Member Briefing January 22, 2024
Global Manufacturing Shrinks in December
The J.P. Morgan Global Manufacturing PMI ™ edged down from 49.3 in November to 49.0 in December, contracting for the 16th straight month. New orders (down from 48.9 to 48.6), output (down from 49.9 to 49.5), exports (down from 48.1 to 48.0) and employment (down from 49.2 to 48.7) each declined at a somewhat faster rate in December.
The outlook for future output (up from 60.1 to 60.5) strengthened, with respondents slightly more upbeat about production growth over the next six months. Delivery times (down from 50.5 to 50.2) narrowed in December for the 11th straight month, albeit just barely. Meanwhile, input prices (up from 52.1 to 52.4) grew very modestly, accelerating a bit from the previous survey. Two of the top 10 markets for U.S.-manufactured goods (China and Mexico) experienced expanding growth in December, the same pace as in November. Seven of the top 10 markets had lower PMI readings in December than in November.
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- Netanyahu Trapped by Clashing Demands From War Cabinet and Hawks – Politico
- Netanyahu Tells US He Opposes Creation of Palestinian State After Gaza War - NBC
- Gaza Death Toll Surpasses 25,000: Gaza Health Ministry – The Hill
- Israel Controls Factors Impeding Gaza Aid, NGOs Say – Washington Post
- U.S. Pushes Hostage-Release Plan Aimed at Ending Israel-Hamas War - WSJ
- Hostage Families Protest Outside Netanyahu’s Home - CNBC
- 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 Drones Hit St Petersburg Gas Terminal in Russia - BBC
- Fire Erupts at Russia’s Novatek Baltic Sea Terminal after Suspected Ukrainian Drone Attack- CNBC
- Russian Bombs Failed to Destroy Ukraine’s Energy Grid. Corruption Could Break its Own - Politico
- Twenty-Five Killed After Ukraine Shells Donetsk, Officials Say – Reuters
- Zelenskyy Calls Trump’s Rhetoric About Ukraine’s War with Russia ‘Very Dangerous’ - 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
- ‘The Western World is in Danger’: Argentina’s Milei Urges Davos Elite to Reject Socialism - CNBC
- UK Inflation Shows Surprise Rise, Denting Bank of England Rate Cut Bets – Reuters
- China Misses Resumes Posting Youth Unemployment Data - CNBC
- Ship Traffic to Resume in Turkey's Bosphorus Strait After Suspension – Reuters
- Ocean Shipping Rates Surge as Red Sea Attacks Continue - WSJ
- Iranian and Hezbollah Commanders Help Direct Houthi Attacks in Yemen – Reuters
- US Rethinks Gas Exports, Spooking Europe – Politico
- UK to Upgrade Warship Defence Missile System Used in Red Sea – Reuters
- China Invests in Factories to Jolt Ailing Economy - WSJ
- North Korean Teenagers Sentenced To Hard Labor For Watching South Korean TV - Forbes
Policy and Politics
House Panel Advances Tax Deal With Resounding Bipartisan Vote
A deal to reduce taxes for businesses and increase the child tax credit (CTC) made it out of the House Ways and Means Committee with broad bipartisan support Friday. The deal advanced with 40 votes in favor and only three opposed. The cost of the proposal — $33 billion for the CTC expansion plus another $33 billion for business breaks — are offset almost exactly by a $77 billion revenue bump achieved by canceling the employee retention tax credit (ERC).
Amendments to further boost the CTC by making it fully refundable and sending it out in monthly payments were proposed by Democrats but shot down by the committee. “This legislation locks in over $600 billion in proven pro-growth, pro-America tax policies with key provisions that support over 21 million jobs,” Ways and Means Chair Jason Smith (R-Mo.) said in a statement released along with the announcement of the deal earlier this week.
