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Member Briefing July 30, 2024

July 30, 2024

Posted By: Harold King in Daily Briefing,

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Durable Goods Orders Declined 6.6% in June

The Commerce Department said durable goods orders plunged by 6.6 percent in June after inching up 0.1 percent in May. Economists had expected durable goods orders to rise by 0.3 percent. The unexpected decrease by durable goods orders came as orders for transportation equipment plummeted by 20.5 percent in June after climbing by 0.6 percent in May. Orders for non-defense aircraft and parts led the way lower, showing a 127.2 percent nosedive in June after jumping by 2.0 percent in the previous month.

Excluding the steep drop in orders for transportation equipment, durable goods orders rose by 0.5 percent in June after edging down by 0.1 percent in May. Ex-transportation orders were expected to tick up by 0.2 percent. The report said orders for machinery and electrical equipment, appliances and components jumped by 1.6 percent and 1.3 percent, respectively, while orders for computers and electronic products climbed by 0.8 percent. Orders for non-defense capital goods excluding aircraft, a key indicator of business spending, shot up by 1.0 percent in June after slumping by 0.9 percent in May. Shipments in the same category, which is the source data for equipment investment in GDP, inched up by 0.1 percent in June after falling by 0.7 percent in May.

Read more at Nasdaq

America’s Post-Covid Factory Boom Is Running Out of Steam

More U.S. manufacturers are rethinking their plans as they brace for an extended slump in demand. Higher interest rates, rising operating costs, a strengthening U.S. dollar and lower selling prices for commodities are dampening activity at factories across the country. Executives for the makers of long-lasting items such as cars, crop-harvesting combines and washing machines are projecting challenging business conditions for the remainder of the year.

The deceleration follows years of robust growth in sales and profits that started during the depths of the Covid-19 pandemic. Supply-chain bottlenecks made it hard to get manufactured goods when consumers stepped up their spending. Companies ordered more to compensate for goods or materials that were hard to obtain. That stoked inflation. But higher prices eventually reduced consumers’ enthusiasm for buying. Government spending programs to support big new plants for making semiconductors, electric-vehicle batteries and power-generating infrastructure are offsetting some of the industry weakness. Some defense companies making weapons and other gear as conflicts in Ukraine and Gaza roll on are operating at robust levels.

Read more at the WSJ

International Trade Deficit Fell Slightly in June

The Commerce Department’s released its advance international trade data for June last week. According to the report the trade deficit decreased to $96.8 billion from $99.4 billion in May. Exports of goods rose to $172.3 billion, an increase of $4.3 billion compared to May. Imports of goods also increased to $269.2 billion, $1.7 billion more than in May. Exports rose 2.5%, while imports were 0.7% higher. Compared to June 20 23, exports are up 5.7%, while imports are up 6.9%.

For the month, foods, feeds and beverage exports rose 4.9%, capital goods exports increased 3.6% and automotive vehicles grew 3.5%. On the import front, consumer goods increased 3.3%, while other goods rose 2.7% and capital goods grew 2.6%.

Read more at Census.gov

Global Headlines

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Policy and Politics

Biden Reveals Supreme Court Reform Plans—Including Term Limits And Ethics Code

Biden laid out three judicial reform proposals in a White House statement Monday: term limits for Supreme Court justices, a binding code of conduct for the top court and no immunity for crimes committed by former presidents during their term in office. The statement criticized the Supreme Court for overturning “long-established legal precedents protecting fundamental rights.”

On the presidential immunity issue, Biden calls on Congress to pass a new constitutional amendment called the “No One Is Above the Law Amendment.” He also backed a proposal in which a sitting president will appoint a Justice once every two years, after which they can serve in the Supreme Court for 18 years. Biden urged Congress to pass binding ethics code that “require Justices to disclose gifts, refrain from public political activity, and recuse themselves from cases in which they or their spouses have financial or other conflicts of interest.” Because the Constitution provides life tenure to justices, it is unclear whether Congress could devise a way to impose term limits on the Supreme Court. And while justices have complied with financial disclosure laws, some justices have questioned whether Congress can impose rules on a coequal branch of government.

