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Member Briefing December 12, 2024

December 11, 2024

Posted By: Harold King in Daily Briefing,

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Inflation Ticked Up to 2.7% in November

Consumer prices rose at a faster annual pace in November, a reminder that inflation remains an issue both for households and policymakers. The consumer price index showed a 12-month inflation rate of 2.7% after increasing 0.3% on the month, the Bureau of Labor Statistics reported Wednesday. The annual rate was 0.1 percentage point higher than October. Excluding food and energy costs, the core CPI was at 3.3% on an annual basis and 0.3% monthly. The 12-month core reading was unchanged from a month ago.

Much of the November increase in the CPI came from shelter costs, which rose 0.3% and have been one of the most stubborn components of inflation. Fed officials and many economists expect housing-related inflation to ease as new rental leases are negotiated, but the item has continued to increase each month. The BLS estimated that the shelter item, which has about a one-third weighting in the CPI calculation, accounted for about 40% of the total increase in November. The shelter index rose 4.7% on a 12-month basis in November. Used vehicle prices rose 2% monthly while new vehicle prices increased 0.6%, reversing the recent trend that has seen those items come down. Elsewhere, food costs rose 0.4% monthly and 2.4% year over year, while the energy index increased 0.2% but was down 3.2% annually.

Read More, See Chart, at CNBC

A Cautious Fed On Track For One Last 2024 Cut Followed By A 'Slowing Down' In 2025

A fresh inflation reading that met Wall Street expectations is likely to keep the Federal Reserve on track to cut interest rates again next week, but some central bank watchers believe the Fed will signal a more cautious approach to 2025 due to stubborn pricing pressures. "I do think they will be slowing down" in 2025, former Cleveland Fed president Loretta Mester told Yahoo Finance as inflation continues to show signs of stickiness.

The former Fed policymaker still expects a rate cut next week but added that a prior prediction for four rate cuts next year has "got to be rethought." Two or three cuts in 2025 "seems right to me." Earlier this month, Fed Chair Jay Powell didn't suggest what the Fed might do at its final policy meeting of the year. But he did say that because the economy is stronger than the Fed thought earlier in the fall, "we can afford to be a little more cautious."

Read More at Yahoo Finance

Sharp Downgrades To U.S. Unit Labor Costs Drive U.S. Productivity Higher

U.S. unit labor costs grew far less than initially thought in the third quarter. The report from the Labor Department on Tuesday also showed labor costs actually declined in the second quarter instead of rising as had been estimated last month. Moderate labor costs growth is likely to be welcomed by Federal Reserve officials when they hold their last meeting of year next week. Unit labor costs - the price of labor per single unit of output - increased at a 0.8% annualized rate last quarter, the Labor Department's Bureau of Labor Statistics said.

Compensation rose at a 3.1% rate last quarter, revised down from the previously reported 4.2% pace. It incorporated data from the BLS Quarterly Census of Employment and Wages (QCEW) for the second quarter. The BLS noted that normal updates to QCEW data "can lead to revisions and the most notable revisions in this release occurred in the manufacturing sectors." Nonfarm productivity, which measures hourly output per worker, increased at an unrevised 2.2% pace. Worker productivity grew at an unrevised 2.1% rate. It rose at an unrevised 2.0% rate from a year ago. Productivity has expanded at a 1.8% pace during the current business cycle, which started in the fourth quarter of 2019. That compares to a 1.5% rate of growth during the last business cycle, which ran from the fourth quarter of 2007 through the fourth quarter of 2019.

Read more at Reuters

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Policy and Politics

Manchin, Sinema Block Democratic Control Of NLRB

The Senate on Wednesday blocked Lauren McFerran’s re-nomination to the National Labor Relations Board, opening the door for Republican control of the board starting next year under President-elect Trump. Senators voted 49 to 50 against a five-year term for McFerran, the NLRB’s chair. Re-confirming McFerran would have locked in a Democratic advantage on the NLRB. Her term is up next week.

