Member Briefing January 29, 2024
Despite Flat Headline, Durables Report Signals Brighter Days Ahead
Orders for long-lasting U.S. manufactured goods were unexpectedly unchanged in December amid a slump in transportation equipment, but demand elsewhere held up. The Commerce Department's Census Bureau said on Thursday that the unchanged reading in orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, followed a 5.5% rebound in November.
Transportation equipment orders dropped 0.9% last month after surging by 15.3% in November. Motor vehicle and parts orders gained 0.4%. Civilian aircraft orders rose only 0.4%. Defense aircraft orders fell 2.9%. But there were increases in orders for electrical equipment, appliances and components, primary metals, machinery as well as computers and electronic products. Non-defense capital goods orders excluding aircraft, rose 0.3% after rising by an upwardly revised 1.0% in the prior month. These so-called core capital goods orders were previously reported to have rebounded 0.8% in November.
December's PCE Inflation Data: Core Numbers Dropped More Than Expected
The Commerce Department’s personal consumption expenditures price index for December, an important gauge for the Federal Reserve, increased 0.2% on the month and was up 2.9% on a yearly basis, excluding food and energy. Economists surveyed by Dow Jones had been looking for respective increases of 0.2% and 3%. On a monthly basis, core inflation increased from 0.1% in November. However, the annual rate declined from 3.2%. The 12-month rate is the lowest since March 2021.
Including volatile food and energy costs, headline inflation also rose 0.2% for the month and held steady at 2.6% annually. The release adds to evidence that inflation, while still elevated, is continuing to make progress lower, possibly giving the Fed a green light to start cutting interest rates later this year. The central bank targets 2% as a healthy annual inflation rate. Markets took little notice of the data Friday, with stocks mixed and Treasury yields mostly lower.
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- Negotiators Close In on Hostage Deal That Would Halt Fighting in Gaza for Weeks -NYT
- Israel Struggles to Destroy Hamas’s Gaza Tunnel Network - WSJ
- U.S., U.K. Among 8 Countries Pausing Funding to UNRWA Amid Allegations 12 Employees Were Part of Oct. 7 Attack - NBC
- World Court Rejects Demand for Gaza Cease-Fire – Forbes
- ICJ Ruling: Key Takeaways from the Court Decision in Israel Genocide Case – Reuters
- Israel’s War With Hamas Has No End in Sight - WSJ
- 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
- Russia's Drones, Missiles Target Ukraine's Critical Infrastructure, Ukraine Says - Reuters
- Woman Given 27 Years for the Killing of Pro-War Blogger in Russian Cafe Bombing - WSJ
- Pentagon: Ukraine Expected to Employ F-16s in 2024 – Air and Space Forces Mag
- Turkey Formally Ratifies Sweden’s NATO Membership, Leaving Hungary as Only Ally Yet to Endorse it - AP
- Russian Court Extends Detention of WSJ Reporter Evan Gershkovich - WSJ
- 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
- Three U.S. Troops Killed in Drone Attack in Jordan - WSJ
- Houthi Rebels Fire Missile at US Warship, Escalating Mideast Crisis – Politico
- Chinese Regulators Curb Short Selling as Market Downturn Deepens – Financial Times
- China Presses Iran to Rein in Houthi Attacks in Red Sea, Sources Say – Reuters
- Lagarde Says 'Proud, Honoured to Lead ECB' After Bleak Union Survey - Yahoo
- Iran Launches 3 Satellites Into Space as Tensions Rise - AP
- Spoilage Alert: Red Sea Crisis Hits Europe’s Fresh Food Trade – Politico
- UK Halts Trade Negotiations with Canada Over Hormones in Beef Ban - BBC
- U.S. Secretly Alerted Iran Ahead of Islamic State Terrorist Attack - WSJ
- Beijing Increases Military Pressure on Taiwan Ahead of US-China Talks - Politico
- Argentina’s President Promised a Free Market Revolution, and Says He’s Delivering - WSJ
Policy and Politics
Key Border Deal Negotiator Says Bipartisan Agreement Has Been Reached, Could be Ready in the Coming Days
Sen. Chris Murphy, a key negotiator on a possible border deal, said Sunday that text of a compromise could be ready go to the Senate floor in the coming days. Components of the deal include a new authority that allows the president to shut down the border between ports of entry when unlawful crossings reach high levels, reforming the asylum system to resolve cases in a shorter timeframe, and expediting work permits. Under the proposed deal, the Department of Homeland Security would be granted new emergency authority to shut down the border if daily average migrants crossing unlawfully reach 4,000 over a one-week span.
