Member Briefing June 24, 2024
US S&P Manufacturing PMI Rises to 51.7 in June, Composite at 54.6
S&P Global said on Friday that its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, nudged up to 54.6 this month. That was the highest level since April 2022 and followed a final reading of 54.5 in May. A reading above 50 indicates expansion in the private sector. Both the services and manufacturing sectors contributed to the gain in activity. The elevated composite PMI reading suggests that the economy ended the second quarter on a solid note. So-called hard data, however, paint a different picture. Retail sales barely rose in May after falling in April. Housing starts extended their decline, hitting the lowest level in nearly four years in May.
The survey's flash manufacturing PMI edged up to 51.7 this month from 51.3 in May. Economists polled by Reuters had forecast the index for the sector, which accounts for 10.4% of the economy, dipping to 51. S&P Global said "manufacturers' commonly cited concerns over the demand environment in the months ahead as well as election-related uncertainty, notably relating to policy." Its flash services PMI increased to 55.1, a 26-month high, from 54.8 in May. That exceeded economists' expectations for a reading of 53.7.
New Home Construction Slows as Mortgage Rates Remain High
Nearly pulling back all of April's sequential gain, total housing starts fell 5.5% in May to 1.277 million units—the slowest annualized pace in four years. Weakness was broad based as both single and multifamily starts fell on the month. The forward-looking permit activity was also soft, suggesting builders have become less optimistic about prospective demand given persistent inflation and the higher-for-longer interest rate environment.
High prevailing mortgage rates remain the millstone around the single-family market's neck. The average 30-year fixed rate reported by Freddie Mac averaged 7% in both April and May and is on course for a three-peat in June. Worsening home builder sentiment and a slip in single-family permits presage further slowdown in single-family construction. Single-family permits fell 2.9% over the month to a 949K-unit pace. Permits have fallen for four consecutive months as builders seem to be reassessing their construction plans in the face of worsening affordability conditions. However, a dearth of supply in the resale market should continue to encourage new development to some degree. In April, nearly one-third of all homes for sale were new builds, more than double the pre-pandemic average of 13%.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Unable to Back Down, Israel and Hezbollah Move Closer to All-Out War - BBC
- US Signals to Hezbollah it Will Back Israeli Offensive, as Frustration with Gaza Ceasefire Grows - Middle East Eye
- Israeli Forces Step up Bombardment Across Gaza, Amid Fierce Fighting - Reuters
- Israeli Tanks at Edge of Rafah's Mawasi Refuge Zone, Residents Say – Reuters
- Netanyahu Complains of ‘Dramatic Drop’ in U.S. Arms Shipments to Israel - WSJ
- The USS Dwight D. Eisenhower Leaves the Red Sea as Houthi Attacks Continue - NPR
- Israel-Hezbollah Hostilities Fan Fears of Widening Gaza War - VOA
- 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
- US Signals that it Has Expanded Policy to Allow Ukraine to Counterstrike into Russia - CNN
- Russia Unleashes ‘Massive Attack’ on Ukraine Energy Facilities – Politico
- U.S. Will Redirect Deliveries of Patriot Missiles to Ukraine - NYT
- A Year After Mutiny, Kremlin Controls Wagner Remnants - BBC
- Romania Agrees to Donate Patriot Air Defense System to Ukraine - Politico
- Seoul Reconsiders Arming Ukraine as Russia, North Korea Align - VOA
- Northrop Planning to Build Munitions Inside Ukraine – Breaking Defense
- 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
- France’s National Rally Confirms Lead in Snap Election Polls - Bloomberg
- Tory Stumbles Dive Labour to Near-Record 20-Point Poll Lead – The Guardian
- U.K. Consumer Confidence Inches Up as Views of Economy Improve - WSJ
- 5 Challenges for NATO’s Next Chief Mark Rutte – Politico
- Sudan's Cemeteries Swell with Fresh Graves as Hunger and Disease Spread - Reuters
- China's Wealthy Choosing Hong Kong Over Singapore - Nikkei Asia
- US and China Hold First Informal Nuclear Talks in 5 Years, Eyeing Taiwan - VOA
- Round 2! Von der Leyen, Meloni and the battle for Brussels top jobs – Politico
- Taiwan Wants a Drone Army—but China Makes the Drones It Wants - WSJ
- Nippon Steel Sees Path Toward U.S. Steel Deal After November Election – Nikkei Asia
Policy and Politics
Biden, Hochul Yield Lowest-Ever Results in New Siena Poll
Governor Kathy Hochul has her lowest ever favorability rating, 38-49%, down a little from 38-46% in May, and her lowest ever job approval rating, 44-50%, down from 45-46% last month. President Biden has a 42-53% favorability rating, down from 45-50% in May, his lowest-ever favorability rating. His job approval rating fell to 45-53%, down a little from 46-51% last month. “While Biden maintains the support of three-quarters of Democrats, Trump has support from 85% of Republicans and leads Biden 45-28% with independents,” Siena College pollster Steven Greenberg said.
