Member Briefing December 6, 2023
Oxford Economics: Manufacturing Outlook Remains Downcast
Matthew Martin, U.S. economist at Oxford Economics provided the following analysis of the ISM Manufacturing Outlook released last week.
- The ISM Manufacturing PMI was unchanged at 46.7 in November, with all components in contraction territory. Production levels declined for the first time since July, and new orders continued to decline and have not increased since August of 2022. Manufacturers are pulling back on employment levels, with the index contracting for a second month as companies manage headcount. The prices index increased to 49.9, indicating declines in prices, but at a slow pace - with respondents signaling declines in energy prices are being offset by higher steel prices.
- The ISM Manufacturing PMI was unchanged from the prior month, with little evidence of a pick-up after the end of the UAW strike, extending the streak of contractionary readings to 13 months. The November ISM report, in addition to the Fed's Beige Book, paint a picture of a sector unlikely to rebound any time soon, with headwinds unlikely to dissipate until late 2024.
- Contrary to market expectations, we expect the Fed to remain on pause until Q3 2024, which, alongside tight lending conditions, will restrict business investment. Though we expect consumption growth to remain positive in the coming quarters, we see services spending contributing to bulk of the strength as goods spending declines outright, with durable goods the most impacted. Inventory levels, which were a source of strength for GDP in Q3, are likely to pull back in the face of weak demand.
Read more at Material Handling & Logistics
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- WHO Warns Humanitarian Situation In Gaza ‘Getting Worse By The Hour,’ Report Says - Forbes
- UN Says Israel Will Not Renew Visa for Top Aid Official - Reuters
- Republican Lawmakers Spar With University Presidents at Campus Antisemitism Hearing - The Hill
- Israel Grinds War South as US Monitors Gaza Civilian Deaths - Bloomberg
- Accounts of Sexual Violence by Hamas Are Aired Amid Criticism of U.N. - NYT
- Inside Biden’s Israel-Hamas War Cabinet - Reuters
- Greta Thunberg Accuses Israel of ‘War Crimes’ and ‘Genocide’ – Politico
- Ackman Doubles Down On Harvard Criticism Over Pro-Palestinian Protests: ‘Antisemitism Exploded On Campus’ - Forbes
- U.S. Considers Task Force to Guard Red Sea Ships From Iranian Proxy Forces - NYT
- Israel Weighs Plan to Flood Gaza Tunnels With Seawater - Reuters
- 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
- The Violent Homecoming of Russian Convicts Freed to Fight in Ukraine - WSJ
- Zelenskyy Set to Brief Senate on Ukraine’s Aid Needs Ahead of Supplemental Vote - Politico
- Speaker Johnson: Ukraine Funding Depends on ‘Transformative Change’ to Border Security The Hill
- Russian Oil Price Cap Has Largely Failed, New Report Finds – Politico
- Ukraine Signals a Shift Toward Defense - CNBC
- In Russia, Some Women Demand Return of Their Men From Ukraine Front - Reuters
- In Ukraine War Arms Race, US Stalls as Israel, Turkey and South Korea Surge - 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
JOLTS Report: U.S. Job Openings Fall to 8.733 Million in October
Job openings declined to 8.733M in October from 9.350M in September and lower than the 9.4M consensus, according to the U.S. Labor Department's Job Openings and Labor Turnover Survey. The September figure was revised from the 9.553M previously reported. The headline number fell to the lowest level since March 2021. There were 587,000 job openings in manufacturing - down from 601,000 in September. Hires fell to 372,000 from 390,000 in September. And total separations fell to 369,000 from 382,000 in September.
Over the month, job openings decreased in health care and social assistance (-236K), finance and insurance (-168K), and real estate and leasing (-49K). Job openings increased in information (+39K). The job opening rate of 5.3% declined from 5.6% in September, while the quits rate stood at 2.3% for the fourth straight month. The number of layoffs and discharges rose slightly to 1.642M from 1.610M in September, with the rate of 1.0% unchanged from the previous month, the Bureau of Labor Statistics said.
U.S. Services PMI at 52.7% - Higher Than Expected
In November, the Services PMI® registered 52.7 percent, 0.9 percentage point higher than October's reading of 51.8 percent. The composite index indicated growth in November for the 11th consecutive month after a reading of 49.2 percent in December 2022, which was the first contraction since May 2020 (45.4 percent). The Business Activity Index registered 55.1 percent; a 1-percentage point increase compared to the reading of 54.1 percent in October. The New Orders Index expanded in November for the 11th consecutive month after contracting in December for the first time since May 2020; the figure of 55.5 percent equals the October reading.
Fifteen industries reported growth in November. The top 5 services industries reporting growth in November — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Transportation & Warehousing. The three industries reporting a decrease in the month of November are: Information; Mining; and Professional, Scientific & Technical Services.