Illustrating the divisiveness swirling around the Biden administration’s border policies as the Senate looks to pass a deal, House Republicans on Sunday released two articles of impeachment against Homeland Security Secretary Alejandro Mayorkas, who they say committed “high crimes and misdemeanors” for his “willful and systemic refusal to comply with the law” and for breaching the public’s trust.
Biden Pauses Approvals for LNG Exports. Environmental Groups Applaud
President Biden said Friday the administration will pause export application reviews as it takes stock of the country’s newfound status as the world’s largest LNG exporter. In a call with reporters Thursday previewing the announcement, Energy Secretary Jennifer Granholm said the process wouldn’t affect already authorized exports or gas exports to U.S. allies, including Europe, which has relied heavily on American gas since Russia’s invasion of Ukraine.
The decision delivers a significant victory for environmental groups. Alongside some Democratic lawmakers, they have for months pressured Biden to halt plans to build new LNG plants on the Gulf Coast, arguing that the expansion would have a harmful effect on the climate, the U.S. economy and local communities. Mike Sommers, president of the American Petroleum Institute, the oil-and-gas industry’s biggest lobby, denounced Friday’s decision, saying it benefited Russia and was a broken promise to U.S. allies. “It’s time for the administration to stop playing politics with global energy security,” he said.
Gallup: Ethics Ratings of Nearly All Professions Down in U.S
Americans’ ratings of nearly all 23 professions measured in Gallup’s 2023 Honesty and Ethics poll are lower than they have been in recent years. Nurses remain the most trusted profession, with 78% of U.S. adults currently believing nurses have high honesty and ethical standards. However, that is down seven percentage points from 2019 and 11 points from its peak in 2020. Engineers rank third at 60% - declining from 66% approval in 2019. At the other end of the spectrum, members of Congress, senators, car salespeople and advertising practitioners are viewed as the least ethical, with ratings in the single digits that have worsened or remained flat.
About half of the 23 professions included in the 2023 survey show meaningful differences by education level, with college graduates giving a more positive honesty and ethics rating than non-college graduates in each case. Almost all of the 11 professions showing education differences are performed by people with a bachelor’s degree, if not a postgraduate education.
Health and Wellness
Marijuana Linked to Mental Health Risks in Young Adults, Growing Evidence Shows
New research published this month, involving millions of people worldwide over decades, is adding to worries that heavy use of high-potency cannabis and legalization of recreational weed in many U.S. states could exacerbate the nation's mental health crisis in young adults. One of the studies, from researchers in Denmark in collaboration with the U.S. National Institutes of Health, found evidence of an association between cannabis use disorder and schizophrenia. The finding was most striking in young men ages 21-30, but was also seen in women of the same age.
The paper, published in the journal Psychological Medicine, looked at data from almost 7 million men and women in Denmark over the course of a few decades to look for a link between schizophrenia and cannabis use disorder. Another study, led by Sultan and Columbia researchers published earlier this month, found that teenagers who use cannabis only recreationally are two to four times more likely to develop psychiatric disorders, including depression and suicidality, than teenagers who don’t use cannabis at all. Because research to date has been observational it’s unclear whether people who already have or are developing psychiatric conditions are more likely to turn to cannabis as a way to self-medicate or whether cannabis use triggers mental problems.
JN.1 Takes Over as the Most Prevalent COVID-19 Variant. Here's What You Need to Know
In mid-October, CDC data shows JN.1 made up about 0.1% of all COVID-19 cases around the country. As of Jan. 20, the CDC estimates that's now up to approximately 86%. The N.1, is a subvariant of Omicron that was first detected by the World Health Organization in late August. At the time it appeared to be spreading slowly but as temperatures have dipped, JN.1 has spiked. Oren added that one of the reasons for the latest surge is that the virus continues to evolve so rapidly that "our immune systems have not been able to keep up."
CDC data indicates that this strain is no more severe than previous iterations, and the list of symptoms remains consistent with what they have been for COVID-19 in recent years: fever, chills, coughing, muscle aches, shortness of breath, sore throat, congestion, headaches, fatigue, and losing one's taste or smell. Eyal Oren, a director and professor of epidemiology at the School of Public Health at San Diego State University noted that most of the list consists of ailments that could be confused with those caused by other viruses common during winter months, including the flu, RSV or the common cold. "That's why it's so important to get vaccinated and to get tested [for COVID], particularly if someone is at higher risk of severe outcomes," he said.
NYS COVID Update
The Governor updated COVID data for the week ending January 12th.
