Member Briefing July 1, 2024
Weak Durable-Goods Orders Show Manufacturing Still Weak
Orders for durable goods such as autos and computers barely rose in May and underscored the ongoing weakness in the industrial side of the U.S. economy. Manufacturers have been treading water for the past year, held in check by high interest rates and a shift in consumer spending habits to favor services such as travel. New orders inched up 0.1% in May, the government said Thursday. Economists polled by The Wall Street Journal had forecast a 1.0% drop in durable-goods orders last month. April’s figure was revised down to 0.2% from 0.6%.
Much of the weakness in new orders was tied to a poor month for Boeing BA, 1.37%, the giant U.S. airplane manufacturer that has been struggling with safety-related issues. Commercial aircraft bookings slid 2.8%. Orders for new cars and trucks, however, rose 0.7% in a bit of surprise. That’s mainly why new orders beat Wall Street expectations. If transportation is omitted, new orders for manufactured goods fell 0.1% and declined in May for the third time in the past six months. A more forward-looking measure known as core orders dropped 0.6% last month. That category omits defense and transportation and is considered a weathervane for broader business investment.
US Q1 GDP Revised Up Slightly to a 1.4% Annual Rate
he American economy expanded at a 1.4% annual pace from January through March, the slowest quarterly growth since spring 2022, the government said Thursday in a slight upgrade from its previous estimate. Consumer spending grew at just a 1.5% rate, down from an initial estimate of 2%, in a sign that high interest rates may be taking a toll on the economy.The Commerce Department had previously estimated that the gross domestic product — the economy’s total output of goods and services — advanced at a 1.3% rate last quarter.
The first quarter’s GDP growth marked a sharp pullback from a strong 3.4% pace during the final three months of 2023. Still, Thursday’s report showed that the January-March slowdown was caused mainly by two factors — a surge in imports and a drop in business inventories — that can bounce around from quarter to quarter and don’t necessarily reflect the underlying health of the economy.
PCE - Fed’s Favored Inflation Gauge Slows, Supporting Case for Cut
An important economic measure for the Federal Reserve showed Friday that inflation during May slowed to its lowest annual rate in more than three years. The core personal consumption expenditures price index increased just a seasonally adjusted 0.1% for the month and was up 2.6% from a year ago, the latter number down 0.2 percentage point from the April level, according to a Commerce Department report.
Both numbers were in line with the Dow Jones estimates. May marked the lowest annual rate since March 2021, which was the first time in this economic cycle that inflation topped the Fed’s 2% target. Including food and energy, headline inflation was flat on the month and also up 2.6% on an annual basis. Those readings also were in line with expectations. Prices were held in check during the month by a 0.4% decline for goods and a 2.1% slide in energy, which offset a 0.2% increase in services and a 0.1% gain for food. Outside of the inflation numbers, the Bureau of Economic Analysis report showed that personal income rose 0.5% on the month, stronger than the 0.4% estimate. Consumer spending, however, increased 0.2%, weaker than the 0.3% forecast.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Iran Election Goes to Runoff, Presenting Choice Between Engagement or Confrontation With West - WSJ
- US Scrambles to Head Off Wider War Between Israel and Hezbollah - WSJ
- Iran Warns of ‘Obliterating War’ if Israel Launches an Offensive in Lebanon - NYT
- US, Europe Warn Hezbollah to Ease Strikes on Israel and Back Off from Wider Mideast War
- Yemen's Houthis Claim Attacks on Four Vessels in Red Sea and Mediterranean – Reuters
- US Struggles to Deter Houthi Threat as Crisis Spirals – The Hill
- 68 Sick and Injured Children Plus Companions Leave Gaza in First Medical Evacuation Since May - AP
- The US Has Sent at Least 14,000 of Highly Destructive 2,000-Pound Bombs to Israel Since October 7 - Yahoo
- 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 Most Dangerous Jets Are Parked In The Open A Hundred Miles From Ukraine. But Kyiv Needs Washington’s Permission To Strike Them. - Forbes
- Zelensky Says Preparing 'Plan' To End War With Russia – Barron’s
- Russian Casualties in Ukraine Mount, in a Brutal Style of Fighting - NYT
- U.S., Israel Near Agreement to Send Patriot Systems to Ukraine - CNN
- At Least 12 People Killed in Russian Attacks Across Eastern Ukraine – France 24
- Russia Warns of ‘Direct Confrontation’ With NATO Over US Black Sea Drones - Semafor
- The Shadowy Judicial System That Controls the Fate of WSJ’s 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
- French Legislative Election: Far Right Wins First Round, Macron Suffers Staggering Losses – Politico
- Giorgia Meloni Hits Out at EU Top Jobs Backroom Deal - Politico
- Opinion Poll Round-up With a Week to go Until THE UK General Election – Yahoo
- Bolivia’s President Arce Swears in New Army Chief After Coup Bid - Bloomberg
- U.S. and Saudi Arabia Move Toward Landmark Deal – The Dispatch
- Multiple Suicide Bombings Kill at Least 18 People in Northeast Nigeria – France 24
- In a First, China Accuses Former Defence Ministers Li Shangfu and Wei Fenghe of Corruption - SCMP
- Beryl Builds Into a 'Major' Hurricane in the Atlantic - Reuters
- Argentina's Parliament Approves President Milei's Austerity-Heavy Reform Package – France 24
Policy and Politics
Supreme Court Overturns Chevron Rule in Blow to Agency Power
The Supreme Court on Friday significantly weakened the power of federal agencies to approve regulations in a major decision that could have sweeping implications for the environment, public health and the workplace. The 6-3 ruling, overturning a precedent from 1984, will shift the balance of power between the executive and judicial branches and hands an important victory to conservatives who have sought for years to rein in the regulatory authority of the “administrative state.”
