Member Briefing June 26, 2023

Posted By: Harold King Daily Briefing,

Manufacturing Recession Deepens in Europe

Euro zone business growth stalled this month as a manufacturing recession deepened and a previously resilient services sector barely grew, leaving the European Central Bank in a policy dilemma as it presses ahead with rate hikes to fight inflation. HCOB's flash Composite Purchasing Managers' Index (PMI) for the 20 nations sharing the euro currency, compiled by S&P Global and seen as a good gauge of overall economic health, sank to a five-month low of 50.3 in June from May's 52.8. The figures suggest that the bloc's economy is at best stagnating after a recession in the previous two quarters and a recovery is nowhere on the horizon, even if robust holiday bookings suggest that the tourism sector could keep the bloc afloat in the near term.

Manufacturing activity has been in decline since July and the downturn deepened this month with the euro zone factory PMI dropping to 43.6 from 44.8, also below all forecasts in the Reuters poll and its lowest since May 2020 when the COVID pandemic was cementing its grip on the world. Germany, with its oversized manufacturing sector, was a drag on the bloc as its own manufacturing PMI fell to 41.0 from 43.2, hitting a 37-month low.

Read more at Reuters


War in Ukraine Headlines


Higher Interest Rates Hit Home Prices Again

The national median existing-home price fell 3.1% in May from a year earlier to $396,100, the largest drop since December 2011, the National Association of Realtors said Thursday. Existing-home sales, which make up most of the housing market, increased 0.2% in May from the prior month to a seasonally adjusted annual rate of 4.3 million, the National Association of Realtors said Thursday. May sales fell 20.4% from a year earlier.

The housing market has slowed in the past year and a half as mortgage rates pushed many buyers out of the market and prompted homeowners with low rates on their current mortgages to stay put. Existing-home sales have declined by about one-third since the start of 2022.

Read more at The WSJ


U.S. Current Account Deficit Widens in the First Quarter

The U.S. current-account deficit, a measure of the nation's debt to other countries, rose 1.5% in the first three months of the year The current-account deficit increased to $219.3 billion in the first quarter from a revised $216.2 billion in the 2022 fourth quarter. The current account reveals if a country is a net lender or borrower. The current account deficit was equal to 3.3% of GDP in the fourth quarter, little changed from the prior quarter. The current-account deficit as a share of GDP peaked in 2005 at 6.3%.

The U.S. current account deficit is the broadest measure of the flow of goods, services and investments into and out of the country. The 1.5% increase in the first three months of 2023, snapped three quarters of narrowing.

Read more at Morningstar


COVID Update - Moderna Seeks US FDA Authorization for Updated COVID Vaccine

Moderna said on Thursday it has completed a submission to the U.S. Food and Drug Administration seeking authorization for its updated COVID-19 vaccine to target the XBB.1.5 subvariant. The submission from the company follows the FDA's advice last week to manufacturers that are updating their COVID-19 vaccines to develop monovalent shots to target XBB.1.5.

Monovalent, or single-target, vaccines would be a change from the most recent bivalent COVID boosters that targeted both the original and Omicron strains of the coronavirus. Moderna said preliminary clinical data demonstrated a robust immune response by its XBB.1.5 monovalent vaccine against XBB descendent lineage viruses. Pending authorization, the updated shot would be available in time for the fall vaccination, Moderna said.

Read more at Yahoo Finance


NYS COVID Update

The Governor updated COVID data for the week ending June 23.

Deaths:

  • Weekly: 29
  • Total Reported to CDC: 79,759

Hospitalizations:

  • Average Daily Patients in Hospital statewide: 467
  • Average Daily Patients in ICU Statewide: 51

7 Day Average Cases per 100K population

  • 1.8 positive cases per 100,00 population, Statewide
  • 2.1 positive cases per 100,00 population, Mid-Hudson

Useful Websites:



New Manufacturers’ Coalition Steps Up to Take on Regulation Barrage

A new manufacturer-led coalition is taking action against the barrage of regulations being handed down by the federal government, the NAM announced Thursday. The NAM, along with members of the NAM’s Council of Manufacturing Associations and Conference of State Manufacturers Associations, has launched Manufacturers for Sensible Regulations, a group aimed at addressing the unworkable onslaught of rules that has emerged from the Biden administration in recent months.

“Washington is creating tremendous doubt across our sector at a time when we’re still dealing with economic uncertainty,” NAM President and CEO Jay Timmons said. The new coalition is already meeting with key members of the Biden administration and Congress to share the impact the numerous regulations have had on the manufacturing industry. More than 63% of manufacturers say they spend more than 2,000 hours a year complying with federal regulations, according to the NAM’s Q2 2023 Manufacturers’ Outlook Survey.

