Member Briefing July 11, 2024
US Wholesale Inventories Rise in May
U.S. wholesale inventories increased solidly in May, likely putting inventory investment on track to support economic growth in the second quarter. The Commerce Department's Census Bureau said on Wednesday that wholesale inventories rose 0.6% as previously estimated last month. Stocks at wholesalers rose 0.2% in April. Inventories fell 0.5% on a year-on-year basis in May. Private inventory investment has been a drag on GDP for two straight quarters as businesses carefully managed stocks and domestic demand remained strong.
There is cautious optimism that inventory accumulation could offset some of the anticipated hit on GDP from a widening trade deficit. Growth estimates for the second quarter are around a 2% annualized rate. The economy grew at a 1.4% pace in the January-March quarter. Wholesale motor vehicle inventories rose 1.4% in May. Excluding autos, wholesale inventories rose 0.5%. This component goes into the calculation of GDP. Sales at wholesalers rose 0.4% in May after rising 0.2% in April. At May's sales pace it would take wholesalers 1.35 months to clear shelves, the same as in April.
American Workers Have Quit Quitting, for Now
Americans aren’t as restless in their jobs as they were a couple of years ago. Numerous surveys show that fewer U.S. adults are currently seeking to leave their roles, compared with the job-switching frenzy of the pandemic years. Other data suggest job satisfaction is rising, and in interviews, formerly job-hopping workers say they’re content with the balance they’ve struck in the positions they have.
Those who are tempted to make a jump face a tightening job market and shrinking pay premium for switching jobs, federal data show. Applying for jobs right now, it’s like hitting your head against the wall,” says Heather Sundell, a director of social strategy and copywriting in Los Angeles. The current mood is a turn from recent years, when a red-hot labor market helped spur a wave of quits among American workers, or the “great resignation.” So different is the current mood that some labor economists have dubbed it the “big stay.”
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Israeli Air Strike Kills 29 People at Gaza Camp for Displaced - BBC
- Gaza Airstrike Hit as Displaced Gathered for Soccer Match, Witnesses Say – Reuters
- Biden Administration Agrees to Ship 500-Pound Bombs to Israel - WSJ
- Israel Military Tells Gaza City Residents to Leave - BBC
- Can Iran’s New President Change the Regime’s Confrontational Foreign Policy? – Center for Strategic Internationals Studies
- Hamas says Israel's deadly strike on a Gaza school could put cease-fire talks back to "square one" - CBS
- 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 Foils Assassination Attempt on Senior Military Officers - Newsweek
- High-Tech American Weapons Work Against Russia—Until They Don’t - WSJ
- Biden Pledges Air Defences for Ukraine as Nato Summit Begins - BBC
- Ukraine Reports Downing 14 Aerial Drones as Russia Attacks Port of Odesa - VOA
- As U.S. Elections Approach, Zelensky Performs Balancing Act - WSJ
- In a Diplomatic Quirk, Russia Chairs a UN Meeting Decrying its Strike on a Ukraine Kids’ Hospital - AP
- Russia Accuses Ukraine of Plot to Destroy Its Last Active Aircraft Carrier - 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
- Biden Opens NATO Summit Saying ‘We’re Stronger Than Ever’ In Closely Watched Speech - Forbes
- NATO Summit: Key Points from Washington Declaration - Reuters
- South Korea Issues Update on Threat From North - Newsweek
- Brazil's Bolsonaro May be Charged Over Jewel Sale - BBC
- 'No Time to Waste': UK's Chancellor of the Exchequer Rachel Reeves Takes Aim at Growth Barriers – Reuters
- China Says India has no Right to Develop Contested Border Region - VOA
- China's Xi Jinping Gets Mixed Reviews After A Decade In Power – Newsweek
- Shell, BP and TotalEnergies Invest in Major Abu Dhabi LNG Project - WSJ
- China Backs Yemeni Gov’t, Engages Houthis, Opposes Red Sea Attacks - gCaptain
Policy and Politics
Biden Outlines Regulatory Plans for the Rest of His Term
Last Friday, the White House published the Unified Agenda of Regulatory and Deregulatory Actions, which “show[s] agencies’ timelines for rules dealing with everything from natural gas power plants to household appliances.” Of particular importance to manufacturers are regulations from the Environmental Protection Agency, the Department of Energy and the Treasury Department.
Energy regs: The DOE is set to unveil regulations on the energy efficiency of several household appliances. The agency “plans to finalize regulations on commercial ice-makers in September, commercial refrigerators and freezers in November, walk-in coolers and freezers in November, residential boilers in December and other appliance categories.”
