Member Briefing January 17, 2024
Empire Manufacturing Survey – Activity “Dropped Sharply” in January
Manufacturing activity shrank significantly in New York State, according to the January survey. After falling twenty-four points last month, the general business conditions index shed another twenty-nine points, coming in at -43.7, its lowest level since May 2020.
- The new orders index fell thirty-eight points to -49.4, and the shipments index fell twenty-five points to -31.3, pointing to a large decline in orders and shipments.
- The unfilled orders index held steady at -24.2, a sign that unfilled orders continued to fall significantly.
- The inventories index came in at -7.4, suggesting that inventories shrank modestly, and the delivery times index remained below zero at -8.4, indicating shorter delivery times.
- The index for number of employees was little changed at -6.9, and the average workweek index came in at -6.1, pointing to a modest decrease in employment levels and hours worked.
- The prices paid index climbed seven points to 23.2, signaling a small pickup in input price increases, while the prices received index held steady at 9.5, a sign that selling price increases remained modest.
- The index for future business conditions climbing seven points to 18.8. The capital spending index increased ten points to 13.7, pointing to some improvement in investment plans.
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- Gaza Combat Resurges as Israeli Tanks Storm Back Into Areas They Left – Reuters
- Drone Video Shows Gaza Destruction After 100 Days of War - BBC
- Putin Says Ukraine's Statehood at Risk if Pattern of War Continues – Reuters
- Hundreds of White House Staff Members Walk Out in Protest of Biden’s Staunch Israel Support - Axios
- The Israel-Hamas War Has Already Triggered U.S. Military Action. Is War With Hezbollah Next? - CNBC
- Hamas Fights with a Patchwork of Weapons Built by Iran, China, Russia and North Korea - AP
- 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
- At Davos, Zelenskyy Tries to Rally Support for Ukraine's Fight - AP
- ‘Perfectly Understandable’: Russia’s Neighbors Back Ukraine’s Refusal to Negotiate on Peace Talks - CNBC
- A New Therapy for Ukraine’s Scarred Soldiers: Ketamine – The Economist
- Boris Akunin: Russia Designates Author ‘Foreign Agent’ - BBC
- Zelenskiy Urges West to Keep Up Pressure on Russia – Reuters
- Secretive Surveillance Flights Keep Close Watch on Russia and Ukraine - AP
- 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
- Taiwan’s New President: 5 Things You Need to Know About William Lai – Politico
- US Targets Houthi Anti-Ship Missiles in New Strike on Yemen, Officials Say - Reuters
- US Military Seizes Iranian Missile Parts Bound for Houthi Rebels in Raid Where 2 SEALs Went Missing – Politico
- Iran Claims Responsibility for Blasts Near US Consulate in Iraq - Politico
- North Korea Will no Longer Pursue Reconciliation with South Because of Hostility, Kim Jong Un Says - AP
- Chinese Premier Li Qiang Says Country’s Economy Grew 5.2%
- Iran Strike Sparks Dispute With Iraq as Fears of Regional Upheaval Grow - Reuters
- Canada Inflation Accelerates to 3.4% in December - WSJ
- Iran Says it Has Launched Attacks on What it Calls Militant Bases in Pakistan - AP
Policy and Politics
House, Senate Tax Chiefs Announce Deal on Business Deductions, Low-Income Credits
Top tax writers in Congress announced a deal Tuesday morning to beef up the child tax credit (CTC) and reinstate business deductions that were taken away to pay for the reduction of the corporate tax rate in the 2017 Tax Cuts and Jobs Act. The CTC expansion would increase the maximum credit per child to $2,000 from $1,600 through 2025 while restoring business deductions for research and development costs, interest payments and capital investments. To pay for the $80 billion deal, tax writers want to nix the employment retention tax credit, which they say has been aggressively marketed within the tax industry and has been a locus of fraudulent business activity.
The deal includes expensing for research and experimental costs, restoration of an earlier interest deduction, an expansion of small-business expensing and an extension of bonus depreciation, according to a section-by-section summary released by the Ways & Means Committee. Senate Finance Chair Ron Wyden, D-Ore has said he hopes to pass the deal by the beginning of tax filing season, which is Jan. 29.
Hochul's $233 Billion Budget Proposal Addresses Migrant Crisis, Medicaid Costs, Education Funding
New York Gov. Kathy Hochul proposed an executive budget Tuesday for Fiscal Year 2025 that will reach a record-breaking $233 billion funding plan if approved – exceeding last year’s $229 billion package – that includes funding for public safety, health care initiatives, education and affordability, as well as money to address the state's ongoing migrant crisis. “The big three are school aid, Medicaid and migrants,” budget director Blake Washington told Spectrum News Monday. He said spending increases in those three sectors, as well as a drop in federal pandemic aid, have driven up state operating funds by $5.9 billion. Washington said there are no recommendations calling for increased taxes on high earners or corporations.