The decision overturns the Chevron v. Natural Resources Defense Council precedent that required courts to give deference to federal agencies when creating regulations based on an ambiguous law. Congress routinely enacts open-ended laws that give latitude to agencies to work out — and adjust — the details to new circumstances. Conservatives have long sought to rein in regulatory authority, arguing that Washington has too much control over American industry and individual lives. The justices have been incrementally diminishing federal power for years, but the new case gave the court an opportunity to take a much broader stride.
US Supreme Court Faults SEC's Use of In-House Judges in Latest Curbs on Agency Powers
The U.S. Supreme Court rejected as unconstitutional the Securities and Exchange Commission's in-house enforcement of laws protecting investors against securities fraud, dealing a blow on Thursday to the agency's powers in a ruling that could reverberate through other federal regulators. The decision, a setback for President Joe Biden's administration, upheld a lower court's ruling siding with a Texas-based hedge fund manager who contested the legality of the SEC's actions against him after the agency determined he had committed securities fraud.
The court ruled that agency proceedings seeking penalties for fraud that are handled by SEC itself instead of in federal court violate the U.S. Constitution's Seventh Amendment right to a jury trial. It was the latest decision curbing the authority of U.S. agencies powered by the Supreme Court's conservatives, who have indicated skepticism toward expansive federal regulatory power. Thursday's ruling opens the door to challenges to other federal agencies in-house enforcement schemes, as the liberal justices expressed doubt that the decision can be limited only to fraud actions pursued by the SEC.
Supreme Court Puts Biden Policies Like Net Neutrality and Ban on Noncompete Contracts at Risk
Some of the Biden administration’s top domestic priorities, from cracking down on power-plant pollution to bringing back net neutrality, are on shakier legal footing after a Supreme Court decision on Friday shifted power away from federal agencies. “It’s hard to overstate the impact that this ruling could have on the regulatory landscape in the United States going forward,” said Leah Malone, a lawyer at Simpson Thacher & Bartlett. “This could really bind U.S. agencies in their efforts to write new rules.”
Net-neutrality provisions introduced during the Obama administration were scrapped during the Trump presidency. But in April the Biden administration said they were coming back. To do that, the FCC reclassified internet providers as public utilities under the Communications Act. There are pending court cases challenging the FCC’s reinterpretation of that 1934 law, and the demise of Chevron deference heightens the odds of the agency losing in court, some legal experts said. The Federal Trade Commission, for its part, might struggle to defend its ambitious ban on noncompete contracts in court. That rule, which would take effect in September, prevents employers from using noncompete agreements to prevent workers from joining rival firms. There are unsettled questions about whether the FTC Act—the law from 1914 creating the agency—gave it the authority to issue such broad competition rules. For much of its history, the FTC chose not to claim that it was granted such power by Congress.
Health and Wellness
CDC Recommends Updated 2024-2025 COVID-19 and Flu Vaccines for Fall/Winter Virus Season
On June 27th the, CDC recommended the updated 2024-2025 COVID-19 vaccines and the updated 2024-2025 flu vaccines to protect against severe COVID-19 and flu this fall and winter. It is safe to receive COVID-19 and flu vaccines at the same visit. Data continue to show the importance of vaccination to protect against severe outcomes of COVID-19 and flu, including hospitalization and death. In 2023, more than 916,300 people were hospitalized due to COVID-19 and more than 75,500 people died from COVID-19. During the 2023-2024 flu season, more than 44,900 people are estimated to have died from flu complications.
CDC recommends everyone ages 6 months and older receive an updated 2024-2025 COVID-19 vaccine to protect against the potentially serious outcomes of COVID-19 this fall and winter whether or not they have ever previously been vaccinated with a COVID-19 vaccine. Updated COVID-19 vaccines will be available from Moderna, Novavax, and Pfizer later this year. This recommendation will take effect as soon as the new vaccines are available.
