Member Briefing February 6, 2024
OECD Raises Global Growth Outlook on US Strength
The global economy is on course to hold up better this year than expected only a few months ago as an improved outlook in the United States offsets euro zone weakness, the OECD said on Monday. World economic growth is expected to ease from 3.1% in 2023 to 2.9% this year, better than the 2.7% expected in November in the Organisation for Economic Cooperation and Development's last outlook. The Paris-based OECD left its 2025 global estimate unchanged at 3.0%.
- The U.S. economy was expected to grow 2.1% in 2024 and 1.7% in 2025 as lower inflation and boosted wage growth triggers interest rate cuts, the OECD said, raising its 2024 forecast from 1.5% previously and leaving 2025 unchanged.
- As China contends with real estate market wobbles and weak consumer confidence, its growth was seen slowing from 5.2% in 2023 to 4.7% in 2024 and to 4.2% in 2025, all unchanged from November forecasts.
- With a slowdown in Germany weighing on the broader euro area, the shared currency bloc's outlook had worsened since November, with its economy now expected pick up from 0.5% last year to only to 0.6% this year, down from 0.9% previously. In 2025, it was seen growing 1.3%, revised down from 1.5%.
ISM Services PMI Gains More Than Expected in January, Prices Paid Jump
The U.S. services sector growth picked up in January as new orders increased and employment rebounded, but suppliers appeared to fall behind, resulting in a measure of input prices rising to an 11-month high. The report added to January's blowout employment gains in suggesting that economic growth momentum from the fourth quarter spilled over into the new year. It also further diminished the chances of an interest rate cut in March.
- A measure of new orders received by services businesses rose to 55.0 last month from 52.8 in December. There was a jump in export order growth.
- The measure of supplier deliveries rebounded to 52.4 from 49.5 in December. A reading above 50 indicates slower deliveries.
- The measure of services sector employment bounced back to a reading of 50.5 after plunging to 43.8 in December.
- A measure of prices paid for inputs by businesses increased to 64.0, the highest reading since last February, from 56.7 in December. Though services prices remain high, overall inflation is cooling, with the personal consumption expenditures price index excluding food and energy rising at a 2% annualized in the fourth quarter, bang on the Fed's 2% target.
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- 800 Western Officials Anonymously Protest Over Israel Gaza Policy - BBC
- Israeli Strikes Raise Gaza Death Toll as Blinken Heads to Mideast – France 24
- 2-State Solution Remains Key to Ending Israel-Hamas War, Sullivan says – Politico
- Hamas Demands Release of High-Profile Terrorists- BNN
- Spain Pledges More UNRWA Funds as Top EU Diplomat Warns Against Cuts – France 24
- Many Israelis Want Netanyahu Out. But There Is No Simple Path to Do It - NYT
- 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
- Zelenskiy Says He Might Replace Several Ukraine Officials, Not Just Military – Reuters
- Netherlands Pledges Six Extra F-16 Fighter Jets to Ukraine - Politico
- Russia Holds 3 Over Alleged Plot To Kill Crimean Official – Barron’s
- Losing 54 Vehicles, Russia Just Had One of Its Worst Days of the War - Forbes
- The Owners of Russia’s Tech Pioneer Yandex are Selling — at a Big, Kremlin-Required Discount - AP
- Anti-War Putin Challenger Faces Disqualification from Russian Election Race – 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
- Senegal Grapples with Protests as Parliament Contemplates Debate on Extending President’s Mandate - BNN
- US Strikes Houthi Missiles a Day After Yemen Air Raids – France 24
- U.S. Steps Up Offensive Against Iranian Proxies – The Dispatch
- Iran Says US-British Strikes in Yemen Are ‘fueling Chaos and Disorder’ in Mideast – Politico
- US Declines to Rule Out Hitting Targets in Iran, Jake Sullivan Says - AP
- China Bets on Open-Source Chips as US Export Controls Mount - Reuters
- Samsung’s Leader Acquitted in Stock and Accounting Fraud Case - NYT
- El Salvador's Nayib Bukele Wins Re-Election - AP
- A Mounting Crisis of Confidence Confronts Olaf Scholz – The Economist
- Red Sea Chaos Leaves Egypt to Grapple With Dwindling Suez Canal Revenue - Bloomberg
- Hungary’s Ruling Party Balks at Swedish NATO Vote – Politico
Policy and Politics
Border Deal Meets Immediate Blowback. Here is How It Would Work.
The long-awaited bipartisan border agreement met swift opposition from hard-line conservatives and allies of former President Trump within hours of negotiators unveiling the 370-page package. The bill’s central aim is to end widespread use of a practice known as “catch and release,” in which migrants claiming asylum are released into the U.S. with immigration court dates years into the future.
It contains new measures that make it tougher to qualify for asylum, limit how many people can make asylum claims a day and detain or track migrants as they move through the process. In addition, it makes several minor changes to the legal immigration system, including ones to help children of work-visa holders avoid deportation when they become adults. Here’s an explanation of what the bill would do if enacted.