Read more at Forbes

DOL's New Fiduciary Rule On Hold, As Judge Grants Insurer Groups' Request For Injunction

The Department of Labor's new fiduciary rule, which was set to go into effect September 23, is now on hold, as a Texas federal judge has granted a request by an insurance industry trade association to temporarily block the rule that classifies more retirement advice providers as fiduciaries, in Federation of Americans for Consumer Choice, et al. v. U.S. Department of Labor, et al.

The Federation of Americans for Consumer Choice (FACC), a trade organization whose members are independent marketing associations, insurance agents and agencies that market fixed annuities, filed a lawsuit against the DOL on May 2. FACC is likely to succeed on the merits of their claims because the new fiduciary rule conflicts with the Employee Retirement Income Security Act by redefining "investment advice fiduciary" to include non-trust-and-confidence relationships, said Judge Jeremy Kernodle of the US District Court for the Eastern District of Texas, as he issued a preliminary injunction of the DOL's new rule.

Read more at Benefits Pro

Health and Wellness

It’s Not 8 Glasses A Day Anymore. Here’s How Much Water You Should Drink Each Day

The average human body is more than 60% water. Water makes up almost two-thirds of your brain and heart, 83% of your lungs, 64% of your skin, and even 31% of your bones. It’s involved in almost every process that keeps you alive. So if you’ve hopped on the water-drinking bandwagon, you’re doing yourself a big solid. “Water is essential for your body’s survival,” says Crystal Scott, registered dietitian-nutritionist with Top Nutrition Coaching. “It helps regulate your temperature, transports nutrients, removes waste, lubricates your joints and tissues, and it also plays a crucial role in maintaining the delicate balance of electrolytes and fluids in your body.”

The common rule of thumb you’ve likely heard is the 8×8 rule: Drink eight eight-ounce cups of water a day. If you’re achieving that, you’re doing well, says Scott. But it’s possible you could benefit from some adjustments. “I don’t think that amount is necessarily wrong, but I think research over time has definitely evolved,” she says. “Water recommendations are going to vary depending on age, sex, and activity level.” The National Academies of Science, Engineering, and Medicine recommends an average daily water intake of about 125 ounces for men and about 91 ounces for women. If you’re not filling up a water bottle to exactly that amount every day, you’re probably still close or even over, because you also get water from food, says Scott.

Read more at Fortune Well

Election 2024

Industry News

Wallets Remain Light - Americans Saved The Least Amount Last Month Since 2022

Americans’ leftover income fell to its lowest level since 2022 last month, according to government data released Friday morning, as the effects of the high-inflation economy roar even as headline economic growth proves strong and the stock market trades at record levels. The national personal saving rate, the proportion of monthly disposable income leftover after expenditures, fell from 3.5% in May to 3.4% in June, according to the Bureau of Economic Analysis’ monthly release on personal income and outlays looking at how Americans spend and save. That’s the lowest monthly reading since December 2022.

The 3.4% savings rate is less than half of June 2019’s 7.1%, before the COVID-19 pandemic upended the economy and how Americans allocate their money. And the personal saving rate never fell below 4.5% for the entire 2010s, indicative of the financial challenges many Americans face today despite robust overall growth. The data was a secondary component of the release, which includes the Federal Reserve’s favored core personal consumption expenditures (PCE) inflation metric, which matched economist estimates of 2.6% inflation, the 40th consecutive month in which core PCE came in above the Fed’s 2% target.

Read more at Forbes

Ford, GM, Stellantis Face A Daunting Second Half Of 2024

The last time shares of Ford Motor dropped by more than 18% in a day, as they did last week, the U.S. automotive industry was on the brink of bankruptcy during the Great Recession. Ford, which avoided bankruptcy in 2008-2009, is far from any sort of such disaster, but the freefall in shares after the company missed Wall Street’s earnings expectations is the leading example of the uphill battle automakers face for the remainder of the year.

