Member Briefing June 25, 2024
US Leading Economic Index® (LEI) Fell Again in May But 'Doesn't Currently' Signal Recession
The Conference Board’s Leading Economic Index (LEI) declined 0.5% last month, more than expected and the third straight month of losses. Over the past six months, it fell by 2.0%. Economists polled by Dow Jones Newswires and The Wall Street Journal were anticipating a decline of 0.3% in May. Justyna Zabinska-La Monica, senior manager of The Conference Board’s Business Cycle Indicators, explained that the slide was driven primarily by “a decline in new orders, weak consumer sentiment about future business conditions, and lower building permits.”
However, she noted that despite being “firmly negative” over the past half year, “the LEI doesn’t currently signal a recession.” Zabinska-La Monica added that because of high inflation and interest rates continuing to impact consumer spending, The Conference Board predicts real U.S. gross domestic product (GDP) growth will slow to an annualized rate of less than 1% in the current and third quarters.
Read more at The Conference Board
Ocean Shipping Prices Are Pushing Toward Pandemic-Era Highs as Congestion Swells
Ship backups that plagued seaports during the Covid pandemic are making a comeback, raising concerns about new delays and higher costs during this year’s peak shipping season. Flotillas of containerships and bulk carriers are forming off the coasts of Singapore, Malaysia, South Korea and China while ports in Spain and other parts of Europe look to dig out from container piles.
The backups are the result of vessel diversions because of attacks by Yemen’s Houthi rebels on commercial ships in the Red Sea that have disrupted shipping schedules and left shipments and sea containers out of sync. The snags are complicating logistics for retail and manufactured goods, but the bigger concern is that backups could expand as demand picks up heading into the busy peak shipping season. Experts say some shippers are already booking earlier to get ahead of the congestion.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Netanyahu Says He Will Only Accept Partial Ceasefire Deal - Newsweek
- Houthis Claim Attacks on Two Ships in Red Sea and Indian Ocean – Reuters
- Netanyahu Says Intensive Fighting in Gaza Is Close to Ending - WSJ
- US Military Says it Destroyed 3 Houthi Vessels in Red Sea - VOA
- Netanyahu: Israeli Forces Will Move to Lebanon Border as Rafah Winds Down - BBC
- Any Israeli Offensive into Lebanon Risks Iranian Response, Top US Military Leader Says – France 24
- War with Israel Would Deepen Lebanon's Myriad Crises – Reuters
- 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
- How Biden, Trump Differ Over Ukraine Policy - VOA
- How Ukraine’s Naval Drones Turned the Tide in the Battle of the Black Sea - WSJ
- Russia Threatens ‘Consequences’ for US Over Crimea Missile Strikes – Politico
- Kremlin Responds to Reports Russian Ally Supplying Weapons to Ukraine - Newsweek
- The Texas Factory About to Become a Key Ammo Supplier for the U.S., Ukraine - WSJ
- EU Approves up to €1.4B Military Aid to Ukraine from Russian Frozen Assets – Politico
- Ukraine Inches Closer to EU Dream After Decade of War - Reuters
- Video Shows Kyiv's First Upgraded HIMARS Cluster Strike on Russian Troops - 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
- Terrorist Attacks in Russia’s Dagestan Target Synagogue, Churches, Police - WSJ
- Von der Leyen Feels the Squeeze as EU Liberals Implode – Politico
- Philippines Condemns China's 'Illegal Use of Force' in Sea Clash - VOA
- China Wants EU to Scrap EV Tariff Plans as Talks Start – Reuters
- Weakening Yuan Could be What China Needs, but Not What it Wants – Nikkei Asia
- At Least 16 Dead And 6 Missing After Fire At Lithium Battery Plant In South Korea - Forbes
- Vietnam Reaffirms 'Strategic Partnership' With US Day After Putin Visit - Newsweek
- Kenyan Police Officers May Deploy to Haiti Tuesday, Reports Say - VOA
- US Military Looks for West Africa 'Plan B' After Niger Ousting – Reuters
Policy and Politics
Labor Chair Defends Bills to Protect N.Y. Warehouse, Retail Workers as Hochul Considers Veto
The head of the state Assembly Labor Committee said he stands by legislation to improve safety protections for warehouse and retail workers and to expand New York's workers' compensation program as business leaders urge Gov. Kathy Hochul to veto the measures. Labor unions want the governor to sign a bill requiring warehouses with more than 100 workers to come up with a workplace safety plan and reduce a surge in accidents. The Warehouse Worker Injury Reduction Act would mandate an annual hazard analysis and embolden the state Labor Department to enforce safety standards.
