Member Briefing June 12, 2024

Posted By: Harold King Daily Briefing,

Top Story

World Bank Boosts Global Economic Forecast to 2.6% This Year

The World Bank upgraded its outlook for the global economy Tuesday, estimating that it will expand 2.6% this year on the strength of sustained growth in the United States. The bank's latest outlook marks an increase from the 2.4% growth for 2024 it had predicted in January. And it would match the global economy's 2.6% expansion in 2023. Stronger-than-expected growth in the United States — the world’s biggest economy — accounted for 80% of the World Bank's upgraded outlook. The agency now expects the U.S. economy to expand 2.5% in 2024, the same as in 2023 but up sharply from the 1.6% the bank had predicted in January.

  • The World Bank expects emerging market and developing countries to collectively grow 4% this year, down from 4.2% in 2023. In many cases, their populations are outpacing their economies, reducing their annual income growth per person to 3% this year through 2026 — far below the average 3.8% in the decade before the pandemic struck.
  • China, the world’s second-largest economy after the United States, is struggling with the collapse of its real estate market and with weak consumer confidence. The Chinese economy is expected to decelerate to 4.8% this year from 5.2% in 2023.
  • Growth in Latin America is forecast to slow from 2.2% last year to 1.8% in 2024. The World Bank expects the economy of sub-Saharan Africa to grow 3.5%, modest but up from 3% last year.
  • The 20 European countries that share the euro currency, hurt by the consequences of Russia’s war against Ukraine, are expected to eke out 0.7% growth in 2024, though that would be nearly twice their 0.4% growth in 2023.
  • The World Bank expects Japan’s economic growth, hobbled by sluggish consumer spending and flagging exports, to slow to 0.7% this year from 1.9% in 2023.

Read more at Yahoo Finance

Small Business Uncertainty Index Reaches Highest Level Since 2020

The NFIB Small Business Optimism Index reached the highest reading of the year in May at 90.5, a 0.8-point increase but still the 29th month below the historical average of 98. The Uncertainty Index rose nine points to 85, the highest reading since November 2020. Twenty-two percent of owners reported that inflation was their single most important problem in operating their business, unchanged from April and the top business problem among owners. Key findings include:

  • A net negative 8% (seasonally adjusted) of owners viewed current inventory stocks as “too low” in May, down four points from April and the lowest reading since October 1981.
  • Owners’ plans to hire rose three points in May to a seasonally adjusted net 15%, the highest reading of the year.
  • Seasonally adjusted, a net 28% plan price hikes in May, up two points from April.
  • Six percent of owners reported that financing was their top business problem in May, up two points from April. The last time financing as a top business problem was this high was in June 2010.

Read more at The NFIB

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Policy and Politics

The Bills That Passed and Failed to Pass in the Last Week of Session 

Lawmakers in Albany wrapped up their legislative session last week under a cloud of uncertainty after Gov. Kathy Hochul surprised everyone with her decision to indefinitely pause congestion pricing in Manhattan, leaving a $15 billion hole in the Metropolitan Transportation Authority’s current capital plan. In addition to the regular end-of-session horsetrading and marathon legislating, lawmaking needed to consider whether or not to bail Hochul out with a new tax or an IOU for MTA funding. In the end, they left without approving either of the governor’s pitches, but they still approved plenty more.

Of the 805 bills that passed both chambers of the Legislature this year, 489 were passed in the final week of session, with the state Senate wrapping up on Friday and the Assembly finishing its business early Saturday morning. Bills passed last week include landmark new social media regulations for kids, an massive expansion of red light cameras in New York City and a new fee on polluters to pay for climate mitigation.

Read more at City & State

US Bars Imports from Footwear, Seafood and Aluminum Firms Over Uyghur Labor

The U.S. has added three more companies to an entity list that bars imports from firms allegedly involved with Uyghur forced labor in China, according to a U.S. government notice posted online on Tuesday. The latest targets include shoe manufacturer Dongguan Oasis Shoes Co, electrolytic aluminum maker Xinjiang Shenhuo Coal and Electricity Co and food processor Shandong Meijia Group Co, also known as Rizhao Meijia Group, the notice from the U.S. Department of Homeland Security said.