COVID 19 News – Study: Slow Rollout Cost Thousands of Lives
Thousands of lives could have been saved if the Food and Drug Administration and the Centers for Disease Control and Prevention approved COVID-19 boosters sooner, along with stronger public health messaging, according to a new study. The Northwestern University study used Israel as a counterfactual or a "what if" scenario to see the possible outcomes that could have happened in the United States. Researchers estimated that through June 2022, if the U.S. moved at a faster pace to approve it and get people boosted, an estimated 29,000 lives could have been saved -- matching Israel's uptake and speed.
Israel was used because it was the first country to launch the boosters as well as vaccinate its population in July 2021. Researchers used vaccination data, mortality data, and vaccine effectiveness from Milwaukee County, Wisconsin and Israel. Vaccine availability and eligibility are one thing, but it also depends on people's willingness to get vaccinated. Inconsistent public health messaging also contributed to avoidable deaths, according to researchers.
OECD Education Survey Shows 'Unprecedented' Drop in Student Performance
Teenagers' mathematics and reading skills are in an unprecedented decline across dozens of countries and COVID school closures are only partly to be blamed. The Paris-based Organization for Economic Cooperation and Development (OECD) said it had seen some of the steepest drops in performance since 2000 when it began its usually triennial tests of 15-year-olds reading, maths and science skills. Nearly 700,000 youths took the two-hour test last year in the OECD's 38 mostly developed country members and 44-non members for the latest study, closely watched by policymakers as the largest international comparison of education performance.
Compared to when the tests were last conducted in 2018, reading performance fell by 10 points on average in OECD countries, and by 15 points in mathematics, a loss equivalent to three-quarters of a year's worth of learning. "COVID probably played some role but I would not overrate it," OECD director of education Andreas Schleicher told a news conference. "There are underlying structural factors and they are much more likely to be permanent features of our education systems that policymakers should really take seriously."
The World’s Most Powerful Women – According to Forbes
For many, summer 2023 was a season defined by powerful women: As Taylor Swift and Beyoncé hit the road on record-breaking stadium tours, Greta Gerwig’s Barbie became the highest-grossing movie in Warner Bros.’ long and storied history. But the story of female power this year isn’t limited to the entertainment industry.
Forbes’ list of the World’s 100 Most Powerful Women, published yesterday, includes political leaders, the heads of major companies and more. And each of these 100 women are helping to shape the policies, products and political fights that define our world. Yes, that includes Barbie, too.
Fall in Euro Zone Business Activity Adds to Recession Expectations
The downturn in euro zone business activity eased last month but still indicates the bloc's economy will contract again this quarter as the dominant services industry continues to struggle to generate demand, a survey showed. Last quarter the economy contracted 0.1%, according to official data, and Tuesday's Composite Purchasing Managers' Index (PMI) for November indicated the 20-country currency union is on track to do so again this quarter, meeting the technical definition of recession.
HCOB's composite PMI, compiled by S&P Global, rose to 47.6 from October's near three-year low of 46.5 and coming in above a 47.1 preliminary estimate. That was its best reading since July but remained firmly below the 50 mark separating growth from contraction. A PMI for the services sector rose to 48.7 from October's 47.8. "The service sector maintained its downward slide in November. The modest improvement of the activity index does not leave much room for optimism regarding a swift recovery in the immediate future," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
India's Cyclone Michaung Forces Foxconn and Pegatron to Temporarily Shut Down iPhone Production
Taiwan’s Foxconn and Pegatron have halted production of Apple iPhones at their factories near Chennai in southern India because of heavy rains, sources close to the matter said on Monday. In Tamil Nadu’s capital Chennai, the state’s largest city and a major electronics and manufacturing hub, at least two people died and the runway of one of the country’s busiest airports was submerged after torrential rain as the city braced for a severe cyclone expected to hit in the next 24 hours. Two others had died elsewhere.
Cyclone Michaung was expected to make landfall on the coast of the southern Indian state of Andhra Pradesh around noon on Tuesday, the country’s weather office said, with sustained winds of 90kph to 100kph (56mph to 62mph), gusting to 110kph. Foxconn, which employs about 35,000 people at its Tamil Nadu iPhone factory, has resumed production on Tuesday, the sources said.
The Hottest Holiday Shopping Trend? Buy Now, Pay Later
Online shopping financed with buy now, pay later services, which let you pay typically via a multiweek installment plan, hit $940 million this past Cyber Monday. That’s an all-time high, according to Adobe Analytics. Buy now, pay later, or BNPL for short, really started getting popular during pandemic lockdowns. But more recently, inflation and higher interest rates on credit cards have kept consumers using the services across pretty much anything you can buy online.
BNPL users typically buy more stuff than other shoppers, which is why retailers are fans. Traditional BNPL programs don’t charge interest, which can be especially luring to low-income consumers. But late fees can make those deals pretty expensive, noted Consumer Reports’ Jennifer Chien, and the BNPL model is evolving. “Increasingly, many buy now, pay later providers are now also offering longer-term interest-bearing loans,” Chien said.
Congress Provided $7.5B for Electric Vehicle Chargers. Built So Far: Zero.
