Member Briefing February 2, 2023
US Manufacturing PMI at 47.4%; January 2023 Manufacturing ISM Report On Business
The Institute for Supply Management (ISM) said on Wednesday that its manufacturing PMI dropped to 47.4 last month from 48.4 in December. The third straight monthly contraction pushed the index to the lowest level since May 2020 and below the 48.7 mark viewed as consistent with a recession in the broader economy.
The ISM survey's forward-looking new orders sub-index plunged to 42.5 in January from 45.1 in December. It was the fifth straight month that this measure has contracted. Weakening demand and improved raw material supplies have reduced the backlog of unfinished work at factories. The survey's measure of supplier deliveries edged up to 45.6 from 45.1 in December. A reading below 50 indicates faster deliveries to factories. The ISM survey's measure of factory employment dipped to 50.6 from 50.8 in December. But this gauge, which has swung up and down, has not been a good predictor of manufacturing payrolls in the government's closely watched employment report.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Biden's 'No' on F-16s for Ukraine Met With Skepticism in Pentagon – Washington Post
- Ukraine is Fighting Western War Fatigue, Minister Says - Politico
- Russia’s Economic Growth Suggests Western Sanctions Are Having a Limited Impact. - NYT
- Russian Marines Attempt Another Frontal Assault On Ukrainian Positions Around Pavlivka – Forbes
- U.S. Readies $2 Billion-Plus Ukraine Aid Package With Longer-Range Weapons - Reuters
- Ukraine Billionaire Ihor Kolomoisky Targeted in New Anti-Corruption Swoop - BBC
- Georgia Wants Russia to Leave Its Land in a Ukraine Peace Deal – Bloomberg
- Nearly a Year on From the Supposed Russian Exodus, Most Major Companies Are Still Operating in the Country - CNBC
- Russia Says it Wants to Keep New START Nuclear Treaty, Despite U.S. Friction – Reuters
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Fed Approves Quarter-Point Rate Hike, Signals More Increases Likely
The Federal Reserve approved a quarter-percentage-point interest-rate increase and signaled plans to raise rates again next month to continue lowering inflation.The decision Wednesday followed six consecutive larger rate rises, including an increase of a half point in December and 0.75 point in November. Officials nodded to recent improvement in inflation readings but didn’t significantly alter their guidance around upcoming rate moves in a policy statement released after the meeting.
“The committee anticipates that ongoing increases” in interest rates “will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive,” said the statement, using the same language included in policy statements since last March. The latest increase caps a year in which the Fed lifted its benchmark federal-funds rate from near zero to a range between 4.5% and 4.75%, a level last reached in 2007.
US Consumer Confidence Slips on Uncertain Outlook: Survey
Consumer confidence in the United States edged down in January on concerns over the economy in the coming months and less optimism on the jobs outlook, according to survey data released Tuesday. The closely watched consumer confidence index ticked down more than expected to 107.1 in January, down from a revised 109.0 reading in December, said think tank The Conference Board.
Consumers were less upbeat about the short-term outlook for jobs, and also expect business conditions to worsen in the near term, he added. The expectations index fell below a reading of 80, which typically signals a recession within the next year, said The Conference Board's report. But the expectation is that incomes will remain relatively stable in the months ahead, with fewer people planning to buy a home.
U.S. COVID – From the End of Free COVID Tests to the Return of Copays, Here’s What THE End of the COVID Health Emergency Means for You
The Biden administration plans to end the national COVID public health emergency on May 11, it said Monday, bringing to an end access to free COVID tests, treatments, and vaccines for many. The announcement stunned many as the Biden administration had just re-extended the national pandemic emergency status on Jan. 11, through April. Still, the announcement is in keeping with the administration’s promise to give at least 60 days’ notice to states before ending the emergency. Lead time is important due to myriad implications of repealing the emergency status, including the anticipated loss of Medicaid coverage for millions of Americans.
What are the implications for Americans? Here’s what we know.
Long Covid Has an ‘Underappreciated’ Role in Labor Shortage, Study Finds
Long Covid is keeping people out of work and may reduce on-the-job productivity for others, contributing to a labor shortage and weighing on the U.S. economy at large, according to a recent study by the New York State Insurance Fund. Long Covid is a chronic illness that results from a Covid-19 infection. Its potential symptoms number in the hundreds and, for some, can be debilitating and persist for years. Up to 30% of Americans develop long Covid after a Covid infection, affecting as many as 23 million Americans, the U.S. Department of Health and Human Services said in November.
