Member Briefing January 23, 2023
The Conference Board Leading Economic Index® (LEI) Inched Down in December
The leading indicators for the U.S. economy fell again in December to mark the 21st decline in a row, but a widely predicted recession still appears no closer than when the long losing streak first began. The leading index slid 0.1% last month, but it was smaller than the 0.3% drop forecast by economists polled by the Wall Street Journal. The losing streak is the third longest on record. The leading index is a gauge designed to show whether the economy is getting better or worse. The two other times the index was negative for so long, a recession took place. Yet the economy has not followed the usual patterns since the 2020 pandemic.
Six components positively contributed to the LEI in December—the most since early 2022. Stock prices distantly led the pack, adding 0.20 percentage points to the headline index, as the S&P 500 was in the midst of a run toward another record high that it set last week. Initial claims for unemployment insurance (+0.09) and home building permits (+0.06) were modestly additive as well. On the flip side, sentiment remains weak. The new order component of the ISM manufacturing index chopped 0.18 percentage points off the LEI in December, nearly canceling out the gain from stock prices.
Read more at US News and World Report
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- Gaza Hostage Relatives Burst Into Israeli Parliament, Calls for Action Mount – Reuters
- U.S. and European Officials Push for Gaza Aid to Pass Through an Israeli Port - NPR
- Saudi Arabia Won’t Normalize Relations With Israel Without Path to Palestinian State - Time
- Israeli Forces Storm Khan Younis Hospital in Bloodiest Fighting of 2024 - Reuters
- UN Chief Denounces Israel for ‘Utterly Unacceptable’ Killings – Politico
- What Might Happen Next in the Genocide Case Against Israel - 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
- Ukraine Shelling of Russian-Controlled City of Donetsk Kills 27, Officials Say - Reuters
- UN Panel to Grill Russia on Fate of Thousands of ‘Evacuated’ Ukrainian Children – France 24
- Ukraine’s $30 Billion Problem: How to Keep Fighting Without Foreign Aid - WSJ
- Ukraine to Slovakia’s Fico: Piss off - Politico
- Americans Fighting in Ukraine Battle Against Gridlock in DC – The Hill
- Macron Urges French Defence Firms to Boost Production to Support Ukraine – France 24
- 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
- America and Iran Step Closer to the Brink of War – The Economist
- China Moves to Support Yuan as Stock Markets Tumble - Reuters
- Hapag-Lloyd to Offer Land Transit Through Saudi Arabia Amid Red Sea Disruption - Reuters
- Ocean Shipping Rates Surge as Red Sea Attacks Continue - WSJ
- Navy Seals Presumed Dead After Anti-Houthi Mission - BBC
- India’s Modi Opens Controversial Hindu Temple Ahead of Key Elections - CNN
- Farmers’ Protests Sweep France, Seizing Agenda Before EU Elections – Politico
- Blinken starts West Africa tour to boost democracies, counter Sahel security threat – France 24
- Japan Hopes Sunlight Can Save Stricken Slim Moon Lander - BBC
- Panama Canal Transits Sink to New Drought-Driven Low in December - FreightWaves
- Milei Suspends Plan to Privatize Argentina State Oil Company YPF - Bloomberg
Policy and Politics
Senate Awaits Border Deal - Debate Could Begin This Week
Senate Majority Leader Chuck Schumer (D-N.Y.) told attendees at a White House meeting last week that he is aiming to start the floor process for the border-Ukraine bill as soon as this week. And Senate Minority Leader Mitch McConnell (R-Ky.) last week said he expects the chamber to move forward with the legislation this week. Leaders are exuding confidence despite House conservatives urging Speaker Mike Johnson (R-La.) to reject the deal. House opposition to the Senate agreement would deal a blow to the upper chamber’s negotiators, who have been engaged in discussions over the border for months. It would also spell trouble for the future of aid to Ukraine, especially as the war approaches the two-year mark next month.
