Up Russia’s Best Warplanes On The Tarmac. The White House Said No - Forbes
- Photos Show Devastation after Ukraine Strikes Russian Airfield Ammo Storage - Newsweek
- Johnson Calls On Biden To Release Weapons To Israel Following Rocket Attack On US Base – The Hill
- Anti-War Russian Pianist Dies In Hunger Strike - Newsweek
- With their nation under siege, Ukrainian athletes shine at Paris Olympics - NPR
- 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
- Venezuelans March Over Contested Election, Number Of Detained Rises - Reuters
- Venezuela’s Opposition Trounced Maduro, Election Receipts Show – The Hill
- EU fights outbreak of sheep and goat plague – Politico
- US Personnel Wounded In Attack Against Base In Iraq, Officials Say - Reuters
- Bangladesh PM Hasina's Dramatic Fall From Grace: 5 Things To Know – Nikkei Asia
- India On Alert At Bangladesh Border, Confirms Hasina In New Delhi - VOA
- Bangladesh Parliament Dissolved As Protesters Back Nobel Laureate Yunus To Lead Country – France 24
- 6,000 Police At The Ready To Quell UK Riots – France 24
Policy and Politics
Siena Poll: Harris Gives Slight Boost to Down Ticket Dems
Vice President Kamala Harris leads former President Donald Trump 53-39% among likely New York State voters, the first time the Siena College poll has included Harris in a horserace against Trump. Harris has a 53-43% favorability rating, up from 42-47% in October 2023. Trump’s favorability rating is 39-59%, little changed from 37-59% in June, among registered voters. By a 74-23% margin, voters say this is the most important election of their lifetime.
“The landscape has changed since the last Siena College poll. The change at the top of the Democratic ticket has had a noticeable, while not dramatic, effect on the horserace. Harris has the support of 86% of Democrats, up from the 75% support Biden had in June. And while independent voters support Trump over Harris 47-40%, they supported Trump over Biden 45-28%,” Siena College pollster Steven Greenberg said. “Harris leads with Black voters 81-11%, up from Biden’s 59-29% lead in June.
Read more at The Siena Research Institute
Other Odds and Ends From the Siena Poll
- Voters support banning smartphones in classrooms 60-32%. In a true oddity, it is supported 58-36% by both Democrats and Republicans, with even stronger support from independents, 64-21%.
- Governor Kathy Hochul has a 39-50% favorability rating, compared to 38-49% in June. Her job approval rating, 46-49%, is up slightly from 44-50% in June. Hochul has never hit 50% of voters viewing her favorably, and this month she hit 50% of voters viewing her unfavorably, the first time she’s hit that mark.
- Strong majorities of voters think that crime in New York has gotten worse over the last year, (54%), as has the influx of migrants (64%), the availability of affordable housing (71%), and the cost of living (82%).
- Voters favor Democrats for Congress over Republicans, 52-37%, little changed from 50-35% in June. While the Democratic lead for the presidential race grew from 8 to 14 points, the race for Congress stayed the same. While more than two-thirds of New York City voters favor Democrats, they only hold narrow leads where the most competitive races are – the suburbs (47-44% Democrat) and upstate (44-42% Democrat).
- Voters remain sour on the direction of the state and country. By 51-39% (52-37% in June) voters say New York is off in the wrong direction, rather than on the right track. Voters are even more negative about the direction of the nation, thinking the country is headed in the wrong direction 61-30% (61-31% in June).
Read more at The Siena Research Institute
USTR Review Raises Steel, Aluminum Tariffs
The Office of the U.S. Trade Representative (USTR) recently completed its four-year review of the Section 301 duties imposed on goods imported from China. These Section 301 tariffs were put in place by the Trump administration in 2018 in response to trade practices the administration determined to be unfair. The tariffs increased the cost of importing goods from China by imposing an additional, Section 301, duty assessment of between 7.5% and 25% onto the cost of the importation. Currently 2/3s of goods imported from China are assessed a Section 301 tariff.
In the program review, the USTR determined that additional duty increases are necessary to persuade China to change its business practices and protect recent U.S. investments in strategic sectors such as clean energy, electric vehicle and semiconductor manufacturing. The Section 301 tariffs for Chinese steel and aluminum products have been tripled effective August 1. Imports of Chinese steel and aluminum are also subject to Section 232 (national security) tariffs of 25% and 10% respectively. Combining the two types of tariffs yields an eye-popping duty cost of 50% for Chinese steel and 35% for aluminum and aluminum products.
Health and Wellness
Nearly A Third Of Adolescents Getting Mental Health Treatment, Federal Survey Finds
Close to 1 in 3 adolescents in the U.S. received mental health treatment in 2023, the Substance Abuse and Mental Health Services Administration reported Tuesday, which works out to around 8.3 million young people between the ages of 12 and 17 getting counseling, medication or another treatment. The result is among the findings now released from SAMHSA's National Survey on Drug Use and Health for 2023. The federal agency's sweeping annual poll is closely tracked by mental health and addiction experts.It includes a broad range of questions asked to Americans ages 12 and older living in the community, not in care facilities.
