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Member Briefing June 27, 2024

June 27, 2024

Posted By: Harold King in Daily Briefing,

Top Story

Q2 Manufacturers’ Outlook Survey: Impending Tax Increases, and Workforce Top Concerns

If Congress doesn’t stop impending tax increases, manufacturers and the larger U.S. economy will feel the pinch—and badly, according to findings from the NAM’s Q2 2024 Outlook Survey, out yesterday. The survey of manufacturers, conducted this quarter from May 14 to June 3, spotlights the criticality of Congress moving now to “prevent tax increases that will limit the industry’s ability to create jobs, support their communities and compete in the global economy.”

Some 73% of manufacturers say congressional failure to stop the tax increases will limit their capital investment opportunities. Almost 94% agree that Congress should move to prevent the increases before the end of next year.
More than 67% of manufacturers cited the inability to attract and retain employees as their top primary challenge, followed by rising health care costs (66.7%), an unfavorable business climate (59.6%) and a weaker domestic economy (56.8%).

“If Congress does not take action, job creation, wage growth and investments in communities—in short, America’s manufacturing edge—will be at risk, as well as our country’s ability to attract meaningful investments into our economy,” NAM President Jay Timmons said.

Read more at The NAM

High Mortgage Rates Continue to Weigh on New Home Sales

New home sales fell 11.3% to a 619K-unit pace in May, the weakest pace since November 2023. The new home market has softened recently alongside higher mortgage rates, increased availability of existing homes and a more moderate pace of economic growth. Although these factors are likely to remain as a constraint moving forward, an uptick in mortgage applications for purchase so far in June suggests that the small dip in mortgage rates over the past several weeks will translate to a slightly stronger pace of home sales in coming months.

The average 30-year fixed mortgage rate peaked at 7.22% the first week of May, according to Freddie Mac. Although mortgage rates moved lower over the month, prevailing mortgage rates above 7.0% likely suppressed demand and diminished contract signings over the month. Builder incentives have grown more prevalent as mortgage rates remain elevated. According to the National Association of Home Builders, the portion of builders offering incentives ticked up for the second consecutive month in June to 61%, reaching its highest share since January. Greater use of builder incentives could continue to help shore up new home sales somewhat; however, a moderating labor market may serve to constrain sales moving forward.

Read more at Wells Fargo

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Policy and Politics

USDOT Announces 2024 RAISE Grants

U.S. Transportation Secretary Pete Buttigieg announced $1.8 billion in awards from the Rebuilding American Infrastructure with Sustainability and Equity (RAISE) discretionary grant program for 148 projects across the country. The announcement brings the total amount of Biden-Harris Administration RAISE grants to more than $7.2 billion for over 550 projects across the country. The competitive RAISE program, which was authorized $1.5 billion a year on top of already appropriated funds from the Bipartisan Infrastructure Law (BIL), supports a diverse set of communities with projects of local and regional significance. Some examples of the projects selected include:

Joe Louis Meets the Iron Belle: Connecting Communities in Detroit Project in Detroit, Michigan – $20,704,712 will fund the construction of two shared-use paths in the Joe Louis Greenway and Iron Belle Trail systems.
Browning Streets Community Connectivity Planning Project on the Blackfeet Reservation, Montana – $3,906,652 will fund planning and design for reconstructing streets in Browning, taking a Complete Streets approach to addressing roadway safety and pedestrian issues.
Holloway Street: Safe Access to Durham’s Busiest Transit Route Project in Durham, North Carolina – $12,044,800 will improve 33 intersections, including ADA curb ramps and crosswalks, tighten curb radii, upgrade bus stop amenities, and close sidewalk gaps.
Santa Ana Boulevard Grade Separation Project in Santa Ana, California – $25,000,000 in funding will support the reconstruction of an existing rail crossing with the Southern California Regional Rail Authority Orange Line double tracks at Santa Ana Boulevard, adjacent to the Santa Ana Regional Transportation Center, with a new multimodal grade separated underpass.
Lake Wales Complete Streets Project in Lake Wales, Florida – $22,930,000 will fund the Complete Streets redevelopment of four road segments in Lake Wales: 1st Street, Central Avenue, A Street, and Lincoln Avenue.

The full list of projects can be found on USDOT’s website.