Congress at the urging of the Biden administration agreed in 2021 to spend $7.5 billion to build tens of thousands of electric vehicle chargers across the country, aiming to appease anxious drivers while tackling climate change. Two years later, the program has yet to install a single charger. States and the charger industry blame the delays mostly on the labyrinth of new contracting and performance requirements they have to navigate to receive federal funds. While federal officials have authorized more than $2 billion of the funds to be sent to states, fewer than half of states have even started to take bids from contractors to build the chargers — let alone begin construction.
Getting chargers up and running across the country is essential to reaching President Joe Biden’s goal of having half the vehicles sold in the United States be electric by the end of the decade — a key cog of his climate agenda. Americans consistently say the lack of charging infrastructure is one of the top reasons they won’t buy an electric car. Republican opponents are now trying to shut down the administration’s efforts to build a charging network by choking off its funding.
DOE Funds 7 Projects to Strengthen Domestic Clean Energy Supply Chains
The U.S. Department of Energy (DOE) will allocate $275 million to fund seven projects that are designed to strengthen clean energy supply chains and accelerate domestic clean energy manufacturing. Each project is located in a different state across the country and is hoped to improve America’s global competitiveness and national security. The projects will be able to leverage over $600 million in private sector investments and generate nearly 1,500 new jobs at small- and medium-sized manufacturing companies.
According to the DOE, the projects will “address critical clean energy supply chain vulnerabilities by supporting key materials and components for energy storage for grid and transportation uses, wind energy, and energy efficient solutions for buildings.” Each project is located in a different state across the country and is hoped to improve America’s global competitiveness and national security.
Biden Greenlights $3B for Las Vegas-to-California High Speed Rail
The Biden administration announced $3 billion in funding for the Brightline West rail project on Tuesday, covering a quarter of the cost for a high-speed rail line planned to run from Las Vegas to Los Angeles. A bipartisan group of lawmakers from Nevada and California have pushed for the federal grant for months, pitching Brightline West as a needed economic driver. The $3 billion grant is funded from the Bipartisan Infrastructure Law, Rosen said.
Brightline, the only private passenger rail company operating high-speed service in the country, requested $3.75 billion for the project out of an estimated $12 billion cost. The company launched a high-speed Orlando to Miami service, the first of its kind, earlier this year. The Brightline West project is planned to run from a new station near the Las Vegas Strip to Rancho Cucamonga, Calif., where it would link with Los Angeles’ existing regional rail system. The trip would take just under 3 hours
Quadrillion-Dollar’ Tax Case Leaves Supreme Court Justices Exploring Narrow Resolution
The Supreme Court explored ways to narrowly resolve a major tax case during oral arguments Tuesday, with justices raising concerns about sweeping consequences if they fully adopt either side’s position. Specifically, the justices on Tuesday are weighing the constitutionality of a provision enacted as part of then-President Trump’s sweeping 2017 tax bill. But at the heart of the dispute is an issue that the Biden administration warns would pose ramifications for large swaths of the U.S. tax code and one tax expert raised as a “quadrillion-dollar” question: whether the federal government can tax unrealized income without apportioning it among the states.
Experts and advocates on both sides are closely watching the case for how the decision impacts other tax provisions and whether it deems a federal wealth tax unconstitutional. But during the two-hour argument, several justices seemed alarmed about issuing such a sweeping ruling that defines what constitutes “realization” in all scenarios.
Global Carbon Emissions Reached Another Record High In 2023, Study Suggests
This year’s global carbon emissions from fossil fuels are projected to total 36.8 billion tonnes—a 1.1% rise from 2022, according to a study published by Global Carbon Budget. The report, compiled by an international team of climate researchers from more than 90 universities, determined that time is “running out fast” to avoid the worst impacts from climate change.
The global rise comes even after a sizable reduction in emissions from the European Union and the United States, decreasing by 7.4% and 3% respectively. However, emissions from India are projected to increase by 8.2%, and emissions from China are expected to rise by 4%. However, experts say this stabilization will not be enough to ensure emissions breach the 1.5ºC threshold—after which the earth will experience irreversible damage from climate change. The Global Carbon Budget now estimates that there is a 50% chance the world will exceed the 1.5C threshold in just seven years.
At 99, Billionaire Charlie Munger Shared How to Avoid Major Mistakes in Life: Dodge ‘Toxic People and Toxic Activities’
Avoiding mistakes in business and life comes down a few simple things, according to billionaire investor Charlie Munger, who died last week at age 99: good financial habits, integrity and “avoiding toxic people and toxic activities.” Munger shared the advice during a Q&A session at Berkshire Hathaway’s annual shareholders meeting in May.
People are “almost certain to succeed” if they spend less than they earn, invest shrewdly, learn continually and remain disciplined, Munger continued. Without those traits, you’ll need a lot of luck to be successful, he said. As for avoiding toxic people, look out for those “who are trying to fool you or lie to you or aren’t reliable in meeting their commitments,” Munger said. “A great lesson of life is get them the hell out of your life — and do it fast.”