The most common type of mental health treatment was meeting with a provider in an outpatient setting, like at an office of a therapist or school counseling center. Among adolescents, the biggest increase from 2022 was in the number getting medication for mental health treatment. SAMHSA estimates that 13.9% of those age 12 to 17 received such a prescription in 2023. That is up from 12.8% the year before, though the agency said that the increase was not statistically significant. The share of adults receiving mental health treatment has also climbed, from 21.8% in the 2022 survey to 23% in 2023. Among adults, 16.3% got prescription medication for mental health treatment, compared to 15.2% in 2022.
Election 2024
- Harris Picks Minnesota Gov. Tim Walz as Running Mate – The Hill
- Trump, Harris Campaigns Race To Define Democratic Running Mate Tim Walz - CNBC
- Cori Bush Loses Primary In Latest Blow To Progressive ‘Squad’ The Hill
- Cracks in Economy Pose Risk to Harris’s Momentum - WSJ
- Harris Has Momentum, But The Race Is Still Tight. Here Are The Paths To The Presidency - NPR
- Trump Says Harris ‘Afraid’ To Accept Fox News Debate – The Hill
- Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - Fivethirtyeight
Industry News
DOE Spends $24 Million To Increase Clean Energy Workforce Training Programs For Manufacturers
21 projects with the goal of increasing the development of clean energy workforce training programs will receive $24 million in funding from the Bipartisan Infrastructure Law. These programs can develop within union training programs, community colleges, and trade schools. The 21 projects will also expand the U.S. Department of Energy’s (DOE’s) Industrial Training and Assessment Centers (ITAC) network. This network, which used to be called the Industrial Assessment Centers (IACs) network, is designed to train energy-efficiency workers to help manufacturers decrease their carbon emissions and energy costs.
U.S. Secretary of Energy Jennifer M. Granholm said, “… a strong manufacturing sector – and a workforce that supports it – is vital to our nation’s economy. Our Industrial Training and Assessment Centers will provide necessary training opportunities and reduce barriers to good paying, union jobs that will boost our clean energy economy.”
China Caixin PMI Signals Pickup in Services-Sector Activity
A private gauge of China’s services sector signaled that activity expanded at a faster pace in July compared with a month ago, in contrast with the trend seen in official data. The Caixin services purchasing managers index rose to 52.1 in July from 51.2 in June, Caixin Media Co. and S&P Global said Monday. Both supply and demand improved in July, with business activity and total new orders growing for the 19th month in a row and at a faster pace than the previous month, said Caixin.
In a positive sign for China’s labor market, the indicator for employment in the services sector entered positive territory for the second time in the past half year, notching the highest reading since August 2023, according to Caixin. However, businesses’ optimism was limited, with some surveyed companies expressing confidence in further market improvement ahead while others showed concern about the outlook. In July, the gauge for future activity expectations rebounded slightly but was at its second-lowest level since March 2020 during the imposition of strict Covid-19 restrictions.
Automakers Use AI To Manage Their Supply Chain Ecosystem
The supply chain is central to the efficiency of automotive manufacturers, impacting costs, on-time deliveries, production efficiencies, and overall customer satisfaction. The complexity of that chain has deepened with the introduction of hybrids and electric vehicles as well as regulatory mandates and corporate sustainability objectives. However, new AI technologies have arisen that are digitizing processes and procedures that offer companies new ways to streamline processes throughout the entire supply chain and largely avoid costly disruptions—from outside vendors to line management and to final mile customer deliveries.
Supply chains are largely in place to handle traditional automobiles, but with EVs comes the need for a distinct group of partners to supply the specialized components that are required for these alternative vehicles. Thus, traditional supply chains will be impacted by new suppliers, new sources of origin and new delivery and transportation methods based on battery charge and safety. Sourcing parts and components from different parts of the world requires precise planning and coordination. With the complexity of global supply chains and production for multiple markets, the automotive industry faces increasingly complex logistics challenges involving multiple players.
NTSB Holds Hearings On Boeing 737 MAX 9 Mid-Air Emergency
The U.S. National Transportation Safety Board will question key witnesses from Boeing Spirit AeroSystems and the Federal Aviation Administration on the mid-air cabin panel blowout of an Alaska Airlines 737 MAX 9 door plug in January. During the start of its two-day investigative hearing, the board also plans to release documents including factual reports and exhibits from the ongoing investigation.
Boeing's senior vice president for quality, Elizabeth Lund, and Doug Ackerman, vice president of supplier quality for Boeing, are among those who testified during the hearings scheduled to last 20 hours over two days, the NTSB said. Terry George, senior vice president and general manager for Boeing Program at Spirit AeroSystems and Scott Grabon, a senior director for 737 quality at Spirit, which makes the fuselage for the MAX, will also appear, it added. The NTSB said Boeing would no longer see information produced during the probe and, unlike other parties, will not be allowed to ask questions of other participants during the hearing.
