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Member Briefing February 15, 204

February 15, 2024

Posted By: Harold King in Daily Briefing,

Top Story

Surveys Show CFOs Are Prioritizing Marketing

A handful of recently published studies suggest we might look back at 2024 as the year marketing and automating were the blocking and tackling of business. Grant Thornton, which recently polled more than 240 CFOs for its quarterly report series found 71% of respondents expect revenue growth this year, an increase of five points from three months earlier. Similarly, sentiment has improved when it comes to cost controls and labor and supply chain needs—i.e., the executives don’t plan on devoting as much of their budgets to those latter items.

That growing confidence and extra cash flow are translating into a greater willingness to spend on initiatives that can ensure sales and share gains aren’t only for the short term: 45% of CFOs expect to spend more on sales and marketing in the next year. That demand generation is high on the priorities list is something of an eyebrow-raiser; in the past, C-suites were almost always reining in that line item late in a business cycle. Investing in marketing also ranked high in The Conference Board’s C-Suite Outlook 2024 study. Globally, it trailed only new products and services and Conference Board researchers noted that “about two-thirds of CEOs say they are planning to increase budgets for customer service, customer experience, and new customer acquisition over the next 24 months.”

Read more at IndustryWeek

Mortgage Rates Surge Higher Again

After a brief reprieve in December and January, mortgage rates are moving higher again, and that is taking its toll on mortgage demand. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.87% last week from 6.80% the week before, with points rising to 0.65 from 0.59 (including the origination fee) for loans with a 20% down payment. That is the highest rate since early December 2023.

Total mortgage application volume fell 2.3% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Applications for a mortgage to purchase a home dropped 3% for the week and were 12% lower than the same week a year ago. Applications to refinance a home loan, which are most sensitive to weekly rate changes, fell 2% for the week but were 12% higher than the same week one year ago. Rates are still about one-half a percentage point higher now than they were a year ago, but the recent drop in rates from a 20-year high last fall has brought more borrowers out looking for any savings they can get. The vast majority of current borrowers, however, have loans with rates far lower than those available today.

Read more at CNBC

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Policy and Politics

NYS Tax & Finance Audit: Tax Incentive Program Results Mixed (at Best)

New York State gives out over $1 billion in tax incentives and credits every year to create and retain jobs and bolster the economy. But do they work? A new report released Tuesday shows that for some programs targeted toward manufacturing and scientific research development, the incentives do work. But for others, like those for the motion picture and theater industries, the state is losing way more than it’s paying out.

However, the auditors found that while the Film Production and Post-Production Credits have supported well over 100,000 jobs, they don’t provide a positive return for the state’s investments when it comes to direct revenue. Ken Girardin, research director at the Albany-based Empire Center for Public Policy, called the report “a pretty damning indictment of the way state lawmakers and governors going back more than two decades have been spending public money in trying to encourage particular industries in New York.”

Read more at WKBW

New York State Redistricting Panel Plans to Vote on Newly Drawn Maps Thursday

A thick layer of uncertainty hanging over New York's congressional races soon may be lifted. An appointed panel ordered to redraw the state's 26 House districts plans to vote on a proposed map on Thursday, sending it then to the state legislature for approval. The panel hasn't revealed yet how it has drawn the new boundaries and won't do so until after the 2 p.m. meeting.

The announcement came with campaigns underway and raised the possibility of a bipartisan agreement on new district lines, a difficult feat at a politically charged time. The same panel had deadlocked on that very task in 2022 because its Democratic and Republican appointees fiercely disagreed. The vote by the state Independent Redistricting Commission will fulfill its duty almost two weeks earlier than the Feb. 28 deadline set by the Court of Appeals in its order in December. Karen Blatt, co-executive director of the commissioner, confirmed Tuesday that the panel will vote on a single map, not separate Democratic and Republican versions. But it remains unclear if members from both parties have reached a consensus.

Read more at The Democrat & Chronicle

House Republicans Impeach Biden's Top Border Official

By a vote of 214-213, the House approved two articles of impeachment accusing Homeland Security Secretary Alejandro Mayorkas of not enforcing U.S. immigration laws, which Republicans argue led to record flows of migrants across the U.S.-Mexico border, and making false statements to Congress. It came a week after a similar vote failed in a legislative defeat for Speaker Mike Johnson. Republican Representative Steve Scalise, who had been receiving treatment for cancer, was not present for last week's vote, but returned to Washington this week, providing a crucial vote.

Mayorkas has said he does not bear responsibility for the border situation, blaming it instead on a broken U.S. immigration system that Congress has not been able to fix. Constitutional experts and even some Republicans and have said the House investigation of Mayorkas failed to provide evidence of the "high crimes and misdemeanors" that the U.S. Constitution cites as reasons for impeachment. Instead, they cast the fight as merely "policy disputes." It is highly unlikely that the Democratic-majority Senate will vote to oust Mayorkas.