The U.S. market – a profit engine for most automakers – is normalizing after years of record high prices, low vehicle inventories and resilient demand. Inventories, especially for the Detroit automakers, are rising, and vehicle pricing is slowly declining. Wall Street has been waiting for that set of circumstances for some time, with the cyclical nature of the auto industry ushering in a down period.

Read more at CNBC

Average Cost Of Data Breach Climbed To Record $4.45 Million Last Year, Research Finds

IBM Security analyzed the rising expense associated with cyberattacks in its Cost of a Data Breach Report 2023. "Globally, the average cost of a data breach rose to $4.45 million, a $100,000 increase from 2022," the report said. "This represents a 2.3% increase from the 2022 average cost of $4.35 million. Since 2020, when the average total cost of a data breach was $3.86 million, the average total cost has increased 15.3%." Among the report's key findings:

Slightly more than half of organizations plan to increase security investments as a result of a breach. The top areas identified for additional investments included incident response planning and testing, employee training and threat detection and response technologies.
Extensive security AI and automation has a $1.76 million impact on reducing costs and minimizing time to identify and contain breaches. Organizations that used these capabilities extensively within their approach experienced, on average, a 108-day shorter time to identify and contain the breach.
Only one-third of companies discovered a data breach through their own security teams, highlighting a need for better threat detection. Two-thirds of breaches were reported by a benign third party or by the attackers themselves. When attackers disclosed a breach, it cost organizations nearly $1 million more.
Eighty-two percent of breaches involved data stored in the cloud, whether in public, private or multiple environments. Attackers often gained access to multiple environments, with 39% of breaches spanning multiple environments and incurring a higher-than-average cost of $4.75 million.

Read more at Benefits Pro

PepsiCo Is Using Robotics And AI-Powered Crop Planning To Transform Its Supply Chain

PepsiCo generated more than $91 billion in 2023 from the sales of more than 500 brands worldwide, including its namesake soda, Lay's, Doritos, Gatorade, and Mountain Dew. The company's earnings for the first two quarters of 2024 exceeded Wall Street's expectations, but volume in North America for the Frito-Lay and beverages businesses has been declining as consumers have pushed back against years of price hikes. Athina Kanioura, PepsiCo's chief strategy and transformation officer, described investments in PepsiCo's seed-to-shelf supply chain as the "glue" in the company's future ability to deliver higher profits and revenue growth. And it all begins with the work done in the field.

Workers at manufacturing facilities and distribution centers and the unions that represent them often bristle at automation, which can lead to layoffs. Food producers are also confronting a generational shift. Research from McKinsey suggests t not enough of them are taking jobs at factories to fill vacancies. PepsiCo trains workers to monitor autonomous machines and ensure they're working safely and efficiently. Its modernization efforts include how it puts together variety packs, such as those containing several small bags of Ruffles, Doritos, Cheetos, and Fritos. Even as it has invested in automation, PepsiCo's total workforce has swelled: It grew by 20%, to 318,000, over the five years that ended in 2023.

Read more at Business Insider

Nissan Cuts Output At Top Japanese Plant, Sources Say

Nissan cut planned production by a third at its top Japanese plant this month, a move that will also see it slash output of a flagship crossover model, two people said, as it struggles with weak U.S. demand for its ageing line-up. The Japanese automaker on Thursday reported an almost complete wipe-out in April to June profit and cut its full-year outlook after it was forced to offer deep discounts in the U.S., highlighting the deepening risk it faces in its largest market.

Unlike rivals Toyota and Honda, Nissan doesn't offer hybrid models in the U.S. and therefore hasn't benefitted from recent upswing in demand from U.S. consumers for hybrids as enthusiasm around EVs has cooled. The car maker now plans to produce just under 25,000 vehicles at its Kyushu plant in southwest Japan this month, according to two people with knowledge of the situation. Both declined to be identified because the information isn't public. The company expects to make around 10,000 of the Rogue crossover for export at the plant, half of what it had previously planned to make this month of the popular car, the sources said.

Read More at Reuters

Global Steel Output is Flat at Midyear

Through June 30, year-to-date global raw steel production stands at 954.6 million metric tons, unchanged from the same date of one year ago, with declining output in most of the world’s largest steelmaking nations. Total global production for the month of June was 161.4 million, down -2.3% from May but slightly above (+0.5%) higher than the tonnage recorded for June 2023.

