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Member Briefing February 4, 2025

February 4, 2025

Posted By: Harold King in Daily Briefing,

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Manufacturing Expanded in January for 1st Time Since 2022

Buoyed by gains across various sub-components, the ISM Manufacturing Index broke above 50 for the first time since 2022. Prices, production, employment and new orders all rose in a long-awaited rebound for a sector that has felt the pain of higher interest rates more acutely than others. There was broad based strength in the ISM with four of the five components that make up the headline index higher at the start of the year. Specifically, new orders leaped three points to 55.1, which marks the fifth-consecutive monthly move higher suggesting more of a trend-step up rather than one-off bum. The measure of current production was also in expansion for the first time in nine months signaling stronger activity.

The one caveat in this report is that stronger activity comes with stronger price pressure. The prices paid index rose to 54.9, consistent with the broadest expansion in manufacturing input prices since May. Eleven industries reported paying higher prices for materials last month. Manufacturing hiring looks to have at least stabilized according to purchasing managers. The employment component rose 4.9 points, which was more than any other sub-component, to crest modestly above 50 in January. That said, the underlying details in terms of number of industries hiring was not overly positive.

Read more at Wells Fargo

Americans Optimistic On Key Economic Factors: Gallup

Americans are feeling optimistic that the stock market will rise and that the economy will grow, according to a Gallup poll taken in the weeks just before President Trump’s inauguration. Sixty-one percent of those polled predicted the stock market would rise in “the next six months,” with just 18 percent predicting a drop in the markets. The poll also found that 53 percent expect “economic growth” in the next six months, compared to 29 percent who think growth will fall.

A recent The New York Times and Ipsos poll found that 45 percent of respondents said Trump’s policies “will help the national economy,” while 39 percent said the opposite. The Gallup poll found that a rise in inflation was predicted by 52 percent when it comes to the next six months. A drop in inflation was predicted by 33 percent. The Gallup poll took place between Jan. 2 and 15 and featured 1,005 people, as well as a plus or minus 4 percentage points margin of sampling error.

Read more at The Hill

Construction Spending Strengthens in December

U.S. construction spending increased more than expected in December, boosted by single-family homebuilding, but high mortgage rates could curb further gains in new residential construction. The Commerce Department's Census Bureau said on Monday that construction rose 0.5% after an upwardly revised 0.2% increase in November. Construction spending increased 4.3% on a year-on-year basis in December. It advanced 6.5% in 2024.

Spending on private construction projects shot up 0.9%. Investment in residential construction rose 1.5%, with outlays on new single-family projects up 1.0%. New construction had been hampered in recent months by rising mortgage rates, which offset hopes among builders for less stringent regulations from President Donald Trump's administration. Outlays on multi-family housing units slipped 0.3% in December. Spending on home renovations increased. Investment in private non-residential structures like offices and factories edged up 0.1% in December. Spending on public construction projects dropped 0.5% in December. State and local government spending fell 0.5%, while outlays on federal government projects decreased 0.2%.

Read more at Yahoo Finance

Global Headlines

Middle East

Ukraine

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Policy and Politics

Trump Pauses Tariffs On Mexico And Canada, But Not China

U.S. President Donald Trump suspended his threat of steep tariffs on Mexico and Canada on Monday, agreeing to a 30-day pause in return for concessions on border and crime enforcement with the two neighboring countries. Both Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum said they had agreed to bolster border enforcement efforts in response to Trump's demand to crack down on immigration and drug smuggling. That would pause 25% tariffs due to take effect on Tuesday for 30 days.

Canada agreed to deploy new technology and personnel along its border with the United States and launch cooperative efforts to fight organized crime, fentanyl smuggling and money laundering. Mexico agreed to reinforce its northern border with 10,000 National Guard members to stem the flow of illegal migration and drugs. The United States also made a commitment to prevent trafficking of high-powered weapons to Mexico, Sheinbaum said.

