Member Briefing June 4, 2024
S&P Manufacturing PMI Slides for the Second Straight Month in May
The 48.7 reading for the May ISM manufacturing index represents the second-straight monthly decline and the second-lowest reading so far in 2024. The ISM manufacturing index has been in expansion territory just once in the past 19 months. That is not to say that nothing is going right. The production component is still in expansion, if only barely so at 50.2, and, the employment component notched a two and a half point gain. Trade also looks somewhat decent with both import orders and export orders in expansion territory. But that is the extent of the good news.
Pricing pressure abated modestly with the prices paid measure coming down to 57.0 in May. That's down slightly from April but still higher than at any point since the scorching-hot price environment that was the summer of 2022. While price pressure isn't cooling fast enough, the most troubling development came in the way of softening demand. The new orders component fell 3.7 points, and, at 45.4, it sits at the lowest reading in a year. The Chemical Products' industry was the only of the top-six largest sectors to report an increase in orders last month. Underlying activity continues to be mixed across manufacturing sectors, but the overall industry remains constrained by tighter financial conditions and restocked inventory levels.
Several Manufacturers Cutting Back Operations in the Region
Several Manufacturers are cutting back their operations in the Hudson Valley region. While every situation is different each cited changing business conditions for their decision.
Amscan, Inc., a manufacturer of party goods, will be closing its Route 17K, Town of Newburgh center. The company informed the State Department of Labor of its planned closure, citing economic reasons. The company, commonly known as Kookaburra, headquartered in Woodcliff Lake, New Jersey, said all 117 employees would be affected. Amscan will begin its closure on August 30 and conclude it on November 29, the company informed the state. – Mid-Hudson News
Genpak, the company that manufactures polystyrene foodservice containers, is shutting down its Middletown plant with the closure expected by August, impacting all 138 employees. The plant has operated for over 50 years but is closing largely influenced by polystyrene packaging bans in New York and neighboring states. In 2020, New York announced the expanded polystyrene foam container and polystyrene loose fill ban, which bans the use and sale of single-use polystyrene food service containers. According to a filing with the New York State Labor Department, the plant closure will start on August 27 and end on December 21. Mid-Hudson News
A total of 88 of the 305 workers at the PepsiCo Frito-Lay crisps manufacturing factory in Middletown, plant will see their jobs put on the line. The decision was made for “economic” reasons, according to a WARN filing published Wednesday (29 May). Layoffs are due to begin on 30 August, ending on 13 September, the notice said. Frito-Lay, a PepsiCo subsidiary, has more than 30 crisp manufacturing sites in the US, according to its website. The group has around 55,000 employees across North America. The Middletown plant makes the popular “PopCorners” snack. Just Food
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Biden's Gaza Plan 'Not a Good Deal' but Israel Accepts it, Netanyahu Aide Says - Reuters
- Israel and Hamas at Odds Over U.S.-Backed Cease-Fire Proposal - WSJ
- Netanyahu Downplays Immediate Gaza Cease-Fire Prospects - VOA
- Israeli Ruling Coalition Ministers Threaten to Quit Over Ceasefire Plan - BBC
- Iran’s Parliament Speaker Registers Presidential Bid - VOA
- Map Shows Countries with Bans on Israeli Passport Holders – Newsweek
- Timeline: How the U.S.-Built Pier in Gaza Broke Apart and What’s Next – Fast Company
- Chuck Schumer Booed While Speaking at Israel Parade in NYC - Newsweek
- 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
- Russia Warns US Against 'Fatal' Miscalculation in Ukraine – Reuters
- In Crimea, Ukraine is Beating Russia – The Economist
- Russia’s Mad Max War Bikes Are A Bad Idea - Forbes
- Zelensky Accuses Russia and China of Undermining Swiss Peace Summit - BBC
- Vice President Kamala Harris to Attend Ukraine Peace Summit in Switzerland This Month - VOA
- Ukraine Got Permission To Launch American Rockets At Targets Inside Russia. Hours Later, HIMARS Opened Fire. - Forbes
- German Tanks and Troops in Lithuania Have one Goal: Scare Off Russia – Politico
- 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
- Hong Kong Newspaper Runs Blank Front Page Ahead of 35th Tiananmen Anniversary - RFI
- India's Election Commission Said a Record-Breaking 642 Million Voters Cast Their Ballots in the General Election – Reuters
- Claudia Sheinbaum Elected Mexico's First Female President – Washington Post
- Mexico Ruling Party’s Election Sweep Spooks Markets - WSJ
- China Is ‘Prepositioning’ for Future Cyberattacks—and the New NSA Chief Is Worried - WSJ
- Power Cut Across Nigeria as Workers Go on Strike - BBC
- UK Election: Farage is Running - Politico
- Tens of Thousands of Children in Afghanistan are Affected by Ongoing Flash Floods, UNICEF Says - AP
- Somalia Wants All Ethiopian Troops to Leave by December - VOA
Policy and Politics
Lawmakers Considering Commission to Review N.Y. COVID-19 Response
A bill in play the final week of the state's legislative session would create a commission with the power to subpoena witnesses to probe New York's decisions during the COVID-19 pandemic as a $4.3 million state-contracted review continues to be delayed. State comptroller's transactions show the Olson Group Ltd. — the consulting firm hired nearly 18 months ago to complete a 32,000-hour pandemic review — has billed the state less than half of its $4.3 million contract, which is overseen by the state Division of Homeland Security & Emergency Services.