New York Democrats Want to Ban CO2 Fracking in State Budget
State lawmakers on Friday introduced new legislation to expand the state's ban of the controversial drilling process to extract natural gas to include a newer practice that uses carbon dioxide to extract methane and circumvents the current policy. Fracking was first prohibited in the state a decade ago, and permanently banned in the 2021 state budget. Top Democrats in the Legislature want to expand the law to bar the use of CO2 as a medium to frack natural gas in New York.
Texas-based company Southern Tier CO2 to Clean Energy Solutions has its sights set on drilling from the reserves of natural gas in upstate's Marcellus and Utica shales — using carbon dioxide instead of water. "This is hydrofracking called by a different name," said bill sponsor Sen. Lea Webb, a lifelong Southern Tier resident. The legislation would make it illegal to push methane out of shale using high-pressure liquified carbon dioxide.
Read more at NY State of Politics
Hochul Announces Launch of Tuition Assistance Program for Non-Degree SUNY, CUNY programs
Governor Kathy Hochul announced the launch of the first-ever Tuition Assistance Program eligibility to cover hundreds of SUNY and CUNY non-degree programs that lead to jobs in high-demand and growing fields. Beginning in the Spring 2024 semester, non-degree-seeking students in 283 programs across 32 SUNY campuses may be eligible for the Tuition Assistance Program for the first time.
If students later matriculate toward a degree program, they will be granted full credit for the work they completed as part of the program. “Tuition assistance for workforce development opportunities will help ease a path to rewarding and successful careers for low- and middle-income families,” Governor Hochul said in a news release.
Health and Wellness
World Health Organization Forecasts 75% Increase in Global Cancer Cases by 2050
The World Health Organization (WHO) has projected that global cancer cases will surge by more than 75% by the year 2050, according to a recent report. This alarming forecast coincides with the observance of World Cancer Day, a global event dedicated to raising awareness about cancer and advocating for its prevention, detection, and treatment. Lung cancer, driven by tobacco use and air pollution, is predicted to remain the most common variant among men, while breast cancer is expected to continue as the leading cancer type in women. Lifestyle changes, such as increased consumption of tobacco and alcohol, along with rising obesity rates, are also contributing to a rise in colorectal cancer diagnoses.
The report’s technical lead for control, Andre Ilbawi, provided insights, highlighting factors such as aging populations, lifestyle changes, environmental factors, and the possible spread of certain infectious agents known to cause cancer. Air pollution, particularly in developing countries, is a significant contributor, linked not only to physical health deterioration but also to mental health issues. Tobacco and alcohol use, obesity, poor air quality, and changes in exposure to risk factors are primary drivers of the projected surge.
Election 2024
Nikki Haley Raised $16.5 Million in January – Axios
Why Taylor Swift is Making Headlines Amid Donald Trump vs Joe Biden Battle – Mint
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
U.S. Auto Sales Softened in January
U.S. new vehicles sales softened in January, the Commerce Department said last week. January sales of lightweight trucks and autos fell 6.8% to 15.0 million annual rate. That followed a revised 6.8% gain to a 16.1-million-unit rate in December. The drop was larger than expected. Economists surveyed by Econoday expected a slight slowdown to a 15.7 million rate in January. A separate measure by Autodata Corp. estimated that auto and truck sales fell 6.6% to a 15.1 million rate in January.
Lydia Boussour, senior economist at EY, said that cold weather in January might have been a factor in the surprise decline. She said she didn’t think the slowdown would persist. Will Compernolle, economist at FHN Financial, said the January level was at the lower end of monthly sales over the past year, which have been in a range of 14.8 million units to 15.9 million. “I wouldn’t take it as a red flag that consumer spending has necessarily reached a meaningful inflation point just yet,” Compernolle said.
January Was One of the Largest Months for Layoffs in Almost 15 Years
January was one of the largest months for layoffs in almost 15 years, a new report by Challenger, Gray & Christmas said Thursday, as more than 82,000 people, largely in the technology and financial services sectors, were let go from their jobs. A total of 82,307 people were laid off from U.S.-based employers last month, the report says, with companies citing restructuring, closing, market conditions and cost-cutting as the largest reasons for dramatic staffing changes.
With the exception of January 2023, when 102,943 job cuts were announced, last month saw the highest number of layoffs since January 2009, when 241,749 people lost their jobs. Financial companies announced the most cuts in January (23,238), followed by the technology sector (15,806), food production industry (6,656) and retail sector (5,364). Despite the layoffs, the unemployment rate remains low—well below levels at the start of the pandemic in 2020 or the financial crisis 15 years ago.
Siemens to Integrate Generative AI Into Predictive Maintenance Solution
Siemens is releasing a new generative artificial intelligence (AI) functionality into its Senseye predictive maintenance solution to make predictive maintenance more conversational and intuitive. The new functionality is designed to make human-machine interactions and predictive maintenance faster and more efficient, helping Senseye customers bring out existing knowledge from their machines and systems and select the right course of action to help boost efficiency of maintenance workers.
One of Senseye’s customers who will leverage the new generative AI capability is BlueScope, an Australian steel manufacturer. "The innovative generative AI functionality from Siemens will help to accelerate our efforts to scale knowledge sharing across our global teams and will continue to support our ambitious digital transformation strategy,” said Colin Robertson, Digital Transformation Manager, BlueScope.
