Member Briefing January 10, 2024
NAM Survey: Manufacturers’ Outlook Still Dim
The National Association of Manufacturers Q4 2023 Manufacturers’ Outlook Survey shows that small companies with fewer than 50 employees and medium-sized firms with between 50 and 499 employees, which make up a vast majority of the sector, continued to have historically lower levels of optimism with 65.9% and 63.0% positivity rates in Q4, respectively. The NAM conducted the survey from November 14 to December 1, 2023.
Among the Key Findings:
89% of respondents said higher tax burdens on manufacturing activities would make it more difficult to expand their workforce, invest in new equipment or expand facilities.
Workforce challenges also continue to dominate the sector, with more than 71% of manufacturers citing the inability to attract and retain employees as their top primary challenge.
A weaker domestic economy and sales for manufactured products (63.7%), an unfavorable business climate (61.1%) and rising health care and insurance costs (59.8%) are also impacting manufacturing optimism.
U.S. Trade Deficit Continues Narrowing Trend
International trade flows were weak in November, but a larger drop in imports caused a modest narrowing in the U.S. trade deficit. Exports and imports both slipped by nearly 2% during the month, but the dollar decline was larger in terms of imports (-$6.1 billion) than exports (-$4.8 billion). This outturn caused the trade deficit to narrow modestly to -$63.2 from a downwardly revised -$64.5 previously. Most of the November weakness can be traced to goods specifically. Goods exports slid $5.4 billion (or by 3.2%) amid a large drop in industrial supplies and materials, which accounted for nearly 70% of the total decline in goods exports.
Exports were weak elsewhere as well, with capital goods the only major end-use category to post growth, and modestly so, as exports here rose by just $49 million. Import weakness, on the other hand, was due to a $4.1 billion drop in consumer goods specifically, responsible for about 70% of the drop in overall imports. Industrial supplies and materials and capital goods imports were also fairly weak in November. After adjusting for inflation, the decline in goods was slightly less bad in terms of exports.
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- Conflict Between Israel, Lebanon Continues to Escalate - AP
- Israeli Strike on Car Kills Journalists in South Gaza – USA Today
- Netanyahu’s Coalition Bickers Over Gaza – Politico
- U.N. Experts Condemn 'Extrajudicial' Killing of Hamas Figure in Lebanon – Reuters
- Hamas Took More Than 200 Hostages From Israel. Here’s What We Know. - WSJ
- Blinken Brings Arab Message to Israel: Keep Hope of Palestinian State Alive - Reuters
- 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
- A Heavy Wave of Russian Missile Attacks Pounds Areas Across Ukraine - AP
- Russia Says it's Detained U.S. Citizen Robert Woodland on Drug Charges - CBS
- Ukraine Wants More Western Air Defenses ‘Right Now’ - Politico
- Russia Claims ‘Strategic Initiative’ in War - CNBC
- Germany’s Scholz Badgers EU Countries to Boost Military Aid for Ukraine – Politico
- North Korea's Kim Jong Un Believed to Have Turned 40 - BBC
- 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
- Eurozone Inflation Rose 2.9%, Less Than Expected, Keeping Rate-Cut Talk on Track -- Update
- Taiwan Presidential Election Scenario Analysis – Wells Fargo
- Macron Appoints Youngest Prime Minister in France’s Modern History - WSJ
- ‘It’s a Scary Time’ as World Shatters Temperature Record – Reuters
- Finland Counters Russian Border Gambits in the High North – Politico
- Who is Lai Ching-te, the leader in Taiwan’s presidential race? – The Economist
- How Attacks in the Red Sea Could Increase Costs of Items from Clothing to Coffee - Time
- Nord Stream Probe Hampered by Resistance From Poland - WSJ
Policy and Politics
Biden Renominates Julie Su for Labor Secretary After Senate Declined to Confirm Her for Ten Months
President Joe Biden renominated Su for the role Monday, after she languished in the Senate after her initial nomination for nearly 10 months without a vote on the floor. Su still faces significant hurdles on her path to confirmation, as Sen. Joe Manchin (D-W. Va.) has said he would oppose her nomination and the White House indicated that Independent Kyrsten Sinema may also vote against Su.
