Member Briefing December 14, 2023
Fed Holds Rates Steady and Sees Cuts Next Year
The Federal Reserve held interest rates steady and signaled inflation had improved more rapidly than anticipated, opening the door to rate cuts next year. Most officials penciled in three interest rate cuts for 2024 in projections released after their two-day meeting on Wednesday. Central-bank officials are trying to balance two risks: One is that they move too slowly to ease policy and the economy finally crumples under the weight of higher interest rates, causing millions of people to lose their jobs. The other is that they ease prematurely and inflation settles above 3%—higher than their 2% goal.
One year ago, many economists anticipated that Fed officials would have to raise rates to levels that would create enough slack—such as unemployed workers and idled factories—to significantly slow inflation. But healed supply chains and an influx of workers into the labor force are curbing wage and price increases without causing broad economic weakness. Fed officials have acknowledged that they could lower rates next year simply because inflation is well on its way to their 2% target. Holding rates steady as inflation falls would lead inflation-adjusted or “real” rates to rise, which the Fed doesn’t want. Officials could lower nominal rates simply to prevent real interest rates from turning too tight.
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- Support for Hamas Grows Among Palestinians in West Bank - BBC
- Israeli Commander Among 10 killed Overnight, IDF Says – ABC News
- Israel Losing Global Support Over ‘Indiscriminate’ Gaza bombing: Biden – AP
- Amid Outcry Over Gaza Tactics, Videos of Soldiers Acting Maliciously Create New Headache for Israel - Yahoo
- UN General Assembly Votes to Demand Immediate Ceasefire in Gaza - CNN
- Israel Begins Pumping Seawater Into Hamas’s Gaza Tunnels - WSJ
- Tactic of Flooding Hamas Tunnels Has Been Used Before by Egypt – Insider
- UK to Give Two Royal Navy Minehunter Ships to Ukraine - BBC
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Zelensky Plea for Ukraine Aid Draws Sympathy but Doesn’t Break Washington Impasse - WSJ
- E.U. Moves to Tap Frozen Russian Assets to Help Ukraine - NYT
- ‘Cockroach Strategy’: How Europe Failed to Sap Russia’s Energy Profits - Politico
- Dozens Wounded in Russian Missile Strikes On Kyiv - BBC
- Russia May Have Used Next Generation S-400 Missile System in Devastating Overnight Attack on Kyiv - Yahoo News
- Ukraine Says Russia Has it Outgunned 7 to 1 When it Comes to Drones – Insider
- Russian Hacker Group Claims Responsibility of Kyivstar Cyberattack – Yahoo
- Orbán Aide: Hungary Could Lift Ukraine Funds Veto if EU Unblocks All Frozen Cash - Politico
- 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
What Cardboard Prices Tell Us About the State of the Economy
Cardboard prices are pointing to better times ahead. Producers are lifting prices for the thick paper used to make delivery boxes for the first time since the Federal Reserve began raising interest rates early last year. Some analysts warn, however, that it is too soon to tell if the price increases will stick and be repeated, or if they are a one-time adjustment in a market whipsawed by the unique circumstances of the pandemic.
Big producers, including International Paper IP -0.36%decrease; red down pointing triangle, WestRock and Packaging Corp. of America, have said that they would raise prices Jan. 1 for both types of containerboard, which are combined to make corrugated cardboard. Linerboard, the sheets used for outer edges, is going up $70 and $75 a ton, depending on the producer. The fluted medium that is sandwiched between the flat layers and gives cardboard its strength will cost an additional $100 or $110 a ton. The increases amount to a roughly 9% rise from the current price for benchmark 42-pound unbleached kraft linerboard, which was pegged in November at about $825 a ton by Fastmarkets RISI’s PPI Pulp & Paper Week.
U.S. Companies Are Finding It Hard to Avoid China
Trade data, corporate announcements and new academic research show that a large portion of the products shipped to the U.S. from places such as Southeast Asia and Mexico are being made in factories owned by Chinese companies, which are expanding overseas, in part to avoid U.S. tariffs. Many other goods finished in smaller countries are being made with key inputs from Chinese suppliers, meaning they wouldn’t get produced at all without Chinese involvement.
