Member Briefing January 3, 2024
Top Story
US Manufacturing PMI Falls to 47.9 in December
S&P Global's manufacturing PMI fell to 47.9 points in December, down from 49.40 in November and a preliminary reading of 48.2, indicating that manufacturing conditions had deteriorated further last month. Output returned to a decline and the downturn in new orders gathered pace, selling prices increased at the quickest rate since April, and muted client demand led to a third successive monthly drop in employment. Business confidence, on the other hand, rose to a three-month high. The manufacturing PMI hit an all-time high of 63.4 in July 2021, while its record low of 36.1 points was recorded in April 2020.
“US manufacturers ended the year on a sour note, according to S&P Global’s PMI survey. Output fell at the fastest rate for six months as the recent order-book decline intensified. Manufacturing will therefore likely have acted as a drag on the economy in the fourth quarter.” Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said. “The slowdown is spreading to the labor market. Payrolls were cut for a third month running as increasing numbers of firms grew concerned about the development of excess operating capacity. The fourth quarter has consequently seen factories reduce employment at a pace not seen since 2009 barring only the early pandemic lockdown months.
Global Factory Activity Ended 2023 on a Soft Note
A range of factory purchasing managers' indexes published on Tuesday showed a persistent slowdown and suggested any turnaround this year would take time, challenging the renewed optimism in financial markets over the past few weeks.
EUROPE - HCOB's final euro zone manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, nudged up marginally to 44.4 in December from 44.2 in November but remained well below the 50 level that marks growth in activity. The trend points to a contraction in euro zone GDP in the quarter just gone by, with manufacturing activity in the 20-country bloc's largest economy, Germany, also shrinking in December. Britain's manufacturing sector also suffered a setback, with the final reading of the S&P Global/CIPS manufacturing PMI weakened to 46.2 in December, ending a run of three months of improvement.
ASIA - Asia's factory activity continued to struggle as well last month, especially in technology-reliant economies. South Korean factory activity dipped back into decline and Taiwan extended its contraction for the 19th straight month. China's Caixin PMI showed an unexpected acceleration in activity in December, although this contrasted with Beijing's official PMI released on Sunday that remained in contraction territory for the third straight month. The mixed economic prospects for China continue to cloud the outlook for its major trading partners.
Global Headlines
Gaza
- Israel and Hamas: The Latest News – The Guardian
- Israel steps Up Strikes in Southern Gaza, Residents Say - BBC
- What Israel's Partial Withdrawal Means for Future of Gaza War - Newsweek
- US Sends Aircraft Carrier Back to Virginia from Israel – The Hill
- Top Hamas Official Saleh Arouri, Who headed West Bank Operations, Killed in Beirut Blast - AP
- Only 15% of Israelis Want Netanyahu to Keep Job After Gaza War, Poll Finds – Reuters
- Palestinian Fighters Warn Israel After Senior Hamas Leader Killed in Beirut - Newsweek
- 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
- ‘Seething’ Putin Hammers Ukraine With Massive Missile and Drone Attacks – Politico
- A New Year’s interview with Volodymyr Zelensky - The Economist
- Putin Smells Blood As Ukraine Faces Growing Calls To Negotiate - Newsweek
- Ukraine's Zelenskiy Says Russia Suffering Heavy Losses - Reuters
- Ukraine Faces Slow, Protracted Defeat—Military Analysts - Newsweek
- 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
- Tsunami Waves Hit Japan After 7.6 Magnitude Earthquake - AP
- Japan Quake Death Toll Rises to 55 With Search On for Those Still Trapped - WSJ
- Iranian Warship Enters Red Sea as Tensions Rise – Politico
- Maersk Halts Red Sea Shipping Until Further Notice After Houthi Militant Attack - CNBC
- Oil Prices Jump After Red Sea Fighting, Iran Sends in Warship – Barron’s
- All Passengers, Crew Escape Blaze on Japan Airlines Plane After Tokyo Airport Collision – Reuters
- Last Taiwan Polls Show US-Friendly DPP Set for Election Win - Bloomberg
- China Is Pressing Women to Have More Babies. Many Are Saying No. - WSJ
- How Ransomware Could Cripple Countries, Not Just Companies – The Economist
- Democracy is in Peril in the World’s Bonanza Year of Elections - Politico
Policy and Politics
SUNY Warns of Future $1B Deficit Without Higher Tuition or More Aid
State university leaders are asking the state for regular increases in aid or permission to increase tuition, warning that they need more money to stave off huge annual deficits that could balloon to $1 billion in a decade. In the upcoming academic year, the SUNY system will have a $244 million deficit if nothing changes - though officials said they expect at least some improvement, particularly because community colleges are required to submit balanced budgets.