As for the Senate negotiations a number of hurdles remain as lawmakers work to address the situation at the southern border. High up on the list is the issue of parole, which key members have said is a hang-up in the talks. Democrats have indicated they do not want the topic on the negotiating table, but Republicans say the ultimate agreement has to include alterations to the parole policy in addition to changes to the asylum process they already concur on.
Siena Poll: Hochul’s Favorability Up
New Yorkers are feeling best about Gov. Kathy Hochul in nearly a year, according to a new poll from Siena College. The poll found that 45% of New Yorkers have a favorable view of Hochul, while 42% have a negative view. That’s up from November, when polling had her favorability at 40%-43%. It’s also the first time since February last year that more New Yorkers viewed her favorably than viewed her poorly. Notably, Hochul’s favorability is also up in the suburbs, where 46% of those polled have a positive view of her, while 41% have a negative one.
This latest poll of 807 registered New York voters was taken from Jan. 14 to Jan. 17, following Hochul’s State of the State address that took place Jan. 9. Her State of the State address avoided bold and potentially controversial proposals and focused on issues that will resonate with the suburbs. Only 39% of those polled thought Hochul will make New York safer, while 49% said she would not. Just 33% believed she would make living in the state more desirable, while 54% believed she wouldn’t deliver. They similarly expressed relatively little confidence that she would increase the housing supply, make New York the AI capital of the world and fix the state’s mental health system.
Health and Wellness
New COVID-19 Hospitalizations in U.S. Show First Drop in Months
Coronavirus hospital admissions last week decreased for the first time in more than two months, according to data from the Centers for Disease Control and Prevention. Though the number remains elevated, weekly hospitalizations fell by nearly 10% week over week. More than 32,800 new COVID-19 hospital admissions were reported over the week ending Jan. 13, and over 27,800 Americans on average each day were considered currently hospitalized due to the disease during the same time frame, according to CDC data.
National COVID-19 wastewater viral activity levels remain very high, with the highest levels reported in the South and Midwest. The vast majority of COVID-19 cases are stemming from a new COVID-19 variant, JN.1. CDC estimates published on Friday indicate the strain is likely responsible for about 86% of new coronavirus cases over the past two weeks. It’s also the most prominent variant globally. JN.1 doesn’t appear to be any more severe than previous coronavirus strains, and the CDC noted Friday that “COVID-19 infections are causing severe disease less frequently than earlier in the pandemic.”
Read more at US News and World Report
Election 2024
What does DeSantis exit mean for New Hampshire? – The Hill
GOP, Democrats Neck and Neck on Generic Congressional Ballot: Survey – The Hill
Here Are Trump’s Most Likely Running Mate Picks- Forbes
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
Existing Home Sales Fall – But Lower Mortgage Rates May Mean Shift Is Coming
Existing home sales fell 1.0% to 3.78 million units at the annual rate in December, the slowest rate since August 2010, according to the National Association of Realtors. Homeowners—particularly those who locked in super-low mortgage rates—have been less willing to sell their existing homes, limiting inventories for sale, but with sharply reduced rates in the past few months, there could be a shift moving forward.
In the latest data, sales strengthened in the West but weakened in the Midwest and South. Single-family home sales declined 0.3% to 3.40 million units, with condominium and co-op sales down 7.3% to 380,000 units. On a year-over-year basis, existing home sales have fallen 6.2% from 4.03 million units in December 2022. There were 3.2 months of unsold inventory of existing homes for sale on the market in December, down from 3.5 months in November. The median sales price was $382,600, up 4.4% from one year ago.
Read more at The National Association of Realtors
Wells Fargo: Global Economy is Likely to Experience Slower Growth in 2024. No Recession in US.