Su has been serving as head of the US Labor Department in an “acting” capacity since her predecessor, Marty Walsh, left the administration. During that time the agency has tackled major rulemakings to address employee classification, increase overtime pay benefits, and overhaul the apprenticeship system. Su’s status has drawn the ire of business groups and Republican lawmakers who say Biden is circumventing the “Advice and Consent” clause of the US Constitution. In the time since the Senate sent Su’s nomination back to the White House at the end of 2023 session, critics have called on the administration to take the opportunity to nominate someone else.
Hochul Says State of the State Is Concerning, but Fixable
Gov. Kathy Hochul delivered her third State of the State address Tuesday afternoon, focusing on moderate housing proposals in New York and making the state a safer and more affordable place to live by addressing serious mental health issues — especially in young people. Hochul’s speech, delivered in the state Assembly chamber in Albany, reviews large concepts outlining the governor’s priorities for the 2024 legislative session, but lacks details. More details are expected when the governor releases her executive budget in one week on Jan. 16.
All eyes are on Gov. Hochul and state leaders to address affordable housing after the Legislature could not agree on anti-eviction provisions like Good Cause and tax incentives to reach a deal last year. Hochul said she will address migrant spending in next week's budget address. Sources in the Budget Division say decisions about migrant spending are not yet finalized. There's also a $4.3 billion budget deficit the Legislature has to close. "We cannot spend money we don't have," Hochul said. "Inflation didn't just hit families it hit state government operations as well."
Read more at NY State of Politics
See the State of the State Book
Austin’s Undisclosed Surgery Was for Prostate Cancer, Pentagon Says
Defense Secretary Lloyd Austin underwent surgery to combat prostate cancer, in an initial Dec. 22 hospital visit he kept secret from the White House, the Pentagon revealed Tuesday. The cancer was detected during a routinely recommended health screening Austin had in early December, according to a statement from doctors John Maddox and Gregory Chesnut at Walter Reed National Military Medical Center in Washington, D.C.
Austin was admitted to the medical center and “underwent a minimally invasive surgical procedure called a prostatectomy to treat and cure prostate cancer,” during which he was under general anesthesia. The doctors said he recovered uneventfully from his surgery and returned home the next morning, with his prognosis excellent as the cancer was detected early. But Austin was again admitted to Walter Reed on Jan. 1 — a visit he also kept secret for days — due to complications from the earlier procedure, “including nausea with severe abdominal, hip, and leg pain,” which doctors found was caused by a urinary tract infection.
Health and Wellness
New, Highly Mutated COVID Variants ‘Pirola’ BA.2.86 and JN.1 May Cause More Severe Disease, New Studies Suggest
Highly mutated COVID variant BA.2.86—close ancestor of globally dominant “Pirola” JN.1—may lead to more severe disease than other Omicron variants, according to two new studies published Monday in the journal Cell. In one study, researchers from Ohio State University performed a variety of experiments using a BA.2.86 pseudovirus—a lab-created version that isn’t infectious. They found that BA.2.86 can fuse to human cells more efficiently and infect cells that line the lower lung—traits that may make it more similar to initial, pre-Omicron strains that were more deadly.
In the other study, researchers in Germany and France came to the same conclusion. “BA.2.86 has regained a trait characteristic of early SARS-CoV-2 lineages: robust lung cell entry,” the authors wrote. The variant “might constitute an elevated health threat as compared to previous Omicron sublineages,” they added.
Employees Reveal 10 Simple Things That Boost Mental Health at Work
Kind gestures are the cornerstone of any healthy working environment – and now employees have revealed which small acts of kindness they appreciate most. A new study of 2,000 employees found that a manager saying ‘thank you’ is the best way to boost mental health in the office, followed by a customer or client saying ‘thank you’, and getting a ‘pat of the back’ for a job well done.
The survey, which was commissioned by British Gas, found that a colleague helping you when they are busy themselves is always appreciated, as is being able to finish early due to family commitments, and even just someone offering to make you a cup of tea or coffee. Celebrating your birthday with a cake or card was another well-received gesture, as is being included on team activities, your workplace offering free lunches or breakfasts, and someone offering to help pick up a job for you.
Election 2024
- The Changing Congressional Map is Shifting the Fight for Control of the House – Politico
- Rep. Pat Ryan Faces Relentless Pro-Ceasefire Protests – City & State
- Molinaro’s 2023 Progress Report – Binghamton Homepage
- Haley looks to defy expectations in Iowa – The Hill
- US Presidential Race: What Are the Key Dates? - Reuters
- 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. Small Business Outlook Improves Marginally, NFIB Index Shows
The National Federation of Independent Business said Tuesday that its small-business optimism index rose to 91.9 in December from 90.6 in November, better than expectations for a slight rise to 90.8 according to economists polled by The Wall Street Journal ahead of the release. It marks the 24th straight month, or two-straight years, when the index was below the 50-year average of 98, NFIB said. Despite the mild improvement, small-business owners remain pessimistic about economic prospects this year.