Read more at the NAM


New York is Poised to Ban Non-Compete Agreements

In what will likely be a sea change to existing law, the New York legislature passed a bill this week banning post-employment non-compete agreements. If Governor Hochul signs the bill, as she is expected to do, New York will soon join a host of other states restricting non-compete agreements. The bill, which becomes effective 30 days after it is signed, would ban agreements that seek to prohibit a worker from competing with a company after the work relationship has ended. This bill represents a sweeping change to the existing legal landscape in New York.

There are some ambiguities in the law, but it appears that confidentiality agreements and agreements protecting trade secrets will still be permitted. The same goes for agreements prohibiting non-solicitation of clients and customers, but they must be limited to clients and customers the employees learned about through their employment (which generally formalizes the current approach taken by NY courts). Significantly, the bill allows workers to bring suit against a company if they are presented with an agreement that violates the law.

Read more at Greenwald Doherty


U.S.-India Relations Enter a New Chapter and Could Unlock Even More Tech and Defense Deals

U.S. President Joe Biden and Narendra Modi hailed a new era in their countries' relationship after the White House rolled out the red carpet for the Indian prime minister on Thursday, touting deals on defense and commerce aimed at countering China's global influence. “Two great nations, two great friends, and two great powers. Cheers," Biden told Modi in a toast at a state dinner. Modi said in reply: “You are soft spoken, but when it comes to action, you are very strong.”

The two countries announced agreements on semiconductors, critical minerals, technology, space cooperation and defense cooperation and sales. Some are aimed at diversifying supply chains to reduce dependence on China. Others are aimed at cornering the market in advanced technologies that may feature on the battlefields of the future. They also ended disputes at the World Trade Organization, and India removed some tariffs on U.S. goods. The United States is India's largest trading partner but the U.S. has much larger trading relationships with China, the EU, and North American neighbors.

Read more at Reuters


Ford Gets $9.2 Billion U.S. Loan for Battery Plants, Announces Layoffs of Salaried Workers

The U.S. Energy Department plans to lend up to $9.2 billion to a joint venture of Ford Motor (F.N) and South Korea's SK On to help it build three battery plants in Tennessee and Kentucky, the biggest-ever award from the government program. The conditional commitment for the low-cost government loan for the BlueOval SK joint venture comes from the government's Advanced Technology Vehicles Manufacturing (ATVM) loan program.

Meanwhile, the company is preparing to initiate another round of layoffs in the coming weeks, according to people familiar with the matter, the latest in a broader effort by the automaker to streamline operations and reduce costs. The layoffs, expected to mostly include U.S. salaried workers, would be one of several that Ford has initiated in less than a year and could be announced as early as next week, some of the people said.

Read more at Reuters


Paris Air Show 2023: A Resounding Return as Aviation Industry Takes Off Again

The first Paris Air Show after a four-year hiatus due to the pandemic is over, and it has been a good one for the industry. The world’s biggest and most prestigious aviation event clearly shows aviation is back on track as a growth industry after a near-death experience only three years ago.

The indicator seen as the most important gauge of an air show’s success is usually the number of aircraft orders revealed on this big stage in the global limelight. In sheer units, at last count by industry portal Flightglobal, 1,266 order and option announcements have been made during the show, ranking the 2023 edition of the Paris Air Show as third among other big air shows in the last ten years.

Learn more at Business Traveler


Younger Workforce is Not Afraid to Leave Their Jobs, Study Finds

A new survey by Amdocs says that employees are looking for opportunities beyond just their individual careers. Thirty-three percent of people said they would leave their job if they lacked support for internal mobility – the ability to take on a completely new challenge or team and be supported in doing so. However, less than half (45%) said their workplace supports it.

Growth and talent mobility are a priority for 85% of respondents. 46% of respondents have already left a company despite liking the compensation, benefits and culture due to lack of growth in their role, mobility to other roles, or reskilling/upskilling opportunities. Additionally, 57% said that a lack of growth opportunities would cause them to leave their current role. Compared to the national average, Gen Z and younger Millennials (ages 25-34) show the greatest likelihood of leaving a job if they lack areas like hybrid work, reskilling, the ability to change roles within a company, and more. This group also reports the highest instance (53%) of a job not meeting expectations with three to six months of starting the role.