EPA rules: The EPA—a primary source of the flurry of federal regulation in the past year—is being closely watched for several pending rules. These include its highly anticipated rule on greenhouse gas emissions from existing natural gas power plants, expected to arrive in December. In April, the EPA released its final rule on emissions from existing coal-fired and new natural gas-fired power plants. While NAM outreach to legislators was critical in getting existing gas plants removed from the purview of these rules, the regulations issued are unachievable without permitting reform, as the NAM said at the time. A rule to set wastewater standards for per- and polyfluoroalkyl substances, or PFAS, from chemical and plastics plants will be proposed by September, the EPA said. In April, the EPA set the first-ever national drinking water rule limiting PFAS levels to “near zero,” a move the NAM said could “have adverse effects on manufacturers.”
Treasury rules: Treasury is on track to finish a proposal tied to the Inflation Reduction Act of 2022 that would give incentives to clean energy projects built next year “and potentially decades into the future.” The agenda includes a proposal to add credits under the IRA’s sections 45Y and 48E “for electric power projects that eliminate greenhouse gas emissions.” Treasury is reviewing public comments on its guidance for the IRA’s first clean hydrogen production tax credit, the 45V, which the NAM has urged it to revise. There is “no date set” for the rule’s finalization.
‘No Turning Back’: Hudson Tunnel Gateway Project Fully Funded After Signing
Lawmakers and transit officials are pledging 95,000 construction jobs, $20 billion in economic impact, and promising: no turning back. “This time it’s real,” exclaimed Sen. Majority Leader Chuck Schumer on Monday. For more than a decade, he has been a major backer of the $16.1 billion Gateway Hudson Tunnel Project, which includes a new rail tunnel linking New York and New Jersey — set to be open by 2035. The project for the new tunnel comes after the 110-year-old ones currently in use were damaged in Superstorm Sandy
Construction on both sides of the river is underway. There was heavy equipment on West 30th Street stabilizing the ground Monday for even bigger machines to be brought in to dig the new tunnel. The Tunnel Boring Machine — which will dig the bulk of the underwater tunnel — expected to begin spinning at the end of 2024 or early 2025. The machine will launch on the New Jersey side and will go through 2027. Another tube, which will start in Weehawken, would overlap somewhat and will be dug from 2026-2028. Supporters of Gateway say when it opens, there will be critical rail resiliency and redundancy to prevent commuting nightmares like the stalled trips plaguing NJ Transit and Amtrak passengers this summer.
Beryl, Now as Tropical Depression to Impact Midwest and New England: See projected Path
Tropical Depression Beryl is forecast to move northeastward, bringing heavy rain and flooding to central Arkansas and the Lower Ohio Valley Tuesday night and into the Lower Great Lakes and New England on Wednesday, according to the National Weather Service. "Widespread heavy rains and thunderstorms are likely along and to the northeast of the path of Beryl over the next two days," the NWS said, with rainfall totals of 2-5 inches expected from central Arkansas all the way up to parts of Vermont and New Hampshire.
Beryl unleashed a barrage of severe weather to southeast Texas on Monday, killing at least four people, flooding highways, closing oil ports, canceling more than 1,300 flights, and knocking out power to more than 2.7 million homes and businesses. According to the National Hurricane Center, Beryl, the season's earliest Category 5 hurricane on record, weakened from a hurricane after pounding the coastal Texas town of Matagorda, a coastal community between Corpus Christi and Galveston. It had sustained winds of more than 80 mph as it made landfall at 4 a.m. CT Tuesday.
Health and Wellness
Bird Flu Strains: Where are They Spreading Around the Globe?
Avian influenza, or bird flu, has public health officials on alert after an unprecedented spread in dairy cows in the United States this year. Four dairy workers have also tested positive in the country. A particularly severe variant of the H5N1 strain has been spreading around the world in animals since 2020, causing lethal outbreaks in commercial poultry and sporadic infections in other species from alpacas to house cats. Until this year, it had never infected cows.
