Member Briefing June 3, 2025
U.S. ISM Manufacturing PMI drops to 48.5 in May
U.S. manufacturing activity sank a little deeper into contraction in May, reflecting persistent worries over the impact of the Trump administration’s whipsawing trade policy. The Institute for Supply Management said Monday that its purchasing managers’ index of manufacturing activity fell to 48.5 in May, from 48.7 in April, matching a consensus of economists polled by The Wall Street Journal. That brought the index to its lowest level since November, as activity fell further below the 50-mark that divides growth and contraction. It was last above 50 in January and February, though that followed 26 consecutive months of contraction.
- The Employment Index increased a tad to 46.8 from 46.5 in April, indicating that the sector's payrolls are increasing at a faster pace.
- The Prices Paid Index, the survey's inflation component, eased slightly to 69.4 from 69.8.
- The New Orders index went up to 47.6 from April’s 47.2.
- Down a drastic 7.2 points from April’s 47.1%, the imports index fell into extreme contraction with a May reading of 39.9%
- Concerns surrounding tariffs continue to dominate the comments section of the survey. A respondent from the transportation equipment sector writes, “There is continued softening of demand in the commercial vehicle market, primarily related to higher prices and economic uncertainty. The impact of ever-changing trade policies of the current administration has wreaked havoc on suppliers’ ability to react and remain profitable.”
NAM Outlook Survey – Optimism Drops in Q2
The NAM’s Q2 Manufacturers’ Outlook Survey, released today, shows that manufacturers’ optimism about the future is dropping precipitously. The headline number: Only 55.4% of respondents report a positive outlook for their companies—a nearly 15-percentage-point drop from Q1 and the lowest level since the height of the COVID-19 pandemic in Q2 of 2020. Trade uncertainty remained the top business concern for the second consecutive quarter, cited by 77.0% of respondents. Almost as alarming is the increase in raw material costs, which was cited by 66.1% of respondents.
Manufacturers do have a prescription for renewed confidence, however, as 85.4% of respondents believe Congress should preserve pro-growth tax policies in response to trade uncertainty. “These numbers are yet another indicator that manufacturers need increased policy certainty. Congress must act urgently to preserve tax reform and empower manufacturers to make the long-term investments that drive the American economy,” said NAM President and CEO Jay Timmons.
Monthly Advance Report on Durable Goods Shows Decline in April
New orders for manufactured durable goods in April, down following four consecutive monthly increases, decreased $19.9 billion or 6.3 percent to $296.3 billion, the U.S. Census Bureau announced today. This followed a 7.6 percent March increase. Excluding transportation, new orders increased 0.2 percent. Excluding defense, new orders decreased 7.5 percent. Transportation equipment, also down following four consecutive monthly increases, drove the decrease, $20.3 billion or 17.1 percent to $98.8 billion.
Non-defense aircraft and parts plummeting 51.5% after surging 158.5% in March. When excluding transportation, new orders ticked up 0.2%.
Global Headlines
Middle East
- Iran Significantly Growing Uranium Stockpile, Warns UN Nuclear Agency – BBC
- Iran Poised To Dismiss US Nuclear Proposal, Iranian Diplomat Says - Reuters
- The ‘Water Mafia’ Is Real—and It’s Draining Iran Dry – Foreign Policy
- Iran Carried Out Secret Nuclear Programme With Undeclared Material UN Says – France 24
- Israeli Forces Open Fire A Kilometer Away From Gaza Aid Site, Killing 3, Health Officials Say - AP
- US Gives Nod To Syria To Bring Foreign Jihadist Ex-Rebels Into Army - 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
- New Russia-Ukraine Talks Yield Another Large POW Swap — But No Ceasefire – Politico
- Russia Sets Out Punitive Terms At Peace Talks With Ukraine - Reuters
- Ukraine’s Stunning Assault Upsets Russia’s Global Military Strategy - WSJ
- After Talks With Zelenskyy And Macron, US Senators Warn: Putin ‘Is Preparing For More War’ - Politico
- Graham Praises ‘Ever-Resourceful’ Ukraine For Russian Attack – The Hill
- To Attack Russian Air Bases, Ukrainian Spies Hid Drones In Wooden Sheds - Reuters
- 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
- A Colossal Cloud Of Sahara Dust Is Smothering The Caribbean En Route To The US – AP
- Poland's Conservative President-Elect To Be Tough Opponent For PM - BBC
- Polish PM Donald Tusk Calls For Confidence Vote After Nationalist Wins Presidency – France 24
- Mexico’s Judicial Election Puts Spotlight on Former President’s Son - WSJ
- EU Science Advisers Slam Brussels’ Weakened 2040 Climate Plans - Politico
- UK Put On A War Footing With Defense Overhaul — But Is It Too Little, Too Late? - CNBC
- Harvard Chinese Grad Speech Draws Praise And Ire - BBC
- UN Seeks 20% Cut In Staff To Help Deal With A Funding Shortfall – AP
Policy and Politics
A Rate Cut Debate Is Heating Up Inside The Fed
A divide is emerging within the Federal Reserve about whether to hold rates steady for some time or get more comfortable about cuts later this year as officials try to determine whether any inflation coming from President Trump's tariffs will prove to be longer-lasting. Some policymakers are arguing for "looking through" the impact of the duties as temporary, a stance that would leave the door open for cuts. Many on the rate-setting committee, however, believe there is a risk that inflation from tariffs could become more persistent.
