Member Briefing July 25, 2024
US S&P Global Manufacturing PMI Slumps to 49.5, Services PMI Improves to 56 in July
The business activity in the US private sector continued to expand at a healthy pace in July, with the preliminary S&P Global Composite PMI improving to 55 from 54.8 in June. The S&P Global Manufacturing PMI declined to 49.5 from 51.6 in the same period, while the Services PMI rose to 56 from 55.3. Assessing the PMI surveys' findings, "the flash PMI data signal a ‘Goldilocks’ scenario at the start of the third quarter, with the economy growing at a robust pace while inflation moderates," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
"In terms of inflation, the July survey saw input costs rise at an increased rate, linked to rising raw material, shipping and labour costs," Williamson added. "These higher costs could feed through to higher selling prices if sustained, or cause a squeeze on margins."
Mid-Atlantic Manufacturing Gauge Slips In July
Manufacturing activity in the mid-Atlantic region declined sharply in July, with the Federal Reserve Bank of Richmond's composite manufacturing index plunging to -17, down from -10 a month earlier. The Richmond Manufacturing Index is a gauge of manufacturing activity in the Fifth Federal Reserve District (Maryland, North Carolina, the District of Columbia, Virginia, most of West Virginia, and South Carolina) compiled from a survey of ~100 manufacturers.
The composite manufacturing index is an average of indexes on shipments, new orders, order backlogs, capacity utilization, supplier lead times, number of employees, average work weak, wages, inventories, and capital expenditures. Notable contractions in shipments, new orders and employment fueled the region's decline. Despite the downbeat outlook, companies expect shipments and new orders to pick up over the remainder of the year.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Israeli Forces Recover Bodies Of Two Hostages From Gaza, Army Radio Reports - Reuters
- Red Sea Shipping Crisis Worsens After Israel-Houthi Attacks - DW
- Tensions In Yemen Could Lead To ‘Devastating’ Regional Escalation, Says UN Envoy – France 24
- Gaza's Insulin Crisis: How Diabetics Are Fighting To Survive - Newsweek
- Netanyahu Sketches Vague Outline For Post-War Gaza - Reuters
- Netanyahu Dismisses Critics, Scolds Protesters In Defiant Speech To Congress – Washington Post
- 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
- NATO Ally's F-16 Jets Scrambled After Russian Drone Crosses Border – Newsweek
- Russian Attacks Kill Three, Damage Swiss NGO's Office In Kharkiv - Reuters
- China Casts Itself as Peacemaker in First High-Level Talks With Ukraine Since Russia’s Invasion - WSJ
- Breath Bated, Russia And Ukraine Monitor US As Biden Withdraws From Race - Politico
- Will Russia and Ukraine Face Each Other at 2024 Olympics? - Newsweek
- Russia: Military intelligence officer injured in car bombing - DW
- 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
- Rugby Sevens And Football Get 2024 Paris Olympics Ball Rolling - France 24
- Korean Tensions Flare As Seoul, Pyongyang Take Opposing Sides On Ukraine – Nikkei Asia
- Kenya's Ruto Names Opponents To Cabinet, Protesters Slam 'Corrupt' Deal - Reuters
- French Security Forces Intercept Six Drones A Day Near Olympics Sites, PM Says – France 24
- France’s Far Right May Work With Far Left To Torpedo Macron’s Pension Reform - Politico
- New Zealand Inquiry Finds 200,000 Children And Vulnerable Adults Abused In Care - Forbes
- Typhoon Gaemi Pounds Philippines, Shuts Taiwan’s Financial Markets and Offices. -Bloomberg
- Bank Of Canada Cuts Rates, Sees Weaker Economy In 2024 - Reuters
- Honda To Cut ICE Car Production Capacity In China - Reuters
Policy and Politics
NLRB Withdraws Appeal of 2023 Joint Employer Rule Case, Will Revert to Trump-era Rule
The National Labor Relations Board voluntarily dismissed Friday its appeal of a Texas federal judge’s decision enjoining its joint employer final rule. In a July 19 court filing for the case, NLRB v. Chamber of Commerce, the Board said that it would “like the opportunity to further consider the issues identified in the district court’s opinion” and that dismissal would “allow it to consider options for addressing the outstanding joint employer matters before it.” The Board said Friday that it “remains of the opinion” that the joint employer rule is lawful.