According to official U.S. trade data, China accounted for just 13.3% of U.S. goods imports during the first six months of this year—the lowest level since 2003, and far below the annual peak of 21.6% in 2017. But a closer examination of available data reveals a more complex picture, in which some parts of the economies of U.S. and China are breaking apart, while others aren’t. In some cases, U.S. policies are triggering supply-chain adjustments that are actually locking in further dependence on Chinese suppliers, economists say.
COVID 19 News – A Next-Generation Inhalable Dry Powder COVID Vaccine
Researchers from the Institute of Process Engineering (IPE) of the Chinese Academy of Sciences have proposed a new "nano-micro composite" delivery concept for vaccines. Based on this idea, they have developed a single-dose, dry-powder, inhalable vaccine platform using nano-micro composite multilevel structures, which has been successfully prepared in the laboratory, and the vaccine has been shown to be effective in blocking respiratory viral infection and transmission in animal models.
This platform combines biodegradable microspheres with protein nanoparticles. The surface of these nanoparticles can simultaneously display multiple antigens, thus inducing a broad-spectrum immune response and expanding the range of vaccine protection. It also allows for the quick and convenient development of other respiratory virus vaccines due to the flexibility of antigen presentation. Moreover, the platform's unique nano-micro composite structure enables an efficient immune response in the lungs by facilitating high-performance delivery. Once the antigen-nanoparticles are released, they can be efficiently taken up by antigen-presenting cells.
COP28 Nations Agree for First Time to Transition Away From Fossil Fuels
More than 190 governments at the United Nations climate conference approved an agreement Wednesday calling for the world to transition away from fossil fuels, sending an unprecedented signal to the global economy that governments are intent on cutting back on coal, oil and natural gas in the fight against global warming. The agreement targeting fossil fuels shows a new determination by governments around the world to cut fossil-fuel consumption. Supporters say the agreement should accelerate the flow of private investment into clean energies, such as solar and wind, and away from fossil fuel production.
The deal, the result of two weeks of negotiations, calls for “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner.” It says the shift to clean energy for the global economy should accelerate this decade with the aim of net-zero greenhouse gas emissions by 2050. Scientists say that is crucial to fulfilling the Paris accord, the landmark climate agreement that calls for governments to attempt to limit global warming to 1.5 degrees Celsius above preindustrial temperatures.
October Data Show UK Economy Shrinks, Exports Fall
Britain's economy shrank in October, official data showed on Wednesday, raising the risk of a recession and testing the Bank of England's resolve to stick to its tough anti-inflation line against cutting interest rates from their 15-year high. Gross domestic product (GDP) fell by 0.3% from September, the Office for National Statistics said, adding that exceptionally wet weather might have impacted the data.
The economy has flat-lined through most of 2023 with economic output now back at its January level. Britain's huge services sector shrank by 0.2% in October. Manufacturing and construction contracted by 1.1% and 0.5%. The economy was 2.0% bigger than immediately before the COVID-19 pandemic hit Britain in early 2020, a stronger performance than thought before recent ONS data revisions but another weak period for living standards nonetheless. Exports to the European Union - which is similarly at risk of recession - fell sharply. Adjusted for inflation, goods exports to the bloc that Britain used to belong to fell for a third month in a row and hit their lowest level since mid-2009
Hasbro Laying Off 1,100 Employees
Hasbro CEO Chris Cocks announced layoffs for 1,100 workers in a Monday memo to employees, cuts which come in addition to the roughly 800 jobs eliminated earlier this year. Cocks said the decision to reduce Hasbro’s workforce was made in light of market headwinds proving to be “stronger and more persistent than planned.” Some Hasbro employees will find out whether their job has been eliminated this week, while the rest of the layoffs will happen over the next six months, Cocks said in the memo.