“There’s little partisan difference when it comes to Hochul’s end-of-session surprise decision to put congestion pricing on hold. It is supported by 46% of Democrats, 45% of Republicans and 43% of independents, all large pluralities.
“An overwhelming bipartisan majority of voters, 65%, says decisions made by the U.S. justice system are influenced by politics. Only 18% think the justice system operates without political influence,” Greenberg said.
Voters continue to favor Democrats for Congress over Republicans, 50-35%, little changed from 49-33% in May.
Voters overwhelmingly continue to say the recent influx of migrants to New York is a serious problem, with 83% saying it’s a very (57%) or somewhat (26%) serious problem, a consistent view for nearly a year.
Read more at The Siena College Research Institute
IRS Asks Congress to Scrap Employee Retention Credit Amid ‘Gold Rush’ of Bogus Claims
The IRS is getting blasted with bogus claims for the employee retention tax credit (ERC) and is asking Congress for help. IRS Commissioner Danny Werfel also said Thursday that the IRS had completed an internal review of the ERC claim process and will use information from the review to “deny billions of dollars of clearly improper claims.” “The program turned into a gold rush for promoters,” Werfel told reporters Thursday, requesting that lawmakers close down the ERC program.
The program was given a moratorium last fall, but Werfel said the IRS is still getting around 17,000 claims per week. Blame for the glut of fraudulent requests that are gunking up the agency was placed squarely by Werfel on advertisers and marketers of the credit, whose work promoting it “bombarded the airwaves” and resulted in a “gold rush” for their businesses, he said. The employee retention tax credit has already been on the radar of lawmakers and is now being considered for cancellation in the Senate as a way to pay for other tax credits, including other business credits and an expansion of the child tax credit. That swap of credits would total about $79 billion but has stalled in the Senate amid criticism from Republicans and Democrats.
Private Health Insurance Plans Cover More Americans: CDC
Employer-sponsored health plans and other private plans seem to be covering more Americans, but people with income over 400% of the federal poverty level are less likely to have any coverage. The National Center for Health Statistics, part of the U.S. Centers for Disease Control and Prevention, put the numbers telling that story in a new batch of results from the National Health Interview Survey program. In most of the United States, 400% of the 2024 federal poverty level is $60,240 for an individual and $124,800 for a family of four.
The number of people under age 65 with some kind of employer-sponsored or individual private health coverage increased to 1.4% between the fourth quarter of 2022 and the fourth quarter of 2023, to 176.4 million. The percentage who were uninsured increased to 3.5%, from 2.8%, for high-income people of all ages; to 4.5%, from 3.7%, for high-income people ages 18 through 64; and to 2%, from 1.8%, for high-income children. One reason for the increase in the uninsured rate for high-income people could be the end of tax incentives, subsidies and other arrangements designed to help people at all income levels keep health coverage in place while the COVID-19 pandemic was making headlines.
Health and Wellness
The COVID Summer Surge May Be Here
Powered by the dominant new COVID-19 variant KP.3, a wave of summer COVID-19 infections may be upon us. But the size of that wave remains unknown. Wastewater (sewage) testing, which can provide an early warning signal that COVID-19 is increasing, has recently shown “very high” levels of viral activity in Florida, Hawaii, and Montana, and “high” levels in Alaska, California, Connecticut, Georgia, Maryland, and New Mexico, per the Centers for Disease Control and Prevention (CDC). The CDC also noted that emergency department visits due to COVID-19 have risen by 12.6 percent over the week ending June 8. But hospitalizations remain low.
The surge in new COVID activity appears to be due to the rise of a family of very contagious variants called FLiRT (short for the technical names of their specific mutations). These variants start with the letters “KP” or “JN,” and combined they currently account for more than two-thirds of cases in the United States. The leader of the FliRT pack is a new strain called KP.3, which now makes up 25 percent of COVID cases, surpassing KP.2, which just weeks ago was the primary cause of COVID in the United States and now accounts for 22.5 percent of infections.