Boeing Finds New Problem With 737 MAX Fuselages
Boeing is reworking 50 undelivered 737 MAX jets after a supplier’s employee recently found misdrilled holes on some fuselages, a new production snafu for the aircraft manufacturer. Spirit AeroSystems, which has been at the center of quality issues affecting 737s, supplied the fuselages. Boeing said that the issue could delay some deliveries in the near term and that existing 737s can keep flying. Boeing said it is finalizing instructions for the rework and expects to know how long it will take in coming days.
A Spirit spokesman said the company is aware of the issue and is in close communication with Boeing. Last year, misdrilled holes by Spirit on the aft bulkhead of some MAX jets led to production delays. Variances such as the one flagged by Spirit aren’t unheard of. By taking a harder look at its production processes, Boeing might turn up more flaws. Boeing executives have pledged to review manufacturing practices and root out defects.
Rare Earths Prices Seen Rebounding in Second Half of 2024
Rare earth prices have likely bottomed out and are poised to rise later this year on demand from electric vehicles (EVs) and wind power and as dominant producer China is expected to pull back on expanding output quotas, analysts said. Rare earths are a group of 17 elements used in products from lasers and military equipment to magnets found in EVs and consumer electronics.
Prices surged to their highest in a decade in 2022 only to plunge last year on increased production in China and slower-than-expected demand growth crippled by the country's patchy post-pandemic economic recovery. Last year, China issued a third batch of rare earth output quotas, the first time it issued a third set of quotas in a year since 2006, with the total quota for the year at a record high of 255,000 tons, up 21.4% from a year earlier. However, China's quotas are expected to increase at a slower rate this year, at between 10% to 15%.
AIA Calls for Senate Action on R&D Tax Reform
The Aerospace Industries Association and small and medium-sized enterprises have urgently requested that Congress pass The Tax Relief for American Families and Workers Act, highlighting a key provision allowing immediate expensing of research and development costs instead of spreading them over five years. They argue that the requirement to amortize R&D expenses over five years has hindered investment capabilities and led to significant layoffs.
"For these reasons, we fully support The Tax Relief for American Families and Workers Act, particularly the restoration of full-year expensing for R&D expenditures, and request that you bring this legislation to the floor for a vote as soon as possible," the letter states.
Hyundai Touts Early Success with Amazon Retail Program
Just one month into the pilot program Hyundai made its first vehicle delivery to an Amazon employee in Seattle, the company told dealers last week. Amazon and Hyundai made big headlines last year when they announced a new partnership in which, starting in 2024, Hyundai auto dealers will be able to sell Hyundai vehicles through Amazon’s U.S. e-commerce platform. Hyundai, the South Korean automaker, is known for value and reliability. It is famous for its 10-Year/100,000 Mile powertrain limited warranty.
The keys to success are pricing transparency and paperwork. If Amazon can make a dent in either one of these two friction points, consumers will come. They most certainly will come. Pricing transparency is already one of Amazon points of differentiation as is one-click buying. Should either of these concepts ultimately be grafted onto the auto buying process in some new fangled way, look out.
Read more at Forbes
Visit the Amazon/Hyundai Showroom
World Defense Show kicks off in 2nd Edition in Saudi Arabia
Russia’s invasion of Ukraine, and rising tension in the Indo-Pacific caused by China’s growing military might, have boosted demand for weapons. The second biannual World Defe nce Show takes place this week in Riyadh. More than 750 defense companies will be exhibiting their wares to over 100,000 trade visitors and around 115 national delegations. In 2022 contracts worth a total of $8bn were inked during the show. The theme of this year’s exhibition is investing in new technologies. Such investment will almost certainly push deal-making beyond the level of 2022.
According to SIPRI, a think-tank that monitors the arms trade, global military expenditure rose by 3.7% in real terms in 2022, to reach a record high of $2.2trn. Military expenditure in Europe rose by 13% in that year—the largest annual increase in the post-cold-war era. Defense businesses can count on bulging order books for years to come.
New York Beats Out Dallas For FIFA World Cup 2026 Final
New York will host the final match of the 2026 World Cup Final, FIFA announced Sunday, as soccer fans await the tournament’s U.S. return more than two years from now. The opening match of the tournament will be June 11, 2026, in Mexico City, Canada’s first match will be played on June 12, 2026, in Toronto, and the United States’ first match will be played June 12, 2026, in Los Angeles. The bronze medal final will take place in Miami, and the semi-final games will take place in Atlanta and Dallas.
While the entire tournament will take place in 16 locations across the U.S., Canada and Mexico, the quarterfinal games will take place in Kansas City, Missouri; Boston, Los Angeles and Miami. Dallas will host nine matches, the largest number of games of any of the 16 cities. AT&T and MetLife are among the handful of stadiums that will have to replace artificial turf with grass ahead of the soccer matches. Some stadiums will also have to change the size of their field to match FIFA’s 75-by-115 yard field requirement for World Cup games.