Federal Reserve governor Chris Waller is now firmly in the first camp. On Sunday night, he made another argument for why any impact on inflation from tariffs likely won't last. "Given my belief that any tariff-induced inflation will not be persistent and that inflation expectations are anchored, I support looking through any tariff effects on near-term inflation when setting the policy rate," Waller said in a speech in Seoul, South Korea. But other members of the Fed — including Minneapolis Fed president Neel Kashkari and Dallas Fed president Lorie Logan — have been more vocal about holding rates steady. Kashkari said last week that he believes trade talks could take months or years to resolve and that tariff increases could occur tit for tat as trading partners respond to one another.
Hochul, Jeffries Raise Concerns Over Possible Impacts Of One Big Beautiful Bill
All eyes will be on the U.S. Senate this week as senators debate what to do after the House of Representatives passed President Donald Trump's One Big Beautiful Bill Act last month. New York Gov. Kathy Hochul and House Minority Leader Hakeem Jeffries are urging senators to vote no. They rallied Sunday in Brooklyn to highlight what they say could happen if the bill becomes law and say those provisions would be detrimental to the state.
Hochul and Jeffries say the act would hurt federal funding to Medicaid and the Essential Plan, causing about 1.5 million New Yorkers to lose their health insurance. They also say it would result in more than $3 billion in losses for hospitals in the state. The package includes roughly $700 billion in reduced spending on Medicaid. The bill would also create new community engagement requirements of at least 80 hours per month. That requirement would not go into effect until January 2029. The president and House Republicans say the cuts are targeting waste, fraud and abuse.
Read more at New York State of Politics
GOP Senator Draws Red Line on Trump Megabill
Sen. Ron Johnson (R., Wis.) is used to watching his fellow GOP senators look at their shoes during closed-door meetings when he waves his charts and digs in his heels on the fiscal policies that are the foundation of his political career. The three-term Republican is insisting on deeper spending cuts in President Trump’s “big beautiful bill,” saying his party is doing too little to address the country’s debt burden. His hard-line stance threatens to complicate passage of the GOP’s multitrillion dollar measure, which the Senate is turning to now and Trump wants on his desk by July 4.
He takes issue with GOP colleagues’ claims that economic growth from the new tax cuts will rein in the deficit, instead siding with official scorekeepers who say the deficit will expand. He said he appreciates that Trump’s ideas, such as no tax on overtime, are “directed toward working men and women, but there’s nothing growth-incentivizing about his tax proposals.” The current bill—with tax relief and border spending partially offset by Medicaid and other reductions—is expected to increase budget deficits by $2.7 trillion through 2034, compared with doing nothing, though a final official estimate wasn’t available.