No such deal has emerged for China, which faces across-the-board tariffs of 10% that were poised to begin at 12:01 a.m. ET on Tuesday (0501 GMT). A White House spokesperson said Trump would not be speaking with Chinese President Xi Jinping until later in the week.

Read more at Reuters

Siena Poll: Hochul’s Favorability, Approval & Re-Elect Ratings Remain Underwater

Governor Kathy Hochul has a negative 39-47% favorability rating and her job approval rating is 44-48%, both little changed from December, according to a Siena College poll of New York State registered voters released today. While 31% of voters say they would re-elect Hochul, 57% want ‘someone else,’ also little changed. President Donald Trump has a negative 41-56% favorability rating, up from 37-59% in December, with the 41% matching his highest ever favorable rating. His early job approval rating is 46-51%. Voters are split on whether Trump will usher in a ‘new golden age of America,’ with 48% saying it’s likely and 46% saying unlikely.

“The good news for the Governor is that 10 of her recent proposals are supported by voters, eight very strongly,” Greenberg said. “Four proposals have strong majority support from Democrats, Republicans and independents, and another four have majority support from all voters, and at least plurality support from Ds, Rs and Is. Providing free breakfast and lunch for all public school students and ensuring a police officer on all overnight subway trains for the next six months are both strongly supported across every demographic breakdown,” Greenberg said. “Also strongly supported – with majority support from every party – are increasing the child tax credit and requiring school districts to restrict smartphone usage by students during the school day.

Read More at Siena College Research Institute

Despite Historic Forgiveness Student Loan Debt Swelled Under Biden. Blame the Root Cause

Former President Joe Biden forgave more student debt than any other president. However, the country’s education debt tab still grew during his presidency. Outstanding federal student debt stood at roughly $1.64 trillion toward the end of 2024, according to U.S. Department of Education data analyzed by higher education expert Mark Kantrowitz. That compares with around $1.59 trillion at the start of 2021.

Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit that helps borrowers navigate the repayment of their debt, said it didn’t surprise her that the country’s loan balance still climbed. “We’re going to continue to see that until we solve the root cause of the student loan crisis,” Mayotte said. “And the root cause is the cost of higher education.” Before financial aid, the sticker price at some four-year colleges and universities — after factoring in tuition, fees, room and board, books, and other expenses — is now nearing $100,000 per year.

Read more at Reuters

Trump’s First 100 Days

Health and Wellness

Health Experts Advise How To Stay Healthy During “Quad-Demic”

The Centers for Disease Control and Prevention (CDC) is calling it a “Quad-demic” with the flu, COVID-19, RSV, and norovirus surging throughout the U.S. and here in the Hudson Valley. The highly contagious norovirus – popularly known as “the stomach flu”– is up significantly over previous years. Experts suggest it may have spiked in part due to a new strain of the virus. To keep you and your family healthy during this time, Jodi Galaydick, MD, epidemiologist for Garnet Health, recommends practicing good habits such as washing hands frequently, getting vaccinated, eating well and getting enough rest avoiding crowded spaces, cleaning and disinfecting regularly, and staying home when sick.

Due to norovirus’ highly contagious nature, use these extra precautions to prevent the virus from spreading: Wash hands thoroughly before eating or preparing food. Wash fruits and vegetables; cook seafood thoroughly. If you are sick, avoid food preparation. “This has been a tough winter for respiratory and gastrointestinal viruses,” added Dr. Jessie Moore, Sullivan County’s Public Health Director. “Even the strongest of immune systems have been put to the test this winter. It is crucial to take preventive measures to reduce the risk of infection and protect yourself, your family, and the community.”

Read more at Mid-Hudson News

Industry News

Tariffs Give U.S. Steelmakers a Green Light to Lift Prices

Steel prices started rising for some U.S. companies even before President Trump announced tariffs on Canada and Mexico. Executives said they are bracing for more to come. At Riverdale Mills, a Massachusetts-based manufacturer of wire fencing and welded mesh used in lobster and crab traps, Chief Executive James Knott said his domestic suppliers of steel wire rod notified him two weeks ago that they are raising prices.