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U.S. Jobless Claims Hold Steady at 20-Month High

The number of people filing for state unemployment benefits for the first time held steady at a 20-month high last week, remaining elevated for a third straight week in what may be an early indication of a softening labor market in the face of the Federal Reserve's aggressive credit tightening. Data from the Bureau of Labor Statistics on Thursday showed 264,000 new claims were filed for jobless benefits on a seasonally adjusted basis in the week ended June 17, unchanged from the prior week's upwardly revised level, which is the highest level of initial claims activity since October 2021.

Meanwhile, the ranks of all those continuing to receive benefits beyond the first week fell to 1.759 million in the week ended June 10 from a revised 1.772 million the week before. The latest reading compared with a median economists' estimate of 1.782 million so-called continued claims.

Read more at Reuters


Chinese Shopping App Temu Now the No. 1 Most-Downloaded App in the U.S.

Chinese shopping app Temu launched in the United States last year to inflation-weary shoppers, offering rock-bottom prices on thousands of items shipped straight from China. It's now the No. 1 most-downloaded app in the U.S., but the marketing campaign that it used to get there wasn’t cheap and the company is expected to lose an estimated $500 million to $900 million this year. “They’re lighting money on fire,” e-commerce expert Juozas Kaziuk─Śnas said.

Temu shoppers are inundated with a relentless barrage of texts, emails and push notifications, which dangle some new discount or deal that Temu insists won’t last. “They’re just hitting you over and over and over again,” said Barbara Kahn, a marketing professor at Wharton. Subject lines on promotional emails can be misleading, like “Order Notification” or “Thanks for your order” when no order has been placed. A class-action lawsuit filed in May accused Temu of sending unsolicited text messages, including some at night, in violation of federal and state laws governing robo calls. Temu didn’t respond to requests for comment.

Read more at Forbes


Lithium Producers Warn Global Supplies May Not Meet EV Demand

Lithium producers are growing anxious that delays in mine permitting, staffing shortages and inflation may hinder their ability to supply enough of the battery metal to meet the world's aggressive electrification timelines. There were 45 lithium mines operating in the world last year, with 11 expected to open this year and seven next year, according to Fastmarkets. That pace is far below what consultants say is needed to ensure adequate global supply.

This week, Lake Resources became the latest lithium company to announce a project delay, pushing back first production from its Kachi lithium project in Argentina by three years. It cited power supply and other logistics concerns. Albemarle, the world's largest lithium producer, is growing rapidly across the Americas, Asia and Australia. Still, it expects global lithium demand to exceed supply by 500,000 metric tons in 2030. Various consultancies and other producers have slightly different projections, but all warn of a looming shortage.

Read more at Automotive News


Airframe Builder Halts Production Ahead of Strike

Spirit AeroSystems suspended its Wichita, Kan., manufacturing operations on June 22 after the International Association of Machinists and Aerospace Workers union announced plans to strike on June 24. The IAM union members rejected the company’s proposed four-year labor agreement, which would have succeeded the contract expiring on June 24.Five other Spirit AeroSystems plants in Maine, North Carolina, Oklahoma, and Texas are not affected by the decision to suspend production, though with a reported 11,000 workers the Wichita plant is by far the largest of the group.

Spirit AeroSystems supplies major airframe products to both Boeing and rival Airbus, so a prolonged outage could have a significant effect on aerospace supply chains. Spirit supplies the full fuselage for Boeing’s best-selling aircraft, the narrow-body 737 MAX; and forward sections for other Boeing series. It also supplies structural components to Airbus for its A220 mid-sized jets, which are assembled in Mobile, Ala.

Read more at American Machinist


Report Examines Role Manufactured Homes Can Play in Aiding New York's Housing Woes

The Rural Housing Coalition released a report on the role manufactured homes and mobile home parks play in the state's broader housing picture, finding challenges for residents when it comes to large investment firms buying parks and raising fees along the way. The report found manufactured housing is prevalent in more rural areas of New York while also making up a viable option for affordable housing. “There are 192,890 manufactured housing units in New York State – making up 2.4% of the state’s total housing stock,” said Mike Borges, the executive director of the Rural Housing Coalition. “However, in rural areas, that percentage jumps to 10.3% of housing stock – more than 100,000 manufactured housing units.

The report identifies Saratoga, Dutchess, and Ulster Counties as having the highest concentrations of manufactured housing communities in the state.” The report supported legislation that would expand chances for residents to purchase their housing communities in case of a sale. Advocates also pointed to the need to fund and purchase development rights for manufactured housing communities by using open space and farmland conservation programs as a potential model.

Read more at New York State of Politics