Scores of companies have been added to the Uyghur Forced Labor Prevention Act Entity List, which restricts the import of goods tied to what the U.S. government has characterized as an ongoing genocide of minorities in China's western Xinjiang region. U.S. officials believe Chinese authorities have established labor camps for Uyghurs and other Muslim minority groups in Xinjiang. Beijing denies any abuses. The Chinese embassy in Washington did not immediately respond to a request for comment. It has previously called the U.S. list "an instrument of a few U.S. politicians to disrupt stability in Xinjiang and contain China's development."

Read more at Reuters

NAM Launches Campaign to Prevent Tax Increases on Manufacturers

Tuesday the NAM launched an industry-wide campaign to educate legislators, candidates and the Biden administration on the urgent need for action to preserve pro-growth tax policies scheduled to expire at the end of next year. Critical reforms from the 2017 Tax Cuts and Jobs Act will expire at the end of 2025. The NAM’s Manufacturing Wins campaign is designed to ensure that Congress preserves 2017 tax reform in its entirety. If they do not, at the end of 2025, virtually all manufacturers will face devastating tax increases that will cost manufacturing jobs, stifle growth and stunt innovation.

  • Small manufacturers, which are often organized as pass-through businesses that pay tax at the individual tax rates, face increases in their income taxes and a loss of tax reform’s 20% pass-through deduction.
  • Family-owned manufacturers will experience changes to the estate tax that subject more of their assets to taxation upon the death of a loved one.
  • Investments in manufacturing growth will continue to be delayed without action to restore immediate R&D expensing, accelerated depreciation for capital equipment purchases and a pro-growth interest deductibility standard.
  • A recent NAM survey found that if Congress fails to prevent the 2025 expirations, 73% of manufacturers would be forced to limit their capital investments, 65% would have to reduce job creation and 52% would spend less on R&D. Further, 93% of pass-through manufacturers said that the loss of the pass-through deduction would harm their ability to grow, create jobs and invest in their business.

Read more at The NAM

Health and Wellness

Advisory Panel of Experts Endorses F.D.A. Approval of New Alzheimer's Drug

 A panel of independent advisors to the Food and Drug Administration on Monday recommended Eli Lilly’s Alzheimer’s drug donanemab, paving the way for the treatment to receive full approval in the U.S. later this year. The FDA typically follows the recommendations of its advisory panels but is not required to do so. If cleared for use, Eli Lilly’s donanemab would become the second Alzheimer’s drug of its kind currently on the U.S. market after another treatment called Leqembi from Biogen and its Japanese partner Eisai. n a second vote, advisors unanimously said the benefits of Eli Lilly’s donanemab outweigh its risks.

An approval would expand the now limited treatment options for the more than 6 million Americans who have Alzheimer’s, the fifth-leading cause of death for adults over 65. In a first vote, 11 committee members unanimously said available data on the drug shows that it is effective at treating Alzheimer’s patients at the early stages of the mind-wasting disease. But several advisors noted that more data is needed on donanemab in Black and Hispanic patients, among other groups. Both drugs are monoclonal antibodies that target amyloid plaque in the brain, considered a hallmark of Alzheimer’s, to slow the progression of the disease in patients at the early stages of it.  But neither of the treatments are cures.

Read more at CNBC

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Industry News

Baltimore Key Shipping Channel Fully Reopens After Francis Scott Key Bridge Collapse

The main passageway into the Baltimore port was fully restored after the March 26 collapse of the Francis Scott Key Bridge, which left six people dead and obstructed maritime traffic into the harbor. The bridge toppled after the cargo ship Dali crashed into the infrastructure, choking a major shipping artery into the U.S.′ busiest auto port. On Monday evening, the U.S. Army Corps of Engineers said that the Fort McHenry Federal Channel was reinstated to its original operational dimensions of 700 feet wide and 50 feet deep for commercial transit through the Port of Baltimore.

The restoration follows a cleanup process that started on March 30 and removed about 50,000 tons of bridge wreckage from the Patapsco River, allowing for the gradual reopening of the channel in the weeks since.

Read more at CNBC

Apple Execs Explain Why its AI is Different from Competitors

Apple fully embraced artificial intelligence on Monday, as company executives explained the features and reasoning behind Apple Intelligence, the company’s new AI software suite. But Apple’s Worldwide Developers Conference launch event was carefully crafted to distinguish the iPhone maker from current AI leaders, such as Microsoft and Google, at a panel discussion Monday afternoon.

