Member Briefing February 20, 2024
Top Story
Empire Manufacturing Survey: Headline Index Improves, But Remains Negative
On the heels of a significant contraction last month, manufacturing activity shrank further in New York State, according to the February survey. After falling fifty-three points over the prior two months, the general business conditions index shot up forty-one points, but held below zero at -2.4.
- The new orders index climbed forty-three points to -6.3, pointing to an ongoing decline in orders.
- The shipments index increased thirty-four points to 2.8, indicating a small increase in shipments.
- The unfilled orders index came in at -9.6, a sign that unfilled orders continued to fall.
- The inventories index was little changed at -9.6, suggesting that inventories shrank modestly.
- The delivery times index remained negative at -3.2, indicating shorter delivery times.
- The index for number of employees climbed to a level of around zero, suggesting employment levels were unchanged.
- The average workweek index came in at -4.7, pointing to a small decline in hours worked.
- The prices paid index moved higher for a second consecutive month, rising ten points to 33.0.
- The prices received index climbed eight points to 17.0, pointing to a pickup in both input and selling price increases.
- The capital spending index was little changed at 11.7, suggesting capital spending plans remained somewhat soft.
Industrial Production Declined 0.1% in January
The stall speed of industrial sector activity that characterized 2023 continued in January, with total industrial production down 0.1% during the month. Weakness was primarily due to a 0.5% drop, or the largest in three months, in manufacturing output. Manufacturing activity is a bulk of industrial production, accounting for about three quarters of the total. But additional weakness also came from mining output which slipped 2.3%. The big offset was in the small but mighty utilities component of IP, which rebounded 6.0% in January after being down in three of the previous four months.
Manufacturing activity continues to be constrained by economic uncertainty and higher financing costs crimping capex investment. January's output was held back by a wide range of industries. Petroleum & coal products output dropped the most, down 3.7%. On the other end of the spectrum, output in the electrical equipment & appliances and aerospace & miscellaneous transportation industries both rose 1.5%. The largest gain in output came from printing, up 1.6%. In short, activity was a bit more mixed than the total drop would suggest.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Rafah Attack: How Israel Plans to Hit Hamas and Scale Back War - Reuters
- Israeli Cabinet Opposes Unilateral Recognition of a Palestinian State - WSJ
- U.S. Strikes Multiple Houthi Targets—Including Apparent Underwater Attack Vessel - Forbes
- WHO Says Gaza's Nasser Hospital Not Functional After Israel Raids - BBC
- Egypt Builds Walled Enclosure on Border as Israeli Offensive Looms - WSJ
- At World Court, Palestinians Demand End to Israeli Occupation – Reuters
- Iran’s Revolutionary Guard On The Ground In Yemen To Assist Houthis, U.S. Official Says – Forbes
- Crew Abandon British-Registered Cargo Ship off Yemen After Houthi Attack - BBC
- 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
- Ukraine Withdraws From Besieged City of Avdiivka as Russia Advances - WSJ
- Is Avdiivka's Fall a Sign Russia is Turning the Tide? - BBC
- Navalny's Widow Pledges to Carry On Opposition Leader's Work - NYT
- Russia Using Thousands of Musk’s Starlink Systems in War, Ukrainian General Says - WSJ
- Lawmakers Scramble for Plan B on Ukraine - The Hill
- 'Artificial Shortage' of Weapons Helps Putin, Says Zelensky - BBC
- ‘China Has a Lot More to Lose’: U.S. Considering Sanctioning Chinese Firms Aiding Russia’s War - 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
- U.S. Fears Russia Might Put a Nuclear Weapon in Space - NYT
- Munich Security Talks Marked by Global 'Lose-Lose' Anxiety - BBC
- China Coast Guard Boarded Taiwanese Boat Near Frontline Islands, Taiwan Says – Reuters
- Hungary Can Ratify Sweden’s NATO Bid as Soon as Feb 26, Orban Says- CNN
- Solar Radiation Storm Causing Massive Enduring Radio Blackout - Newsweek
- Venezuela Orders UN Human Rights Office to Close, Accusing it of Anti-Government Activity - AP
- White House Monitoring Russian ‘Anti-Satellite’ Capability, Cautions no Cause for Alarm – The Hill
- Pakistan Official Admits Election Rigging -Forbes
- Mexico Sees Surge in African Migrants Seeking the US - BBC
- China's Travel Spending During Lunar New Year Holidays Beats Pre-COVID Levels - Reuters
Policy and Politics
DiNapoli Releases Report on NYS Executive Budget
In his annual report assessing the proposed Executive Budget, State Comptroller Thomas P. DiNapoli identifies positive developments, as well as risks, challenges, and concerns, including several new proposals that restrict independent oversight by his office. “New York state has taken positive steps to stabilize its finances with higher reserves and lower projected budget gaps,” DiNapoli said. “Still, the Executive and the Legislature face the difficult challenge of ensuring adequate funding for our schools, health care programs, and other critical needs while improving the state’s affordability.”