Different bird flu strains have been found in Australia and Mexico in humans, while different H5 subtypes are also present around the world in both animals and humans, in countries including China and Cambodia. Most of the human cases reported exposure to poultry, live poultry markets, or dairy cattle prior to infection, but scientists are worried the virus could mutate in ways that make it more easily spread from person-to-person, which could spark a pandemic. The World Health Organization says the risk to people is low at this point. Below are occurrences of varying types of the bird flu virus that have been found in humans this year
Election 2024
- Why Some Democrats Are Sticking With Biden - WSJ
- Nancy Pelosi Avoids Endorsing Joe Biden - Newsweek
- Six States Move Toward Trump in Electoral College Ratings – Cook Political Report
- Biden Support Slips in Deep Blue New York: ‘We’re a Battleground State Now’ - Politico
- Donald Trump Addresses Vice President Speculation at Rally - Newsweek
- 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
Mortgage Refinance Demand Drops Further, Despite Homeowners Sitting on $17 Trillion in Equity
The recent run-up in home prices, a staggering increase of more than 40% from pre-pandemic levels, should have current homeowners rushing to refinance. But for most, pulling that cash out simply costs too much now that interest rates are more than twice what they were just two years ago. Applications to refinance a home dropped last week for the fourth straight week, down 2%, according to the Mortgage Bankers Association’s seasonally adjusted index. Last week’s results included an adjustment for the July Fourth holiday. Demand is still 28% higher than it was the same week one year ago, when rates were 7 basis points higher.
Homeowners were sitting on a collective $17 trillion in equity at the end of the first quarter of 2024, according to CoreLogic. In just one year, homeowners gained $1.5 trillion, or $28,000 per borrower. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased last week to 7.00% from 7.03%, with points falling to 0.60 from 0.62 (including the origination fee) for loans with a 20% down payment. Applications for a mortgage to purchase a home increased 1% for the week but were 13% lower than the same week one year ago.
Samsung Union Strike Could Impact Global Memory Chip Supplies
Samsung Electronics’ unionized workers in South Korea announced an indefinite strike on Wednesday to step up their campaign for a pay raise, a move that threatens to disrupt the production of the company’s advanced memory chips used in AI accelerators, computers and smartphones. The National Samsung Electronics Union said the decision to go on an indefinite strike was made after the company’s leadership failed to engage in dialogue with them during a three-day walkout by some of its members, Yonhap News Agency reported.
According to the union, around 6,500 of its members are on strike—including more than 5,000 workers from the company’s semiconductor division. Samsung told several news outlets that the strike hasn’t caused any disruptions so far. On its website, the union claimed it had “clearly identified line production disruptions” and warned the company would “regret the decision” to not engage in dialogue. According to Bloomberg, the union is first targeting a smaller chip fabrication plant before turning its focus towards Samsung’s high-bandwidth memory chip production facility in Pyeongtaek.
Big Pharmacy-Benefit Managers Increase Drug Costs, FTC Says
The Federal Trade Commission on Tuesday released a long-awaited report slamming the pharmacy benefit manager industry for manipulating the drug supply chain to profit at the expense of patients and independent pharmacists. The report, which focuses on PBMs’ pharmacy practices, gives further credence to a mountain of research finding the companies are contributing to higher drug costs. It could also put further pressure on Congress to act to curb anticompetitive business practices in the sector after momentum around PBM reform fizzled out late last year.
In the report, the FTC highlights how unchecked consolidation has created a market where the six largest PBMs control almost 95% of the prescriptions filed in the U.S., allowing them to influence which drugs are available — and at what price. It stems from the agency’s yearslong inquiry into the drug middlemen, which remains ongoing, and comes after a bipartisan group of senators urged the agency to release a status report on the investigation earlier this year. The Pharmaceutical Care Management Association, the national PBM lobby, quickly denounced the report as one-sided. The companies have attempted to sidestep blame for problems in the U.S. drug supply chain by pointing the finger at drugmakers, which set list prices for medications.
NATO Signs $700 Million Stinger Missile Contract Amid Production Push
NATO has signed a nearly $700 million contract to have member countries produce more Stinger missiles, one of many steps the alliance is pressing at its summit in Washington to get each country to boost its own weapons production capabilities. Outgoing NATO Secretary General Jens Stoltenberg announced the contract Tuesday at a Chamber of Commerce industry day focused on increasing NATO member countries' defense manufacturing capabilities to deter future attacks.
The Stinger is a portable surface-to-air defense system that can be carried and fired by troops or mounted onto a vehicle and used as short-range defense against aircraft. The Raytheon-produced system was one of the first weapons the U.S. shipped to Ukraine following Russia’s 2022 invasion. It is now among hundreds of types of systems, and tens of millions of rounds of ammunition, artillery and missiles, that countries have pulled from their stockpiles to help Ukraine. But the rapid push over the past two years exposed that defense firms both in the U.S. and in Europe were not set to produce at the levels needed in a major conventional war.