New York Lawmakers Are on Board With Bill to Reduce NY Plastic Packaging by Half
Over 200 organizations have signed a letter in support of the Packaging Reduction and Recycling Infrastructure Act. Additional support includes members of the New York City Council, Mayor Eric Adams’ administration, as well as a majority of the state Senate and nearly half of the Assembly. The legislation, first introduced last year, seeks to reduce the use of plastic packaging by 50% over the next 12 years. It sets intermediary benchmarks every few years to ensure compliance, and would apply to businesses with net incomes above $1 million a year.
In addition to seeking to reduce plastic packaging, which is difficult to recycle, the legislation would also prohibit certain toxic chemicals like PFAS, mercury and formaldehyde from packaging, and ban so-called “chemical recycling,” a process to convert plastics in fuel and raw material for new plastic that environmental advocates say actually creates more pollution. It would also impose a fee on companies that use plastic packages, with money going toward recycling programs and local infrastructure.
K-12 Education’s Absenteeism Problem
Nearly four years since the beginning of the COVID-19 pandemic, the classic story of a bunch of Ferris Buellers blowing off school to lead downtown Chicago in a rousing rendition of “Twist and Shout” seems insufficient to explain the U.S. public education system’s nationwide problem with student attendance. The causes of the current crisis—which in 2023 saw rates of chronic absenteeism 71 percent above their national pre-pandemic average—are many and complex, and researchers and policymakers are still struggling to understand why attendance hasn’t rebounded. And while some states and school districts have taken steps toward boosting attendance, the scale of the problem remains
Consistent attendance is key to student success, but post-pandemic attendance has been far from consistent. Nationwide, chronic absenteeism—the percentage of students missing at least 10% of a school year—surged from 15% in 2018 to 29% in 2022, and remained high in 2023. Return to Learn’s (R2L) chronic absenteeism data span districts in 50 states from 2016–17 to 2022–23, where available, for the most current and comprehensive chronic absenteeism data available anywhere.
Read more and view the map at Return 2 Learn
Health and Wellness
Long Covid Explanation in New Study Possibly Paves Way for Tests and Treatments
Scientists have identified a persistent change in a handful of blood proteins in people with long Covid that indicates that an important part of their immune system remains on high alert for months after an acute infection. The findings, published Thursday in the journal Science, could help explain what causes the persistent fatigue, brain fog and other debilitating symptoms of long Covid, as well as pave the way for diagnostic tests and potentially, a long-awaited treatment, experts say.
The study followed 113 Covid patients for up to one year after they were first infected, along with 39 healthy controls. At the six-month mark, 40 patients had developed long Covid symptoms. Repeated blood samples turned up important differences in their blood: A group of proteins indicated that a part of the body’s immune system called the complement system remained activated long after it should have returned to normal.
NYS COVID Update
The Governor updated COVID data for the week ending January 12th.
Deaths:
- Weekly: 140
- Total Reported to CDC: 82,021
Hospitalizations:
- Average Daily Patients in Hospital statewide: 2,858
- Percent Available ICU Beds: 17%
7 Day Average Cases per 100K population
- 21.5 positive cases per 100,00 population, Statewide
- 25.8 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
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Ron DeSantis Drops Out of Presidential Race, Endorses Trump - WSJ
- Hutchinson Throws Support Behind Haley Days Before New Hampshire Primary – The Hill
- New Hampshire Primary: What to Expect from Trump, Haley and DeSantis - CNBC
- Why Biden Won't be on the New Hampshire Primary Ballot – Axios
- 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
Taiwan’s TSMC Pushes Back Timeline for Second Plant at $40 Billion Arizona Site
Taiwanese chip maker TSMC said it expected to delay production at the second of two semiconductor plants it is building in Arizona, the latest setback for a $40 billion project at the core of Washington’s effort to rebuild U.S. chip manufacturing. TSMC—the world’s leading contract manufacturer whose chips power Apple iPhones and Nvidia’s artificial-intelligence chips—also cast uncertainty on an earlier statement that the plant would produce an advanced type of chip.