Software chief Craig Federighi and AI chief John Giannandrea said during the panel that Apple has a different approach to the technology than its Silicon Valley rivals. Unlike companies that are building AI for a broad range of products, Apple is instead focused only on the devices it sells and the personal data that AI could use. Apple revealed a more limited approach that eschews future-focused thinking about the potential of the technology in favor of small tasks that can be done now without burning up battery life. “We think AI’s role is not to replace our users but to empower them,” Federighi said.

Read more at CNBC

Pimco Warns of More US Regional Bank Failures on Property Pain

Pacific Investment Management Co. expects more regional bank failures in the US because of a “very high” concentration of troubled commercial real estate loans on their books. “The real wave of distress is just starting” for lenders to everything from malls to offices, John Murray, Pimco’s head of global private commercial real estate team, said in an interview. His division sits within Pimco’s $173 billion alternatives business.

Uncertainty over when the Federal Reserve may cut interest rates has exacerbated challenges faced by the commercial real estate sector, where high borrowing costs have hammered valuations and triggered defaults, leaving lenders stuck with assets that are tough to sell. Contrary to some market expectations, larger banks have been disposing of some of their higher quality assets first to avoid deeper losses, according to Murray. The turmoil has been particularly felt among regional banks, which boosted their CRE exposure that in many cases is now worth only a fraction of their value at their peak. Smaller banks have continued to worry investors ever since the collapse of a few last year.

Read more at Yahoo Finance

UAW President Under Investigation by Federal Monitor

United Auto Workers President Shawn Fain is under investigation by a federal court-appointed watchdog who is tasked with monitoring the union and eliminating corruption, according to a Monday court filing. The monitor, Neil Barofsky, is investigating whether Fain abused his power as union president. He also accuses union leaders, including Fain, of obstructing the investigation and interfering with his access to information. Such actions could potentially violate a 2020 consent decree between the UAW and the U.S. Department of Justice that avoided a federal takeover of the union.

The court filing, which was first reported by The Detroit News, says Barofsky’s concerns largely began in February, after the monitor “began investigating current members of the IEB—including the President, Secretary-Treasurer, and one of the Union’s Regional Directors.” The union is in the middle of a national organizing drive of nonunion automakers. The accusations follow Fain’s rise to international prominence after the union under his leadership scored record-setting contracts last year with General Motors, Ford Motor and Stellantis

Read more at CNBC

Fallout from Japan’s Car Testing Scandal Spreads, Ensnares Honda

Honda Motor on Monday became the fourth Japanese carmaker to be inspected by the transport ministry over improper tests for vehicle certifications, as several local newspapers warn of a “day of reckoning” for the sector. The widening scandal facing Japanese carmakers has been compared to the “dieselgate” emissions debacle that sideswiped German car giant Volkswagen in 2015. Takaki Nakanishi, CEO of the Tokyo-based Nakanishi Research Institute and a specialist in the auto sector, said the domestic media had exaggerated the extent of the saga but the spotlight could still hurt Japanese carmakers.

In addition to Honda, ministry inspectors have visited the headquarters of Toyota Motor, Yamaha Motor and Suzuki Motor, with an investigation at Mazda Motor expected next. In total, 38 models by Honda, Toyota, Yamaha and Suzuki were found to have not undergone proper certification for safety and environmental performance, based on the companies’ statements and media reports. The ministry has ordered the manufacturers to halt shipments of six models that are still in production.

Read more at SCMP

How to Build an Airplane: Boeing’s Urgent Mission to Train Thousands of Rookies

Boeing’s factory workforce has undergone a dramatic transformation in recent years. Legions of senior machinists retired when the pandemic hit and in the years since. The company, racing to meet demand for new jets as travelers returned to the skies, has been on a hiring spree to replenish its ranks.  Like so many McDonald’s restaurants, the Renton, Wash., factory where Boeing builds the 737 has a banner outside that reads: “We’re hiring.”

Last year in the Puget Sound area alone, Boeing hired an average of 800 factory workers a month. It’s still bringing in hundreds of new recruits a month, though the pace has slowed somewhat.  The result: factories populated by new employees, many of them younger than their predecessors and with no experience related to building airplanes. It’s an environment that Boeing executives say contributed to quality issues that the company is grappling with in the wake of January’s near-catastrophe, when a piece of the fuselage blew off during an Alaska Airlines flight. In the soul-searching that followed, a dearth of experience on the factory floor topped the list of issues cited by employees who were asked to identify problems in the company’s manufacturing process, said Elizabeth Lund, recently named quality chief of Boeing’s commercial airplane unit.

