Member Briefing February 14, 2024
CPI = 3.1 In January - Far Worse Than Expected
The consumer price index, a broad-based measure of the prices shoppers face for goods and services across the economy, increased 0.3% for the month, the Bureau of Labor Statistics reported. On a 12-month basis, that is 3.1%, down from 3.4% in December. Excluding volatile food and energy prices, the so-called core CPI accelerated 0.4% in January and was up 3.9% from a year ago, unchanged from December. The forecast had been for 0.3% and 3.7%, respectively.
- Core services advanced 0.7% in January, the largest monthly gain in 16 months.
- Shelter prices, which comprise about one-third of the CPI weighting, accounted for much of the rise. The index for that category climbed 0.6% on the month, contributing more than two-thirds of the headline increase, the BLS said. On a 12-month basis, shelter rose 6%.
- Food prices moved higher, up 0.4% on the month. Ham prices fell 3.1% and eggs jumped 3.4%.
- Energy helped offset some of the increase, down 0.9% due largely to a 3.3% slide in gasoline prices. Electricity costs rose 1.2%
- Used vehicle prices declined 3.4%,
- Apparel costs fell 0.7%
- Medical commodities declined 0.6%.
- Airline fares increased 1.4%.
Small Business Optimism Declined in January
The NFIB Small Business Optimism Index decreased two points in January to 89.9, marking the 25th consecutive month below the 50-year average of 98. The net percent of owners who expect real sales to be higher declined 12 points from December to a net negative 16% (seasonally adjusted), a very negative shift in expectations. Key findings include:
- The frequency of reports of positive profit trends was a net negative 30%, five points worse than in December and a very poor reading.
- Twenty percent of owners reported that inflation was their single most important problem in operating their business, down three points from last month and one point behind labor quality as the top problem.
- Thirty-nine percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down one point from December and the lowest reading since January 2021.
- Fifty-nine percent of owners reported capital outlays in the last six months, up one point from December. Of those making expenditures, 40% reported spending on new equipment, 25% acquired vehicles, and 17% improved or expanded facilities.
- A net negative 11% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, unchanged from December. The net percent of owners expecting higher real sales volumes declined 12 points to a net negative 16%.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Biden Urges Six-Week Pause In Israel-Hamas War As Part Of Hostage Release Deal - Forbes
- Talks on Gaza Cease-Fire, Hostage Deal Restart - WSJ
- Yemen's Houthis Strike Cargo Ship Bound for Iran, Causing Minor Damage - PBS
- France Proposes Hezbollah Withdrawal, Border Talks for Israel-Lebanon Truce – Reuters
- EU’s Top Diplomat Slams US for Sending Arms to Israel as Gaza Deaths Mount – Politico
- Inside Israel’s Daring Hostage Rescue in Gaza: ‘Diamonds Are in Our Hands’ - WSJ
- Invasion of Rafah Could Threaten Key Israel-Egypt Peace Treaty: Report
- 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
- Russian Air Attack Damages Dnipro Power Plant, Ukraine Says – Reuters
- Russia Buying Musk’s Starlink Systems in Arab Countries, Ukraine Says - WSJ
- Russia Puts Estonian PM Kaja Kallas on Wanted List - Politico
- Russia Preparing for Military Confrontation With West, Says Estonia – Reuters
- EU Proposes Sanctions on Chinese Firms for Helping Russia – 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
Other Headlines
- How China Miscalculated Its Way to a Baby Bust - WSJ
- Head of French Farmers Union Says Protests Could Resume - Reuters
- Pakistan’s Election Left No Clear Winner. What’s Next? - Politico
- Why are Indian Farmers Protesting Again? Demands for Government Explained – Reuters
- Germans Want More Defense Spending – Politico
- Four Armenian Soldiers Killed in New Azerbaijan Border Flare-Up - BBC
- Everything You Need to Know About the 'Incredible' Logistics of Indonesia's Presidential Election - CBC
- U.S. Seizes Iranian-Tied Cargo Jet Grounded in Argentina - WSJ
- India Narrows Gap with China in Key MSCI Index With Weight Hitting New High – Reuters
- Kelvin Kiptum, Marathon World Record Holder, Dies in Car Crash at 24 – The Athletic
Policy and Politics
Senate Passes $95 Billion Aid Bill For Ukraine And Israel In Bipartisan Vote
Senators passed a $95 billion bill early Tuesday providing aid to Ukraine and Israel along with humanitarian aid to Gaza, in a bipartisan 70-29 vote despite objections from Republican senators who fought the U.S. sending more aid to Ukraine—though it still faces long odds in the House. The bill passed with the help of 22 Republican votes, while Democratic Sens. Jeff Merkley (Ore.) and Peter Welch (Vt.) and Independent Sen. Bernie Sanders (Vt.) voted against it.