In 10 years, the SUNY system will have a $1.1 billion annual budget shortfall if expenses and revenues continue as currently projected, the report said. In 2033-2034, the SUNY system would cost $6.9 billion a year. But if the system increases tuition — described as “modest, differential tuition increases” — or receives consistent increases in state aid, that deficit would be reduced to $89.1 million a year. A deficit of that size, the report said, “could be readily managed through efficiencies, collaboration and other actions.”
Unions Poised to Capitalize on U.S. Labor Board Rulings That Bolstered Organizing
The coming year will reveal the full impact of a U.S. labor board's recent rulings that were seen as providing a major boost to union organizing and whether those changes can withstand legal challenges amid a series of high-profile labor campaigns. Democratic President Joe Biden's appointees to the National Labor Relations Board (NLRB) paved the way in 2023 for workplaces to unionize outside of the decades-old secret ballot election process, made it easier for unions to organize franchise and contract workers, and expanded the type of worker conduct protected by U.S. labor law, among other significant moves.
Business groups and employers are challenging many of those decisions in court, but in the mean time companies should brace themselves for an uptick in organizing emboldened by the NLRB's burst in pro-union activity, experts said. Trade groups and lawyers say the most impactful decision for businesses came in August, when the board established a blueprint for workplaces to unionize without elections in a case involving building supply company Cemex Construction Materials Pacific LLC.
Governor Hochul to Deliver State of the State January 9th
Governor Kathy Hochul will deliver the annual State of the State address on January 9th at the State Capitol in Albany. The address will take place in its traditional location, the Assembly Chamber, at 1 p.m. The address, delivered annually, has long been regarded as the unofficial kickoff of the legislative session and is when the governor will lay out her priorities for 2024. Members of the State Assembly and State Senate officially return to Albany on Wednesday to begin the 2024 legislative session.
The Manufacturing Alliance will host its advocacy day on February 28th at the Fort Orange Club in Albany. Among the issues we will be monitoring are regulations implementing the CLCPA, tax parity for pass through manufacturing businesses, apprentice support, unemployment assessments, and COVID Leave Policies.
Health and Wellness
The 9 Most Influential FDA-Approved Drugs and Vaccines of 2023
Hundreds of drugs are approved in the U.S. every year, but GoodRx recently listed one dozen approvals that it said were the most influential for 2023. The report by GoodRx, a digital pharmaceutical platform, highlighted drugs that it said represented a major advancement compared to other treatment options. The new list came as the U.S. public has been hearing a lot about weight-loss drugs such as Ozempic and Wegovy; and a new drug in that category, Zepbound, is included on the GoodRx list. However, the list includes a wide range of drugs and vaccines, including a contraceptive, treatments for respiratory diseases, and a treatment for Alzheimer’s disease.
The No. #1 most influential drug on the list is probably already familiar to most, especially if they know someone who has been infected with COVID-19. Paxlovid, which treats the symptoms of the disease, was approved on an emergency basis in late 2021, and has been used in more than 11 million treatment courses, the report noted. The drug, which received full FDA approval last May, has been a first-choice recommendation for COVID treatment for non hospitalized adults and adolescents ages 12 and older.
Respiratory Virus Activity is High and Rising Across the United States, CDC Data Shows
Tens of thousands of people have been admitted to hospitals for respiratory illness each week this season. During the week ending December 23, there were more than 29,000 patients admitted with Covid-19, about 15,000 admitted with the flu and thousands more with respiratory syncytial virus, or RSV, according to data from the US Centers for Disease Control and Prevention.
Nationally, Covid-19 levels in wastewater, a leading measure of viral transmission, are very high – higher than they were at this time last year in every region, CDC data shows. Weekly emergency department visits rose 12%, and hospitalizations jumped about 17% in the most recent week. And while Covid-19 remains the leading driver of respiratory virus hospitalizations, flu activity is rising rapidly. The CDC estimates that there have been more than 7 million illnesses, 73,000 hospitalizations and 4,500 deaths related to the flu this season, and multiple indicators are high and rising.
Industry News
New Disruptions, Geopolitics Hang Over 2024 Supply Chains
Companies that assembled new supply chain strategies in the wake of the Covid-19 pandemic are having to put those plans into practice far faster than they may have thought possible. Global supply chains are entering 2024 roiled by disruptions at two of the world’s crucial trade corridors—the Panama Canal and the Suez Canal—even as geopolitical tensions appear set to take a more prominent role in sourcing and distribution. That could potentially force countries and companies to redraw trade maps that have been built over decades.