NYS COVID Update
The Governor updated COVID data for the week ending June 28th.
Deaths:
- Weekly: 11
- Total Reported to CDC: 83,443
Hospitalizations:
- Average Daily Patients in Hospital statewide: 755
- Patients in ICU Beds: 68
7 Day Average Cases per 100K population
- 6.6 positive cases per 100,00 population, Statewide
- 7.9 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- There’s No Spinning Joe Biden’s Very Bad Night – The Dispatch
- ‘This Can’t Continue’: Biden-Sympathizing Columnists Urge Him to Step Aside - Politico
- 'I Don't Debate as Well as I Used to': Biden Tries to Move on From His Tough Debate at an Energized Rally - NBC
- Biden Panic Goes Global - Commentary
- Biden’s Difficult Debate Puts Spotlight on Harris – The Hill
- 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
China's June Factory Activity Contracts Again, Services Slows
China's manufacturing activity fell for a second month in June while services activity slipped to a five-month low, an official survey showed on Sunday, keeping alive calls for further stimulus as the economy struggles to get back on its feet. The National Bureau of Statistics (NBS) purchasing managers' index (PMI), at 49.5 in June, was unchanged from May, below the 50-mark separating growth from contraction and in line with a median forecast of 49.5 in a Reuters poll. With consumers wary and the Labour Day holiday boost fleeting, the non-manufacturing PMI, which includes services and construction, fell to 50.5 from 51.1 in May, the lowest since December.
While a sub-index of production was above 50 in June, other indexes of new orders, raw material stocks, employment, supplier delivery times and new export orders were all in contractionary territory, the NBS survey showed. China's exports exceeded forecasts in May, but analysts said the jury is still out on whether export sales are sustainable given growing trade tension between Beijing and Western economies. Meanwhile, a protracted property crisis continues to drag on domestic demand.
Weekly Unemployment Claims Drift Lower
Fewer people applied for unemployment benefits last week but the total number of Americans collecting jobless benefits rose to the highest level in more than two years. The Labor Department reported Thursday that jobless claims for the week ending June 22 fell by 6,000 to 233,000 from 239,000 the previous week. However, the total number of Americans collecting unemployment benefits rose for the eighth straight week, to 1.84 million, for the week of June 15. That's the most since November of 2021.
The four-week average of claims, which softens some of the week-to-week volatility, rose by 3,000 to 236,000. Weekly unemployment claims — a proxy for layoffs — remain at low levels by historical standards, a sign that most Americans enjoy unusual job security. Still, after mostly staying below 220,000 this year, weekly claims have moved up recently.
The State of Carbon Dioxide Removal
A report, led by the University of Oxford’s Smith School of Enterprise and the Environment and issued earlier this month, offered an assessment of the current state of global carbon dioxide removal. CDR is human activity that captures CO2 from the atmosphere and stores it for decades to millennia. There are many CDR methods, which cover a variety of ways to capture and store CO2. These methods have different levels of readiness, potential and durability.
Around 2 GtCO2 per year of CDR is taking place already. Almost all of this comes from conventional CDR methods – those methods that are well established and widely reported by countries as part of land use, land-use change and forestry (LULUCF) activities – principally through afforestation/reforestation. These methods have delivered a relatively stable rate of CDR over the past two decades. Novel CDR methods – which are generally at an earlier stage of development than conventional CDR – contribute 1.3 million tons (0.0013 Gt) of CO2 removal per year. To scale up CDR, innovative activity needs to intensify, of which we see robust evidence.
Read more at Material Handling & Logistics
IRS Issues Final Regulations Regarding the CHIPS Advanced Manufacturing Investment Credit
The CHIPS Act created a temporary Advanced Manufacturing Investment Credit for investments in semiconductor manufacturing property. The IRS recently issued final regulations, including some changes related to the election to treat the credit as a federal tax payment. The credit generally equals 25% of the qualified investment related to an advanced manufacturing facility — that is, a facility with the primary purpose of manufacturing semiconductors or semiconductor manufacturing equipment. A manufacturer’s qualified investment equals its basis in any qualified property placed in service during the taxable year.
For pass-through entities, such as partnerships or S corporations, the qualified investment is calculated based on the partner’s or shareholder’s pro rata basis in the property. Accordingly, manufacturing partnerships and S corporations with qualifying property may pass through a portion of the qualified basis to taxpayers who can then claim a credit (subject to any limits at the partner or shareholder level). Qualified property is tangible property that: Qualifies for depreciation or amortization, Is constructed, reconstructed or erected by the taxpayer or acquired by the taxpayer if the original use of the property begins with the taxpayer, and Is integral to the operation of the advanced manufacturing facility. It also can include a building, a portion of a building (other than a portion used for functions unrelated to manufacturing, such as administrative services) and certain structural components of a building.