Hasbro, known for making toys such as Transformers and Play-Doh, and games like “Magic: The Gathering” and “Dungeons & Dragons,” had 6,300 employees prior to the layoffs, according to its website. Layoffs are not the only cost-cutting move Hasbro is undertaking: In August, the company announced it would sell its eOne film and TV business to Lionsgate for approximately $500 million. The company will also reduce its office footprint, exiting its Providence, Rhode Island, space at the end of its lease term in January 2025, according to Monday’s memo.
FedEx Ground Hikes Fuel Surcharge 100 Basis Points, Leapfrogging UPS
FedEx Ground, the ground-delivery arm of FedEx Corp., has raised its diesel fuel surcharge by 100 basis points to 16%, exceeding the fuel levy assessed earlier this month by rival UPS Inc. The increase taook effect Monday. FedEx’s fuel surcharges apply to its base rates and to any add-on charges known as accessorials. UPS had hiked its levy 50 basis points to 15.25% but will reduced them to 15% effective Monday. The carriers’ levies are based on the on-highway diesel prices set each week by the Department of Energy’s Energy Information Administration.
UPS, FedEx and other parcel delivery carriers have wide latitude as to when they adjust diesel and jet fuel surcharges. In recent years, surcharges have remained elevated despite world price fluctuations that have headed south. Analysts who follow the fuel surcharge market have said that surcharge levels stay higher long after prices have dropped, thus allowing the carriers to reap additional revenue on each transaction.
Future Fighter Jet: A Look At The F/A-XX Program
As the Boeing F/A-18 E/F flying for the US Navy begin to age, the time has come to start drafting their replacement prototype. The F/A-XX program intends to bring sixth-generation fighter technology to the US Navy. A sixth-generation fighter? Anybody who’s been to an airshow would believe the fifth-generation fighters F-22 and F-35 are very good – especially knowing they have agility, helmet-mounted sights, internal weapons carriage, sensor-fusion, supercruise, stealth, and more. But the sixth-generation fighter jet will have to network with drones packing at least some artificial intelligence (AI). Additionally, it has the capability to carry directed energy weapons like lasers.
The F/A-XX is going to have a long list of requirements as a Super Hornet replacement – well beyond just taking off and landing on carriers. According to the US Naval Institute blog post, the F/A-XX will have to be the “quarterback” for drones at significant range. Adding drones to the mix will increase survivability, especially considering the range and quantity of People’s Republic of China (PRC) missiles. It will require adaptive engines (aka variable cycle engines) that can do long-range, efficient cruise, and also bursts of speed.
FAA to Set New PW1100G Maintenance Requirements After Learning More Parts Could Fail
The Federal Aviation Administration plans to place new maintenance requirements on airlines after learning that more components in Pratt & Whitney (P&W) PW1100G engines may be affected by a powder-metal manufacturing problem. P&W says the proposed requirements fall within the scope of its previously disclosed comments about the impact of the powder-metal issue. P&W said several weeks ago that it expected the FAA would soon issue airworthiness directives related to the new maintenance requirements.
The FAA laid out new proposed requirements in a regulatory filing released on 11 December, saying some PW1100G rotors, hubs and air seals will need “accelerated replacement” due to the manufacturing issue. The proposal would affect 430 US-registered PW1100Gs, which power Airbus A320neo-family jets.
Boeing Closes In on 737 Target With November Delivery Spurt
Boeing Co. delivered 46 of its 737 family jets in November, its largest such tally in five months, leaving the manufacturer just 24 aircraft short of its revised annual target. The US planemaker has stepped up its delivery tempo as it streamlines inspections of a supplier defect in some 737 Max models and works to clear already built aircraft from storage lots. Boeing lowered its annual goal to delivering between 375 and 400 of the cash-cow jets in October after shipments slowed to a crawl.
Narrowbody deliveries now stand at 351 for the year, Boeing said. The company shipped 10 widebodies during the month, including six of its 787 Dreamliner jets. With that tally, the manufacturer has handed over 62 Dreamliners through November, leaving it eight jets shy of the range of 70 to 80 deliveries targeted for the year. Output at planemakers Boeing and Airbus SE typically surges during December as the manufacturers work at full bore to meet annual targets. Airbus needs to deliver 97 planes in December to meet Chief Executive Officer Guillaume Faury’s 2023 goal of 720 handovers.