About 18% of people with long Covid hadn’t returned to work for more than a year after contracting Covid. Of this share, more than 3 in 4 were under 60 years old. Another 40% returned to work within 60 days of infection but were still receiving medical treatment — presenting challenges such as reduced hours, lower productivity and other workplace accommodations, NYSIF said.
Kathy Hochul’s $227B NY Budget Proposal Starts Months Long Negotiation Process
Gov. Kathy Hochul unveiled a $227 billion executive budget Wednesday that seeks to double the growth of New York's housing over the next decade, invest $1 billion in mental health services and continue to address relatively high crime rates both through community-based services and further changes to bail laws. Hochul's budget kicks off an at least two-month budget negotiation that will include some of the most debated state policy proposals.
It will also offer a test after a particularly narrow election victory in November for Hochul about whether she seeks a more moderate position on policy initiatives or takes a posture to placate progressives who assert they are the ones who carried her over the finish line. The proposed spending plan comes as Hochul seeks to keep a balanced budget in the face of a projected recession and declining tax revenues that are expected in the coming years. Hochul projects a budget this year that has out-year gaps in how the state will be able to afford its investments if it was not to dip into reserves.
Amazon Illegally Resisted NYC Union Drive, Labor Board Judge Says
Amazon.com Inc. violated federal labor law as part of its efforts to resist unionization at two facilities in New York City, a National Labor Relations Board judge ruled in a case that tees up major potential changes to board precedent. Amazon illegally threatened to withhold wage increases and improved benefits if workers elected a union, Administrative Law Judge Benjamin Green held Monday. The company also broke the law by removing a worker’s post on a digital message board inviting his colleagues to sign a petition at a union tent to make Juneteenth a paid holiday, the judge found.
Green dismissed several other allegations that the NLRB general counsel’s office lodged against Amazon, including some that relied on arguments to change board precedent to find the company’s conduct illegal. Administrative law judges are required to apply existing case law. With the case transferred to the NLRB to consider challenges to the judge’s ruling, the Democrat-majority board will get the opportunity to overturn longstanding precedent, including a 75-year-old decision allowing mandatory anti-union meetings convened by employers.
Boeing Delivers Final 747 to Atlas Air
Boeing delivered the final Boeing 747 ever built to cargo carrier Atlas Air during a ceremony Tuesday afternoon at its assembly plant in Everett, Washington. The delivery of the jumbo jet, a 747-8 Freighter, marked the end of a 53-year production run that saw 1,574 aircraft go to more than 100 customers and log more than 118 million flight hours. Dubbed the "Queen of the Skies," the 747 revolutionized air travel as the world’s first twin-aisle airplane and enabled more people to fly farther, faster, and less costly than ever before. Marked by its distinctive hump in the front section of its fuselage, the airplane helped Boeing cement its reputation for engineering excellence and penchant for innovation.
The last version, the 747-8, stretches more than 250 feet and can fly some 467 passengers to a range of 7,790 nm. Unfortunately for Boeing, the GEnx-powered 747 fell out of favor with the industry’s lack of appetite for a four-engine airliner and the Covid pandemic only served to accelerate the program’s cancellation in July 2020, even as its cargo version benefitted from a robust air freight market.
Boeing to Add 737 MAX Assembly Line
Boeing Commercial Airplanes will set up a fourth assembly line for 737 MAX series jets in the second half of 2024, according to an internal announcement that the manufacturer has confirmed. The line will be installed in the Everett, Wash., plant now available since the end of production last year of the Boeing 747. At the present time, 737 MAX final assembly is centered at Renton, Wash.
The 737 MAX is Boeing’s best-selling aircraft, with over 500 net new orders logged last year. It reported more than 3,600 outstanding orders for the twin-engine, narrow-body jets at the end of December. The 737 MAX series is available in four variants, two of which (MAX 7 and MAX 10) have not yet achieved FAA certification. Currently, Boeing is completing about 31 new 737 MAX jets each month, with a targeted rate increase to 50 jets/month during 2025-26.
A Wave of New Container Ships May Help Ease Inflation Shipping Costs
The orderbook of new container ships — most of which are slated to be delivered between this year and 2027 — stands at more than 900 vessels, and those will have the equivalent of about a quarter of the existing carrying capacity, according to Drewry. A surge will pose a challenge from shipyards in China and South Korea, to the corporate marketeers who will have to come up with names for all those newly christened launches. (Click here for today’s full story in Bloomberg Businessweek.)