The 2023 joint employer final rule, effectively blocked due to the Texas district court’s decision, would have changed NLRB’s interpretation of the National Labor Relations Act’s joint employer standards, specifying that an entity may be considered a joint employer of another employer’s employees if the two share or codetermine essential terms and conditions of employment. Under the rule, entities would be considered joint employers if they possess or exercise either direct or indirect control over one or more essential terms and conditions of employment.
Philly Judge Won't Block FTC Noncompete Ban
A federal judge rejected a small Pennsylvania company’s challenge of the Federal Trade Commission’s ban on noncompete contracts, creating a divide in the judiciary over the regulator’s powers. The FTC has clear legal authority to issue “procedural and substantive rules as is necessary to prevent unfair methods of competition,” said Judge Kelley Brisbon Hodge of the US District Court for the Eastern District of Pennsylvania. ATS Tree Services has failed to establish it would eventually succeed on the merits of its argument that the agency lacks such power, she said.
Hodge, an appointee of President Joe Biden, is the second federal judge to preliminarily rule on a challenge to the FTC rule barring noncompete provisions in employment agreements. Such contracts generally restrict workers from switching jobs in a particular industry for a set period of time. A judge appointed by Donald Trump in Texas on July 3 sided with a Texas tax firm and the US Chamber of Commerce in blocking the rule. Judge Ada Brown said the “FTC lacks substantive rulemaking authority with respect to unfair methods of competition” under the FTC Act, the opposite conclusion that Hodge reached.
Manchin, Barrasso Announce Permitting Reform Deal, Breaking Lengthy Impasse
Sens. Joe Manchin (I-W.Va.) and John Barrasso (R-Wyo.) have reached an agreement on a bill to speed up the nation’s energy and infrastructure projects after about two years of trying to reach a deal. The bill takes on a suite of issues known collectively as permitting reform. It is expected to bolster the buildout of both renewable and fossil fuel energy sources. Passing a permitting reform bill has been a long-time priority of Manchin’s and is expected to be considered a legacy issue for him after he departs the Senate next year. It’s not immediately clear whether party leaders have bought into the plan, if it will be brought to the floor or if it will garner enough votes to evade a filibuster.
The bill would enhance that ability by shortening the process to allow federal energy regulators to approve new power lines. The bill also contains provisions that boost fossil fuels. For one, it would set a deadline for the Energy Department to make a decisions about whether to approve or reject a gas export project — effectively barring policies like President Biden’s now-stalled pause on gas export approvals. The legislation also seeks to make it easier to extract oil gas and coal from public lands and to build renewable projects there. It would additionally require the federal government to give companies at least one opportunity each year to bid on chances to drill offshore and to bid on chances to build offshore wind farms between the years 2025 and 2029.
Health and Wellness
‘Very High’ COVID Levels Detected In 7 States
Coronavirus levels in California’s wastewater have reached a “very high” level for the first time since last winter. According to the most recent data from the Centers for Disease Control and Prevention (CDC), the trend matches what’s being reported in several other states. The Golden State was one of seven states with “very high” levels; the others were Arkansas, Florida, Maryland, Nevada, Oregon and Texas. In Los Angeles County, the nation’s most populous, coronavirus levels in wastewater have also increased.
Overall, coronavirus levels have increased nationwide, indicating a summer trend continuing to grow. Two new COVID variants, known as FLiRT, are responsible for more than half of the latest rise in cases. Experts have found that the latest variants are highly transmissible but don’t cause more severe disease.
Election 2024
- Biden’s Formal Campaign Exit Kickstarts Brutal Trump-Harris Battle - WSJ
- Democratic Convention Planners Are Working To Pull Off A Dramatic Biden-Harris Role Reversal - AP
- Biden Says Best To Pass 'Torch To A New Generation' - CNN
- Harris Skipping Netanyahu Address Shows Daylight With Biden On Israeli Leader – The Hill
- Harris Campaign Memo Lays Out Path To Victory In November – 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
CEOs Need a Game Plan as US Elections Approach
2024 was expected to be a year of highly consequential elections globally, and it certainly hasn’t disappointed. Only midway through the year, voter preferences have already been far more volatile and unpredictable than even seasoned political scientists expected, creating uncertainty in both election outcomes and government continuity. In Europe, the political center held, barely, in the EU parliamentary elections, despite significant far-right gains. Elsewhere, Indian Prime Minister Narendra Modi won re-election, as expected, but by a far smaller margin than anticipated. South Africa’s ANC wasn’t so fortunate, losing its majority for the first time. And in Taiwan, the surprise for many Western pundits was the measured reaction of the Chinese government to the victory by the independence-leaning DPP candidate, Lai Ching-te.