Tesla Loses Tax Credits for Model 3, Recalls 2 Million Vehicles Over Autopilot Safety
Tesla's Model 3 Rear-Wheel Drive and Long Range vehicles will lose an up to $7,500 federal tax credit from Dec. 31 based on new guidance under the U.S. Inflation Reduction Act, a message on the U.S automaker's website showed late Tuesday. The U.S. Treasury issued guidelines earlier this month detailing new battery sourcing restrictions that take effect Jan. 1 aimed at weaning the U.S. electric vehicle supply chain away from China.
Meanwhile, Tesla is recalling nearly all vehicles sold in the U.S., more than 2 million, to update software and fix a defective system that’s supposed to ensure drivers are paying attention when using Autopilot. Documents posted Wednesday by U.S. safety regulators say the update will increase warnings and alerts to drivers and even limit the areas where basic versions of Autopilot can operate. The recall comes after a two-year investigation by the National Highway Traffic Safety Administration into a series of crashes that happened while the Autopilot partially automated driving system was in use. Some were deadly.
Read more at Reuters and the AP
With Hacks on the Rise, Manufacturers Hone Their Cybersecurity Smarts
IBM’s X-Force Threat Intelligence reported that in 2021, manufacturing surpassed finance and insurance as the top targeted sector of cyber bad actors. Today, 1 out of every 4 cyber-attacks on business are against manufacturers. And no wonder: Despite FBI guidance, manufacturers pay the requested ransom more often than other industries – and at typically higher rates. The biggest challenge? Cybercriminals with a track record of innovation set the pace of change. But manufacturers aren’t simply circling the wagons. Just the opposite – they’re meeting the challenge head on.
It’s not like they have a choice on whether to integrate their IT with OT such as machine automation, industrial control systems (ICS), robotics, programmable logistics controllers (PLCs) and building management systems (BMS). Successful IT/OT collaboration is critical to modern manufacturers’ digital strategies. Unfortunately, it’s also the portal where cyber criminals gain entry to the lifeblood of the company: factory operations.
Commodities Carriers Star Bulk and Eagle Bulk Shipping Agree to $2.1 Billion Merger
Star Bulk Carriers and Eagle Bulk Shipping EGLE -1.31%decrease; red down pointing triangle said they agreed to merge in an all-stock deal that would create the world’s fourth-biggest commodities carrier and make it more attractive to large investors. Star Bulk, which is based in Athens, Greece, and Eagle Bulk shareholders will own 71% and 29% of the combined entity, respectively, the companies said Monday. The deal, which values the merged company at roughly $2.1 billion, is slated to close next year.
Shipping companies often have struggled to attract a wide pool of investors, including mutual funds, because their market capitalizations tend to run below $1 billion. As of Monday, Star Bulk had a market value of about $1.88 billion and Eagle Bulk’s was around $445 million. The merger comes as China begins to restock commodities like iron ore and coal from exporters in Australia, Brazil and Indonesia. This has pushed daily freight rates of the largest dry bulkers to more than $40,000 from $10,000 in the beginning of the year.
MacKenzie Scott Has Donated $2.2 Billion To Charity This Year
Billionaire philanthropist MacKenzie Scott announced nearly $2.2 billion in 2023 gifts to 360 organizations in a post on her Yield Giving website dated December 6, bringing her total lifetime giving to nearly $16.6 billion. The two time novelist’s announcement was a short paragraph announcing the donation: “Excited to call attention to these 360 outstanding organizations, every one of whom could use more allies. Grateful to everyone in the extended team who made it possible to give them gifts,” Scott wrote on her Yield Giving website. “Inspired by all the ways people work together to offer each other goodwill and support.”
Scott’s 2023 grants spanned a similar range to her previous years’ gifts—from $600,000 to $25 million for organizations that often have annual budgets smaller than that—and mostly went to organizations supporting early learning, access to affordable housing, race and gender equity, health equity, and civic and social engagement. Recipient charities include career training organization Jobs for the Future, affordable housing advocate the San Francisco Community Land Trust and early childhood education nonprofit Zero to Three.