The $95.3 billion bill includes approximately $60 billion in aid to Ukraine, approximately $14.1 billion to support military operations in Israel, $9.2 billion in humanitarian assistance for Gaza and more than $8 billion to Taiwan and operations in the Indo-Pacific region to deter Chinese aggression. The bill will now go to the House, where it faces long odds of success. House Speaker Mike Johnson (R-La.) spoke out against the legislation Monday night, saying that after the initial version of the legislation with border security measures failed, lawmakers “should have gone back to the drawing board” and the bill that passed Tuesday is “silent on the most pressing issue facing our country.” “
Tom Suozzi Wins NY-3 By Comfortable Margin
Democrat Tom Suozzi cruised to victory Tuesday night over Republican candidate Mazi Melesa Pilip in the special election for New York’s 3rd Congressional District – a sounding rebuke of harsh Republican rhetoric on immigration and the migrant crisis in New York City. National observers have kept a close eye on the race as a potential bellwether for races across the country, and about the issues that will play nationwide in the suburbs. Tuesday’s outcome provides a boon for Democrats ahead of November and evidence that immigration may not be the winning issue that Republicans hoped it would be. But various aspects of the race could still make it difficult to repeat Suozzi’s path to victory in other states.
At the statewide level, the victory spells good news for Democrats, who were hoping to see a positive outcome in the first congressional race of the year. After a brutal 2022 midterm, the party was expected to perform better during a presidential election year. And winning a highly contested, low-turnout, dead of winter special election signals that Democrats may have reason for optimism this year.
Education Department Moving to Speed up College Financial Aid Awards After Bumpy FAFSA Rollout
The Department of Education announced new ways it is supporting colleges to ensure they can easily process its delayed Free Application for Federal Student Aid (FAFSA) forms Tuesday. It is the second wave of support the department has announced after it said colleges will not receive this year’s student FAFSA information until March, significantly reducing the time schools have to process the forms and students have to choose an institution.
The department announced three new ways it will be helping colleges with FAFSA forms: reducing verification requirements, temporarily stopping program reviews and giving flexibility on recertification.
Health and Wellness
CDC Plans Dropping 5-Day Covid Quarantine Guidance For Patients With Improving Symptoms,
The US Centers for Disease Control and Prevention is expected to shift its Covid-19 isolation guidance this spring to say that people no longer need to isolate once they have been fever-free for 24 hours and their symptoms are mild or improving, according to the Washington Post. Since 2021, the agency has said people should isolate for at least five days if they tested positive for Covid-19, and then continue to mask. The updated guidance would bring Covid-19 in line with guidance for other respiratory viruses, such as flu.
The science around Covid-19 transmission hasn’t changed, but experts broadly agreed after the California and Oregon changes that easing isolation timeframes won’t significantly increase community transmission or severe outcomes — in part because the virus has been circulating at very high levels, even with more restrictive guidance in place. Some infectious disease experts said the change made sense because it would align with what many Americans already do.
Election 2024
NY – 3, Weather May Impact Turnout Today - PoIitico
Supreme Court to Confront 14th Amendment Disqualification — and Not Just Trump’s – The Hill
All 4 of Trump’s Criminal Cases Reach Inflection Points This Week - Politico
What to Know About the Special Elections for George Santos and Kevin McCarthy’s Seats - PBS
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
Aerospace and Defense Industry Surges in 2023
According to the 2023 edition of PwC’s Global Aerospace and Defense: Annual Industry Performance and Outlook, the aerospace and defense industry reported revenues of $741 billion in 2022, an increase of 3% from 2021. The growth in aerospace was driven by factors such as surging passenger demand despite increased airfare prices, as consumers continue to seek experiences instead of goods. In defense, the growth was due partly to elevated geopolitical risks globally, resulting in increases in defense budgets.