Wells Fargo’s outlook for the global economy for 2024 has improved, as they now forecast global GDP growth of 2.7% for this year, up from 2.4% a month ago. A soft landing for the U.S. economy explains much of the upgrade, although improved growth prospects for the Eurozone, United Kingdom, China, Canada and Mexico also contribute to the improved outlook. The bank anticipates a more gradual pace of monetary easing than previously and they We forecast a slower pace of U.S. dollar depreciation through 2024 than previously anticipated.
Wells Fargo now believe the U.S. economy will avoid recession and achieve the desired “soft landing.” Even though activity in the manufacturing sector is weak, total nonfarm payrolls rose an average 225,000 per month last year, consumer spending continues to advance, and while the ISM services index has softened, it remains in expansion territory. A sharp deceleration in inflation has seen real household disposable income growth return to positive territory. While they still acknowledge the risk of a downturn, they now believe the most likely outcome is for the U.S. economy to continue growing through the end of 2025 and achieve the hoped-for soft landing. We now forecast U.S. GDP growth of 1.7% for calendar 2024 (previously 0.9%) and 1.7% for calendar 2025 (previously 1.5%).
Cummins, Daimler and Paccar are Joining to Build Battery Plant in Mississippi Electric Commercial Trucks
The U.S.’s biggest commercial truck and engine builders are betting that the freight industry is ready to swap diesel fuel pumps for battery chargers. The diesel engine maker Cummins and the truck builders Daimler Truck and Paccar plan to build a $2 billion battery factory in Mississippi to produce batteries for commercial trucks. The plant, which the companies will operate as a joint venture, is expected to begin producing battery cells in 2027.
The plant in Mississippi’s Marshall County, south of Memphis, Tenn., will be the nation’s largest dedicated to batteries for commercial vehicles, with initial output projected to be enough batteries annually to power more than 40,000 medium- and heavy-duty trucks. The investment is a big bet that the typically risk-averse trucking industry will start to convert rapidly to alternative power as new government standards for engine exhaust make it significantly more expensive and restrictive to buy and operate diesel trucks. States and the federal government are starting to apply more pressure on truck manufacturers and reluctant truckers to get on board with zero-emissions vehicles.
Home Builder Sentiment Surges on Falling Interest Rates
Homebuilder sentiment improved significantly in January, buoyed by reduced mortgage rates, according to the National Association of Home Builders. The Housing Market Index rose from 37 in December to 44 in January. With rates dropping sharply in the past two months, there is hope for stronger demand among potential homebuyers, but the housing market remains challenged for now. Affordability has been a problem for would-be buyers over the past few years, and builders continue to cite other challenges, including the need for more workers and the lack of available lots.
In January, the index of current activity for single-family homes increased from 41 to 48, while the index for expected single-family sales jumped from 45 to 57. At the same time, the traffic of potential buyers remained very weak despite increasing from 24 to 29. The potential buyers traffic index has been below 50 every month since May 2022.
More Workers Want to Change Jobs but Now Face Tougher Odds
Millions of workers switched jobs during the past couple of years, enticed by abundant openings and big pay raises from companies desperate to hire. The market for salaried, white-collar jobs has since cooled, but workers’ itchiness to find new work hasn’t. Roughly 85% of 1,000 U.S. professionals polled in a new LinkedIn survey say they are thinking about changing jobs this year, up from 67% a year earlier. While the market for hourly jobs remains robust, the number of listings for finance, marketing, software development and other white-collar fields has fallen below prepandemic levels, according to data from the jobs site Indeed. On LinkedIn, one job opening is available for every two applicants. A year ago, jobs outnumbered applicants two to one.
Those who are actually job hunting—versus those who might be venting their work frustrations—are discovering that they have less leverage than in the recent past. Companies are offering new hires less-generous pay and flexibility than they did a year or two ago, data from job boards suggest. They are also holding the line in negotiations over perks such as additional vacation time, applicants say.