Read more at Reuters

Health and Wellness

There’s a New Life-Saving RSV Vaccine. Why Won’t People Take It?

RSV, or respiratory syncytial virus, usually hits in fall and winter. It’s mild for most people but lethal for some — especially babies and older people. In a typical year, according to the CDC, as many as 80,000 children under age 5 are hospitalized, and between 100 and 300 kids die. For those 65 and over, there are up to 160,000 hospitalizations a year, and 6,000 to 10,000 deaths. But ahead of this RSV season, for the first time ever, immunization was finally approved for the most vulnerable groups of Americans, young and old. It was also recommended for those late in pregnancy, which would protect infants from birth.

The latest data from the CDC shows that only 16 percent of eligible pregnant people got vaccinated. Among the over 60 population, it was just over one in five. And among babies and eligible young children, the uptake was “low,” the CDC said. Four years after Covid hit and fueled growing vaccine hesitancy, the rollout of the RSV vaccine this fall and winter offered a case study unfolding in real time. At issue was whether the public health and medical communities had acquired the skills, speed and agility needed to counter malicious misinformation before it took hold in the public’s mind.

Read more at Politico

Election 2024

Industry News

Inflation Tracker Graphic: At 3.1%, See the Items Keeping Prices High

The Journal has put together a price tracker of common items that many Americans buy monthly to see the direction of prices that matter to you. This living page will automatically update with the most recent prices from the CPI as new numbers are released. Prices rose the fastest for frozen noncarbonated juices and drinks , a change of 29% from prices a year ago this month. Eggs had the largest drop, falling 28.6%.

When looking at the graphic, keep in mind that these percentages compare prices year-to-year and not month-to-month. If a price change of 100% is reported for two months in a row, it means that for each month, prices are roughly double what they were the same time last year (they haven’t doubled twice in a row). As prices stabilize, we’d expect to see a flattening out of the monthly year-over-year numbers, resulting in more boxes in very pale shades of blue and orange.

See the interactive graphic at the WSJ

DOE Invests $71.5 Million to Support U.S. Hydropower Facilities

The U.S. Department of Energy (DOE) has selected 46 hydroelectric projects to receive up to $71.5 million in incentive payments. The purpose of the program is to increase the generation efficiency of the country’s existing hydropower fleet. Funding for the programs is made possible by the Bipartisan Infrastructure Law, with the Grid Deployment Office handling administrative needs. According to the DOE, the Hydroelectric Efficiency Improvement Incentive program is expected to generate $468 million in combined federal and private investment. As part of the program, $3.4 million will be allocated to renovate two units at Central Hudson's Dashville hydroelectric facility in Ulster County.

In a recent quote, U.S. Secretary of Energy Jennifer M. Granholm said, “Hydropower is the nation’s prototype of renewable power playing an important role in deploying affordable and reliable electricity across the country. Thanks to the President’s Investing in America agenda we are maintaining and expanding our hydropower fleets, helping reduce costs of operation and ensuring American workers continue to drive the nation’s clean energy transition.”

Read more at Plant Services and the Poughkeepsie Journal

US Issues $135 Million in Advance EV Tax Rebates Since Jan 1, Treasury Says

The U.S. government has reimbursed auto dealers for about $135 million in advance point-of-sale consumer electric vehicle tax credit payments since the start of the year through Feb. 6, the Treasury said on Wednesday. Prior to 2024, U.S. auto buyers could only take advantage of the $7,500 new electric vehicle credit or $4,000 used EV credit when they filed tax returns the following year. Starting Jan. 1, consumers can transfer the credits to a car dealer at the time of sale, effectively lowering the vehicle’s purchase price.

The Internal Revenue Service has received more than 25,000 time of sale reports, including more than 19,500 - or 78% - with advance payment requests and approximately $135 million has been paid to dealers since Jan. 1, Treasury said in disclosing the previously unreported figures. The advance payment requests include 17,500 for new EVs and 2,000 for used vehicles. More than 11,000 U.S. auto dealers have registered for the program, including more than 8,000 registered for advanced payments.

Read more at Reuters

U.K. Inflation Holds Steady, Bringing Forward Prospects of Interest-Rate Cuts

U.K. inflation held steady at 4% year-on-year in January on the back of easing prices for furniture and household goods, food and non-alcoholic beverages.Month-on-month, the headline consumer price index fell to -0.6%, returning to negative territory after December’s surprise increase by 0.4% on the month and 4% annually. “The largest upward contribution to the monthly change in both CPIH and CPI annual rates came from housing and household services (principally higher gas and electricity charges), while the largest downward contribution came from furniture and household goods, and food and non-alcoholic beverages,” the Office for National Statistics said Wednesday.

The closely watched core CPI figure — which excludes volatile food, energy, alcohol and tobacco prices — came in at an annual 5.1%, below a consensus estimate of 5.2%. On a monthly basis, core CPI slid to -0.9%, below a -0.8% forecast. While the Bank of England is expected to begin cutting interest rates over the summer, any announcements of tax cuts in the government’s Spring Budget statement next month would risk pushing the central bank to keep policy tighter for longer.

