Member Briefing February 13, 2024
Recession Risks are Fading, Business Economists Say, But Political Tensions Pose Economic Threat
Just a quarter of business economists and analysts expect the United States to fall into recession this year. And any downturn would likely result from an external shock — such as a conflict involving China — rather than from domestic economic factors such as higher interest rates. But respondents to a National Association of Business Economics survey released Monday still expect year-over-year inflation to exceed 2.5% — above the Federal Reserve’s 2% target — through 2024.
- A growing share of business forecasters worry that the Fed is keeping rates unnecessarily high. 21% in the NABE survey called the Fed’s policy “too restrictive,’’ up from the 14% who expressed that view in August. Still, 70% say the Fed has it “about right.’’
- A conflict between China and Taiwan even if it isn't an outright war also worries respondents. 63% consider such an outcome at least a “moderate probability.’’
- Likewise, 97% see at least a moderate chance that conflict in the Middle East will drive oil prices above $90 a barrel (from around $77 now) and disrupt global shipping.
- Another 85% are worried about political instability in the United States before or after the Nov. 5 presidential election.
- The respondents are also increasingly concerned about U.S. government finances. 57% say budget policies – which have created a huge gap between what the government spends and what it collects in taxes – need to be more disciplined.
- They say the most important objectives of government budget policy should be promoting medium- to long-term growth (cited by 45% of respondents) and reducing the federal deficit and debts (42%). Coming in a distant third – and cited by 7% -- is the goal of reducing income inequality.
Senior Loan Officer Service: Commercial Lending Standards Remain Tight
Despite notable improvements in the latest data, lending standards for commercial and industrial loans remained tight in the first quarter of 2024. A net percentage of 14.5% of domestic banks reported tightening lending standards for large and middle-market firms, down from 33.9% in Q4 and the best reading since Q2 2022. A net percentage of 18.6% said the same thing for small firms, down from 30.4% in the previous quarter and also the lowest in seven quarters.
Meanwhile, lending demand remained weak for the sixth straight quarter despite some progress. A net percentage of -25.0% of domestic banks reported stronger demand for large and middle-market firms in Q4, improving from -30.5% in Q3 and the highest since Q4 2022. Similarly, a net percentage of -22.4% noted stronger demand for small firms in Q4, up from -49.1% in Q3 and also a five-quarter high.
Read more at the Federal Reserve
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Israel Rescues Two Hostages in Rafah Amid Deadly Strikes - BBC
- Israel Frees Two Hostages, Palestinian TV Says 74 Killed in Assault - Reuters
- Chief of UN Aid Agency in Gaza Calls EU Funds ‘Absolutely Critical’ but the Bloc Wants an Audit - AP
- Biden Warns Netanyahu Against Rafah Operation Without ‘Credible’ Safety Plan - Guardian
- Palestinian President in Qatar to Discuss Ceasefire Efforts – Reuters
- Dutch Court Moves to Block Export of Fighter Jet Parts to Israel - AP
- Houthis Claim Missile Strike On ‘American Ship’ In Red Sea – Forbes
- 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
- Exhausted Ukraine Struggles to Find New Men for Front Line - BBC
- Ukraine Destroys 14 of 17 Russia-Launched Drones - Ukraine Air Force – Reuters
- Zelensky’s Military Shake-Up Ties Him to Battlefield Performance - WSJ
- Zelenskiy Appoints Oleksandr Pavliuk as New Ground Forces Chief – Reuters
- Russian Bill Targets Assets of People Who Spread 'Fake News' About Military - VOA
- Musk Denies Selling Starlink Terminals to Russia After Kyiv Alleges Their Use in Occupied Areas - CNBC
- 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
- Why 2023 Will be a Tough Year for Indian Economy – Times of India
- Myanmar Junta Enforces Compulsory Military Service Law - CNN
- Pakistan’s Shocking Election Result Shows Authoritarians Don’t Always Win – Washington Post
- Philippines Landslide: Death Toll Rises to 68 in Davao de Oro - BBC
- How China Miscalculated Its Way to a Baby Bust - WSJ
- Former Finland PM Alexander Stubb Wins Presidential Election - Politico
- King Charles Makes First Public Outing Since Cancer Diagnosis - CNN
- Millions of Displaced Children in Sudan Subject to Hunger, Violence, Abuse - VOA
- Venezuela Accuses Human Rights Activist of Plot to Kill Maduro - Bloomberg
Policy and Politics
US Senate Forges Ahead on 'Enormously High Stakes' Ukraine, Israel Aid
The U.S. Senate on Monday will attempt to steer a $95.34 billion package containing aid for Ukraine and Israel to passage this week following months of delays, even as it lacked any guarantee that House of Representatives Republicans will support it. The measure cleared an important procedural hurdle a day earlier in a 67-27 vote, with the support of 18 of the chamber's 49 Republicans. Democratic Majority Leader Chuck Schumer on Monday was aiming to push it through two more procedural hurdles in order to put it on a path to passing on Wednesday.