Now the focus shifts to the most consequential election of all – the United States presidential race. In the face of such uncertainty, it is tempting for C-Suite executives to proceed with current strategies and plans, and merely wait to see what the outcome will be. However, such passiveness would be a significant error, as different election outcomes will have profoundly different effects on most industries and businesses. Instead, companies should urgently analyze U.S. election scenarios to avoid potentially costly errors and give executives more time to mitigate risks and prepare for opportunities.
Here are some scenarios to consider at IndustryWeek
China’s Threat to Ban Critical Mineral Exports Is Not a Bluff
Over the past year, China has imposed export controls on gallium, germanium and graphite—all critical minerals necessary in important downstream goods like semiconductors. As U.S.-China competition intensifies, it’s a real possibility that China could implement further controls—even bans—on mineral exports to the United States. China’s threat to ban critical minerals exports is not a bluff, and such bans could create mineral shortages in the United States.
To mitigate the risks of potential Chinese export bans in the short term, the U.S. government should increase its mineral stockpiling. If China imposes mineral export bans, the U.S. government could sell stockpiled minerals to key U.S. industries like the defense industrial base by declaring a national emergency, which is a statutory requirement for releasing minerals from the National Defense Stockpile. Currently, however, the stockpile is only around 1% of its 1962 value. To mitigate the risks of potential Chinese export bans in the long term, the U.S. government should increase funding for mineral exploration, including drill programs to locate and define mineral resources as well as technical studies to evaluate the project.
GE Aerospace Profit Soars on Surging Demand for Engines
GE Aerospace raised its outlook after quarterly results beat Wall Street estimates, pointing to strong demand for its commercial engines and services. Shares (GE) rose 6.7% to around $173.67 in early trading. The maker of jet engines reported an 18% jump in orders from a year earlier to $11.2 billion. Revenue rose nearly 4% from a year earlier to $9.09 billion. Analysts polled by FactSet had expected $8.44 billion. Adjusted earnings, stripping out one-time items, jumped to $1.20 a share, from 74 cents a share last year.
"The GE Aerospace team delivered another strong quarter marked by double-digit increases across orders, operating profit, and free cash flow," CEO H. Lawrence Culp Jr. said in a statement. "Given our performance year to date and momentum across our businesses, we are raising our full-year profit and free-cash-flow guidance. GE guided for full-year adjusted earnings of $3.95 to $4.20 a share, raising both ends of its range by 15 cents. The company lifted its guidance for annual operating profit to between $6.5 billion and $6.8 billion. It forecast free cash flow of $5.3 billion to $5.6 billion, having previously guided for more than $5 billion.
Tesla Reports 7% Drop In Auto Revenue As Earnings Fall Short Of Wall Street Estimates
Tesla reported weaker-than-expected earnings for the second quarter as automotive sales dropped for a second straight period. The stock slid more than 8% in extended trading. Earnings per share were 52 cents adjusted and revenue was $25.50 billion. Revenue increased 2% from $24.93 billion a year earlier, Tesla said in an investor deck on Tuesday. But automotive revenue dropped 7% to $19.9 billion from $21.27 billion in the same quarter a year ago. Auto revenue included regulatory credits of $890 million, more than triple the figure from last year.
After a rocky first half of the year that saw Tesla cut more than 10% of headcount, the company reported better-than-expected deliveries for the second quarter earlier this month. However, deliveries were still down from a year earlier for a second straight period. Tesla remains the top seller of electric vehicles in the U.S. by far, but is losing market share to a growing number of rivals due in part to its aging lineup of sedans and SUVs and the impact of Musk’s incendiary and political commentary.
Porsche Waters Down EV Ambitions, Says Transition Will Take 'Years'
Luxury carmaker Porsche expects the transition to electric vehicles to take longer than it thought, it said on earlier this week, having previously said its aim was for 80% of sales to be all-electric by 2030. It has now watered down that goal by tying it explicitly to customer demand and developments in the electromobility sector, saying in a statement only that it could now deliver on the 80% target if those factors warrant it.
"The transition to electric cars is taking longer than we thought five years ago," Porsche said in a statement. “Our product strategy is set up such that we could deliver over 80% of our vehicles as all electric in 2030 - dependent on customer demand and the development of electromobility." Executives at carmakers from Mercedes-Benz to Renault have warned in recent months that goals they set in recent years for fully electric sales in the next decade were too ambitious as customers remained reticent to make the switch away from gas-powered cars.