The bottom line for some analysts: There’s too much container supply coming to meet the demand, threatening another spell of depressed ocean freight rates hangs in the balance if the shipping lines don’t take steps soon to reel in their capacity.
The World's Most Admired Companies Ranked by Fortune
Apple is still on top of Fortune’s annual ranking of corporate reputation this year, capping a string of 16 years. Amazon, Microsoft, and Berkshire Hathaway are close behind. Pfizer, which came from nowhere to capture the fourth spot last year on the all-star list, based on its pandemic performance hangs in at number 8. On the downside, Netflix slid from number 9 to number 29. five companies that have been on the list every year since it started 25 years ago: Berkshire Hathaway, Coca Cola, Johnson & Johnson, Microsoft and Toyota.
Running a most admired company appears to be correlated with the longevity of CEOs. Warren Buffett (#4) has 53 years on the job. Jamie Dimon (#5) has 17 at JPMorgan Chase. Overall, the CEOs of The 500 all-star companies had an average of 7.8 years as of Jan. 1. That is 25% more than the average Fortune 500 CEO.
See the list at Fortune (subscription)
Lithium Americas Soars After GM Invests $650 Million. The EV War Is Escalating.
General Motors said Tuesday it plans to invest $650 million in Lithium Americas to secure access to lithium, a vital component of batteries for electric vehicles. It’s the biggest investment an automaker has ever made to secure sources of the raw materials that go into batteries, the companies said. When the lithium is extracted from the Thacker Pass mine, which is the largest source of lithium identified in the U.S., and processed it will provide enough for GM to make as many as 1 million electric vehicles per year, the companies said.
Lithium is a critical component for batteries because it has a very high energy density and withstands charging and discharging well, according to GM and Lithium Americas. “Direct sourcing critical EV raw materials and components from suppliers in North America and free-trade-agreement countries helps make our supply chain more secure, helps us manage cell costs, and creates jobs,” GM Chair and CEO Mary Barra said in a statement announcing the investment.
Toyota Calls On Science To Tell EV-Only Extremists That They’re Wrong
Toyota is known mostly for its hybrid-powered vehicles, with the Prius first coming into mind, but with all the other manufacturers racing towards an EV-only future, the Japanese brand seems to be lagging in terms of a wider-scale adoption on the electric-only front. But even as Toyota moves to develop its first dedicated EV platform, it still won’t make the shift to an all-electric lineup and now it’s using science to tell EV-only extremists that they’re wrong.
With some solid facts and figures at hand, the carmaker’s Chief Scientist Gill Pratt says that the best approach for a sustainable future is a multipronged one, blending EVs with hybrids and other green technologies, and not a full-on commitment to battery-powered cars only. Toyota isn’t anti-EV, but it believes in a diversified approach and it’s predicting a global shortage of lithium, which is the most important material used in today’s lithium-ion batteries found in pure EVs, hybrids, and plug-in hybrids.
New Metro-North Rail Service to Penn Station Postponed by Seven Months
A $2.9 billion project to extend Metro-North Railroad service into New York City’s Penn Station has been delayed by about seven months, Metropolitan Transportation Authority officials said Monday. Commuter-rail line expansion is now expected to finish by October 2027. The new access would mean riders will save up to 50 minutes each way.
The hold up is because the MTA relies on the owner of the existing tracks, Amtrak, to allow access to those lines during construction. While the MTA has a deal with Amtrak to open up the tracks and provide staffing, it has yet to fully deliver on that commitment, Jamie Torres-Springer, president of the MTA’s Construction & Development, said Monday during a monthly committee meeting.
Biden Touts $300 Million Grant for 'Critical First Phase' of Gateway Hudson River Tunnel
President Joe Biden joined a bevy of New York’s top Democratic leaders at the West Side Rail Yard to unveil a $292 million grant that will go towards completing a concrete casting to revamp a pair of century-old rail tunnels beneath the Hudson River that connects New Jersey to Midtown Manhattan. According to White House officials, this is a “critical first phase” of the long-delayed Hudson Tunnel Project, the biggest section of the overarching Gateway Program.
Officials plan to rehabilitate the old tunnel, which suffered damage from Hurricane Sandy in 2012, as well as add a second tunnel. The revitalization of the project began in 2013, but stalled under former President Donald Trump. The nearly $300 million in funding stems from the bipartisan $1.2 trillion infrastructure law signed by Biden towards the end of 2021.