- Tensions Flare Between US and China Beyond Trade – Seeking Alpha
- RFK Jr. Fires ‘Opening Salvo’ On Vaccine Status Quo – The Hill
- Trump Administration Proposal Would Lift Biden-Era Limits On Alaska Oil Drilling - Reuters
- The Law Firms That Appeased Trump—and Angered Their Clients - WSJ
- US Judge Blocks Trump From Nixing Union Bargaining For TSA Officers - Reuters
- Trump’s ‘Big, Beautiful Bill’ Heads For Showdown With Senate Parliamentarian – The Hill
- Trump Administration Targets Tech Firms as It Cuts More Contracts - WSJ
- Trump Administration Asks Supreme Court To Lift Judge’s New Block On Mass Layoffs – The Hill
- Trump Tracker: Keep Tabs On The Latest Announcements And Executive Orders - WSJ
Health and Wellness
FDA Grants Limited Approval To New Covid Vaccine From Moderna
Moderna announced this weekend that the Food and Drug Administration approved its lower-dose Covid-19 vaccine for adults 65 and older, as well as people ages 12 to 64 with at least one medical condition that increases their risk for severe Covid. The approval, which is limited to individuals who have previously received a Covid vaccine, was granted by the FDA on Friday.
Moderna said in a Saturday press release that the new vaccine should be available in the U.S. in time for the 2025-26 respiratory virus season, which starts in the fall. Moderna is also updating its original vaccine to target the LP.8.1 variant this fall. The company submitted an application in May for the FDA to approve the updated formula. The newly approved vaccine, mNEXSPIKE, contains one-fifth of Moderna’s original Covid vaccine dose, Spikevax. It is intended as an alternative for individuals who prefer a lower-dose option, not as a replacement for existing Covid vaccines.
Industry News
Trade War Updates
- US Pushes Countries For Best Offers By Wednesday As Tariff Deadline Looms - Reuters
- Steel Stocks Surge After Trump Doubles Steel Tariffs, Cleveland Cliffs Jumps 25% - CNBC
- Brewing Tariff Court Battles Won’t Spike White House Leverage In Trade Talks, Lutnick Says - Politico
- Tariffs Reshape Supply Chains in Unpredictable Ways – Material Handling & Logistics
- Retailer Temu's Daily US Users Halve Following End Of 'De Minimis' Loophole - Reuters
- The Supreme Court May Not Step in and Save Trump’s Tariffs - Politico
- The Reality Of Trump's Steel And Aluminium Tariffs - Reuters
- Bessent Says China Already Violating Its Latest Trade Deal - Politico
- ‘We Just Keep Expanding’: California Businessman Says Tariffs Have Exploded Demand For His Warehouse Business - Moneywise
- China, EU Tensions Escalate As US Pushes Countries For Deals – Yahoo Finance
Why Nvidia Can’t Just Quit China
Nvidia used its fiscal first-quarter report last week to send a rather stark message to the Trump administration about the dangers of shutting American chip companies out of the Chinese artificial-intelligence market. “China’s AI moves on with or without U.S. chips,” Nvidia Chief Executive Jensen Huang said on the company’s conference call. Making the point that half the world’s AI developers are in China, Huang argued that preventing U.S. companies from competing there could ultimately cost America its leading position in the global AI industry. Nvidia also has powerful financial reasons to make that argument. The U.S. government’s decision in April to stop the company from selling its H20 chips to the Chinese market cost the company about $2.5 billion in lost sales in the April-ended quarter and will cost another $8 billion in the current period ending in July. That is because the H20 chip was designed specifically for the Chinese market to comply with then-current export restrictions, so it isn’t really salable anywhere else.
Demand for Nvidia’s AI chips is still booming in the rest of the world, so the lost China sales don’t hurt much in the near term. But Nvidia is now valued at around $3.3 trillion—triple the market cap of the next-largest chip company—precisely because investors think it still has a long runway of significant growth ahead. Wall Street analysts expect Nvidia’s annual revenue to cross the $200 billion mark this year and hit $300 billion by 2028, according to consensus estimates from FactSet.
Neuralink Competitor Paradromics Completes First Human Implant
Neurotech startup Paradromics on Monday announced it has implanted its brain-computer interface in a human for the first time. The procedure took place May 14 at the University of Michigan with a patient who was already undergoing neurosurgery to treat epilepsy. The company’s technology was implanted and removed from the patient’s brain in about 20 minutes during that surgery. Once regulators give it the green light, Paradromics plans to kick off a clinical trial later this year that will study the long-term safety and use of its technology in humans.