Despite Production Delays Aircraft Orders Abound at Farnborough
Aircraft makers are busy securing multiple plane orders at the Farnborough Airshow in the U.K., one of the biggest events for the aviation world, despite production and delivery delays as well as supply chain issues. The event, which began on Monday and ends on Friday, has seen 191 aircraft orders so far. According to trade organization ADS Group, day 1 of the airshow saw around $50.72B in deals signed.
Boeing bagged the most orders (118) as of the second day of the event, including 20 777-9s (yet to be certified) for Qatar Airways. The airline plans to enter these planes into service in Q1 2026. Korean Air also ordered at least 40 wide-body jetliners from Boeing. Rival Airbus secured 69 orders, including 20 A350-900s for Japan Airlines and 20 Airbus A330neo planes for Vietjet. Airbus also displayed its A321XLR, the world's longest-range single-aisle plane. Planemakers have been facing supply chain headwinds. Boeing's management, however, appeared to be more confident on the airshow's first day, forecasting that production will improve in the second half of 2024 and it will end the year consistently producing 38 737 Max planes per month. Airbus management, meanwhile, cautioned on ongoing plane component constraints.
Lockheed Martin Lifts 2024 Sales Target On Fighter Jet, Missile Demand
U.S. defense company Lockheed Martin raised its annual sales target on Tuesday, following the unexpected resumption of deliveries of its F-35 aircraft after the Pentagon began accepting the jets last week. It expects 2024 sales to be between $70.5 billion and $71.5 billion, versus $68.5 billion to $70 billion forecast earlier.
The U.S. resumed taking F-35 deliveries after a months-long pause on delays on its software upgrade. Lockheed has been upgrading the jets under Technology Refresh 3, or TR-3 program, that gives the F-35 better displays and processing power. The delivery resumption includes incomplete software upgrades and Pentagon will withhold some payment, the details of which is unknown, until the remaining enhancements are finished.
New Home Sales Retreat in June
New home sales unexpectedly dropped last month as high mortgage rates continued to keep potential buyers on the sidelines. Sales of new single-family homes came in at a seasonally adjusted annual pace of 617,000 in June, according to government data released Wednesday, marking a seven-month low. This represented a 7.4% drop from the same time last year and a decline of 0.6% from the revised May figure. Economists polled by Bloomberg were expecting new home sales to rise to a seasonally adjusted annual rate of 640,000 units.
Ongoing challenges, including high mortgage rates and elevated home prices, continue to constrain buyer activity. Mortgage rates have been stuck at or near 7% for the past year, which has consequently stifled buyer appetite for homes. Despite the drop in June sales, the government data showed the median sales price of a new home increased to $417,300 in June from $407,100 in May. A year ago, the median sales price of a new home was $417,600.
Google Earnings Top Estimates With $24 Billion Quarterly Profit
Google parent Alphabet came in above Wall Street’s lofty expectations in its second-quarter earnings report released Tuesday afternoon, as the internet behemoth continues to rake in tens of billions of advertising dollars. Alphabet’s $84.7 billion of second-quarter revenue was slightly above average analyst estimates of $84.2 billion, according to FactSet, a 14% year-over-year increase. The company tallied earnings per share of $1.89, also topping forecasts of $1.84, while its $23.6 billion net income was just shy of Q1’s prior record of $23.7 billion. Shares of the Silicon Valley kingpin rose slightly immediately after the earnings announcement.
Alphabet is an advertising business at its core. About three-fourths of its Q2 revenues were from ads, including $49 billion from its search business and $9 billion on YouTube ads. Alphabet’s potential largest-ever acquisition, a $23 billion purchase of Israeli cybersecurity firm Wiz, fell through late Monday after the sides were reportedly in advanced talks for a deal last week.
United Airlines & NOAA To Monitor Greenhouse Gas Emissions With Boeing 737
United Airlines and the National Oceanic and Atmospheric Administration have come together to measure atmospheric pollutants and greenhouse gases by equipping one of the carrier’s Boeing 737 planes with an instrument. This will not only reduce the cost for the US government for such projects but also help scientists measure greenhouse gas emissions more accurately in the US.
The deal includes equipping one of United’s Boeing 737 aircraft with an instrument that measures carbon dioxide, methane, and other greenhouse gases. This will also help scientists better forecast weather. According to Bloomberg, the 100-pound instrument package will be 22 inches long and 18 inches across and will be attached to the fuselage of the 737. The Cooperative Research and Development Agreement (CRADA) was announced at the White House Super Pollutants Summit in Washington D.C. Sarah Kapnick, Ph.D., NOAA’s chief scientist, said,