The statements by TSMC Chairman Mark Liu at a news conference Thursday offered further evidence of challenges faced by the Arizona project, including a shortage of skilled workers and difficult negotiations over how much money the U.S. government will provide. The second factory had been scheduled to begin production of 3-nanometer chips in 2026. Liu revised that schedule on Thursday, saying that while construction continues, TSMC now is looking at 2027 or 2028 as the timeline for volume production.
Ford to Cut Production of Electric F-150 Lightning Amid Weaker Demand
Ford Motor is slashing production of its F-150 Lightning electric pickup truck while adding workers to its gas-engine vehicle factories, citing weaker-than-expected demand for battery powered models. The automaker said Friday it is moving 1,400 of the 2,100 hourly employees at the Lightning plant to gas-engine factories and other operations, reducing to one work shift, from two. Some workers are expected to take retirement packages negotiated as part of a recent deal with the United Auto Workers union.
A spokeswoman for the company declined to quantify the planned cut to Lightning production. A letter Ford sent to suppliers late last year, reviewed by The Wall Street Journal, said the automaker was expecting to reduce Lightning output in half this year because of “changing market demand.” Overall, Ford is adding nearly 900 workers to its Michigan Assembly Plant near Detroit to increase production of gas-powered Bronco sport-utility vehicles and Ranger pickups.
Consumer Sentiment Jumps to 78.8, the Best Level Since July ’21
The University of Michigan’s Survey of Consumers showed a reading of 78.8 for January, its highest level since July 2021 and up 21.4% from a year ago. That followed a big jump in December and comes despite public opinion surveys showing concern about the nation’s direction. On a two-month basis, sentiment showed its largest increase since 1991, said Joanne Hsu, the survey’s director.
The outlook for the inflation rate a year from now declined to 2.9%, down from 3.1% in December for the lowest reading since December 2020. The Federal Reserve has boosted short-term interest rates to their highest level in more than 22 years and inflation has followed suit lower, though it remains above the central bank’s 2% target. At the same time, the survey’s index of current conditions also leaped higher, rising to 83.3, or 21.6% higher than a year ago.
US Housing Starts December 2023: Construction of New Homes Fell
Construction of new homes fell 4.3% in December, as home builders scaled back new projects. So-called housing starts fell to a 1.46 million annual pace from 1.53 million in November, the government said Thursday. That’s how many houses would be built over an entire year if construction took place at the same rate every month as it did in December. Housing starts are down for the first time in four months. New construction recently peaked at 1.8 million in April 2022. The numbers are seasonally adjusted.
Single-family construction was down in December, while multi-family ticked up. Even though the December numbers show a drop in new housing units being constructed, in a more recent survey of builders in January, they were more upbeat about future sales of new homes, as mortgage rates fall.
Newport News Brings Shipbuilding Into Digital Age
the future Ford-class carrier USS Enterprise (CVN-80) that’s now in the works there will be the first ever to be completely designed on computers and tablets, and physically built using digital manufacturing capabilities. During separate briefings at HII’s new Arlington office on Jan. 8, two of its top executives spotlighted some of the company’s latest metrics and the milestones they’re eyeing in 2024. In a technology-driven first for HII, the CVN-80 is the first carrier to be designed and produced digitally, using laptops, tablets and other “intelligent” tools.
Historically, the company has been known as a top American submarine and shipbuilder. In a 2022 reshuffle to better spotlight its other major role as an all-domain defense solutions provider, HII renamed its Technical Solutions division to Mission Technologies. It was during that time that the company, formerly branded as Huntington Ingalls Industries, changed its name to HII.
Tata Steel's Blast Furnaces to Close In Wales With 3,000 Expected Job Losses
Tata Steel is to push ahead with plans to close both its blast furnaces in Port Talbot with the expected loss of 3,000 jobs UK-wide, the BBC has been told. Most are expected to go by September, with the majority in Port Talbot where the steelworks will be transitioned to a greener electric arc furnace. Unions called it a "crushing blow" and the "worst-case scenario". Tata Steel currently employs 8,000 people, with about 4,000 based at the UK's largest steelworks in Port Talbot, which has two coal powered blast furnaces.