Read more at CNBC

The Cost of Car Ownership Is Getting Painful

One place Americans still can’t get relief from inflation is behind the wheel. Many of the costs related to car ownership continued to outpace the consumer-price index last month. Car insurance premiums rose 20.6% in January from a year earlier. A trip to the mechanic, the price of a parking space, and highway tolls are also up, offsetting the savings from one of the big exceptions, falling gas prices. The ballooning costs for that car in the driveway can squeeze budgets. Transportation is Americans’ second-biggest expense, after housing, and one that is hard to cut.

Already, more Americans are feeling the strain. In the fourth quarter of last year, 7.7% of auto loans transitioned to delinquency on an annualized basis, according to the New York Fed—the highest rate in 13 years. The total annual cost of owning a new car, including expenses such as gas and insurance, climbed to $12,182 in 2023, up from $10,728 in 2022, according to the latest estimates from AAA.

Read more at The WSJ

Boeing Deliveries Suffer Under FAA Scrutiny

Boeing Commercial Airplanes delivered 27 aircraft during January, -29% fewer than during January 2023, demonstrating the scope of the problem for the OEM since the exposure of a manufacturing defect in its 737 MAX series. Following a structural failure on a 737 MAX jet early last month, Boeing paused the manufacturing and assembly process for its top-selling aircraft series. The January deliveries included 25 737 MAX jets, down from 35 delivered last January.

As Boeing worked to reevaluate its assembly processes, the Federal Aviation Administration placed inspectors on location at the Renton, Wash., plant where the 737 MAX program is centered. Now, FAA is blocking any increase in 737 MAX production rates. But CFO Brian West reportedly told an audience of investors on February 13 that Boeing will increase that output from 31 to 38 jets/month in the second half of this year. While Boeing posted solid new orders and deliveries for 2023, and continues to have a strong backlog of orders for the 737 MAX, stabilizing production and increasing output is a critical issue for the manufacturer.

Read more at American Machinist

Air Force Reorganizes for Modern Warfare

Chief of Staff of the Air Force Gen. David W. Allvin told thousands of Airmen gathered here that the service is facing a hinge in history, less than 24 hours after unveiling the biggest changes to the Air Force in decades. While the Air Force is introducing new commands, new ranks, and more, Allvin said a deeper, fundamental shift in airpower is occurring worldwide, as drones and other cheap weapons systems proliferate. In turn, the U.S. Air Force must assess how many bedrock concepts fit into modern conflict against China in the Pacific, militia groups in the Middle East, or elsewhere.

“You’ll see this proliferate more and more, which makes the importance of coming up with a low-cost solution to taking these things down … so we’re not taking $700,000 missiles and shooting down a $5,000 drone,” Gen. James B. Hecker, the commander of U.S. Air Forces in Europe-Air Forces Africa and NATO Allied Air Command, told reporters Feb. 12. “But we want to inflict that cost maybe on our enemy should we be able to deter so I think you’ll see that we’ll be getting some of those capabilities as well.”

Read more at Air and Space Forces

China’s BYD Plans New EV Assembly Plant in Mexico

China's BYD Co Ltd will set up a new electric vehicle (EV) factory in Mexico, Nikkei reported on Wednesday, citing the company's Mexico head, as the EV maker aims to establish an export hub to the United States. BYD, known for its cheaper models and a more varied lineup, recently overtook its biggest rival Tesla Inc (TSLA.O), opens new tab to become the world's top EV maker in terms of sales.

According to the Nikkei report, BYD has launched a feasibility study for the Mexican plant and is currently negotiating with officials over terms, including the factory's location. While BYD has its sales concentrated in China, opens new tab, it also aims to expand globally and is building new plants overseas in addition to expanding Chinese exports. Mexico's massive automaking sector, populated by many of the industry's top global players, is tightly integrated with the U.S. industry.

Read more at Reuters

Pop-Tarts Creator William Post Dead at 96: 'Extraordinary Life'

The man credited with inventing Pop-Tarts has been described as a humble person who achieved "legendary accomplishments," following his death aged 96. William "Bill" Post died on Saturday, February 10, an obituary published in his local newspaper in Michigan, The Grand Rapids Press, reported. He is survived by his children, grandchildren and great-grandchildren.

From the age of 21, Post worked as a manager at biscuit manufacturer Hekman—now the Keebler Company—and rose to managing the company's plant in Grand Rapids. Pop-Tarts quickly became a success, and Post went on to work as a consultant for Kellogg's. Despite being credited as the breakfast treat's inventor, the obituary quoted Post as saying: "I assembled an amazing team that developed Kellogg's concept of a shelf-stable toaster pastry into a fine product that we could bring to market in the span of just four months." He told WWMT his favorite flavor remained the original strawberry, and that he always kept a box in his car—which bore a personalized Pop-Tart numberplate—as a snack.

Read more at Newsweek

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