But in order to become law the bill must pass the House as well as the Senate, and the House has not passed any major aid for Ukraine since Republicans took control of the chamber in January 2023. House Speaker Mike Johnson voted against earlier Ukraine aid bills when Democrats held a House majority and has not committed to allowing a vote on the current measure even if it passes the Senate.
BPHA Caucus to Demand Higher Tax Hikes for the Rich in State Budget
Gov. Kathy Hochul has made it clear she's unwilling to increase taxes in the next budget, but members of the state Black, Puerto Rican, Hispanic & Asian Legislative Caucus said conversations to change the state's tax policy in the final spending plan have just begun.
Caucus leaders want the state to collect more in personal income taxes from the wealthiest New Yorkers to fund the Medicaid Quality Incentive Program, and other Medicaid cuts and changes to education funding proposed in Hochul's budget. Caucus members are discussing the details of the proposal the group of lawmakers will back to increase taxes on New York millionaires and billionaires and keep the state more affordable for the middle class.
Read more at New York State of Politics
The Days of Optional SAT Scores May be Coming to an End
Are standardized tests poised for a comeback? Dartmouth College announced this week it would be reinstating its requirement for applicants to submit scores from the SAT or ACT, a mandate that it and hundreds of other U.S. schools had dropped during the COVID-19 pandemic. Despite the celebration from some students and academics when schools nixed required SAT scores, Dartmouth says the results of an internal study showed they were actually helpful for constructing the best incoming class.
Experts are divided on if the Ivy League member’s decision could have a domino effect on other elite institutions — as well as if these scores are a good indicator for matriculating students. Critics say requiring the scores offers an advantage to students who already have others. The Massachusetts Institute of Technology and Georgetown University have also brought back testing requirements.
Health and Wellness
16 Wellness Perks Your Employees Will Get Excited About
When team members are happy and healthy, they’re better equipped to tackle problems, think critically and contribute to the business’s long-term growth and success. Many organizations are supporting their employees’ well-being by creating corporate wellness programs that go beyond the basics and spark genuine excitement in their staff.
To that end, 16 members of Forbes Business Council share their top wellness program perks, policies and initiatives that empower workers to make healthy choices. With ideas for flexible scheduling, family-friendly policies and new approaches to PTO, business leaders can create opportunities for their team members and organization to thrive.
Election 2024
- NY – 3, Weather May Impact Turnout Today - PoIitico
- What to Expect in the Race to Replace George Santos - AP
- Two Cases. Two Judges. One High-Stakes Week for Trump. - NYT
- Biden’s Campaign Joins TikTok, Even as Administration Warns of National Security Concerns With App - AP
- Robert Kennedy Jr. Apologizes To His Family After Super Bowl Ad Copies JFK’s Famous Campaign - Forbes
- 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
Supply Chains Are Headed Back Into Choppy Waters
As global supply chains face another wave of disruption, how feasible is long-term resilience to these risks? Economists, business leaders and governments worldwide have had their fair share of change to manage and decisions to make over the past 18 months. Rampant inflation, rising interest rates and ratcheting geopolitical tension have all contributed to the overriding sense of uncertainty that has weighed heavily on global trade.
Amidst this backdrop, the last quarter of 2023 brought a glimmer of hope as Tradeshift's Q4 Index of Global Trade Health indicated a slight rebound in trade activity, fueled by a surprise surge in order volumes, which rose at their fastest rate in nearly two years. The apparent resurgence in orders, though admittedly from a relatively low base, played out consistently in major economic hubs, including the US, Eurozone, and, to a lesser extent, the UK. We should be cautious about drawing firm conclusions from a single quarter’s data. Still, the near-uniformity with which activity seemed to be increasing across key markets offered some hope that the pattern of dwindling demand in recent quarters may finally have hit bottom.