Read more at the WSJ

What Will the Robots Do Next?

The arrival earlier this year of a collaborative robot capable of handling up to 66 lbs. (30 kg) and achieving a reach of 51.2 in. (1,300 mm) – all in a footprint of less than 10 in. diam. (Ø 245 mm) – was a new highpoint in the rapid development of cobot technology over the past decade. UR and other automation developers have pushed this evolution. Cobots have been a watershed for manufacturers’ understanding of automation. They have redefined role for robots by positioning the devices as reliable and safe partners with human workers, simple and quick to program, and conveniently mobile for repurposing to different tasks.

And because cobots have brought more manufacturing operations on board with automation, other developers have advanced automation technology in every direction, not just collaborative operations. Earlier this spring, ABB Robotics took the cue on upsizing automation devices with the IRB 7710 and IRB 7720. Together with the previously introduced IRB 5710-IRB 5720 and IRB 6710-IRB 6740, this series offers 46 different robot varieties for handling payloads between 70 and 620 kg. The new robots support applications in various industries, including EV, HEV, and traditional automotive production – from press automation, body-in-white, EV battery construction, and final assembly. Specifically, they are applicable in high-payload diecasting (e.g., gigacasting) and similar heavy-lifting requirements.

Read more and see the slideshow at Foundry Magazine

Chinese Semiconductor Ban to Impact Defense Contractors

The Federal Acquisition Regulatory Council in early May released an Advanced Notice of Proposed Rulemaking describing the agency’s plan to implement Section 5949 of the National Defense Authorization Act for fiscal year 2023. This notice gives the defense industry an early look at how the U.S. government may handle sourcing of semiconductors from certain Chinese sources.

Section 5949 restricts the procurement or use of “covered semiconductor products or services,” defined to include semiconductors and associated products designed, produced or provided by Semiconductor Manufacturing International Corp.; ChangXin Memory Technologies; and Yangtze Memory Technologies Corp., plus subsidiaries and affiliates. In addition, the statute anticipates that additional covered semiconductor products or services connected to the government of a “foreign country of concern” — such as Iran, Russia, China and North Korea — could be added via internal government coordination and publication in the Federal Register. This restriction has two prongs. Under the first prong, the U.S. government may not directly procure or obtain any electronic products or services that include covered semiconductor products or services. And under the second prong, the U.S. government may not enter a contract with an entity to procure or obtain electronic products that “use” electronic products that include covered semiconductor products or services.

Read more at National Defense

Work-From-Home Levels Reach Lowest Since 2020—But Remote Work Still Dominates These Industries

Only 26.6% of paid workdays in the U.S. were done from home in May, down from the pandemic peak of around 60%, and 28.6% in May 2023—meaning about 1 in 10 workers commuted one more day each week this year compared to last year, according to the study from researchers that included economists from Stanford University and the University of Chicago. Among full-time employees in the U.S., 13% were fully remote, 26% were working hybrid and 62% were fully on-site.

The information and technology sector had the highest share (69%) of work-from-home employees and most remote workdays (2.2 per week), followed by finance and insurance, in which 66% work from home, also averaging 2.2 days per week—researchers noted these industries lean strongly toward remote work due to high-paying, computer-intensive jobs often located in major cities, where long commutes make remote work appealing.

  • Employees in retail and hospitality had low work-from-home rates, ranging from 0.6 to 0.7 days per week—those industries largely require physical presence to engage with consumers or involve work with specialized equipment and facilities, according to researchers.
  • Of the nine major U.S. metro areas analyzed, Greater Los Angeles led the way in remote work with a 34.4% rate for paid workdays, followed by Greater Houston (32%), the San Francisco Bay Area (32%), Washington D.C.-Baltimore area (30.7%) and New York metropolitan area (30.7%).
  • Workers in their 50s and 60s went into the office more often than younger workers, with 68% of workers aged 50-64 working fully on-site, higher than those in their 40s (62%), 30s (59%), and 20s (57%).
  • Companies founded in 2020 have the highest share of remote work, with 36% of their workdays being remote due to their digital-first nature, while firms created before or after then show lower work-from-home rates, researchers found.
  • Manufacturers have 27% fully remote workers.

Read more at Forbes