Knott said he has been buying about 80% of Riverdale’s wire rod from Canada because shipping costs are lower to the East Coast than buying from mills in South Carolina, Texas and Illinois. Steel represents two-thirds of Riverdale’s production costs, and he said higher prices would put his company at a disadvantage versus foreign competitors. “We like to use U.S. steel, but if you can’t buy the steel at the right price, you can’t compete,” Knott said. “The U.S. has the highest-priced steel.”

Read more at The WSJ

G10 Central Banks Start the Year in a Dovish Overall Mood

It was a busy week for foreign central banks, with several institutions offering their first monetary policy assessment of 2025. The European Central Bank lowered its policy rate 25 bps to 2.75%, while repeating that inflation should converge to 2% by late this year and that growth remains weak. We expect 25 bps rate cuts in March, April, June and September, for a terminal policy rate of 1.75%. The Bank of Canada cut its policy rate 25 bps to 3.00%, but did not offer any future policy guidance amid tariff-related uncertainty. We would not interpret that as a hawkish signal, however, and indeed the central bank's modeling suggested higher tariffs would have a relatively rapid and substantial impact on economic growth, and a somewhat more gradual impact in boosting inflation. Our view remains for 25 bps rate cuts in March, April and June, which would see the policy rate reach a low of 2.25%.

Sweden's Riksbank cut its policy rate 25 bps to 2.25%, while its accompanying statement was mildly dovish in tone. We think an accumulation of benign inflation and subdued activity data will see the central bank deliver a final 25 bps rate cut by May. In Australia, the latest inflation figures slowed more than forecast and pointed to an easing in domestic price pressures. We now expect the Reserve Bank of Australia to start its easing cycle with a 25 bps rate cut in February, and look for a cumulative 100 bps of policy rate cuts this year, to a low of 3.35%.

Read more at Wells Fargo

Shortages 2025: Geopolitics, Severe Weather Fuel Uncertainty

While some tailwinds prompting shortages in 2024 may have been resolved, others will carry onto this year with additional twists. Supply chain managers may still have to deal with risks ranging from geopolitical and weather-related turmoil to more localized challenges. Heightened shortage risks come whenever a change impacts a high concentration of goods manufactured or produced in a very limited number of places, said Richie Daigle, supply chain evangelist at Tive, a shipment tracker technology company.

Here’s a look at the goods and topics that could be at the top of mind for procurement officers in 2025 including Geopolitical-driven shortages such as from tariffs, automotive parts, food such as eggs, coffee and cocoa and semiconductors.

Read more at Supply Chain Dive

Spirit Aero Shareholders Approve Boeing Takeover

Shareholders of Spirit AeroSystems have endorsed the pending acquisition of the firm by Boeing Co., an $8.3-billion deal announced in July 2024. "Our shareholder’s resounding approval today represents an important milestone in our carefully planned merger with Boeing," stated CFO Irene Esteves. "As we continue executing our transition plan, we remain focused on Spirit’s foundational principles of safety, compliance and quality.” Boeing’s purchase is on track to be completed by midyear. Spirit Aerosystems has been linked to multiple quality defects in Boeing aircraft over recent years, notably in the January 2024 incident which saw the sidedoor plug of a 737 MAX 9 jet blown open during a flight.

Spirit Aero’s customers include Airbus and other aircraft manufacturers, and the sale to Boeing includes a side deal that will transfer to Airbus operations in Kinston, N.C., and St. Nazaire, France, that manufacture fuselage sections of widebody A350 jets; and plants in Belfast, Northern Ireland and Casablanca, Morocco, that produce A220 wings and mid-fuselage sections; and an A220 pylon production line in Wichita, Kan.