Lockheed Wins $534M for Hypersonic Conventional Strike Development
The U.S. Dept. of Defense assigned a $534-million contract to Lockheed Martin Space for systems engineering and development, and testing, of the Conventional Prompt Strike component of the broader hypersonic weapons development. Conventional Prompt Strike (CPS) is DoD’s label for its strategy to deliver a precision-guided conventional weapon strike anywhere in the world within one hour. That capability exists with nuclear-armed missiles (ICBM), but establishing it also for conventional weapons would be a new advantage to U.S. forces against a range of global threats.
That strategic enhancement is a broad goal for DoD’s development of hypersonic weapons technology, largely through Lockheed. Hypersonic weapons – which are among the top U.S. developmental priorities – are high-speed (Mach 5 or above) weapons that travel at suborbital heights, making them difficult for air-defense systems to track and intercept due to their speed and maneuverability. The new assignment for Lockheed is made in a “not to exceed…” manner, and comes under a cost-plus incentive-fee modification to an earlier award. The modification incorporates an optional line item that could increase the total value of the contract to $570 million.
Read more at American Machinist
Boeing's Starliner Spacecraft Still Doesn't Have a Landing Date, NASA says
NASA says Boeing Starliner will extend its first astronaut mission well into the summer after launching June 5 for what was supposed to be a 10-day flight. Starliner experienced both helium leaks and thruster issues during a June 6 docking with the International Space Station (ISS). The spacecraft is stable and rated to leave the ISS in case of emergency, Boeing and NASA leadership stress. But after testing the thrusters in space, NASA and Boeing said they want to take more time to understand the root cause.
A test campaign will start as soon as July 2 at the White Sands Test Facility in New Mexico to replicate how the thrusters were used during the flight, NASA commercial crew program manager Steve Stich said during a livestreamed update today (June 28) with reporters. The testing will take approximately two weeks, but that depends on what is found — and more analysis will be required afterwards. As such, NASA and Boeing do not yet have a landing date for Starliner.
How Tractor Supply Decided to End DEI, and Fast
The beginning of the end of Tractor Supply’s diversity efforts started on June 6. That afternoon, Robby Starbuck, a former Hollywood director turned conservative activist, posted a message on the social-media platform X saying, “It’s time to expose Tractor Supply.” The company has conservative shoppers who don’t agree, he said. “Let’s start buying what we can at other places,” said Starbuck, who has about half a million followers on X. The company concluded he wasn’t going away, said one person familiar with the matter.
Three weeks later, Tractor Supply delivered its decision: Diversity, equity and inclusion at the rural chain were over, including related job roles, and so were some of its environmental initiatives and other causes frequently championed by social progressives. Because of the chain’s customer base, they decided to be more definitive in their tone than companies that have responded to similar controversies. Tractor Supply didn’t want to “fire” its shoppers’” said one of the people. “We have heard from customers that we have disappointed them,” Tractor Supply said in a statement that was also posted on the social-media platform X last week.
Startup That Says It Can Help EVs Charge Faster Raises $375 Million
A rechargeable-battery startup that is developing technology it says can help electric vehicles drive farther and charge faster raised $375 million from investors such as T. Rowe Price. The California startup, Sila, said the funds will help it complete construction of a factory early next year. The company plans to start delivering its battery parts to customers such as Mercedes-Benz and Tesla partner Panasonic by the fourth quarter of 2025. Other investors include Sutter Hill Ventures, Bessemer Venture Partners and Perry Creek Capital.
The battery anodes made by Sila hold charges mostly in silicon, rather than the graphite used in most rechargeable batteries. Silicon can store more energy than graphite, giving EVs that use the batteries greater range. But it is also more difficult to work with since it tends to swell and crack when charged—challenges Sila said it has solved. Batteries with Sila’s American-made silicon anodes would more easily qualify for the tax credits. “There’s a really big graphite problem” in the U.S., said Chief Executive Gene Berdichevsky. “Sila can absolutely solve it.”
Microsoft Wrestles With Rising Emissions From AI Ahead of Its 2030 Carbon-Negative Goal
Scope 3 emissions are emerging as a major concern for companies seeking to eliminate carbon from their supply chains. Microsoft recently said that emissions from its supply chain and value chain make up more than 96% of the tech giant’s overall output. The company’s chief sustainability officer, Melanie Nakagawa, tells the WSJ’s Perry Cleveland-Peck that “Scope 3 is everyone’s challenge,” pointing to the operations from the company’s suppliers that are outside its own direct business. “We have thousands upon thousands of suppliers,” she says. “What we’re looking at is those of the largest volume because that is really where the energy matters.”
That concern over indirect, third-tier suppliers is a growing concern for many companies. It also figures prominently in logistics operations, where goods often pass through multiple service providers before reaching their destination. One recent study found just 15% of companies have set targets for Scope 3 emissions.