Deaths:
- Weekly: 148
- Total Reported to CDC: 82,210
Hospitalizations:
- Average Daily Patients in Hospital statewide: 2,408
- Percent Available ICU Beds: 20%
7 Day Average Cases per 100K population
- 17.6 positive cases per 100,00 population, Statewide
- 21.4 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
RNC Moving to Declare Trump Its Presumptive Nominee – The Dispatch
Biden in South Carolina for One of His First Campaign Appearances of 2024 -Guardian
Biden vs. Trump Inevitable Rematch Will Test the Strength and Patience of America – USA Today
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
Fourth Quarter GDP: The U.S. Economy Ended 2023 on a Solid Note
The "advance" release of GDP data for the fourth quarter of 2023 showed that the U.S. economy expanded at an annualized rate of 3.3% relative to the previous quarter. Although the outturn marks a downshift from the 4.9% growth rate that was registered in Q3-2023, it nevertheless was significantly stronger than the 2.0% rate that the consensus forecast had anticipated.
The breakdown of GDP into its demand components showed that growth was more or less well-balanced in the fourth quarter. Real personal consumption expenditures (PCE) grew at a solid rate of 2.8%, only marginally below the 3.1% rate that was registered during the previous quarter. Real fixed investment spending eked out a 1.7% rise, while government spending grew 3.3% on an annualized basis. The real surprise came in net exports. Growth in real gross exports (6.3%) outpaced growth in real imports (1.9%). Consequently, real net exports added 0.4 percentage points to the overall GDP growth rate while most analysts had looked for a modest drag. Monthly trade data for December will be released on February 7. Today's quarterly data imply that real exports of goods must have grown at a robust rate of 4% in December relative to November.
GM and Honda's Hydrogen Joint Venture Starts Production of Fuel Cell Systems in Michigan
Honda and GM last Thursday announced that their joint venture, the imaginatively titled Fuel Cell System Manufacturing (FCSM), has started commercial production of hydrogen fuel cells on site. FCSM is operating out of GM's Brownstown, Michigan facility, which currently manufactures battery packs for the GMC Hummer EV and Cadillac Lyriq. The JV was first announced in 2017, alongside a combined $85 million investment.
Production was originally slated for 2020, but a whole lot has happened since then. But FCSM doesn't have a whole lot of time to waste, though; Honda announced in early 2023 that its next fuel-cell vehicle will be a hydrogen-powered CR-V, relying on the fuel cell that Honda and GM jointly developed, with production scheduled to commence this year. And according to the company's just-released business strategy, 2024 remains the hydrogen CR-V's target date. GM and Honda make for interesting bedfellows. The two automakers aren't just collaborating on hydrogen-based EVs; Honda's new electric Prologue SUV utilizes GM's Ultium battery pack and rides on a co-developed platform.
New Home Sales Rebound in December
New home sales jumped 8.0% in December, rebounding from November's surprise 9.0% slump. A step-down in mortgage rates, plentiful inventory and falling prices all contributed to the upswing in sales as the new home market continued to show resilience in the face of the broader housing market slump. Overall, new home sales averaged a 668K-unit pace in 2023, up from a 641K-unit pace in 2022. Improving affordability and a glut of supply heading into the busy spring selling season have builders increasingly optimistic.
A recent upturn in home buyer sentiment and mortgage applications for purchase suggest rising optimism on the demand side as well. Declining mortgage rates in December likely drew prospective home buyers off of the sidelines as the affordability picture improved. According to Freddie Mac, the average 30-year mortgage rate averaged 6.8% in December, a full percentage point lower than the recent peak of 7.8% registered in the last week of October. November's surprise sales slump was mostly owed to a pullback in sales in the South, the region with the most active new home market. Sales in the South rebounded in December, with all regions except for the West seeing higher sales.
IBM Earnings Top Estimates in ‘Uncertain, Volatile’ Economy
IBM announced fourth-quarter results late Wednesday that exceeded Wall Street’s expectations. IBM’s revenue increased 4% year over year in the quarter, according to a statement. Net income, at $3.29 billion, or $3.55 per share, increased from $2.71 billion, or $2.96 per share, in the year-ago quarter. The company confronted “a very challenging, uncertain, volatile macroeconomic environment,” Chief Financial Officer James Kavanaugh said in an interview with CNBC.
Earnings per share were $3.87, adjusted vs. $3.78 expected. Revenue was $17.38 billion vs. $17.30 billion expected. IBM’s revenue increased 4% year over year in the quarter, according to a statement. Net income, at $3.29 billion, or $3.55 per share, increased from $2.71 billion, or $2.96 per share, in the year-ago quarter. Free cash flow for the year totaled $11.2 billion, more than the $10.5 billion management had called for. The company’s fourth-quarter gross margin, at 59.1%, was the widest since 1999. Real estate reductions resulted in lower quarterly capital expenditures, Kavanaugh said on a conference call with analysts.