Majority Leader Chuck Schumer hoped to extend McFerran’s tenure at the NLRB to give Democrats effective control of the body into 2026 — part of the way through President-elect Donald Trump’s second term. The floor stayed open at length awaiting a decision from Manchin with the tally tied at 49. The retiring West Virginian, who voted against several NLRB picks in September 2023, ultimately emerged in opposition to the nomination, making the final tally 49-50. Vice President-elect JD Vance returned to oppose ending debate, as did independent Arizona Sen. Kyrsten Sinema, who voted no in her first appearance in the chamber since the Thanksgiving break.

Read More at Politico

Biden Unveils Fresh China Tariff Hikes

The Biden administration will increase Section 301 tariffs on imports of wafers, polysilicon and certain tungsten products from China, the Office of the U.S. Trade Representative announced Wednesday. Solar wafers and polysilicon imports, critical components for solar energy development, will now face a 50% tariff rate. Tungsten products, such as bars and sheets, will be subject to a 25% tariff rate. The hikes will take effect Jan. 1.

The move builds on tariff hikes finalized by the Biden administration in September that target strategic product categories from China, including a 100% tariff on electric vehicles and a 50% tariff on semiconductors. With additional tariff rates on the horizon, many manufacturers are weighing supply chain diversification to lessen their reliance on China for inputs and raw materials. Retailers like Dick’s Sporting Goods and Lowe’s, meanwhile, are leaning on tariff response playbooks from the first Trump administration.

Read more at Supply Chain Dive

Hochul: Administration Will Release New, Detailed Immigration And Enforcement Policies

Gov. Kathy Hochul teased new and detailed policies around immigration and enforcement, saying the public, law enforcement and Washington need to know where she stands. Her position will be two-fold. First, she stated that she’ll aggressively prosecute criminals. “If you are on a terrorist watchlist, you have committed crimes, there’s a warrant out for your arrest from your other country, or you have the audacity to come to here and commit a crime in New York, I will continue to work with all authorities to make sure that number one, you are not deported immediately because I want you to go through my criminal justice system," Hochul said.

Hochul also stated she would protect law-abiding migrant families who have built lives in the state and who pay taxes. The Hochul administration’s new immigration proposals will be released by the end of the year, or by the beginning of 2025. The State of the State address is scheduled for Jan. 14.

Read more at NY State of Politics

Health and Wellness

Certain Foods May Disrupt Your Body’s Fight Against Cancer Cells, Study Says

The food you eat may be affecting your body’s ability to fight cancer cells in the colon, according to a new study. The potential culprit: an overabundance of certain omega-6 fatty acids — perhaps from ultraprocessed foods in your diet — that may hinder the anti-inflammatory and tumor-fighting properties of another essential fatty acid, omega-3. A Western diet is often high in omega-6 fatty acids, experts say, due to widely available seed oils often used to fry fast foods and manufacture the ultraprocessed foods that now make up about 70% of the US food supply. Linoleic acid, an omega-6 fatty acid that is found in corn, peanut, soybean, safflower and sunflower oils, is the most common omega-6 in the US food supply.

“There are mutations every day in the GI (gastrointestinal) tract, and normally they’re quashed right away by the immune system with the help of molecules or mediators from omega-3s,” said Dr. Timothy Yeatman, senior coauthor of the study published Tuesday in Gut, the journal of the British Society of Gastroenterology. “But if you have a body subjected to years of a chronic inflammatory milieu created by an imbalance of omega-6s, the type commonly found in ultraprocessed and junk foods, I believe it’s easier for a mutation to take hold and harder for the body to fight it,” said Yeatman, a surgical oncologist and professor at the University of South Florida and the Tampa General Hospital Cancer Institute.

Read more at CNN

Transition 2024

Industry News

Pentagon Announces New AI Office As It Looks To Deploy Autonomous Weapons

The Defense Department on Wednesday announced a new office focused on accelerating and adopting artificial intelligence (AI) technology for the military as it aims to deploy autonomous weapons in the near future. The Artificial Intelligence Rapid Capabilities Cell (AI RCC) will aim to install AI tech into systems for the military, focusing on emerging technologies like generative AI. The AI RCC, which will be overseen by the Chief Digital and Artificial Intelligence Office and partner with the Defense Innovation Unit, will come into force as the Pentagon aims to dramatically increase its capabilities to counter Chinese mass in the event of a conflict with its main adversary.