Read more at Newsweek

Supreme Court’s Biggest Rulings Are Imminent: Here’s What To Watch For This Week—Including Abortion And Trump

The Supreme Court will issue a slew of major rulings in the coming days before its term wraps up, with opinions set to come out as soon as Wednesday on issues including emergency abortion care, how much power federal agencies have and whether former President Donald Trump has immunity from criminal charges. Here are a few of them expalined

Trump Immunity: Trump has asked the Supreme Court to dismiss his federal charges for trying to overturn the election, arguing he has “presidential immunity” from criminal charges for official acts he took while in office.
Federal Agencies: Herring fishermen could bring about one of the most consequential rulings of this term, as a dispute over carrying federal monitors on their vessels seeks to overturn a landmark ruling giving wide power to federal agencies to enact policies—which could have far-reaching consequences on how the federal government operates.
Sackler Family: Justices will decide whether to uphold a bankruptcy settlement for Purdue Pharma, the manufacturer of Oxycontin, in which members of the Sackler family would pay out $6 billion to victims of the opioid crisis—and be shielded from liability from civil lawsuits going forward.
Homelessness: The court will decide whether a ban on “public camping” that’s been used to punish homeless residents is constitutional, which could have broad consequences for how cities handle their rising homeless populations.
January 6 Rioter: Joseph Fischer, who was arrested for his participation in the January 6 riot, wants the Supreme Court to overturn his federal charges for obstruction, which could affect hundreds of rioters—and potentially Trump—if the court agrees.

Read more at Roads and Bridges

New Salary Level is Coming for Exempt White-Collar Employees July 1

The new salary level regulations issued by the U.S. Department of Labor will take effect July 1. On that date, the salary threshold for white-collar exemptions from the overtime requirements of the Fair Labor Standards Act will increase to $844 a week, or $43,888 a year. Six months later, on January 1, the salary threshold will increase again to $1,128 a week, or $58,656 per year. In addition, the annual salary level required to claim the “highly compensated employee” exemption will increase to $132,964 on July 1, and to $151,164 on January 1.

But the courts may intervene and stop one or both updates with an injunction. If so, the new regulations would suffer the same fate as regulations issued by the Obama Administration in 2016. A federal court in Texas permanently enjoined those regulations only days before they were to take effect. There are three lawsuits pending in Texas that are challenging the new regulations. The one that is most likely to have an early ruling is Texas v. U.S. Department of Labor, which was filed on June 3 in the U.S. District Court in Eastern Texas.

Read more at JD Supra

Health and Wellness

How Extreme Heat and Humidity Affect Your Health

Heat-related illnesses can be serious. They include heat rash, heat cramps, heat exhaustion and heatstroke. "Illness can be something mild, such as heat cramps, which is usually the first stage consisting of cramping and abdominal pain in some instances. Then it can progress to heat exhaustion, which is nausea, filling inability to cool, increased warmth, cramping, dehydration or mild dehydration," Dr. Jesse Bracamonte, a Mayo Clinic family medicine physician says. "And that can become severe, and that's known as heatstroke, which can cause disorientation, confusion, the ability to cool yourself, nausea and vomiting."

Heat exhaustion happens when the body loses too much water or salt from heavy sweating or dehydration, usually after being active in the heat. Heatstroke is more serious and happens when the body overheats and can't cool down. Seeking care promptly for heat-related illnesses is crucial. You should try to cool down quickly, drink cool fluids and stay out of the heat until your symptoms get better. "If you have symptoms of heat cramps or heat exhaustion, it's important to stay cool," says Dr. Bracamonte. Seek a cool, shaded place, go indoors, and drink fluids. Consider sports drinks containing electrolyte-hydrating fluids as well — just watch for heavy sugar content.

Read more, watch video at The Mayo Clinic

Election 2024

Industry News

Auto Dealer Cybersecurity Breach Affects Auto Manufacturers

On Monday, the Associated Press reported that the CDK hack affected dealers for Stellantis, Ford and BMW. Stellantis specifically told AP that some of its dealerships had reverted to pen-and-paper record-keeping to keep sales going. Ford and Lincoln customers had to access sales and service support through “alternative routes.” Penske Automotive Group reported to BleepingComputer that its Premier Truck Group business suffered disruptions.

Andy Thompson, offensive cybersecurity research evangelist at CyberArk, wonders whether BlackSuit is the only threat actor involved in the pair of breaches. “One thought to consider is if there were multiple threat actors involved, which is often the case. We saw this play out in the RNC hack back in 2020, where multiple nation-state threat actors (from the same country) were embedded in the RNC networks, unbeknownst to each other! If that was the case here, there often comes a time when one threat actor strikes first and forces the hand of the other to either execute their own end-game or bow out empty-handed. This potentially sounds like one of those situations. Rather than leaving empty-handed, a second attack could have been executed by the remaining threat actor,” Thompson says.