Read More at American Machinist

Intel 2024 Revenue Dips Amid Corporate Overhaul

Intel’s annual revenue was down 2% year over year in 2024 to $53.1 billion, as the company pushes to cut costs and make its internal foundry profitable, according to a Jan. 30 earnings report. The chipmaker’s internal foundry business, which the company fully launched in Q1, lost $13 billion in 2024. Intel still hopes, however, for the foundry to break even by the end of 2027, interim co-CEO, EVP and CFO David Zinsner said on a Q4 earnings call.

The company is also still on the hunt for a new CEO, after former CEO Pat Gelsinger stepped down on Dec. 1 amid the company’s struggling performance. Zinsner and interim co-CEO and CEO of Intel products Michelle Johnston Holthaus said during the call the company had no updates on the executive search. Entering the new year, Intel is pushing to keep up with competitors like Taiwan Semiconductor Manufacturing Co. when it comes to building AI chips.

Read More at Manufacturing Dive

U.S. Banks Say Demand For Business Loans Rose In Q4 -Fed Survey

U.S. banks say demand for business loans strengthened in the fourth quarter, with the net share of banks reporting an increase turning positive for the first time in two years, a Federal Reserve survey on Monday showed. The net share of banks reporting stronger demand for commercial and industrial loans from large and medium-sized businesses rose to 9.4% in the fourth quarter of 2024, and from small firms to 3.4%.

At the same time, banks also tightened standards for those types of loans, according to the Fed's quarterly Senior Loan Officer Opinion Survey.

Read More at Automotive Dive

Manufacturing Towns Hit by the ‘China Shock’ Bounced Back. The Workers Didn’t.

The flood of Chinese imports that started hitting America a quarter-century ago radically altered the U.S. economy. It upended manufacturing communities, hurt workers and their families, and sowed a discontent with globalization that changed the nation’s politics and helped usher President Trump into his first term. New research offers an unprecedented look at exactly how the “China Shock” rippled through the U.S., hitting manufacturing communities in the Southeast and parts of the Midwest particularly hard. It shows a remarkable change that occurred in the years leading up to the pandemic: Many of the places that were hit came back. The people who got hit did not.

The economists found that, starting in the 2010s, most of the affected economies came roaring back. But the recoveries didn’t come about as the result of a manufacturing revival. Instead, they were driven by expansions in industries such as healthcare, education, retail and restaurants. What’s more, the manufacturing workers who had been hit by the China shock—largely U.S.-born white and Black men without any college education—didn’t participate in these recoveries. The new data show that while some of these workers lost their jobs and struggled to ever find work again, the bulk of them remained employed until retirement. But as they aged out of the manufacturing workforce, they weren’t replaced.

Read more at WSJ

Nearly Half Of Managers Predict Layoffs In 2025

Nearly half (45%) of U.S. managers said their company will likely lay off workers in 2025, according to a Jan. 15 report from ResumeTemplates.com. Managers cited several reasons for layoffs, including economic struggles, industry-specific challenges, automation and artificial intelligence, overstaffing and anticipated policies from the Trump administration. In a survey of 1,000 U.S. managers, 11% said their companies will definitely proceed with layoffs in 2025, while 34% said “probably.” Most said they expect modest impacts, with 28% planning to lay off fewer than 5% of their workforce and 44% projecting between 5% and 10%.

In addition, 31% of companies said they already have a hiring freeze in place, and 13% said they’ll likely implement one at some point in 2025. Beyond that, respondents said the most common cost-reduction strategy will be reductions to bonuses. The next most frequent prediction was reducing office space, followed by reductions to salaries and benefits. While a third of managers said salary reductions will apply across the board, another third said they’ll focus on low-performing employees, and the final third will make cuts in specific ways — only at the executive level or remote roles.

Read more at Automotive Dive

Member Briefing February 3, 2025February 3, 2025