These global defense budgets are a factor because U.S. aerospace and defense industry exports increased 4.4% in 2022 to a total of $104.8 billion, according to the “2023 Facts & Figures” report by the Aerospace Industries Association (AIA) in collaboration with S&P Global Market Intelligence. The AIA report also noted that the industry exported to 213 countries in 2022, up from 205 in 2021. The industry, according to the report, has returned to pre-COVID-19 pandemic levels of employment and economic contributions to the U.S. economy. Employment rose beyond 2019 levels to a total workforce of 2.2 million in 2022, the highest since AIA began tracking this data.
Read more at Business Facilities
UK Unemployment Dips. Key Inflation, GDP and Retail Sales Data Come Later This Week
Britain's unemployment rate dipped in the final quarter of 2023, official data showed Tuesday, firming expectations of a delay to UK rate cuts, as the country awaits key inflation numbers. The unemployment rate fell to 3.8 percent from 3.9 percent in the three months to the end of November, the Office for National Statistics said in a statement. Analysts said the reading firmed the prospect of the Bank of England freezing its main interest rate at 5.25 percent for at least a few months more. Slightly offsetting the drop in unemployment was official data Tuesday showing that UK average regular earnings growth eased to 6.2 percent in the final quarter of last year.
The BoE has hiked borrowing costs to the highest level in 16 years as it tries to cool UK annual inflation, which is expected to have edged higher in January. Official data today will reveal whether the UK Consumer Prices Index (CPI) had indeed risen to 4.1 percent from 4.0 percent in December. Tuesday's unemployment data "is the first major economic release for the UK this week with inflation to come tomorrow, GDP on Thursday, and retail sales on Friday", noted Craig Erlam, senior market analyst at OANDA trading group.
UK Chip Designer Arm Sees Shares Almost Double
Arm Holdings has seen its stock market value almost double in less than a week as investors bet on the artificial intelligence (AI) boom. The Cambridge-based company reported financial results last Wednesday that showed demand for AI-related technology is boosting its sales. Chips designed by Arm already power almost every smartphone in the world.
The firm was taken private by Japan's SoftBank in 2016 and it returned to the stock market last September. Arm's shares have soared since its earnings announcement last week and are now up by more than 98%. It comes as chipmaker Nvidia has seen its shares more than triple in value in the last year on soaring demand for its AI chips. The AI boom has helped Nvidia become one of the most valuable publicly-traded companies in the world, with a stock market valuation of around $1.8 trillion.
Nvidia Is Now More Valuable Than Amazon And Google
Nvidia’s market value surpassed those of fellow technology titans Amazon and Alphabet on Monday, an almost unbelievable feat accomplished as Nvidia’s stock more than quadrupled over the last 15 months as investors bought into Nvidia’s market-leading position in artificial intelligence. Nvidia is by far the most prominent producer of the semiconductor chip technology powering generative AI. Investors have been impressed not just by the potential for Nvidia to capitalize on the growing interest and corporate spending in AI, but also by its already exploding results.
Nvidia’s market cap sat below $300 billion as recently as October 2022, just before the AI wave began to crest, lagging far behind Amazon and Alphabet’s above $1 trillion valuations at the time. Nvidia is now the fourth most-valuable public company in the world, trailing only Microsoft ($3.1 trillion), Apple ($2.9 trillion) and Saudi Aramco ($2 trillion).
Mack Trucks Expanding Roanoke Valley Operations Plant
Mack Trucks is investing $14.5 million to expand its Roanoke Valley Operations (RVO) manufacturing facility in Virginia to prepare the plant for higher demand for the Mack MD Series and Mack MD Electric vehicles. Virginia Gov. Glenn Youngkin announced the $14.5 million investment during an event with state and local officials at RVO. All Mack medium-duty models are produced at RVO. Mack launched the diesel-powered Mack MD Series in 2020 and launched the Mack MD Electric in March 2023. Adding the new model to the product lineup increased the need for more space at the facility. The project will result in 51 jobs.