Wars in Ukraine and in the Middle East are threatening flows of grain, oil and consumer goods. Climate change and mass migration are disrupting trade lanes from the Panama Canal to the U.S.-Mexico border. Growing geopolitical tensions are making international supply chains ever more complex. Still, many companies, including big retailers, can point to dramatic success over the past year in clearing out the big stockpiles of inventory that they built up during the pandemic to cope with shipping disruptions and rapidly changing consumer buying patterns.
US Introduces New Battery Ruling for EV Subsidies - Eligible Vehicles Drop from 43 to 19
The US American tax agency Internal Revenue Service (IRS) released the official list of EVs and PHEVs that qualify for the tax credit in 2024, with the number of models reduced from 43 to 19. This also includes different versions of the same vehicle type. The credit is to be applied as a rebate at the time of purchase. While this has prompted manufacturers to change their sourcing strategies, the information has been known for some time and the industry had sufficient run-up to adapt.
The main idea behind the new sourcing regulation is to support domestic battery material and cell production in the US, although this has also affected American manufacturers such as Tesla. The Mustang Mach-E manufactured in Mexico will not qualify either, while Ford’s F-150 Lightning pickup truck will receive the full subsidy due to being manufactured in Michigan.
Northrop Ready for Production Phase of B-21 Program
The B-21 Raider took to the air for the first time in November, nearly a year after its public debut in California. In 2024, the U.S. Air Force’s next stealth bomber could take even greater steps. The first Raider, which was unveiled in a highly publicized ceremony in December 2022, flew to Edwards Air Force Base on Nov. 10. It is now undergoing flight testing, which also includes ground tests and taxiing. The Air Force Test Center and the 412th Test Wing’s B-21 Combined Test Force are managing the bomber’s testing program, the service said.
The Air Force has confirmed at least six B-21s are in various stages of construction by Northrop Grumman or are undergoing tests. The program is now in the engineering and manufacturing development phase, the service said in November, and Ellsworth Air Force Base in South Dakota is expected to receive its first Raider in the mid-2020s. The service plans to buy at least 100 B-21s, an advanced stealth bomber, to replace the aging B-1B Lancer and B-2 Spirit bombers. It will provide the service with new abilities to conduct penetrating deep-strike missions, and the aircraft will be able to carry both conventional and nuclear weapons.
US Construction Spending Rose Less Than Expected in November
The Commerce Department said on Tuesday that construction spending increased 0.4%. Data for October was revised up to show construction spending surging 1.2% instead of gaining 0.6% as previously reported. Economists polled by Reuters had forecast construction spending rising 0.6%. Construction spending shot up 11.3% on a year-on-year basis in November. Despite coming below expectations, the report added to a recent raft of data on the labor market, consumer spending and confidence in suggesting that the economy regained momentum after appearing to falter at the start of the fourth quarter.
Outlays on new single-family construction projects jumped 2.9%. With the rate on the popular 30-year fixed mortgage falling further below 7%, single-family homebuilding could surge in 2024. Outlays on multi-family housing projects edged up 0.1% in November. The rental vacancy rate also jumped to its highest level in 2-1/2 years in the third quarter. Outlays on private non-residential structures like factories rose 0.2% in November. Spending on manufacturing construction projects increased 0.5%, still supported by semiconductor manufacturing.
Tesla Deliveries Beat Estimates as Year-End Sales Push Pays Off
Tesla (TSLA.O) beat estimates for fourth-quarter deliveries on Tuesday after a push to hand over more Model 3 electric cars before some variants of the compact sedan lose federal tax credits in the New Year under the Inflation Reduction Act (IRA). The world's most valuable automaker delivered a record number of vehicles in the fourth quarter and hit its 2023 target of 1.8 million, helped by increasing discounts on key models. The company handed 484,507 vehicles in the last three months of the year, compared with estimates of 473,253 units, according to 14 analysts polled by LSEG.
The company said it expects to deliver 2.2 million vehicles this year, or an increase of about 22%, but slower than the growth of about 38% in 2023. The newly launched and radically designed Cybertruck is expected to be a small fraction of Tesla's deliveries this year. Musk said in October the company aims to produce about quarter of a million units of the electric pickup truck in 2025.