FAA Clears Way For Boeing 737 Max 9s To Potentially Resume Flying—But Prohibits Increased Production
The Federal Aviation Administration announced last week a pathway toward resumed flights for Boeing 737 Max 9 jets, but it won’t allow Boeing to expand production of the planes after a hole was blown into the side of an Alaska Airlines flight using one of the jets earlier this month, prompting temporary groundings and thorough inspections from the FAA. Boeing will be prohibited from expanding production of its Max jets, including the 737-9 Max model, under the order from the FAA on Wednesday. FAA Administrator Mike Whitaker said in a statement that the extensive review of the planes wouldn’t mark a return to “business as usual for Boeing.”
The FAA also said it approved an inspection and maintenance process that will be performed on all of the 171 grounded Boeing 737-9 Max planes, which if successful, will make the aircraft eligible to return to service. The inspection and maintenance process was approved after the FAA reviewed data collected from inspections on 40 grounded planes. Maintenance performed on the aircraft will involve inspection of exit door plugs and parts associated with them, bolts, guide tracks and the correction of damage.
Chip Makers are Bouncing Back But Keeping Expectations Low.
Chip demand from smartphones and personal computers has begun to revive as manufacturers have slowly digested large inventories left over from the end of the pandemic-era electronics boom. But mostly the recovery is being driven by surging demand from artificial intelligence. Generative AI applications like ChatGPT require large amounts of memory chips for number crunching.
Industry tracker TrendForce expects contract prices for DRAM, a type of memory chip used in processing, to increase 13% to 18% this quarter from a quarter earlier. That is partly because of a product mix that will tilt further toward high-price products like HBM.
Intel Earnings Were Solid, But Its Outlook Isn’t
Intel issued an outlook for the first quarter of 2024 that lagged analyst forecasts, though results for the latest quarter beat Wall Street estimates. For the quarter ended in December: Earnings per share were 54 cents adjusted, vs. 45 cents expected. Revenue was $15.4 billion vs. $15.15 billion expected. For the first quarter of fiscal 2024, Intel expects earnings per share of 13 cents on between $12.2 billion and $13.2 billion in sales, versus LSEG expectations of 33 cents per share on $14.15 billion of revenue.
Intel CEO Pat Gelsinger said on a call with analysts that the core businesses — PC and server chips — would be at the low end of the company’s seasonal range in the current quarter, but that overall sales would take a hit because of weakness in subsidiaries including Mobileye and its programmable chip unit. Intel posted net income of $2.7 billion, or 63 cents per share, compared to a net loss of $0.7 billion, or 16 cents per share, last year. Gelsinger said that demand for PC chips had “normalized,” and that sales were strong in the gaming and commercial sectors. He added that Intel expects the total PC market to expand this year. Data Center and AI saw sales decline 10% to $4 billion. That unit includes server CPUs and GPUs. Zinsner said that Intel expected its Data Center business to decline “double-digit” percentages sequentially in the first quarter versus the fourth quarter.
Boeing 737 Max 9 Flights Resume Following Inspections
After being grounded earlier this month to go through inspections, Boeing 737 Max 9 jetliners are returning to the skies weeks after a midair blowout occurred on an Alaska Airlines flight. Alaska Airlines began to resume commercial flights on the Boeing 737 Max 9 jetliners on Friday afternoon with a flight from Seattle to San Diego, the airline announced last week. The airline said the planes will only return to the air “after the rigorous inspections are completed and each plane is deemed airworthy according to [Federal Aviation Administration] requirements.” United Airlines flew its first resumed passenger flight on 737 Max 9 on Saturday morning from Newark, N.J. to Las Vegas.
The FAA laid out the process to return the Boeing 737 Max 9 aircraft to service last week, saying that it approved a “thorough inspection and maintenance process” that will be performed on each of the 171 grounded Boeing 737 Max 9 aircraft. The jets were grounded just hours after a door plug on an Alaska Airlines flight blew off while in the air, prompting the plane to make an emergency landing earlier this month.
Humanoid Robot for Warehouse Use Ready for Mass Production
Kepler, a general humanoid robotics developer debuted its flagship robot series at CES in Las Vegas and says it’s set for mass production later this year. The Kepler Forerunner series of robots is designed for industrial and logistics use cases and features three models: K1, S1 and D1. All come with “intelligent dexterous hands,” with 12 degrees of freedom and are capable of balancing goods to make them adept at handling products in a factory environment.
The company said its Forerunner series stands out for its dexterity, load-bearing capabilities and ease of motion, featuring planetary roller screws and rotary actuators to enable dynamic, human-like motion. The robots’ software also allows the models to recognize items, interact with their environment in real time and have a high level of hand-eye coordination. As well as industrial settings, Kepler said the robots can be customized for deployment in a range of settings including education and research, automated production lines, emergency rescue services and outdoor safety operations.
Read more at IOT World Today (includes video)