A brain-computer interface, or BCI, is a system that deciphers brain signals and translates them into commands for external technologies. Paradromics’ system is called the Connexus Brain-Computer Interface, and the company says it will initially help patients with severe motor impairments such as paralysis speak through a computer. BCIs have been studied in academia for decades, and several other startups, including Elon Musk’s Neuralink, are developing their own systems. Each company’s BCI is slightly different, but Paradromics is designing a BCI that can record brain activity at the level of individual neurons.
Boeing Plans New Assembly Line for 737 MAX
Boeing Corp. reportedly will install a new production line in Everett, Wash., for the 737 MAX 10, the largest of four variants for Boeing’s top-selling aircraft. The 737 MAX program has three assembly lines now at Boeing’s Renton, Wash., plant, while the Everett complex has been the site of wide-body jet assembly. The plant currently assembles the Boeing 767, mainly a cargo jet but also adapted as the KC-46 tanker aircraft for the U.S. Air Force and some foreign defense forces; the 777 passenger and cargo jet; and the forthcoming 777X, which is expected to begin deliveries in 2026.
In recent years, Boeing relocated the widebody 787 Dreamliner program to North Charleston, S.C., and the 747 program has ended. At Everett, the new 737 MAX 10 assembly line will occupy the space formerly assigned to the 747. With the total backlog for all 737 MAX models at more than 4,700 jets, increasing the production rate for the 737 MAX 8 and MAX 9 is an urgent priority for Boeing. While the Renton complex has been operating under Federal Aviation Administration restrictions Ortberg also told his audience that the output there will rise toward 42 jets/month soon, and then to 47 jets/month, with FAA approval.
Read more at American Machinist
Global Airlines Trim 2025 Profit Forecast Over Trade Tensions And Supply Woes
Global airlines shaved a key forecast for 2025 industry-wide profits on Monday, blaming trade tensions and declining consumer confidence, while hitting out at "unacceptable" delays in jetliner deliveries that have hindered their growth plans. The IATA industry body now expects global airlines to post a combined profit of $36.0 billion this year, down slightly from a previous forecast of $36.6 billion in December, before U.S. President Donald Trump took office. He has since launched a trade war and tightened enforcement of U.S. border controls.
Airline profits, however, are still set to rise from $32.4 billion last year, helped by lower oil prices and record passenger numbers. The International Air Transport Association issued the widely watched forecasts, which give clues to the wider economy, at an annual meeting of its more than 300 member airlines in New Delhi. Trump's sweeping tariffs have stoked fears of an economic slowdown and squeezed discretionary spending, prompting many consumers especially in the United States to delay or scale back travel plans. Meanwhile, aircraft delivery delays have hampered airlines' ability to meet soaring travel demand in certain regions, while driving up operating costs as carriers are forced to keep older jets in service or pay more for the dwindling number of available spare parts.
IBM Acquires Data Analysis Startup Seek AI, Opens AI Accelerator In NYC
IBM on Monday said that it has acquired Seek AI, an AI platform that allows users to ask questions about enterprise data using natural language, for an undisclosed sum. Seek CEO and founder Sarah Nagy said that the startup's technology will be a key part of Watsonx AI Labs, IBM's new NYC-based AI accelerator, which IBM also announced today. IBM's acquisition of Seek comes as the former looks to grow its investments in AI, particularly AI for the enterprise. It's a strategy that's worked well for IBM so far. The tech giant's Q1 earnings beat estimates, driven by software growth and strong AI demand.
NYC-based Seek, which Nagy founded in 2021, offers an array of tools designed to help businesses better leverage their data. The company's software allows users to interact with data using a chatbot-like interface, automatically translating natural language questions into database queries and performing high-level data analysis and summarization. In a press release, IBM said that Watsonx AI Labs will bring together IBM researchers and engineers in a "collaborative hub" to build AI solutions for companies. Watsonx AI Labs will also seek collaborations with local colleges and research institutions.
Construction Spending Drops in April
The Commerce Department's Census Bureau said on Monday that construction spending dropped 0.4% after a downwardly revised 0.8% decline in March. Economists polled by Reuters had forecast construction spending rebounding 0.3% after a previously reported 0.5% decline in March. Spending decreased 0.5% year-on-year in April. Spending on private construction projects slipped 0.7%. Investment in residential construction dropped 0.9%, with outlays on new single-family housing projects declining 1.1%. Outlays on multi-family housing units dipped 0.1% in April.