Assembly Labor Committee chair Harry Bronson argues the state's elevated rate of warehouse injuries show OSHA's requirements do not effectively protect workers. Frank Kerbein, director of the Human Resources Center with the state Business Council, said the safety change is unnecessary because of existing state and federal Occupational Safety and Health Administration laws. "No one argues we should mitigate and reduce injuries in the workplace, but you can't make something more 'illegal-er' than it already is," Kerbein said. "It's already unlawful to put someone in harm's way that way."
Read more at NY State of Politics
IRS Boosts Health Savings Account Contribution Limits for 2025
The IRS has determined that annual health savings account contribution limits will increase by 3.6% for individuals and 3% for families next year. The increases nearly mirror the 3.3% inflation rate in May. The Internal Revenue Service recently announced that for the calendar year 2025, the health savings account contribution limits for individuals with self-only coverage will jump to $4,300—up $150 from $4,150 for this year. For family coverage, the limit will increase to $8,550 next year from $8,300 in 2024.
Although the bump is far below the record-breaking increase of more than 7% this year, Jake Spiegel, research associate at the Employee Benefit Research Institute (EBRI), says employees stand to benefit nonetheless. That’s because HSA contribution limits are indexed to inflation, which increased slower than in previous years, Spiegel says. While this means slower growth in HSA contribution limits, it also means slower growth in deductibles and out-of-pocket maximums for HSA-qualified health plans. “For employees, it means that their health care plan’s deductible will increase at a lower rate than last year, and the HSA contribution limit increase will help them shoulder higher health care costs,” Spiegel says.
House Set to Dive Into Spending Bills
The House is diving into the fiscal year 2025 government funding process this week, with three spending bills scheduled to hit the floor. The trio of measure — funding the Departments of Homeland Security, State, Defense and Foreign Operations — were all opposed by House Democrats in committee, meaning they are all but certain to be rejected in the Democratic-control Senate if they clear the lower chamber.
But House Republicans, nonetheless, are looking to pass the legislation to give them a leg up in eventual negotiations with the Senate over funding the government. The House thus far has passed one appropriations bill, funding military construction and the Department of Veterans Affairs. Lawmakers are staring down a Sept. 30 funding deadline, though Congress is expected to pass a short-term stopgap bill to kick the shutdown cliff to after the November election.
Health and Wellness
55% of CEOs Have Experienced a Mental Health Issue, Up 24 Points
The 2024 State of Workplace Empathy Study from Businessolver, that found 50% of those surveyed reported experiencing a mental health issue, I wasn't surprised. The number was even larger for CEOs – 55% and was a 24 point year-over-year increase from the group’s survey last year. While instinctively we understand that CEOs face a lot of pressure, especially in tough economic times, it’s not generally something talked about.
With all of the recent coverage of mental health issues, you might assume that there is no longer a stimga in talking about this subject, but you would be wrong. The survey found that both CEOs (81%), and employees (67%) all ‘agree’ or ‘strongly agree’ that companies view someone with mental health issues as weak or a burden. This view is supported by a study from the National Alliance on Mental Health which found that sigma and the effect of this revelation on their careers is keeping CEOs quiet. There is also the issue of empathy which plays into revealing struggles. In the survey, 65% of CEOs say they feel intimidated by their coworkers and a majority (72%) feel that will be challenged on decisions if they use empathy, and 69% say being empathetic will “make me a pushover.”
Election 2024
- AP Decision Notes: What to Expect in Today’s New York State Primaries - AP
- Trump Says Foreigners Who Graduate from US Colleges Should Get Green Cards - Reuters
- In This Debate, CNN Is the Decider - NYT
- Bowman Fights for his Political Life in High-Voltage New York Primary – The Hill
- Trump Says He’s Decided on his Running Mate – 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
Federal Prosecutors Recommend to Justice Department that Boeing be Criminally Prosecuted
Federal prosecutors have recommended to top Justice Department officials that airline manufacturer Boeing be criminally prosecuted, CBS News has learned. While the recommendation to the Department of Justice's senior leadership is not a final decision, it is the latest development in the ongoing back-and-forth over Boeing's alleged violation of a 2021 deferred prosecution agreement. The exact nature of the newly recommended charges was not immediately clear.