For State Fiscal Year (SFY) 2024-25, All Funds revenues exclusive of federal receipts are projected by DOB to total $135.9 billion, an increase of 0.4% or $495 million. Proposals included in the Executive Budget will have a minimal net impact to state revenues in SFY 2024-25. The state’s structural budget gap is projected to worsen over the next few years, as DOB projects growth in disbursements to rapidly outpace receipts throughout the five-year Financial Plan period. Over this period, General Fund receipts are projected to grow 4.2% compared to disbursements that are projected to grow over four times as fast (17.7%).
Read more at The Comptroller’s website
NAM: Regulatory Onslaught Disproportionately Hits Small Manufacturers
NAM Vice President of Domestic Policy Brandon Farris told the House Committee on Small Business that the majority of manufacturing firms in the US are small, and “…are the backbone of the manufacturing supply chain, often producing key components for larger firms … [but] manufacturing faces significant headwinds in the form of the cost, complexity and uncertainty associated with overreaching and burdensome federal regulations.” He cited NAM data finding that: The federal cost of regulations for manufacturers in 2022 was roughly $350 billion, a 25% increase from 2012; and The average manufacturer in the U.S. pays $29,100 per employee per year to comply with federal rules, while for the average small manufacturer, that price is $50,100.
Farris cited other recent examples of onerous federal rulemaking, including: The Environmental Protection Agency’s recently finalized update to the National Ambient Air Quality Standard from 12 micrograms per cubic meter of air to 9 micrograms, a level approaching naturally occurring levels in many parts of the U.S.; The Department of Energy’s recent freeze of liquefied natural gas export permits, which, risks “leav[ing] our allies [and] our manufacturers in the cold”; and The Securities and Exchange Commission’s proposed climate disclosure rule, which “would increase manufacturers’ compliance costs dramatically, reveal proprietary and confidential information and ensnare wide swaths of the manufacturing supply chain.”
House Small Business Committee: New DOL Apprentice Rule Would Negatively Impact Small Business Programs
Last week Congressman Roger Williams (R-TX), Chairman of the House Committee on Small Business, along with Congressman Aaron Bean (R-FL) penned a letter to the Department of Labor regarding a new rule that would disincentivize small businesses from using the National Apprenticeship System. “This rule places an especially high burden on small businesses by imposing difficult administrative requirements ranging from mandatory disclosures for training program sponsors to providing details about the operation, performance, and advancement of the training program. It seems the DOL may not have properly considered small businesses in this rulemaking process.
“The proposed rule, among other things, would require the adoption of a time-based model—eliminating the current flexible competency-based approaches to certify an individual has completed their training. Further, the rule adds additional quality and content requirements, and establishes new procedures concerning the registration, cancellation, and deregistration of apprenticeship programs. These new requirements will discourage small business participation in the apprenticeship programs.”
Health and Wellness
25 States See 'High,' or 'Very High' Levels of Respiratory Illness Activity: CDC
Half of all states are seeing high levels of respiratory virus activity, new federal data updated Friday shows. Currently, 25 states plus New York City and Washington, D.C., are experiencing "high" or "very high" levels of respiratory illness activity, according to the Centers for Disease Control and Prevention (CDC). While this is higher than the 23 states experiencing "high" or "very high" activity levels last week, it is fewer than the peak of 38 states reporting "high' or 'very high' levels the week ending Dec. 30.
New weekly COVID hospitalizations remained steady with 21,373 recorded the week ending Feb. 10, slightly up from 21,204 the week ending Feb. 3. Despite the uptick, COVID hospitalizations remain lower than the same time last year. Most counties are still in the low hospital admission category meaning fewer than 10 COVID-19 hospital admissions per 100,000 people. Additionally, other metrics including test positivity and emergency department visits have continued to decline, CDC data shows. Weekly COVID deaths have slightly declined to 2,152 for the week ending Jan. 20, the last week of complete data, from 2,457 the week ending Jan. 13.
NYS COVID Update
The Governor updated COVID data for the week ending January 12th.