NYS COVID Update
The Governor updated COVID data for the week ending June 21st.
Deaths:
- Weekly: No Data
- Total Reported to CDC: 83,422
Hospitalizations:
- Average Daily Patients in Hospital statewide: 673
- Patients in ICU Beds: 42
7 Day Average Cases per 100K population
- 5.9 positive cases per 100,00 population, Statewide
- 6.6 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- Checking in on the Presidential Race Ahead of the First Debate – The Dispatch
- House Speaker Johnson Fundraises in Orange County for Alison Esposito in NY 18 Race – Mid-Hudson News
- Trump’s Post-Conviction Fundraising Surge Wipes Out Cash Deficit – 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
Home Prices Hit a Record High
Home prices rose in May to a new high, with low inventory continuing to spur bidding wars among home buyers in some markets. The national median existing-home price in May was $419,300, a record in data going back to 1999, the National Association of Realtors said Friday. Prices aren’t adjusted for inflation. That was up 5.8% from a year earlier. Those high prices, paired with elevated mortgage rates, have limited the number of sales this spring—typically the busiest season for home buying.
Even though demand is low, home prices are still rising because high mortgage rates are deterring potential sellers from listing their homes, keeping the supply of homes on the market lower than normal. Sales of high-price homes are also rising faster than sales of midprice or affordable homes, pushing up the median price. “Somewhat of a strange phenomenon, where we have low home-sales activity yet prices are hitting record highs,” said Lawrence Yun, NAR’s chief economist. “Affordability is a challenge.”
Education and Health Services Drive Hudson Valley Employment Higher. Manufacturing Level Slips
Over the past year, the private sector job count in the Hudson Valley rose by 10,900, or 1.3 percent, to 826,600 in May 2024. The largest gains were in private education and health services (+10,800), leisure and hospitality (+3,900), financial activities (+1,100) and other services (+900). Job losses were centered in professional and business services (-2,200), trade, transportation and utilities (-1,700), mining, logging and construction (-1,100), information (-600) and manufacturing (-200).
Private education and health services remained the region’s leading jobs generator. Year-over-year in May 2024, the sector grew by 4.9 percent to reach 229,900 – its highest employment count on record, regardless of month. Private sector job growth was spread throughout the region. Year-over-year, Sullivan County posted the strongest gains, up 5.3 percent. They were followed by the Kingston MSA (+2.4 percent), the Dutchess-Putnam Metropolitan Division (+1.6 percent), and the Orange-Rockland-Westchester labor market area (+1.1 percent).
Cybersecurity is the Now the Number One Concern of Automotive Manufacturers
Some argue the only way fully autonomous driving can succeed at scale is if every car on the road connects to a master control system that knows the speed and position of every vehicle on its grid, making sure unexpected surprises don’t turn into massive traffic jams at best or horrible multi-vehicle collisions at worst. Then a hacker worms their way into the master control system and begins pushing virtual buttons and pulling virtual wires.
The automotive industry will not likely face that potential disaster in the foreseeable future, but it does represent the sort of caution auto manufacturers need to consider in the face of rising connectivity. It’s the sort of long-term concern that in Rockwell Automation’s latest State of Smart Manufacturing: Automotive Edition report caused cybersecurity to catapult to the number one barrier for growth perceived by automotive manufacturers. Cybersecurity wasn’t even present on the top five list for automotive in 2023 and ranked only ninth in the general State of Smart Manufacturing report released at the end of March. Recent industry-specific cyberattacks and the sort of nightmare scenario sketched above create the sense of urgency to address the issue.
GE Testing Hybrid Electric Engine Components with NASA
GE Aerospace reported it is working with NASA to test a hybrid electric demonstrator engine with NASA that will embed electric motor/generators in a high-bypass commercial turbofan, to supplement power during different phases of operation. “We’re advancing state-of-the-art propulsion systems for next generation commercial aircraft with an important aim — to drive industry efforts to improve efficiency and reduce emissions compared to today’s aircraft engines,” according to Arjan Hegeman, general manager of future of flight technologies at GE Aerospace.
The research includes modifying a GE Passport engine by inserting hybrid electric components and testing its performance through NASA’s Hybrid Thermally Efficient Core (HyTEC) project. The NASA project is one several efforts by GE Aerospace to establish technologies for more electric aircraft engines, and is being advanced as part of the Revolutionary Innovation for Sustainable Engines (RISE) program that is being led by GE’s joint venture, CFM International.