The Justice Department earlier this year found Boeing had violated the deferred prosecution agreement and indicated in court filings it might proceed with charges against the company for conduct tied to two deadly 737 Max crashes in 2018 and 2019 and beyond. The Justice Department has until July 7 to notify the federal court of its plans.
GE Aerospace: Aviation Supply Challenges Will Continue In 2025
A senior figure at GE Aerospace has said that global supply challenges will likely continue to impact the aviation industry into next year. A shortage of parts and labor has led to a slowdown in manufacturing and maintenance times, causing a major headache for airlines and manufacturers. Russel Stokes, head of GE Aerospace's commercial engines and services, believes the current supply chain snags affecting the aviation industry will prove a challenge "this year and probably next year."
Not only are manufacturers struggling to increase aircraft production rates due to supply issues, but in-service aircraft are spending longer on the sidelines during routine maintenance. According to GE Aerospace's CEO, Larry Culp, mass layoffs of skilled workers during the pandemic downturn are primarily responsible for the present situation. The company said it has now deployed around 500 engineers to work on-site with suppliers. Additionally, it is looking to artificial intelligence to overcome supply chain challenges. This includes incorporating an anti-forgery technology used in the art world to detect counterfeit metal materials.
Airbus Cuts Delivery Target and Delays Jet Production Goal
Airbus on Monday lowered its 2024 total delivery target to around 770 airplanes from around 800 and pushed back a targeted deadline for reaching production of 75 narrow-body airplanes per month to 2027 from 2026. In a fresh blow to its troubled space activities, Europe's largest aerospace group also announced fresh charges of around 900 million euros after its latest review. "We are facing headwinds right now; we have to bite the bullet," Airbus CEO Guillaume Faury told analysts.
The downward revision in industrial forecasts comes weeks after Reuters first reported Airbus faced new output delays as it grapples with increased parts shortages. Industry sources said Airbus concluded it had exhausted its spare margin for deliveries after falling short of its internal target in the first five months, and then starting June at an insufficient delivery rate. The aerospace industry has been struggling to rehire workers and stabilise supplies after the pandemic left many suppliers with weak finances.
Tesla Internal Data Shows Company Has Slashed at Least 14% of Workforce this Year
Tesla’s hefty downsizing since 2023 has reduced its global head count to just over 121,000 people, including temporary workers, internal records suggest, indicating that the automaker has slashed more than 14% of its workforce so far this year. The latest figure is not from precise payroll data, but from the number of people who are on Tesla’s “everybody” email distribution list as of June 17, a tally viewed by CNBC.
Tesla’s layoffs announcement landed in April, when Musk sent out a companywide email telling employees that the automaker would be cutting more than 10% of its staff. Layoffs at that point were already underway. Bloomberg reported that Musk was aiming for a 20% staff cut. Musk indicated that the number could be even bigger. On the company’s first-quarter earnings call later in April, he said Tesla had reached an inefficiency level of 25% to 30% after “a long period of prosperity” that began in 2019.
Home Furnishings Retailers Struggle As Fewer Houses Sell—From Williams-Sonoma To Wayfair To Home Depot
Home furnishings retailers have yet to rebound from the post-pandemic slump, with major players from low- to high-end markets reporting drops in first-quarter sales—as rising mortgage rates and a related slowdown in home sales continue to weigh on demand for big-ticket furniture and home improvement projects.
- RH, an upscale American home furnishings company formerly known as Restoration Hardware, reported a 1.7% net revenue loss for the quarter ending May 4, to $727 million, amid what CEO Gary Friedman called “the most challenging housing market in three decades” in last week’s earnings call.
- Williams-Sonoma saw its net revenue fall 5.4% year-over-year to $1.7 billion for the quarter ending April 28, with sales in Pottery Barn—its high-end brand and largest revenue driver—declining by 10.8%, while its second-biggest West Elm was down 4.1%.
- Ethan Allen, a custom-made furniture retailer, posted a 21.4% decrease in net sales for the quarter ending March 31, citing “sluggish” demand in the overall industry amid elevated interest and inflation rates, according to CFO Matthew McNulty.