Deaths:
- Weekly: 66
- Total Reported to CDC: 82,675
Hospitalizations:
- Average Daily Patients in Hospital statewide: 1,548
- Patients in ICU Beds: 176
7 Day Average Cases per 100K population
- 10.3 positive cases per 100,00 population, Statewide
- 13.2 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- Control of the House Could Come Down to New York Republican Marc Molinaro - Politico
- IRC Releases New Congressional Maps With Few Changes – City & State
- Jeffries Blasts Latest Redistricting Proposal – City & State
- Manchin Not Running for President – The Hill
- 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
CEO Confidence Improved in Q1 2024
The Conference Board announced on Feb. 8 that its Measure of CEO Confidence in collaboration with The Business Council improved to 53 in Q1 2024, up from 46 in the fourth quarter of 2023. With the measure above 50, it's the first time that optimism has prevailed since Q1 2022, the group notes. In the Q1 survey, 32% of CEOs reported general economic conditions to be better than they were six months ago, up from just 18% in Q4 of last year. Just 22% said conditions were worse, down from 32% in Q4.
In the Q1 survey, 32% of CEOs reported general economic conditions to be better than they were six months ago, up from just 18% in Q4 of last year. Just 22% said conditions were worse, down from 32% in Q4. On the other hand, 35% of CEOs expect to expand their workforce over the next 12 months, down only slightly from 38% in Q4. And, 23% of CEOs expect a reduction in their workforce, up from 13%.
Read more at Material Handling & Logistics
2023 Machine Tool Orders Dropped 11%
New orders for machine tools took a surprising, positive turn during December as manufacturers purchased $491.03 million worth of metal-cutting and metal-forming/fabricating machinery. The result was a 21.7% improvement over November, and an 11.9% increase over the December 2022 total, in the U.S. Manufacturing Technology Orders report issued by AMT - the Assn. for Manufacturing Technology. The December USMTO results drove the full-year total for machine tool orders to $4.94 billion, -11.2% lower than the 2022 total.
According to AMT, the 12-month total “surpassed many predictions.” The association offered various indicators that explained the overall decline in machine-tool bookings during 2023. For example, contract machine shops (small/medium-sized businesses, the largest segment of machine-tool buyers) reduced their orders slightly more than 21%, year-over-year. Even so, the overall decline in new orders was not as severe as some early predictions due to new orders from larger manufacturers and OEMs. Orders from the automotive sector rose 2% year-over-year in 2023. The aerospace sector’s 2023 orders fell nearly 9% from 2022.
Read more at American Machinist
January Wholesale Prices Rise More Than Expected, Another Sign of Persistent Inflation
Wholesale prices rose more than expected in January, further complicating the inflation picture, according to a U.S. Department of Labor report Friday. The producer price index, a measure of prices received by producers of domestic goods and services, rose 0.3% for the month, the biggest move since August. Economists surveyed by Dow Jones had been looking for an increase of just 0.1%. PPI fell 0.2% in December.
Excluding food and energy, core PPI increased 0.5%, also against expectations for a 0.1% gain. PPI excluding food, energy and trade services jumped 0.6%, its biggest one-month advance since January 2023. A 0.6% increase in final demand service helped propel the wholesale index higher, which in itself was boosted by a 2.2% rise in hospital outpatient care. Goods prices actually decreased 0.2% on the back of a 1.7% decline in final demand energy as gasoline slid 3.6%. On a 12-month basis, headline PPI increased just 0.9%, slightly lower than the 1% level in December. However, excluding food, energy and trade services, the index rose 2.6%.
Germany in Now World’s Third Largest Economy as Japan Slips Into Recession
Japan has lost its spot as the world’s third-largest economy to Germany, as the Asian giant unexpectedly slipped into recession. Once the second-largest economy in the world, Japan reported two consecutive quarters of contraction on Thursday — falling 0.4% on an annualized basis in the fourth quarter after a revised 3.3% contraction in the third quarter. Fourth-quarter GDP sharply missed forecasts for 1.4% growth in a Reuters poll of economists.
For the whole of 2023, Japan’s nominal GDP grew 5.7% to come in at 591.48 trillion yen, or $4.2 trillion based on the average exchange rate that year, official data showed. Germany, on the other hand, saw its nominal GDP grow 6.3% to reach 4.12 trillion euros, or $4.46 trillion based on last year’s average exchange rate. Nominal GDP measures the value of output in current dollars, without adjusting for inflation.
GlobalFoundries Awarded $3.1 Billion in CHIPS Act Grants and Loans for Saratoga NY, Vermont Expansion
GlobalFoundries would receive $3.1 billion in federal grants and loans to expand its Upstate New York computer chip plant and modernize a factory in Vermont, according to a preliminary deal the White House plans to announce today. GlobalFoundries would receive $1.5 billion in grants and $1.6 billion in federal loans under a preliminary, non-binding agreement, according to the U.S. Commerce Department.