Tesla Falls Behind China’s BYD in Quarterly BEV Sales for First Time
Chinese automaker BYD for the first time topped Tesla TSLA -0.33%decrease; red down pointing triangle as the world’s largest seller of electric vehicles on a quarterly basis, a sign of China’s emerging strength in the global market for battery-powered cars. BYD reported selling more than 526,000 fully electric vehicles in the fourth quarter of 2023, compared with Tesla’s sales of nearly 485,000 for the same period. Tesla remained ahead of BYD for the full year.
Elon Musk’s electric-car maker said Tuesday it delivered about 1.81 million EVs worldwide in 2023, meeting its full-year guidance and slightly beating Wall Street’s expectations. By comparison, BYD sold nearly 1.6 million battery-powered vehicles last year, up more than 70% over 2022. Tesla’s results come as concerns are growing on Wall Street about the level of demand for the company’s cars—and electric vehicles more broadly—in the year ahead.
What Happened in M&A in 2023, and What’s Ahead, in Five Charts
The past year was a downer for mergers and acquisitions, which plunged to the lowest level in a decade, but deal makers are hopeful that 2024 could be better following the Federal Reserve’s pivot toward potential interest-rate cuts in the year ahead. Global M&A is on track to fall 20% in 2023 compared with 2022, to a total value of about $3 trillion, according to advisory firm Bain & Co. Deal making was down especially for venture capital and private-equity firms, which saw estimated 39% and 35% declines, respectively, according to Bain. Strategic deals—in which a company buys or sells all or part of another company—fell by an estimated 14%.
The biggest sticking point this year: Buyers and sellers had a tough time agreeing on a price. Higher rates made debt financing more expensive, especially for non-investment-grade companies. They lowered the projected enterprise value of acquisition targets, particularly for unprofitable startups. Many sellers, however, see the world differently. The stock market this year has gone on a tear, with stocks hitting record highs, driving up the public-market value of potential sellers—and leading many companies to push back against what they see as low-ball offers.
Resilience, Costs and Talent - Here’s What Tops CFO’s 2024 Checklists
While the role of the chief financial officer always is evolving, the Covid-19 pandemic accelerated the pace of change in various corporate functions that has sparked a reset on how CFOs operate. What will happen to the U.S. economy? And what do CFOs need to do to be ready for the coming year? The CFO Journal interviewed some top finance chiefs and experts recently to survey their thoughts on what is top of mind for 2024.
Cloud software provider ServiceNow’s CFO Gina Mastantuono said she spends most of her time thinking about how to make her business more resilient and better positioned to invest for growth. For Lake Success, N.Y.-based Broadridge Financial Solutions, a provider of technology solutions for investing, governance and communications, attracting and retaining technology professionals and engineers remains a focus for the new year, CFO Edmund Reese said. Cost management remains at the forefront of the C-suite agenda, as companies continue to prioritize finding efficiencies and staying profitable, said Paul Goydan, managing director and senior partner at Boston Consulting Group.
Where the Job Market Is Heading in 2024, in Six Charts
Employers slowed hiring and handed out smaller raises in recent months, signs of fading momentum in the job market that have some forecasters expecting unemployment to rise in 2024. And that might be OK. The key for American workers and Federal Reserve policymakers is to have the labor market cool without collapsing. That would support household incomes while helping inflation drift lower, putting the economy on a glide path to a soft landing—as long as the slowdown isn’t too severe.
“You can see these small cracks forming” in the labor market, said Michael Pugliese, a senior economist at Wells Fargo. “That should give you reason for pause going into 2024.” Here is where the labor market is heading in the new year.
Mickey Mouse Will Enter Public Domain in 2024
With several asterisks, qualifications and caveats, Mickey Mouse in his earliest form will be the leader of the band of characters, films and books that will become public domain as the year turns to 2024. In a moment many close observers thought might never come, at least one version of the quintessential piece of intellectual property and perhaps the most iconic character in American pop culture will be free from Disney‘s copyright as his first screen release, the 1928 short Steamboat Willie, featuring both Mickey and Minnie Mouse, becomes available for public use. U.S. law allows a copyright to be held for 95 years after Congress expanded it several times during Mickey’s life.
“More modern versions of Mickey will remain unaffected by the expiration of the Steamboat Willie copyright, and Mickey will continue to play a leading role as a global ambassador for the Walt Disney Company in our storytelling, theme park attractions, and merchandise,” Disney’s statement said. “More modern versions of Mickey will remain unaffected by the expiration of the Steamboat Willie copyright, and Mickey will continue to play a leading role as a global ambassador for the Walt Disney Company in our storytelling, theme park attractions, and merchandise,” Disney’s statement said.
Read more at the Hollywood Reporter