Permian Rivals Reach Deal to Create $50 Billion Oil-and-Gas Behemoth
Rivals Diamondback Energy FANG -1.13%decrease; red down pointing triangle and Endeavor Energy Resources are merging to create an oil-and-gas behemoth worth more than $50 billion, as higher oil prices and a rush to grab prime acreage fuel consolidation in the energy sector. Diamondback announced the deal with the closely held Endeavor on Monday morning. The Wall Street Journal reported on Sunday that a merger was likely.
Endeavor, founded by wildcatter Autry Stephens, has long been one of the most prized businesses in the consolidating Permian Basin, the largest U.S. oil patch that straddles West Texas and New Mexico. In striking a deal for Endeavor, Diamondback fended off competition from other parties including ConocoPhillips, according to people familiar with the matter. The stock-and-cash deal valued Endeavor at around $26 billion, and Diamondback shareholders would own the majority of the combined company after it closes. Diamondback, based in Midland, Texas, has a market value of around $27 billion.
Paper-Like Solar Cell Tech Could Open Doors for PV
Highly efficient silicon solar cells that are as flexible as a sheet of paper could offer a lightweight power source for applications such as uncrewed aerial vehicles while cutting the cost of solar panels on the ground Conventional silicon photovoltaic (PV) cells, which supply more than 95% of the world’s solar electricity, contain brittle crystalline silicon wafers that are typically 150–200 μm thick. The best silicon cells can convert light into electricity with an energy efficiency of just over 27%. Although bendable cells can be made from thinner silicon wafers, they have lower efficiencies.
Meanwhile, some thin-film solar cells—based on materials such as copper indium gallium selenide—are much more flexible because they contain light-absorbing layers just 1 μm thick. That means they can wrap around the curves of vehicles or fit around parts of buildings that are out of bounds for stiff panels. This flexibility would help squeeze more solar power out of every available surface. Yet these thin-film solar cells are less efficient, less durable, or much more expensive than their rigid silicon counterparts. Consequently, “significant efforts are now being made to develop high-efficiency, flexible silicon solar cells that leverage both the physical and chemical stability of crystalline silicon,” says Han-Don Um, a PV researcher at Kangwon National University who peer-reviewed the new work.
Read more at Chemical & Engineering News
China May Be Making More Advanced Chips Despite U.S. Sanctions
China’s biggest chipmaker SMIC seems to have been manufacturing advanced chips in the last few months — defying U.S. sanctions designed to slow down Beijing’s progress. But there are still some major challenges to China’s bid to become more self-sufficient in the semiconductor industry, with questions swirling around the long-term viability of its latest advancements. Last week, the Financial Times reported that SMIC is setting up new production lines to make 5 nanometer chips for Huawei. That would signal even further advancement for China’s biggest chipmaker.
The FT reported that SMIC is aiming to use its existing stock of U.S.- and Dutch-made semiconductor equipment to produce 5 nanometer chips, an advancement on the 7 nanometer. Using older equipment, however, to make more advanced chips poses two major challenges. The first is that it’s more expensive to produce the semiconductors than if more advanced tools and machinery were used. The second is an issue around yield — the number of usable chips that are produced and can be sold to customers. With older equipment, the yield is also lower.
Boeing Is Haunted By Two Decades Of Outsourcing
For 20 years, Boeing has engaged in collaborative product development with a number of suppliers. The outsourced R&D, in turn, supported outsourced manufacturing with over 50 key suppliers. These suppliers, in turn, outsourced various parts of the modules they produced to their suppliers. Historically, Boeing was vertically integrated - the great majority of product development and manufacturing was done in-house. Boeing is now a case study in how not to outsource a supply chain.
“Unless significant sanctions are imposed due to Boeing’s design and production-quality issues, it is likely that business will continue as usual,” according to Christopher Tang. Dr. Tang is a distinguished professor at the UCLA Anderson School of Management. Problems are likely to continue, Dr. Tang argues, because the current crisis is hardly unprecedented; it is based on the changes that Boeing made to its R&D and manufacturing processes during the development of the 787 Dreamliner. The Dreamliner program was launched in April of 2004. “The company aimed to develop the aircraft quickly and inexpensively to compete with the Airbus A380. Instead of developing the aircraft in-house and sourcing parts from suppliers,” Dr. Tang explained, “Boeing decided to outsource 70% of the design, engineering and manufacturing of entire modules to over 50 strategic partners.”