Read more at Industry Week

Global Steel Production Ticks Up

Steel production rose 5.7% worldwide from April to May, and with 165.1 million metric tons produced the industry inched 1.5% ahead of its year-ago total, according to the World Steel Association. The improvements kept the year-to-date total for raw steel production barely even (-0.1%) with the first five months of 2023, with 793.2 million metric tons of steel having been produced for January to May 2024. The World Steel Assn. tracks raw-steel production for 71 member countries that comprise 97.0% of global capacity.

Steelmakers in much of the developed world – notably in Japan, the United States, and European Union – have restrained their outputs to match the level of demand and stabilize steel prices. The growth revealed by the May 2024 total is mainly the result of rising production volume in China, where the May total of 92.9 million tons of raw steel produced is a 7.5% improvement from April, and a 2.7% improvement from China’s May 2023 tonnage. Through much of the current year Chinese producers have posted results that demonstrate ongoing efforts to control overproduction there, but the 438.6 million tons they have produced YTD shows they have narrowed the decrease to a -1.4% drop from 2023.

Read more at American Machinist

Volkswagen Is Investing Up To $5 Billion In Rivian

Upstart electric vehicle maker Rivian said Volkswagen is investing up to $5 billion in the electric vehicle maker and that the two companies are forming a joint venture to develop an automotive software platform based on Rivian technology. Collaborating with one of the world’s biggest automakers could also help Rivian reduce some of its component and materials costs. “Initially, we are investing $1 billion in Rivian and are planning further investments of up to $4 billion,” CEO of Volkswagen Group Oliver Blume said in a media call. “The additional investments will take place through 2026,” assuming the partnership achieves specific technical milestones, he said, without elaborating.

Support for the Irvine, California-based electric vehicle maker from one of the world’s automotive giants — combined with its ongoing relationship with Amazon, its biggest investor and top buyer of its electric delivery trucks — may help ensure that Rivian launches its next products, the midsize R2 electric SUV and compact R3 crossover, on time. The new funds could also help it resume construction of its Georgia plant, mothballed early this year as a cost-saving measure.

Read more at Forbes

Container Transit Times Soar as Red Sea Crisis Continues Unabated

The escalating conflict in the Red Sea region has disrupted international shipping routes, contributing to significantly higher transit times for the container shipping sector, according to a new report released by supply chain visibility platform, Project44. Since the onset the attacks by the Yemen-based Houthis in November, hundreds of ships from all major carriers have altered their courses to avoid the area. Despite the initial variability in schedules post-attacks, carriers have now adjusted to the new routes, with delays reduced to 4-8 days from initial highs.

The Suez Canal, one of the busiest sea routes in the world, has seen an unprecedented drop in traffic as a result. An analysis of May 2024 figures revealed a startling 80% decrease in passages compared to May 2023. The report suggests this trend is unlikely to reverse soon, with the looming peak shipping season unlikely to drive a resurgence of carriers using the route. Carriers are therefore adopting alternative routes around Africa or through the Panama Canal, increasing transit times significantly. Container transit times for routes from China to Europe, Southeast Asia to Europe, and Southeast Asia to the US East Coast have been extended by a median of 10-14 days. Project44’s says these transit times represent the “new normal” as carriers continue to avoid the Red Sea.

Read more at gCaptain

Possible East Coast Port Strike Could Lead to High West Coast Volume

All markets have stabilized for ocean and rail container demand, according to a report from ITS Logistics released June 24. However, the company warns supply chain professionals to be aware of “significant volumes entering the West Coast via Seattle-Tacoma and Los Angeles and Long Beach and for inland point intermodal legs to be canceled.” “Port and rail operations have normalized, and volumes have reduced due to extended dwell times for containers in Asia awaiting export,” said Paul Brashier, vice president of Global Supply Chain for ITS Logistics, in a statement.

“Despite this positive news, we are keeping a close eye on the current conditions, which could quickly change in the coming months due to the potential for International Longshoreman Association (ILA) strikes at US East Coast ports. The potential impact of these strikes on the US West Coast ports is a matter of concern. It's crucial for supply chain professionals to monitor this situation closely and be prepared for any potential disruptions.” This month, the ILA, representing 85,000 port workers along the eastern seaboard and Gulf Coast ports, requested substantial wage increases for its members. The union, citing the high profits of container lines, suspended contract negotiations with the US Maritime Alliance (USMX), which represents employers at East and Gulf Coast ports.