A net of 23% of owners reported that inflation was their single most important problem in operating their business, up one point from November and overtaking labor quality as the top problem. Meanwhile, the index of small business owners expecting better business conditions over the next six months improved six points in December, albeit to a still-net negative 36%, NFIB said.
‘Derisking’ China-Reliant Supply Chains Is Creating New Risks
New research is shedding light on how “derisking” is actually playing out. The preliminary conclusions are concerning: Much of the resiliency that supply-chain measures are designed to create may be illusory. Moreover, more-complicated global supply chains are creating new risks, which policymakers might not fully appreciate. Pairing protectionist policies toward China with genuine trade opening toward friendlier nations would enhance their effectiveness, but may not be politically expedient.
Asian supply chains often appear to simply be lengthening: assembling Chinese parts in Vietnam or Thailand, for example, rather than in China itself. One striking finding of an October paper from researchers at the Bank for International Settlements was that cross-border supplier networks—especially those involving China and the U.S.—have lengthened since 2021 but not become more “dense.” In other words, the average number of suppliers per customer hasn’t increased. More circuitous supply chains with the same number of suppliers smacks of increased complexity and reduced transparency—but not necessarily more resilience.
Pentagon Issues $1B More in F-35 Funds
The U.S. Dept. of Defense approved $1.15 billion for Lockheed Martin Corp. in a new round of funding for the F-35 Lightning II Joint Strike Fighter program – in the amount of $1.15 billion – to Lockheed Martin Corp. The award is a “cost-plus-incentive-fee, fixed-price-incentive-fee” modification to an earlier contract with Lockheed, and all the financing will be supplied on individual orders as they are issued.
The F-35 is a single-engine aircraft built by Lockheed and used for ground attack and combat missions by the U.S. Air Force, U.S. Marine Corps, U.S. Navy, and more than a dozen allied defense forces. While nearly 1,000 of the aircraft have been built to date, production rates are due to rise as more of the aircraft are deployed. The new funding covers the costs for site activation (including training) and hardware requirements for F-35 aircraft sustainment and maintenance for all program participants. The Pentagon is expanding the network of F-35 service and repair depots even as it implements an across-the-board upgrade of the F-35 weapons systems that will require extensive updates to the current F-35 fleet.
Read more at American Machinist
Alphabet’s Isomorphic Labs to Collaborate with Novartis, Lilly on AI-driven Drug Discovery
Isomorphic Labs, a subsidiary of Alphabet Inc., said it entered into strategic research collaboration agreements with Novartis AG and Eli Lilly & Co. Under the terms of the partnership with Lilly, Isomorphic Labs will receive an upfront cash payment of $45 million to collaborate on research into small molecule therapeutics against multiple targets, the company said in a statement. It is also eligible to receive as much as $1.7 billion in performance-based milestone payments, excluding the upfront payment and any subsequent tiered royalties of up to low double digits on net sales.
“This collaboration harnesses our companies’ unique strengths, from AI and data science to medicinal chemistry and deep disease area expertise, to realize new possibilities in AI-driven drug discovery,” said Fiona Marshall, president of biomedical research at Novartis.
PepsiCo, Carrefour Bicker Over Who Dumped Whom
A breakup over grocery prices got messier Monday when PepsiCo said that it, not supermarket chain Carrefour, initiated the split. PepsiCo said that it had decided to stop supplying the chain’s European stores because the two sides hadn’t reached an agreement on a new contract. PepsiCo and Carrefour have been in negotiations for several months on new price listings as the French government has pressured suppliers to come to agreements with retailers on lower prices. Food-price inflation in France surged into double digits in 2022 and reached nearly 16% in March 2023.
The impasse spilled into public view Thursday when Carrefour said it would stop selling Pepsi, Lay’s, Doritos, Cheetos, Quaker Oats and other PepsiCo products in France, Italy, Spain and Belgium. Carrefour posted notes on store shelves saying it would no longer carry the brands because of unacceptable price increases. Carrefour stores in those four countries represent about 0.25% of PepsiCo’s global revenue, according to Bernstein analyst Callum Elliott.