- Wayfair, an online home goods company, reported $2.7 billion in net revenue for the quarter ending March 31, down 1.6% year-over-year, though the retailer narrowed its net loss by $107 million following a 13% workforce reduction in January.
Boeing Starliner Return Delayed Again for Spacewalks, Study of Spacecraft Issues
Boeing and NASA are once again "adjusting" the return home of two astronauts from the International Space Station on the Starliner spacecraft. Suni Williams and Butch Wilmore were scheduled to stay at the ISS for just a week after docking there June 6. Now they aren't expected to make the trip back to Earth until at least early July, following two scheduled spacewalks and continued assessments of reported issues on the spacecraft, Boeing announced in a June 21 update.
The space organizations have not announced a new return date after most recently saying the astronauts might come back Tuesday or Wednesday. Moving the Starliner's undocking and landing from Wednesday deconflicts with "a series of planned (ISS) spacewalks while allowing mission teams time to review propulsion system data," the aerospace company said in the update. The spacewalks were scheduled for Monday and July 2, NASA and Boeing said, meaning the astronauts wouldn't return until after those were complete. The spacewalk that was supposed to happen Monday was canceled following a spacesuit issue. NASA has not yet said how that will impact the planned spacewalk schedule or if it will further delay the astronauts' return.
Carmakers File Challenge to Parts of New Automatic-Braking Rule
A trade group representing carmakers is pushing back on a rule that requires automated emergency-braking systems in future vehicles, arguing the requirements are nearly impossible to meet and would be too costly. The Alliance for Automotive Innovation, which represents the largest automakers, on Monday petitioned the auto industry’s top safety regulator to reconsider certain parts of the final rule, but it didn’t object to an overall requirement that new vehicles come equipped with the automatic-braking feature.
The move by automakers marks the latest clash between the industry and safety regulators, who have tried to impose stricter standards and take advantage of new technologies to reduce traffic deaths after a rise in recent years. Automatic-braking systems use sensors, cameras and software to detect potential crashes with other vehicles and pedestrians, automatically applying the brakes if the driver fails to do so. The National Highway Traffic Safety Administration completed the rule in late April, requiring all vehicles sold in 2029 to come with the auto-braking technology. It mandates certain standards for the systems, such as being able to stop and avoid contact with another vehicle traveling at as much as 62 miles an hour and being able to detect pedestrians in darkness.
Novo Nordisk to build $4.1 Billion North Carolina Facility to Boost Output of Wegovy, Ozempic
Novo Nordisk on Monday said it will spend $4.1 billion to build a new manufacturing plant in Clayton, North Carolina, in a bid to boost the supply of its blockbuster weight loss drug Wegovy, diabetes treatment Ozempic and other injectable therapies. Demand for Wegovy and Ozempic has outstripped supply over the last year, spurring intermittent shortages in the U.S. and forcing the Danish drugmaker to invest heavily to increase its manufacturing footprint. The company said it plans to invest $6.8 billion in production this year, up from roughly $4 billion last year.
The new manufacturing facility will be responsible for filling and packaging syringes and injection pens for the drugs, according to a company release. Construction of the 1.4 million-square-foot facility has begun and is expected to be completed between 2027 and 2029, Novo Nordisk said. The company said 1,000 workers will staff the site, adding to the 2,500 employees already working at its three existing manufacturing plants in North Carolina.
Industrial Assessment Centers Implementation Grant Program to Reduce Industrial Emissions
Small- and medium-sized manufacturers (SMMs) have the opportunity to increase productivity and efficiency while saving money with the Industrial Assessment Centers (IAC) Implementation Grants Program. With the passage of the Bipartisan Infrastructure Law (BIL) on November 21, 2021, $550 million has been invested to expand the IAC Program to reduce industrial emissions and encourage a net-zero environment. Grant awards per eligible manufacturer can be for up to $300,000 per quarterly funding round at 50% cost share. Cost share options include, but are not limited to, internal capital, in-kind contributions, and state and local public programs.
- Gross annual sales less than $100,000,000 (based on the manufacturing firm/entity);
- Under 500 employees at the facility site; and
- Annual energy bills of more than $100,000 but less than $3,500,000 (based on the manufacturing firm/entity).