Mack’s investment will go toward equipment, tooling and a 72,000 square-foot building expansion, making the facility 352,000 square feet. Construction will begin April, and the expansion project is expected to be completed in Q4 2025. The Virginia Economic Development Partnership worked with Roanoke County Economic Development and the Roanoke Regional Partnership to secure the project.
China’s Shipyards Are Ready for a Protracted War. America’s Aren’t.
China emerged as a global power by turning itself into the world’s factory floor. It is expanding that power, and its military might, with another striking industrial feat: becoming the world’s shipyard. More than half of the world’s commercial shipbuilding output came from China last year—making it the top global shipmaker by a wide margin. The once-prolific shipyards of the West that helped forge empires, expand trade and win wars have shriveled. Europe accounts for just 5% of the world’s output, while the U.S. contributes next to nothing. Most of what China doesn’t build comes from South Korea and Japan.
Giant Chinese shipbuilding firms that crank out merchant ships for the world are often the same ones building warships for China’s navy. Their shipyards are thriving, with billion-dollar contracts pouring in not just for warfighting gray hulls but also for containerships, oil tankers and bulk carriers for shipping lines from China, the West and even Taiwan.
Super Bowl Highlights Increase in Private Jet Use
An estimated 1,000 private planes touched down at Las Vegas area airports for the Super Bowl. A professor in public policy sustainability told The New York Times that local greenhouse gas emissions likely doubled average energy usage because of all the air traffic surrounding the big game. The article notes that the Super Bowl is one of the U.S.’s largest annual attractions for private planes.
An estimated one in every six flights handled by the Federal Aviation Administration is a private jet. Globally, the number of private jets has more than doubled in the past two decades, and sales of private planes is expected to continue this upward trajectory. This means it will only get more challenging to quantify environmental impact at the exact moment when climate experts warn we must curtail global warming emissions to 1.5 degrees Celsius about preindustrial levels—or face catastrophic consequences.
Auto Suppliers Need to Shift Focus to Survive the Next Decade
Automotive suppliers are facing substantial shifts in regional positioning, component growth and OEM customer structure. To survive and thrive during the rest of this turbulent decade, manufacturers need to focus heavily on electric vehicle components. Traditional suppliers in Europe and North America are currently not investing enough to foster necessary innovations, claims a recent study conducted by Roland Berger, a consulting firm that specializes in manufacturing and operations management.
According to Felix Mogge, a partner at Roland Berger, automotive suppliers can be divided into two categories. On one hand, there are new, highly profitable companies focused primarily on batteries, semiconductors and software. These companies compete with incumbent suppliers while expanding their traditional portfolios beyond industry and consumer goods. The new suppliers are experiencing strong growth in the automotive sector and are achieving very high margins across all business areas. These suppliers attained an earnings before interest and taxes (EBIT) margin of around 30 percent, reaching as much as 35 percent for software providers. On the other side of the equation are traditional automotive suppliers. Their record profits of the last decade are long gone. Mogge claims that the “new normal” for legacy suppliers is EBIT margins of 5 percent or less.
Read more at Assembly Magazine
Mental Health Issues Still Affecting Workforce
While the focus on mental health was at its height during the pandemic, the issue has not gone away. Companies in logistics and supply chain managment are feeling the effect on workforce performance of employees struggling with mental health issues. To understand the scope the issue, Mental Health America annually assesses the state of mental health in the U.S. This year's report found the following:
In 2019-2020, 20.78% of adults were experiencing a mental illness. This is equivalent to over 50 million Americans.
Over half (54.7%) of adults with a mental illness do not receive treatment, totaling over 28 million individuals.
Almost a third (28.2%) of all adults with a mental illness reported that they were not able to receive the treatment they needed. 42% of adults with a mental illness reported they were unable to receive necessary care because they could not afford it.
In the U.S., there are an estimated 350 individuals for every one mental health provider. However, these figures may actually be an overestimate of active mental health professionals, as it may include providers who are no longer practicing or accepting new patients.
The vast majority of individuals with a substance use disorder in the U.S. are not receiving treatment. 15.35% of adults had a substance use disorder in the past year. Of them, 93.5% did not receive any form of treatment.
Read more at Material Handling & Logistics