The U.S. wants to deploy thousands of autonomous drones powered by AI through its Replicator initiative. A second Replicator initiative is focused on using new technologies to counter swarms of autonomous drones. Chief Digital and Artificial Intelligence Officer Radha Plumb told reporters Wednesday “this rapid experimentation approach will allow us to test and identify where these cutting edge technologies can make our forces more lethal and our processes more effective.”

Read more at The HIll

Apple Teams With Broadcom To Develop Its Own AI Chips and Launches Siri With ChatGPT

Apple is reportedly working to develop its own artificial intelligence (AI) chips, in a move that could make it less reliant on AI chip giant Nvidia. The iPhone maker is collaborating with chipmaker Broadcom to develop a chip code-named ‘Baltra,’ Reuters reported Wednesday, citing coverage from The Information. Mass production of the chip is expected to begin in 2026, the report said. The chip will reportedly be made using an advanced manufacturing process from Taiwan Semiconductor Manufacturing Company, which produces chips for Nvidia and is an Apple supplier.

Meanwhile, Apple Intelligence, the company’s AI offering for iPhone 16 and other devices, got a series of updates Wednesday through iOS 18.2, including integration with OpenAI’s generative AI chatbot, ChatGPT. Apple said the upgrade means its digital personal assistant, Siri, will be able to suggest users access ChatGPT in response to queries and also can provide the response itself, without switching apps. Customers can toggle on and off the ChatGPT integration, and OpenAI will not store inputs when used without a ChatGPT account, Apple said.

Read more at Investopedia

GM Exits Robotaxi Market, Will Bring Cruise Operations In House

After spending more than $10 billion on its robotaxi unit, General Motors is abandoning its Cruise driverless ride-hailing service. The Detroit automaker on Tuesday said it will no longer fund its Cruise division’s robotaxi development and will instead fold the unit into its broader tech team. GM shares rose 2.3% in extended trading. GM cited the increasingly competitive robotaxi market, capital allocation priorities and the considerable time and resources necessary to grow the business as reasons for its decision.

The company will combine the majority-owned Cruise LLC with GM technical teams. Barra, who also serves as board chair of Cruise, said the companies have yet to determine how many employees will move to GM. Cruise has nearly 2,300 employees, a GM spokesperson told CNBC. GM acquired Cruise in 2016. The automaker currently owns about 90% of Cruise and has agreements with other shareholders that will raise its ownership to more than 97%, GM said in a statement. GM anticipates it will complete the acquisition of remaining Cruise shares from outside shareholders by early 2025, CFO Paul Jacobson said Tuesday.

Read more at CNBC

Latest Yellow Terminal Sales To Fetch $192.5M. R+L To By Local Maybrook Terminal

Offers for $192.5 million of Yellow Corp.’s real estate are before a federal bankruptcy court, according to a Tuesday filing. Privately held less-than-truckload carriers Estes and R+L Carriers are the named suitors. The motion shows a $142.5 million purchase agreement from Estes for seven owned and four leased terminals. The larger owned properties to be acquired include a 216-door terminal in Cincinnati, a 198-door site near Chattanooga, Tennessee, 167 doors in Tracy, California and 136 doors in Hagerstown, Maryland. The proceeds from the sales will go toward paying claims from pension funds, former employees and other creditors, totaling in the billions.

The filing also showed Estes is acquiring owned terminals ranging from 67 to 80 doors in Omaha, Nebraska, and both Fort Wayne and Jeffersonville, Indiana (Louisville, Kentucky, market). The leased properties include a 117-door terminal in Miami and 95 doors in Orange, California. R+L is buying a 304-door terminal in Maybrook, New York, for $50 million.

Read more at Freightwaves

U.S. Auto Dealers Are Optimistic On Everything Except Electric Vehicles Sales

There’s a “renewed optimism” among U.S. car dealers heading into 2025, fueled by President-elect Donald Trump’s return to the White House as well as positive trends in interest rates and automaker-backed sales incentives, Cox Automotive reported Wednesday. But dealers aren’t feeling more optimistic about the sale of electric vehicles, according to Cox’s “Q4 2024 Dealer Sentiment Index,” which is based on wide-reaching surveys of dealers after the U.S. presidential election in November.