School aid will also increase across the board by $825 million – bringing total education funding to roughly $35 billion. But Washington said the budget office is proposing a change in school aid funding that seeks to even out aid disbursement between wealthy and poorer districts – an idea in the past that has been opposed by wealthier districts in the suburbs. In higher education, Hochul is proposing $207 million to go to operations at the State University of New York and City University of New York, as well as $1.2 billion for capital projects at higher education institutions
Read more at NY State of Politics
$6 Trillion in Taxes Are at Stake in This Year’s Elections
The winners of November’s presidential and congressional elections will quickly face decisions on extending tax cuts scheduled to expire after 2025. President Biden and Republicans support starkly different tax plans. Republicans generally want to extend all expiring tax cuts from the 2017 law former President Donald Trump signed. The price tag: $4 trillion over a decade.
Biden proposed extending Trump’s tax cuts for households making under $400,000 annually but said the rest should expire. Beyond that, he would raise taxes further on top earners and corporations. That plan, including tax increases the president hasn’t fully detailed, would generate more than $2 trillion beyond current forecasts. That $6 trillion gap is on the ballot, and the ultimate resolution will affect family budgets, corporate profits and the federal government’s fiscal health amid rising debt.
Health and Wellness
World Leaders to Meet to Discuss Threat of Hypothetical ‘Disease X’ Pandemic in Davos
World leaders meeting in Davos for the World Economic Forum (WEF) this week are set to discuss concerns about the potential for a future pandemic that could cause 20 times more fatalities than Covid-19. It’s known by the placeholder name of Disease X, with the term used to refer to planning for a hypothetical future international epidemic caused by a pathogen as yet unknown to cause human disease, according to the World Health Organisation (WHO).
In a session entitled “Preparing for Disease X”, a panel led by the WHO chief Dr Tedros Adhanom Ghebreyesus will talk about “novel efforts needed to prepare healthcare systems for the multiple challenges ahead” if we are to be ready for a much more deadly pandemic, the WEF said. To be clear, scientists don’t yet know what kind of virus might lead to the next pandemic – or, in other words, what Disease X will turn out to be.
Election 2024
Winners and Losers of the Iowa Caucuses – The Hill
Vivek Ramaswamy Suspends Campaign and Endorses Trump - BBC
Orange County Conservatives back Esposito for Congress – Mid-Hudson News
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
PwC CEO Survey: Economic Optimism Doubles In 2024, Business Concerns Rise
The proportion of CEOs who believe global economic growth will improve over the next 12 months has more than doubled year-on-year, according to the PwC 27th Annual Global CEO Survey. However, the proportion of CEOs concerned about their long-term business viability has also risen to 45 per cent as tech and climate pressures accelerate. The survey, which interviewed 4,702 CEOs across all sectors in 105 countries from 2 October to 10 November 2023, found that 38 per cent of CEOs are optimistic about global economic growth prospects over the next 12 months, up from 18 per cent in 2023.
CEO expectations of economic decline have also tumbled from 73 per cent to 45 per cent, as perceived exposure to inflation and macroeconomic volatility fell by 16 per cent to 24 per cent and 7 per cent to 24 per cent respectively. CEOs in most regions of the world are also more likely to be optimistic about domestic economic prospects than pessimistic, the survey shows. However, CEOs in North America and Western Europe buck the trend – in Western Europe, 32 per cent expect their domestic economies to improve, a 48 per cent decline; North America, 31 per cent and 52 per cent, respectively.
New Defense Industrial Base Strategy Warns of Long Recovery to Reverse Atrophy
The decline of the defense industrial base happened over 30 years—each decrement a logical response to world events—and turning it around to deal with modern realities won’t be quick, according to the first-ever National Defense Industrial Strategy released Jan. 11. But the Biden administration is touting the steps it has taken already to inject more vigor and resiliency into its defense enterprise, even as it prepares to release an NDIS “implementation plan” next month. Major world crises—from the COVID pandemic to Russia’s invasion of Ukraine to the Israel-Hamas war—caused the Pentagon to realize major changes in the DIB were needed, according to the NDIS
The DIB can’t do what it needs to do without an all-of-government approach; something the administration said it has been working on since taking office. The “arsenal of democracy” that “overwhelmed the Axis powers in World War II and contributed significantly to deterring the Soviet Union during the Cold War” has shrunk in size and capacity as a natural reaction to world events, the NDIS notes.
Read more at Air and Space Forces Magazine
Are Pension Plans Making a Comeback?
Could pensions be making a comeback? Two recent headlines have, at the least, sparked conversations about reviving the predominant retirement benefit of the last century, experts say. Late last year, IBM announced that it would end 401(k) contributions for its approximately 300,000 employees in 2024 to instead provide a defined benefit plan with no contribution required by employees, essentially a pension plan. Big Blue explained the move in a statement by saying it would help employees diversify their retirement portfolios and enjoy a “stable and predictable” benefit.