UAW, Buoyed by Detroit Three Deals, Targets Nonunion Plant
The UAW’s website, which has become one of the union’s primary tools for the organizing push, carries a new message: “Non-union auto workers are being left behind. It is time for non-union autoworkers to join the UAW and win economic justice.” The site now includes tips for pro-union workers on how to approach uncommitted colleagues, and leaflets outlining the case for union representation that UAW backers can download and distribute to co-workers. UAW President Shawn Fain says the union has collected more than 1,000 signatures from among some 6,000 employees at the Mercedes-Benz plant in Vance, AL. Fain says the union also has collected more than 2,000 signatures from among the 5,500 employees at the Volkswagen of America plant in Chattanooga, TN.
Non-union companies – among them Toyota, Honda, Nissan, Subaru, Volkswagen and Tesla – began raising hourly workers’ pay as part of their efforts to keep the UAW at bay. Scott Vazin, Toyota vice president of communications, says the wage increases at 11 Toyota plants took effect Jan. 1, while Nissan says raises at its U.S. plants took effect Jan. 8. Last year was “an extraordinary year for labor,” says Harley Shaiken, a University of California-based labor expert. “They’re not going to win everything. But the UAW has the wind at its back.”
FAA Says More Boeing 737 Planes Should Get Checks After MAX 9 Incident
The U.S. Federal Aviation Administration late Sunday recommended airlines operating Boeing 737-900ER jets inspect door plugs, opens new tab to ensure they are properly secured after some operators reported unspecified issues with bolts upon inspections. The recommendation follows the FAA's grounding of 171 Boeing 737 MAX 9 planes after the Jan. 5 mid-air cabin blowout of a door plug on an eight-week-old Alaska Airlines MAX 9 jet.
The 737-900ER is not part of the newer MAX fleet but has the same optional door plug design that allows for the addition of an extra emergency exit door when carriers opt to install more seats. The FAA issued a "Safety Alert for Operators" disclosing some airlines have conducted additional inspections on the 737-900ER mid-exit door plugs "and have noted findings with bolts during the maintenance inspections."
Cutting Tool Demand Slows in November, Up Year on Year
U.S. manufacturers, including machine shops, reduced their consumption of cutting tools by -4.9% from October to November 2023, totaling $202.7 million in a critical indicator of manufacturing activity. Following an uptick in the October result, the monthly Cutting Tool Market report index signaled a return to the uncertain direction that marked cutting-tool consumption during the last half of 2023. Cutting tool consumption is indicative of overall manufacturing activity because those purchases reflect the volume of activity by machining operations across a range of manufacturing market segments.
Even allowing for the month-to-month decline for November, the new figure is 4.4% higher than the November 2022 result – and with an 11-month total of $2.26 billion, 2023 cutting-tool consumption rose 7.5% versus the January-November 2022 result. AMT Cutting Tool Products Group chairman Jack Burley explained that “aerospace and automotive markets are still working on an impressive backlog and sales that will continue to keep most shops busy well into the new year.”
Read more at American Machinist
Sam Altman Is Reportedly Raising Billions For Chip Manufacturing Factories—Here's Why That Matters
OpenAI CEO Sam Altman is in the process of setting up fundraising for a network of semiconductor manufacturing factories, according to a new report, amid a multi-billion dollar production race for the chips—technology critical for the production of consumer goods and AI products. Altman has been speaking with large potential investors who would help fund the chip plant network. Investment firms such as Abu Dhabi-based technology group G42 and Tokyo-based SoftBank Group are some of the firms in communication with Altman about the project, Bloomberg added, noting that it would involve top chip manufacturers.
Further details about Altman’s aims with the early-stage project are scant, though its potential success could play a role in the ongoing chip war between the U.S. and China, both of which are seeking to bolster their production of chips for applications in the AI, military and consumer goods sectors. Altman’s project would also likely come to fruition alongside increasing demand for chips in the near to mid-future, as the use of semiconductors in vehicles increases and geopolitical trade risks continue to persist, according to S&P Global.