Read more at American Machinist
Boeing Nearing Deal With Supplier Spirit Aero After Months of Talks
Boeing is nearing a deal to buy back Spirit AeroSystems after its former subsidiary made substantial progress in separate talks with Airbus over a transatlantic breakup of the struggling supplier, people familiar with the matter said on Thursday. Boeing initiated talks earlier this year to buy back the Wichita, Kansas-based supplier it spun off in 2005, seeking to stabilize a key part of the supply chain for its strongest-selling jet following a mid-air blow out on a new 737 MAX in January. However, talks hit a stumbling block over Spirit's work for Airbus, with the European group threatening to block any deal that involved Boeing building parts for its newest models.
Boeing and Airbus have broadly succeeded in dividing Spirit's programs into work that Boeing will take back, along with work that the planemaker's European rival Airbus will take. There is also a third category of programs that may be sold or dealt with separately, said one of the sources.
U.S. Port Strike Fears Grow as ILA Halts Negotiations With USMX
Raising the specter of a labor dispute paralyzing container traffic at U.S. ports on the East and Gulf coasts, the International Longshoremen’s Association (ILA) on June 10 announced it had suspended talks with the United States Maritime Alliance (USMX) that had been scheduled for the next day. The decision arises amid ongoing negotiations of local agreements under a coast-wide master contract, set to expire on September 30, 2024. News of the breakdown in ILA-USMX negotiations came as the National Retail Association and Hackett Associates released a new Global Port Tracker report that indicates that monthly inbound cargo volume at major U.S. container ports is expected to reach its highest level in nearly two years this summer
The ILA said that it canceled master contract talks with the employers’ organization “after discovering that APM Terminals and Maersk Line are utilizing an Auto Gate system, which autonomously processes trucks without ILA labor. This system, initially identified at the Port of Mobile, Ala., is reportedly being used in other ports as well.”
ZIMMERMAN INC. Will Soon Demonstrate a New Large Scale Milling Machine
ZIMMERMAN INC. will be demonstrating a new portal milling machine at IMTS 2024. With the new FZG machine line, Zimmermann has added a five-axis operation with a low rail gantry, well-suited for processing particularly long components. Accessible from the side, the FZG allows easier loading and unloading processes. The developers relied on the proven thermo-symmetrical portal concept and modified its basic design, resulting a stable system that provides high precision, even when processing large and long components.
The FZG series the engineers redesigned the machine base structure. “We lowered the machine onto ground level, enabling the portal to be moved horizontally in almost any desired length,” Demlang explained. Zimmerman will adjust this design for any custom application, so the line is suitable for processing complete components, such as wing structures for the aviation industry, entire railway wagon side sections, tanks in the energy sector, exterior components for the aerospace industry, as well as components for the defense industry.
Read more at American Machinist
Longshoremen Return to Work in Baltimore
Work is ramping up again at the Port of Baltimore. The U. S. Army Corps of Engineers announced last week that 50,000 tons of wreckage have been removed after the collapse of the Francis Scott Key Bridge and that the main waterway to the port is now fully restored. That means cargo ships are able to easily come and go, and there is more to do for the nearly 3,000 longshoremen who work in the port. These are the people who tie ships to the shore, unload containers and vehicles and keep track of everything that’s unloaded.
Sharon Ridgeway is one of hundreds of female longshoremen who work at the port in a job traditionally done by men. Down in the parking lot, she said she doesn’t call herself a longshorewoman. “I stick with ‘longshoreman.’ Been here too long,” she laughed. Ridgeway, who’s 63, has been here 14 years. When she started, she had teenagers at home and wanted something flexible. She can pick up shifts when she wants to, and she said her co-workers are her favorite part of the job. Ridgeway said her colleagues are like family, and like a lot of the other longshoremen, members of her real family worked here first. Cousins as well as her husband.
Panama Canal Averts Shipping Crisis With Its Water Plan — and Some Luck
The Panama Canal announced, through an Advisory to Shipping, that it will increase the current number of daily transits from 32 to 33, effective July 11. Furthermore, this number will increase to 34 as of July 22, following the current and projected level of Gatun Lake for the coming weeks, and due to the arrival of the rainy season in the Panama Canal Watershed With these progressive increases, by July 22 the Canal will have added two transits to the current schedule: one to the panamax locks (raising the daily transits to 25), and one to the neopanamax locks (increasing daily transits to 9). Additionally, an increase in draft from 45 to 46 feet was announced, effective June 15.
The Panama Canal continues to monitor weather conditions on a daily basis in order to implement the necessary operational actions in the event of increased rainfall in its watershed.