“The outlook for EV sales in the coming months fell further, with a majority of dealers suggesting sales would decline in the next quarter. There is concern policies by the new administration are not going to help an already fragile business,” according to Cox. Those potential policy changes under a Trump administration could include less federal funding for promoting EVs, such as an end to the current consumer credit of up to $7,500 for the purchase of one of the vehicles, as well as less strict fuel and emissions regulations.

Read more at CNBC

Air India Books Another $6B with Airbus

Air India is buying 10 Airbus A350 widebody aircraft and 90 A320 series narrow-body jets. The order – which one source estimated will be worth $6.4 billion to Airbus – follows a 250-aircraft booking by Air India in 2023. The jet builder reported Air India has a total of 344 orders for new aircraft in place now as it pursues a fleet-modernization program. Six of the A350s booked last year have already been delivered. Air India also signed on for the Airbus Flight Hour Services-Component program for its A350 aircraft, a material and maintenance service based on a contractual fixed hourly-rate payment.

In 2022 the onetime state-owned airline was taken over by Tata Group, one of the major conglomerates of the Indian and global economy, which initiated an aggressive program to expand and modernize the operation for both domestic and international service. “With India’s passenger growth outpacing the rest of the world, its significantly improving infrastructure and an aspirational young population increasingly going global, we see a clear case for Air India to expand its future fleet beyond the firm orders of the 470 aircraft placed last year,” according to Natarajan Chandrasekaran, chairman of Tata Sons and Air India.

Read more at American Machinist

Adidas Confirms Raid of German Locations in Connection With Investigation on Imports

Sportswear maker Adidas said that some of its locations were searched on Tuesday in connection with an investigation on customs and tax-import regulations. The company’s statement confirms a report late Tuesday in Germany’s Manager Magazin that said Bavarian tax investigation department and customs officials had raided Adidas’s headquarters and other locations in Germany.

According to an Adidas email on Wednesday, the investigation covers the period from October 2019 to August 2024 and is related to compliance with customs and tax regulations related to importing products to Germany. The company is cooperating with the authorities and providing them with documents and information, it said. Adidas primarily produces abroad. Almost 80% of the contract manufacturers of shoes, sportswear and accessories are in Asia.

Read more at The WSJ

Chewy Peak Season Aided By Automation

Chewy’s automated fulfillment centers combined with an “improved supply chain tool” helped the company handle its highest order period during the holiday peak in late November, Chewy CEO Sumit Singh said in a Dec. 4 earnings call. Currently, less than half of Chewy’s volumes moving through its distribution centers are handled using automation, the CEO said. The e-tailer plans to continue automating its network and eventually hopes to have more than 70% of its volumes fulfilled using automated processes.

Chewy began to automate some of it fulfillment centers to reduce operational costs and improve the cycle time between an order submission and a box landing on a truck, according to former VP of operations Mike Gilbert. The CEO said in the call that the pet e-tailer currently has six fulfillment centers that are automated, including in locations such as Tennessee, Nevada, Missouri and Pennsylvania.

Read more at Supply Chain Dive

Albertsons Demands Billions From Rival Kroger After Terminating Merger Bid

Albertsons terminated its $25 billion bid to merge with Kroger on Wednesday after courts blocked the deal and sued its rival, alleging a breach of contract that led to the deal's demise. The formal termination ends a two-year effort by the chains to combine that regulators argued would lead to higher prices for shoppers. Albertsons said it was suing due to Kroger's failure to take "any and all actions" to get the deal approved. "Given the recent federal and state court decisions to block our proposed merger with Kroger, we have made the difficult decision to terminate the merger agreement," Albertsons CEO Vivek Sankaran said. Albertsons is seeking billions of dollars in damages along with a $600 million termination fee.

Kroger called the claims baseless in a statement and said it will defend against them in court. "This is clearly an attempt to deflect responsibility following Kroger’s written notification of Albertsons' multiple breaches of the agreement, and to seek payment of the merger’s break fee, to which they are not entitled," a Kroger spokesperson said.

Read more at Yahoo Finance

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