Read more at Material Handling & Logistics

FedEx Earnings Top Expectations As Company Reviews Freight Segment

FedEx (FDX) closed the door on the fiscal year late Tuesday with better-than-expected fourth-quarter earnings and revenue. The shipping heavyweight also gave initial fiscal 2025 guidance, as FedEx prepares for life without a contract with the United States Postal Service (USPS). FedEx reported fiscal fourth-quarter EPS growing 9.5% to $5.41 with revenue increasing 1% to $22.10 billion. Analysts predicted earnings of $5.34 per share and sales totaling $22.05 billion. For the full fiscal year, FedEx saw EPS increase 19% to $17.80 on revenue of $87.7 billion, a 3% drop compared to a year ago. Analyst expectations had earnings of $17.77 per share on sales of $87.69 billion, according to FactSet.

Looking to fiscal 2025, FedEx predicts low-to-mid single-digit percent revenue growth. For fiscal 2025, FedEx said it expects to repurchase $2.5 billion of stock, including $1 billion during the first fiscal quarter. FedEx added that its board of directors is conducting an assessment of the role of FedEx Freight and is looking into "potential steps to further unlock sustainable shareholder value." The shipping heavyweight is aiming to complete this review by the end of the calendar year, according to the earnings release.

Read more at IBD

Workers to Continue Strike at Canada's Bombardier, Union Rejects Company's Proposal

Canadian workers' union Unifor said on Tuesday its members at Bombardier (BBDb.TO), opens new tab will continue their ongoing strike action after rejecting, what it called, a "final proposal" from the business-jet maker. Two of the union's local units, 112 and 673, announced the strike action at the company after failing to reach an agreement by June 22. The 1,350 workers from these units are engaged in building Bombardier's long-range Global series aircraft at the Toronto-based Pearson international airport facility.

The union said on Tuesday it considered the company's offer as "insufficient", adding that "both the parties remain apart on key union priorities". Bombardier and Unifor are to continue negotiations, the union said, without disclosing details. Bombardier was not available immediately for comment.

Read more at Reuters

Why You Shouldn’t Buy an iPhone This Summer. All the Reasons, From A to I.

Apple Intelligence, the company’s just-announced artificial-intelligence software, requires brand spankin’ new hardware. When the features start to roll out this fall, you’ll need an iPhone 15 Pro or 15 Pro Max—or, presumably, any of the new iPhone 16 models due in September. As for iPads and Macs, they must have an M chip. AI is going to change how we shop for Apple products, and tech in general. (See Microsoft’s recent Copilot+ laptops, too.) Apple Intelligence includes a long list of tools: an emoji generator, a smarter Siri, text summarization, built-in ChatGPT support and more. But why do you need a new phone for it? Two theories.

Theory 1: AI software, especially on-device tools that generate images and transcribe speech, needs better processors and more memory. “You could in theory run these models on a very old device but it would be so slow, it wouldn’t be useful,” John Giannandrea, the Apple senior vice president overseeing AI strategy, said in a recent interview with Daring Fireball’s John Gruber.
Theory 2: Apple wants cold hard cash. Restricting coveted features from older models makes people break out their wallets—and can drive an upgrade supercycle. Apple executives have said that’s not the case, and on Wednesday the company is releasing a paper saying it designs products for longevity.

Read more at The WSJ

Why Most of the World Still Uses the U.S. Dollar to Buy and Sell Oil

If someone in France wants to buy oil from Saudi Arabia, they would usually use dollars, said Steve Kamin, a senior fellow at the American Enterprise Institute. If someone in Mexico wants to buy oil from Norway, he said, they would use dollars too. So even though these countries have their own currencies, they use another country’s currency — the U.S. dollar — to buy oil or gas most of the time. Why? Well, history, for one thing.

“They U.S. was originally one of the world’s biggest oil producers. We sometimes forget that,” said Brad Setser, a senior fellow at the Council on Foreign Relations. “The Rockefeller empire was initially a domestic U.S. oil empire, and going into World War II, the U.S. was one of the world’s biggest oil exporters. ”But the real start of dollar dominance in oil markets came after the oil shock of the early 1970s, said Gregory Brew, an analyst for Eurasia Group’s energy, climate and resources team. “Saudi Arabia had enormous fiscal surpluses. It was earning far more money than it could ever hope to invest in its own economy,” he said. So it needed a place to park all that money. And the natural place was the American market, Brew said.

Read more at Marketplace

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