Then came a report from WTW that defined-benefit pension plans for Fortune 1000 companies were fully funded at the end of 2023 for the first time since the 2008 financial crisis. That means the plans have sufficient assets to cover all accrued pension benefits owed as well as future obligations. And that leaves money available to reinvest elsewhere, likely a big driver behind IBM’s decision, experts say.
California’s Long-Embattled Ports Are Winning Back Imports
Trade is swinging back to the ports of Los Angeles and Long Beach after a period in which pandemic-driven shipping disruptions and broader shifts in manufacturing pushed supply chains more heavily toward Gulf Coast and East Coast ports. The Southern California ports in September, October and November recorded year-over-year increases in containerized imports of between 17% and 31%, according to ports data. At the same time imports fell at East Coast gateways such as Georgia’s Port of Savannah and the Port of New York and New Jersey.
Logistics executives say the neighboring Southern California ports, long the anchor of U.S. supply chains built on trade with Asia, are winning back business in part because of improved labor relations with dockworkers following resolution of long-running contract talks last year. More recently, disruptions at the Panama Canal and the Suez Canal, both of which feed East Coast and Gulf Coast ports, have led importers to route their goods through California to avoid longer transit times and higher costs.
Container Spot Rates Up 15 – 16% in Past Week
The Drewry World Container Index (WCI) was up 15% at $3,072 per feu on 11 January compared to the previous week while the Shanghai Containerized Freight Index (SCFI) was up 16% at 2206.03 points for the week ended 12 January. Increases of the WCI were highest on the Asia – Europe/Med trades which are directly impacted by diversions from the Red Sea where shipping has come under attack from Houthi rebels to transiting via the longer route round the Cape of Good Hope.
According to Drewry freight rates from Shanghai to Genoa increased by 25% to $5,213 per feu while rates rates on Shanghai to Rotterdam rose by 23% to $4,406 per feu. Drewry said it anticipates East-West spot rates to increase in the coming weeks, due to the Red Sea/Suez situation.
Read more at Sea Trade Maritime News
Volkswagen and Rivals Plug Away at Solid-State Battery Puzzle
Volkswagen, whose drive to develop a "solid-state" electric car battery with U.S. startup QuantumScape has been dogged by delays, is casting its net wider in pursuit of the potentially game-changing technology. The German auto giant is holding talks with France's Blue Solutions, which already produces solid-state batteries for Daimler electric buses, about adapting the design for cars, a source with direct knowledge of the discussions told Reuters. VW, Toyota, opens new tab, BMW and other global automakers are vying to crack the conundrum of solid-state batteries, which remain technically elusive despite decades of research and billions of dollars of investment.
VW and Blue Solutions aim to reach a joint development agreement in the coming months, according to the source who asked not to be identified as the talks are private. Volkswagen's move to widen its options in the field points to the array of technical hurdles holding back wider development of solid-state technology, seen by its backers as the "holy grail" of EV batteries, promising longer driving ranges and shorter charging times than traditional lithium-ion packs.
Musk Wants 25% Voting Control at Tesla Before Fulfilling AI Goal
Elon Musk says he would be uncomfortable growing the automaker to be a leader in artificial intelligence and robotics without having at least 25 percent voting control of the company, nearly double his current stake. Musk said in a post on social media platform X, formerly known as Twitter, that unless he got stock in the world's most valuable automaker that was "enough to be influential, but not so much that I can't be overturned," at Tesla, he would prefer to build products outside of the EV manufacturer.
He has long touted Tesla's partially automated "Full Self-Driving" software and its prototype humanoid robots, but the company generates most of its revenue from its automotive business. Musk, the world's richest person, currently owns around 13 percent of Tesla stock after selling billions of dollars of shares in 2022 partly to help finance his $44 billion purchase of Twitter. Companies with dual-class structures have two or more types of shares with different voting rights - usually one with greater voting rights for founders or early investors and another for other shareholders with less voting power.
Judge Blocks Spirit - JetBlue Deal
A federal judge blocked JetBlue Airways’ purchase of budget rival Spirit Airlines after the Justice Department sued to stop the merger, alleging it would drive up fares for some of the most price-sensitive consumers. JetBlue’s proposed $3.8 billion purchase of discounter Spirit would have produced the country’s fifth-largest airline, a deal the carriers said would help them better grow and compete against larger rivals like Delta and United.
“JetBlue plans to convert Spirit’s planes to the JetBlue layout and charge JetBlue’s higher average fares to its customers,” U.S. District Court Judge William Young wrote in his decision. “The elimination of Spirit would harm cost-conscious travelers who rely on Spirit’s low fares.” The decision, handed down Tuesday, marks a victory for a Justice Department that has aggressively sought to block deals it views as anticompetitive. JetBlue and Spirit said in a joint statement that they disagreed with the ruling and were evaluating next steps.