In return for the subsidies, GlobalFoundries said it would invest about $12.5 billion in the projects, most of which would be spent to expand the company’s Fab 8 in Malta, in Saratoga County. The GlobalFoundries expansion would create up to 1,500 manufacturing jobs and 9,000 construction jobs over the next 10 years, federal officials said. GlobalFoundries is one of only four companies in the world outside of China – and the only one in the United States – with the capacity to operate large-scale foundries that produce semiconductors used in both consumer and military applications. The Saratoga County plant produces chips considered vital to national security, supplying more than 200 customers including Lockheed Martin, the nation’s largest defense contractor.
Airbus and China Take Centerstage at the Singapore Airshow, Boeing Skips It
Boeing will not be bringing any commercial planes to the Singapore Airshow, shifting the spotlight for passenger jets to rival Airbus as well as China’s homegrown offering. It comes as Boeing reported a decline in aircraft orders and deliveries in January in the aftermath of a midflight blowout of a fuselage panel on one of its 737 Max 9s at the start of the year. While there will be aerial displays of commercial liners by Airbus and China’s domestic jetliner Comac C919, Boeing will not have any commercial aircraft at the air show.
To be clear, Boeing will still be showcasing its defense capabilities, and will be featuring many of its fighter jets, including the B-52 Stratofortress which will participate in the U.S. Air Force aerial display. While no commercial jets will be featured, Boeing will still be holding a cabin display of its wide-body 777X passenger plane, which the company claims is the world’s largest twin-engine jet. Deliveries for the aircraft, expected from 2025, have been plagued with delays. The Singapore Airshow — held from Feb. 20 to 25 — is typically attended by tens of thousands, including military delegations and aviation enthusiasts. Other aerospace and defense bellwethers including Lockheed Martin, Dassault, SAAB, Leonardo, Thales are among those participating at this year’s event.
Airbus Extends Lead Over Boeing Amid Archrival’s Stumbles
Airbus is rushing to fill the gap in commercial aircraft created by Boeing’s persistent supply chain problems. The European jet maker is projecting another year of growing deliveries after shattering the industry record last year, and its order backlog now spans more than a decade. Airbus is also on track to reach its highest-ever production rates in 2026, a sharp contrast with Boeing, which has pared production, refrained from giving financial guidance, and is warning customers of new delays amid troubles in its 737 MAX program.
At the end of January, Airbus’s unfilled order backlog had reached 8,599 aircraft, with Boeing’s at 5,599. The contrast has industry experts questioning whether the U.S. company can recover its competitive position even in the longer term. Airbus says its supply chain had been “a limiting factor” in recent years, but now it’s looking more like an advantage. Still, it’s far from plain sailing for Airbus, even as it surges ahead of its rival. As with Boeing, customers have complained about delays, while others have noted quality issues with some new deliveries.
Stellantis Delivered Record Financials Despite Getting Bitten By The UAW Strike
Despite the hit made by the six weeks-long UAW strike, Stellantis N.V. reported otherwise strong earnings for the full year. But the global auto giant reported a profit drop during the second half of 2023 due to halted production. Stellantis CEO Carlos Tavares admitted that aside from the UAW industrial action, Stellantis’ U.S. performance was not stellar, despite 2023 being the third consecutive year of record results since the company was formed by a merger of Fiat Chrysler and PSA Groupe at the beginning of 2021. Stellantis was the only major automaker to report a decline in U.S. sales last year.
For the full year, Stellantis reported net revenue rose 6% YoY to 189.5 billion euros with a 7% rise in consolidated shipment volume. Adjusted operating income for the year rose 1% to 24.3 billion euros, and industrial free cash flow grew 19% to 12.9 billion euros. The financial results prove that three years after its inception, the world’s third-largest automaker by revenues deserved its place among global leaders in the automotive industry. Stellantis reiterated it plans to commit at least 30 billion euros to EVs and supporting technologies through 2025. This year, Stellantis plans to launch 18 new EVs in 2024, including eight in the U.S.
Federal Agencies Promise More of the Same Policies in 2024
Before the end of last year, federal agencies were required by law to publish their regulatory and policy agendas for 2024, and those agendas reinforce the fact that they will continue pursuing much the same course they have since the outset of the Biden administration in 2021. A common thread woven through all of the federal agencies’ agendas is their commitment to the promotion of unionization of the nation’s workforce, which includes the various agencies and commissions working together to advance that cause.
In DOL’s 2024 agenda (released in December 2023), its goals were stated plainly: “To create and sustain good jobs, the department has focused rulemaking on worker health and safety, fair wages, and supporting unions and workers who are organizing unions.” DOL also says it is advancing equity and supporting marginalized communities by creating rules that protect workers who are so defined from discrimination. As part of the administration-wide pro-unionization campaign, DOL pledged to work closely with other federal agencies to deal with the controversial joint employer issue. DOL can also be expected to support the National Labor Relations Board's (NLRB) recent actions.