Tata Steel's decision follows a meeting between company executives and the Community, GMB and Unite unions. Sources said Tata rejected the unions' proposal to avoid redundancies by keeping one blast furnace going during the transition. The Indian-owned firm will instead spend £1.25bn - including a £500m UK government subsidy - on its move to a method of steelmaking that will cut carbon emissions and stem financial losses on its UK operations of £1m a day. It will be more environmentally friendly to operate, but require a smaller workforce.
The Red Sea is a Wakeup Call for Companies to Rewire and Localize Their Supply Chains
The Red Sea crisis is yet another indication that supply chain localization and regionalization are very much needed. This is an area under intense discussion, driven by the disruptions that most companies face when their supply chain is very long. As companies diversify and they shorten their supply chains, what should be the closest origin point? If it's Central America, then how ready is Central America to absorb that extra capacity? The trick is to try to make that happen in a less capital intensive way.
Some manufacturing companies are thinking through their raw material sourcing. There's a resilience play here: most of these companies, because the volumes they ship are significant, tend to go with contracted routes. It's spot rates that are going higher. So there's probably a one-time or a short-term cost implication. But in general, if you are a manufacturer and your sourcing is impacted, and you're relying a lot on Asia outbound to the U.S., production planning schedules and forecasting for raw materials are likely the biggest challenge.
With Commercial Real Estate Set for Another Tough Year, Some Small Banks are Worried
Things haven’t been easy for the commercial real estate sector over the last few years. Recently, a lot of companies have been downsizing their office footprint and letting go of bigger leases. At the same time, building owners are facing higher interest rates on loans. Those pressures aren’t only problematic for the owners of office buildings and other types of commercial real estate. They’re also worrying lenders that have a lot of CRE debt on their balance sheets.
Commercial real estate loans don’t work exactly like mortgages, whose interest rates can usually be locked in for 30 years by borrowers. Commercial loans have to be renewed at new interest rates, in many cases every five years or so. Last month, the Federal Deposit Insurance Corp. reminded banks to keep a tight rein on how they manage risk and keep a close eye on their borrowers’ property values. A big concern is whether banks can absorb the blow if some loans go bad, said Columbia Law professor Kathryn Judge.
Freezing Temperatures and EV Batteries
As freezing temperatures swept much of the country this week, a number of electric vehicle owners were frustrated that their cars were slow to charge. As the U.S. moves toward adopting more EVs, it’s a reminder of the susceptibility of battery electric vehicles to very cold temperatures.
Cold weather slows down the chemical and physical reactions in the battery. How much power an EV loses depends on the kind of vehicle: The range for the Kia Kona EV drops 34% in freezing weather, while a Tesla Model S loses 28%, according to a report by Recurrent, which studies electric vehicles. To avoid this effect, EV owners are advised to conduct “preconditioning” on their car battery, or heating or cooling the battery based on the temperature.
Alcoa Execs Hopes ‘the Potential for a Moderate Recovery’ Becomes Reality.
Alcoa Corp. President and CEO Bill Oplinger said Jan. 17 that 2024 is “starting to look like a positive turning point.” All the same, the global aluminum producer’s leaders are more focused for now on cost savings while tweaking their portfolio, curtailing some operations while restarting others. Oplinger said Pittsburgh-based Alcoa is in line to save $310 million on raw material purchases this year versus 2023 through various actions and has launched a program to trim another $100 million in operating costs beyond materials, energy and transportation. The latter push, Oplinger said, will take until early 2025 to hit full stride.
The company posted a net loss of $227 million on sales of $2.6 billion in the last three months of 2023 and lost $773 million during all of last year after posting a small profit in 2022. For the year, the company shipped 2.49 million tonnes of aluminum, down from 2.57 million the year before; Oplinger and his lieutenants are forecasting 2024 shipments of between 2.5 million and 2.6 million tons this year.