Nonresidential construction appears to have peaked. A 0.5% decline in private outlays slightly outweighed a 0.5% uptick in public outlays, prompting a 0.1% slip in total nonresidential spending. That said, the pace of nonresidential construction spending remained elevated 2.8% above the year prior. High interest rates weighed on commercial and health care spending in April, dragging on private nonresidential outlays. The surge in new manufacturing construction has started to fade, driven by a moderation in computer and electronic/electrical facilities. While manufacturing construction remains highly elevated, private outlays have dipped 2.1% from the peak in September 2024. Ongoing momentum in other manufacturing sectors has offset this deterioration somewhat, prompting manufacturing construction to flatline relative to a year ago.
GLP-1 Prescriptions For Weight Loss Soar 587% In Five Years
The number of adults who were prescribed a GLP-1 drug for weight loss surged to just over 2% last year, representing a 587% increase in five years, according to a white paper from FAIR Health. The independent, non-profit organization examined more than 51 billion commercial health care claim records to determine trends in obesity and GLP-1 drug prescriptions among adult patients between 2019 and 2024. This study focused on trends in diagnosis of overweight, obesity and type 2 diabetes, as well as GLP-1 drugs and other obesity treatment options (including bariatric surgery and behavioral health services). Among the key findings:
- The percentage of adult patients with a diagnosis of overweight or obesity increased from 10.4% in 2019 to 15.7% in 2024, a relative increase of 50.7%. However, many adult patients who are overweight or obese may not have received a medical diagnosis of their condition.
- Among all adult patients prescribed a GLP-1 drug, the percentage who had an overweight or obesity diagnosis and no type 2 diabetes diagnosis increased from 3.7% in 2019 to 16.5% in 2024, a relative increase of 344.4%.
- Diagnoses of pancreatitis increased from 0.17% in the year before the first GLP-1 drug prescription to 0.31% in the year after for patients who did not have a type 2 diabetes diagnosis. This was an increase of more than 80%, the largest percent increase among the co-occurring diagnoses examined.
- The use of behavioral health services decreased dramatically for patients prescribed GLP-1 drugs during the study period. Of all patients with an overweight or obesity diagnosis who were prescribed a GLP-1 drug, the percentage who had behavioral health services related to their condition declined from 2019 to 2024. In 2019, 47.2% of such patients had behavioral health services, but in 2024, only 12.4% of patients did, a relative decrease of 73.7%.
Watch: Tower Bridge Lifts For Replica Columbus Flagship
London's Tower Bridge lifted its famous bascules this week to welcome a rare visitor - a full-scale replica of Christopher Columbus's 1492 flagship. The Nao Santa María sailed up the River Thames and arrived at St Katharine Docks Marina on Wednesday. Built in 2018 by the Nao Victoria Foundation, the ship is described as a "faithful, full-scale historical reproduction."
Its arrival marks the ship's first visit to London, which is one of the opening stops on a European tour that includes ports in the UK, France, Spain and the Netherlands. During its stay, visitors can step aboard and explore the ship, which the foundation calls "a floating museum of its own story and Spanish maritime heritage".
Stanley Fischer, Groundbreaking Economist and Fed Vice Chair, Dies at 81
Stanley Fischer, one of the most influential economists of recent decades, has died. He was 81. Fischer served as vice chairman of the Federal Reserve from 2014 to 2017. He left his biggest mark in prior decades, as professor of economics at the Massachusetts Institute of Technology, second in command at the International Monetary Fund and governor of the Bank of Israel, which confirmed his death. In those roles, Fischer helped shape how an entire generation of central bankers and economic policymakers do their jobs.
Fischer was born in 1943 in Northern Rhodesia (now the independent country of Zambia) and first came to the U.S. in 1966 to get a Ph.D. at MIT. After several years at the University of Chicago, he joined the faculty of MIT. In the 1970s, the use of monetary and fiscal policy to steer the economy, as advocated by followers of John Maynard Keynes, was under sustained attack by the theory of rational expectations associated with the University of Chicago’s Robert Lucas. Fisher was part of the “New Keynesian” school that showed frictions such as labor contracts prevented this adjustment, so monetary and fiscal policy were still effective. This assumption is now widespread in today’s central banks.