United Airlines Found Loose Bolts, Other Issues on a Key Part of Grounded Boeing 737 Max 9 Jetliners
United Airlines said it found loose bolts and other “installation issues” on a part of some Boeing 737 Max 9 jets that were inspected after a mid-flight fuselage blowout on a similar Alaska Airlines jet Friday. The inspections are focused on plugs used to seal an area set aside for extra emergency doors that are not required on United and Alaska Max 9s. That plug is the part that blew off the Alaska plane as it cruised 16,000 feet (4,900 meters) over Oregon.
“Since we began preliminary inspections on Saturday, we have found instances that appear to relate to installation issues in the door plug – for example, bolts that needed additional tightening,” Chicago-based United said. The plugs replace doors that aren’t used on Alaska and United Max 9s, and are also common on passenger jets that are converted to cargo planes. On Monday, the FAA approved guidelines for inspecting the door plugs on other Max 9 jets and repairing them, if necessary. That move could speed the return to service of the 171 planes that the FAA grounded.
IRS Announces Improvements and that 2024 Tax Filing Season Will Open On January 29
The IRS will begin accepting paper and electronic tax returns that day. The agency expects more than 128.7 million individual tax returns to be filed by Apr. 15, 2024, by the tax deadline. Many software companies and tax professionals will accept tax returns before opening day. That doesn't mean that your tax return will be filed early. Those software companies and tax professionals will submit returns when IRS systems open.
"As our transformation efforts take hold, taxpayers will continue to see marked improvement in IRS operations in the upcoming filing season," said IRS Commissioner Danny Werfel. This year, those new and expanded tools and resources will include expanded in-person service that meets taxpayers where they are by opening or reopening Taxpayer Assistance Centers (TACs). The IRS will also offer extended hours at many TACs nationwide. Increased help is also available on the toll-free line, and an expanded customer call-back feature is designed to significantly reduce wait times.
China Becomes the World’s Biggest Auto Exporter—With Help From Russia
China’s overseas auto sales surged to a record last year, on track to surpass Japan as the world’s biggest car exporter and marking a tectonic shift for the global industry. While China has become acknowledged as a world leader in electric vehicles, traditional gas-powered autos were the main driver of the increase, with demand surging especially in Russia. Chinese carmakers seized the void left in the country by the departure of Western carmakers following the war in Ukraine, selling at least five times as many vehicles there last year than the 160,000 it sold in 2022, according to the China Passenger Car Association.
The association on Tuesday estimated 5.26 million made-in-China vehicles were sold overseas last year and said that would likely be almost a million more than exports of made-in-Japan cars. Exporting gas-powered cars to markets such as Russia and Mexico, where demand remains resilient for such vehicles, has helped automakers that have been slow to ride the electric wave in China and are grappling with excess output at their factories there.
Honda Unveils Plans for New EV Lineup
Japanese automaker Honda Motor announced on Tuesday plans to launch a new electric vehicle series from 2026, as it plays catch-up with global rivals in the shift to battery powered cars. Japan's second-biggest car maker has been slow to step up EV sales, lagging behind European and U.S. competitors such as General Motors and Volkswagen, while facing a challenge from newer rivals such as China's BYD.
Honda unveiled its "Honda 0 Series" and two concept models at the CES trade show in Las Vegas that it hopes will help it reach its goal of having battery-powered and fuel-cell vehicles make up all of its new car sales by 2040. The automaker aims to roll out the first models of its new series by 2026, Honda executives told a December media briefing in Tokyo ahead of the announcement. The series will be launched globally, starting from the North American market.
Fuel Leak on Astrobotic's Moon Lander Leaves 'No Chance' of Soft Landing
The U.S. may have to wait a little longer before a lunar lander can safely touch down on the surface of the moon for the first time in five decades. The Peregrine spacecraft designed and operated by Pittsburgh aerospace company Astrobotic hitched a ride Monday morning aboard the United Launch Alliance's new Vulcan rocket. The lift-off from Cape Canaveral, Florida was flawless as the lander succeeded in separating from the rocket.
But shortly after Peregrine began powering its way on toward the moon, it encountered a problem with its propulsion system. Though Astrobotic controllers worked from the ground to salvage the mission, the lander began leaking a "critical" amount of propellant that almost certainly has since dashed any hopes of it landing on the moon, the company said. "At this time, the goal is to get Peregrine as close to the lunar distance as we can before it loses the ability to maintain its sun-pointing position and subsequently loses power."