Patent Delays Are Up, But There Are Ways to Ease the Slog
Innovation in the mechanical and industrial space tends to be more incremental than elsewhere, but it is dynamic and constantly evolving. Manufacturers aiming to obtain patent protection for their innovations in these areas should be aware of several recent developments, some of them positive and others challenging to navigate. First, in recent years, the number of patent applications related to additive manufacturing has increased significantly, encompassing improved component design, manufacturing processes and equipment. A September 2023 report by the European Patent Office revealed that between 2013 and 2020, international additive-manufacturing technology patent applications grew at an average annual rate of 26.3%. For all other technologies, the average growth rate was 3.3%. Growth was particularly pronounced in the medical and transportation sectors—where companies have used additive manufacturing to print patient-specific implants and prosthetics—and aircraft parts, including turbine blades, fuel nozzles and air foils.
Second, we have observed a significant increase in the number of patent applications directed to clean-tech and renewable technologies. In 2021, the last year for which comprehensive data is available, the U.S. Patent and Trademark Office (USPTO) received approximately 40,000 patent applications directed to clean-tech technologies (which is equal to about 7% of total applications filed with the USPTO). And according to research available from the WIPO (the United Nations’ World Intellectual Property Organization) and the law firm Mathys & Squire, we know that:
This $1.5 Billion AI Company Is Building A ‘General Purpose Brain’ For Robots
Robots, whether they are bipedal humanoids handling basic factory tasks or four-legged military “robot dogs” intended for urban combat, need brains. Historically, these have been highly specialized and purpose-built. But a Pittsburgh-based robotics startup claims it’s created a single off-the-shelf intelligence that can be plugged into different robots to enable basic functions. Founded in May 2023 by Abhinav Gupta and Deepak Pathak, two former Carnegie Mellon University professors, Skild AI has created a foundational model for what it describes as a “general purpose brain” that can be slotted into a variety of robots, enabling them to do things like climbing steep slopes, walking over objects obstructing its path and identifying and picking up items.
The robots using Skild’s AI models also demonstrated “emergent capabilities”— entirely new abilities they weren’t taught. These are often simple, like recovering an object that slips out of hand or rotating an object. But they demonstrate the model’s ability to perform unanticipated tasks, a tendency that occurs in advanced artificial systems like large language models. Skild has pulled this off by training its model on a massive database of text, images and video — one it claims is 1000 times larger than those used by its rivals. To create this massive database, the cofounders, both former AI researchers at Meta, blended a mix of data collection techniques, which they have developed and tested over years of research.
Walmart is Opening Five Automated Distribution Centers as it Tries to Keep its Grocery Dominance
Walmart said Wednesday that it will open five automated distribution centers for fresh food across the country, as the retailer chases efficiency and its online grocery business grows. The discounter’s new facilities are roughly 700,000 square feet on average. Chilled and frozen areas have automation that stores and retrieves perishable items, such as strawberries and frozen chicken nuggets that are later sold at stores or added to customers’ e-commerce orders.
Walmart is the nation’s largest grocer, but it is modernizing its supply chain to keep up with customers who are increasingly picking up orders in the parking lot or getting groceries delivered to their doors. Store pickup and delivery drove the company’s 22% e-commerce gains in the U.S. in its most recent quarter. The retailer has been automating supply chain facilities across the country, including distribution centers that handle shelf-stable items and fulfillment centers that help pack and ship online orders. Automation, along with higher-margin businesses like advertising, is a key reason why CEO Doug McMillon said in April 2023 that Walmart would grow its profits faster than sales over the next five years.
Breeze Airways Add Twice Weekly Flights to Vero Beach From Stewart Newburgh
The Port Authority of New York and New Jersey today announced a further expansion of service at New York Stewart International Airport (SWF), with the addition of a new route to Vero Beach, Fla. (VRB), from Breeze Airways beginning in November. The twice-weekly service between Newburgh, N.Y., and Vero Beach, Fla., will operate on Thursdays and Sundays beginning Thursday, Nov. 21. It builds on Breeze Airways’ other successful services from New York Stewart, including routes to Orlando and Fort Myers, Fla., and Charleston, S.C.
“We’ve seen tremendous demand from New York to Vero Beach in the last couple of years,” said Breeze Airways CEO David Neeleman. “So, I’m thrilled to announce today that we’re adding service from New York Stewart, joining flights to the popular Treasure Coast from Long Island-Islip, Westchester, Hartford and Providence.” New York Stewart is an economical, convenient alternative to the New York/New Jersey metropolitan region’s airports, offering minimal wait times at security, seamless border and customs checks, and simple baggage claim. The airport’s offerings also include:
Read more at the Port Authority of NY and NJ