FAA Tightening Control of Aerospace Manufacturing
The U.S. Federal Aviation Administration is preparing to institute a new oversight of the civil aviation sector, focusing particularly on the manufacturing process. In testimony to the U.S. House aviation subcommittee recently, FAA Administrator Michael Whitaker described the shift from an audit-based oversight to one that emphasizes inspections. FAA currently has dozens of inspectors on site at Boeing’s 737 MAX assembly plant in Renton, Wash., and Spirit AeroSystems’ fuselage assembly plant in Wichita, Kan. Spirit AeroSystems supplies fuselage structures to Boeing and other OEMs, including the 737 MAX 9 that endured a mid-flight failure of its mid-cabin exit door.
“With manufacturing, there has been an oversight approach that has focused heavily on audits, checking the paperwork to make sure it’s correct and making sure that systems are in place,” Whitaker explained to the committee. “We are migrating to a system that is what I would call ‘audit plus.’ We’re going to have more of a surveillance component, … where inspectors are actually on the ground, talking to people, looking at the work that’s being done. So we’re proposing at this point to expand the oversight approach to include both audit and inspection, which is why we’re moving inspectors into facilities.”
Read more at American Machinist
Crowd Sets Waymo Self-Driving Car Ablaze in San Francisco
A crowd vandalized a Waymo self-driving vehicle and set it on fire by throwing a firework inside the car in San Francisco on Saturday, said Waymo, which is owned by Alphabet. This is not the first time people have attacked a self-driving car, but the severity of the incident may illustrate growing public hostility toward self-driving cars following a pedestrian-dragging accident last year involving a self-driving vehicle operated by General Motors’ Cruise unit.
Waymo said that around 9 p.m. local time on Saturday (0500 GMT Sunday), someone in a crowd broke a car window and threw a firework inside, setting the vehicle ablaze. Waymo did not say what caused the crowd to attack the car. Video footage on social media showed the electric vehicle burning, sending up a huge plume of black smoke. “The vehicle was not transporting any riders and no injuries have been reported. We are working closely with local safety officials to respond to the situation,” the company said. The San Francisco fire department said it turned over the case to the police who were investigating the cause of the attack.
Robot Invasion Hit a Bump in 2023 as North American Economy Cooled
North American companies ordered about a third fewer robots last year as worries about a slowing economy and higher interest rates made it harder to justify buying the advanced machines, the first hiccup in five years in what has been a steady progression of the robot invasion of the region's workforce. "When the economy isn’t great, it’s easier to delay purchases," said Jeff Burnstein, president of the Association for Advancing Automation, an industry group that tracks robot orders.
Companies bought 31,159 robots in 2023, a decrease of 30% over the year before, the largest drop in percentage terms since 2006 and largest drop ever in net units, according to the group, known as A3. The pullback occurred in automotive-related industries - which made up about half of the market last year - as well as other sectors such as food and metals manufacturing. Orders in the fourth quarter hit 7,683, an 8% drop from the same period a year earlier.
Bill Gates-Backed Clean Fuel Startup Raises $246 Million To Aid Plans To Drill For Hydrogen
Koloma, a startup aiming to lead a new industry based on extracting carbon-free hydrogen from natural underground deposits, just raised $245.7 million in a financing round that positions it to stay ahead of competitors in this developing clean energy field. Awareness that hydrogen is generated naturally in underground pockets across the U.S. and globally has grown quickly in the past year. A “gusher” of the gas was just found in a mine in Albania, Science reported on Feb. 8.
The company disclosed the new funds in a Securities and Exchange Commission filing on Feb. 9, a day after winning a research grant from a U.S. Energy Department program to refine methods to stimulate underground hydrogen production and extract the elemental fuel. The round was led by Khosla Ventures and included investment from Amazon’s Climate Pledge Fund and United Airline’s Sustainable Flight Fund. They join previous cleantech backers including Bill Gates’ Breakthrough Energy Ventures and Energy Impact Partners, boosting Koloma’s total funding to more than $300 million.