The global steel industry is coping with a range of issues undermining industrial and construction demand, the most pressing of which apparently is persistent inflation and high interest rates. When the World Steel Assn. issued a semi-annual outlook report for steel demand, it predicted that total demand for 2024 will rise just +1.7% to 1.793 billion metric tons over 2023, about 19 million metric tons less the outlook report issued six months earlier. That forecast also anticipates a more delayed recovery, with demand growing just 1.2% to 1.815 billion metric tons in 2025.

Read more at American Machinist

Generative AI Requires Massive Amounts Of Power And Water, And The Aging U.S. Grid Can’t Handle The Load

Thanks to the artificial intelligence boom, new data centers are springing up as quickly as companies can build them. This has translated into huge demand for power to run and cool the servers inside. Now concerns are mounting about whether the U.S. can generate enough electricity for the widespread adoption of AI, and whether our aging grid will be able to handle the load.

Nvidia’s latest AI chip, Grace Blackwell, incorporates Arm-based CPUs it says can run generative AI models on 25 times less power than the previous generation. “Saving every last bit of power is going to be a fundamentally different design than when you’re trying to maximize the performance,” Vachani said. This strategy of reducing power use by improving compute efficiency, often referred to as “more work per watt,” is one answer to the AI energy crisis. But it’s not nearly enough. One ChatGPT query uses nearly 10 times as much energy as a typical Google search, according to a report by Goldman Sachs. Generating an AI image can use as much power as charging your smartphone.

Read more at CNBC

Apple’s No Longer Among Top 5 Smartphone Vendors In China As Domestic Brands Dominate Market

Apple was edged out of the top five smartphone vendors’ list in China in the second quarter, as competition from domestic brands such as Huawei intensifies, according to a Canalys report. Apple’s market share in China shrank to 14% in the second quarter from 15% in the first quarter and 16% in the same period a year ago. The iPhone maker, which was the third-largest smartphone vendor in the second quarter last year, dropped to the sixth spot with about 9.7 million in shipments, according to CNBC calculations.

From April to June, Vivo reclaimed the top spot with 19% market share and 13.1 million units shipped – driven by strong offline and online sales during the “618” e-commerce festival. Oppo maintained second place with 11.3 million units, buoyed by the launch of its new Reno 12 series. Honor came in third with 10.7 million units shipped, marking a 4% year-on-year increase. Huawei came fourth with 15% market share and 10.6 million shipment units — it had not made it to the top five a year earlier. Huawei’s consumer business has seen a resurgence in China after the launch of its Mate 60 smartphone. Xiaomi took the fifth spot with the buzz from its first electric car, the SU7, also contributing to solid sales of its K70 and flagship 14 series, Canalys said. Overall, the Chinese smartphone market grew 10% year on year in second quarter, with shipments exceeding 70 million units.

Read more at CNBC

Hollywood Shapes Attitudes on Jobs in the Trades

Gen Z is increasingly being turned off to blue-collar trade jobs, and Hollywood may be playing a larger role than expected, a new Jobber study found. Though social attitudes are becoming more critical of higher education and in favor of trades, Gen Z—which has made a name for itself as one of the most skeptical generations—is still not jumping completely on the bandwagon. As "digital natives," Gen Z has grown up with the internet, and the media has likely affected their ideas of career success more than previous generations.

In the Jobber survey, more than one-third, or 35 percent, of Gen Z said TV shows and movies influenced the careers they want to explore. This has huge ramifications for trades, as 47 percent of Gen Z said trades professionals were portrayed negatively in shows and movies, and 47 percent said white-collar workers are portrayed as more successful. There's a lingering stigma that might be preventing Gen Z from joining the trades, even when it's advantageous to them. According to the Jobber report, roughly 83 percent of Gen Z think that trade professionals do not have a strong sense of accomplishment compared to white-collar professionals. Additionally, 76 percent of Gen Zers said there was a stigma attached to these kinds of jobs.

Read more at Newsweek

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