Elon Musk's SpaceX Has a Starlink Rival in China
A launch on Monday kicked off a company's bid to become a Chinese answer to Elon Musk's SpaceX. The rocket carried up an initial batch of 18 low Earth orbit (LEO) communications satellites out of a planned 15,000, the China Securities Journal reported. The launch took place at the Taiyuan Satellite Launch Center in the northern province of Shanxi. A satellite is considered to be in low Earth orbit (LEO) at altitudes of less than 2,000 kilometers (1,200 miles) above the Earth's surface, according to NASA—close enough for convenient communication and observation.
The company, Shanghai Spacecom Satellite Technology, calls the network aimed to provide broadband internet internationally the "Thousand Sails Constellation," also known as the G60 Starlink Plan, which was kicked off last year. Monday's launch comes as China establishes itself as a major player in outer space, a new frontier for great power competition. China conducted 67 space launch missions in 2023, second only to the U.S., and placed 221 spacecraft in orbit. China hopes to up its game with 100 launches this year, according to state-media outlet Xinhua.
Google Illegally Acted As A Search Monopoly, Judge Rules In Major Case
A federal judge ruled on Monday Google violated antitrust laws in a bid to maintain a monopoly with its search engine—a major loss for Google, capping off the latest antitrust case brought against a U.S. tech giant. D.C.-based Judge Amit Mehta wrote “Google is a monopolist” and “has acted as one to maintain its monopoly,” in an opinion siding with the Department of Justice and 11 states. In his ruling, Mehta stated Google exercises monopoly power over product markets, uses exclusive distribution agreements and charges “supracompetitive prices for general search text ads,” which Mehta argues has led to “anticompetitive behavior.”
The case marks the latest antitrust suit against a U.S. tech conglomerate, and comes less than a year after Google agreed to a $700 million settlement in a separate suit for allegedly forcing app makers to use its payment system on its Play Store marketplace—Apple, Amazon and Facebook parent Meta have also faced antitrust suits in recent years. Following Monday’s ruling, Mehta is now tasked with deciding what actions Google must take to remedy alleged antitrust violations, a potentially major consequence for the $2 trillion tech company that spends billions of dollars each year on its search engine.
Microsoft Fires Back At Delta After Massive Outage, Says Airline Declined ‘Repeated’ Offers For Help
Delta CEO Ed Bastian told CNBC last week that the carrier has “no choice” but to seek damages from Microsoft and CrowdStrike for the mass disruptions, which he said cost the company, an airline that prides itself on reliability, about $500 million. Delta struggled more than rival airlines to recover from the outage, canceling more than 5,000 flights in the days following the July 19 incident, which was sparked by a botched software update from CrowdStrike and affected millions of computers running Microsoft Windows.
Mark Cheffo, a Dechert partner representing Microsoft, said in a letter Tuesday to Delta’s attorney David Boies of Boies Schiller Flexner, said Microsoft is still trying to figure out why American Airlines, United Airlines and others were able to recover more quickly than Delta. “Our preliminary review suggests that Delta, unlike its competitors, apparently has not modernized its IT infrastructure, either for the benefit of its customers or for its pilots and flight attendants,” Cheffo wrote.
Ford Turns ‘Dirty’ Business Into A Profit Driver. GM And Stellantis Are Taking Notice
A once “dirty” word, and business, in the automotive industry has become a multibillion-dollar battleground for U.S. automakers, led by Ford Motor. The Dearborn, Michigan-based automaker has turned its fleet business, which includes sales to commercial, government and rental customers, into an earnings powerhouse. And Ford’s crosstown rivals General Motors and Chrysler parent Stellantis have taken notice, restructuring their operations as well.
Many fleet sales, especially daily rentals, have historically been viewed as a negative for auto companies. They are traditionally less profitable than sales to retail customers and are used by automakers at times as a dumping ground to unload excess vehicle inventories and boost sales. But Ford has proven that’s not always the case by breaking out financial results for its “Ford Pro” fleet business. The operations have raked in about $18.7 billion in adjusted earnings and $184.5 billion in revenue since 2021.
Small Aircraft Demand Forecast at $640 Billion
Aircraft builder Embraer recently issued its 20-year forecast for sub-150-seat commercial aircraft deliveries – the market segment in which it is most successful. The report estimates global demand for 10,500 new jet and turboprop aircraft during the 2024-2043 period. In financial terms, it pegs the total demand for new sub-150-seat aircraft over that period at $640 billion. Embraer is the world’s third-largest manufacturer of civil aircraft, following Airbus and Boeing, and has divisions for commercial, executive, military, and agricultural aviation sectors. It is recognized mainly for its regional and medium-range commercial jets, in particular the narrow-body E-Jets.
The report recognizes similar regional demand growth in Asia and Latin America that has been identified by Airbus and Boeing in their annual forecasts over recent years – plus steady growth and high rates of replacement in established markets in North America and Europe. But Embraer notes that the relevance of the small narrow-body category is increasing, as larger aircraft are not always economically or operationally feasible “for medium and lower-density markets, particularly when multiple daily frequencies are essential for those cities to stay well-connected.”
Read more at American Machinist