The contract expires June 20, and a growing number of New York lawmakers want their turn to subpoena witnesses over the state's COVID response and a review that's independent from the Executive Chamber. The Olson Group initially expected to be finished with a public report of its findings by late 2023, but its contract was extended. Company leaders and state officials have refused to answer questions about the reason for the delay. The firm referred all questions about the timeline of the review to state DHSES. The department did not answer questions about the timeline of the report or ongoing delay. It's unclear who the firm has spoken with for the review. Participation is voluntary.
Read more at New York State of Politics
Biden To Issue Executive Order on Southern Border, Limiting Asylum
President Biden is expected to sign an executive order Tuesday that bans migrants who cross the border illegally from claiming asylum, allowing them to be quickly deported back to Mexico or their home countries, according to officials familiar with the planning. The order aims to restrict the flow of migrants over the border as illegal immigration becomes a priority issue for voters ahead of the November elections. Polls show a majority of Americans in polls expressing dissatisfaction with his handling of the issue.
The ban will be contingent upon a similar daily trigger as in the Senate bill that failed to pass. The legal justification for the ban, these people said, stems from a section of the Immigration and Nationality Act known as Section 212(F). That provision says the president can “suspend the entry” of foreigners if he finds that the “entry of aliens or any class of aliens into the United States would be detrimental.” It is the same section of immigration law Trump used to ban citizens of Muslim-majority countries from entering the U.S.
Key Republican Calls for ‘Generational’ Increase in Defense Spending to Counter US Adversaries
The top-ranking Republican on a Senate committee that oversees the military is calling for a “generational investment” in America’s defense, saying aggressive and significant spending increases are necessary to deter coordinated threats from U.S. adversaries such as Russia, Iran and China. Sen. Roger Wicker told The Associated Press that he will seek an additional $55 billion in defense spending over the limits that were forged in the deal to suspend the nation’s debt limit a year ago. Wicker explained his position in global terms, saying there has “never been such a level of cooperation and coordination among an axis of aggressors” that aims to challenge U.S. dominance.
While GOP defense hawks have long advocated for robust defense spending, Wicker’s plan goes a step further, calling for a broad shift in the U.S. defense posture that would amount to a reshuffling of national priorities. Under his proposal, the military would eventually consume 5% of America’s gross domestic product, or total economic output. Closer ties between China and Russia were underscored earlier this month by a visit between leaders Vladimir Putin and Xi Jinping. The two-day visit — Putin’s first trip abroad after being inaugurated to a fifth term in office — reflected a growing partnership between the two nations, an alliance grounded in support for authoritarian regimes and dominance in their respective regions.
Health and Wellness
Why Employers Should Invest in their Employees' Mental Health
As employers think about the future of work, the topic of employee mental health is becoming a business imperative. Considering industry research shows that half of employees "strongly" or "somewhat agree" that their mental health and wellbeing can negatively impact their work performance, making mental health a priority among workplace policies is more important than ever.
Stressors — including finances, shifts in workplace culture exacerbated by the pandemic, politics and even the weather — are having a real impact on employee mental health. There is no time like the present for employers to rethink and optimize their workplace mental health offerings. Here are a few considerations to keep in mind including increasing awareness to reduce stigma, understanding the connection between financial stress and mental health, and providing easy access to support.
Election 2024
- Donald Trump Stung by Multiple Polls After Being Found Guilty – Newsweek
- ‘Unless Jesus Christ Was Running’: In the Heart of MAGA Country, Post-Verdict Trump is Still the Answer. – Politico
- Ohio’s Republican Governor Signs Measure Ensuring Biden Appears on the Fall Ballot - AP
- What to Expect in the New Jersey Presidential and State Primaries Tuesday - AP
- 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
Falling Corporate Profits Helped Drive Down Revised Q1 GDP Numbers
Corporate profits fell 0.6% in the first quarter, after rising 4.1% in Q4. Corporate profits in Q1 increased 7.2% compared to the same period last year. Corporate profits, adjusted for inventory valuation and capital consumption, declined $21.1 billion in the first quarter, following a substantial $133.5 billion increase in the fourth quarter. Domestic financial corporations experienced a significant profit increase of $73.7 billion, up from a gain of $5.9 billion in Q4.
In contrast, domestic nonfinancial corporations’ profits dropped $114.1 billion (-4.7%) after a $136.5 billion rise. Profits from the rest of the world grew by $19.3 billion, reversing an $8.9 billion decrease from the previous quarter. First quarter GDP was revised down to 1.3% from the original estimate of 1.6%.
Copper Prices Stay Firm After Hitting All-Time High on AI Demand, China Recovery
Copper prices have rallied in recent weeks as many traders bet that a supply shortage could materialize soon on the market. Copper stocks monitored by the Shanghai Futures Exchange continue to rise counter-seasonally, hitting 322,000 tons, well above the 130,000 tons seasonal average, Ole Hansen, Head of Commodity Strategy at Saxo Bank, said on Friday. “We have argued for some time that the scale of the move higher in copper had become detached from short-term fundamentals,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a Friday note.
Copper prices could reach $40,000 per tonne in the next few years, hedge fund manager Pierre Andurand told the Financial Times. The metal has risen almost 20% this year, reaching a record $11,000 per tonne ($5.00/lb) this week. “We are moving towards a doubling of demand growth for copper due to the electrification of the world, including electric vehicles, solar panels, wind farms, as well as military usage and data centers,” the top trader told the Financial Times.
The U.S. Gave Chip Makers Billions. Now Comes the Hard Part.
Two years into a nearly $53 billion government effort to shore up the U.S. chip industry, the challenges in shifting global semiconductor supply chains are becoming clearer. The headwinds to the Chips Act include fast-growing chip industries in competing countries, political complexity regarding funding allocations at home and the sheer expense of manufacturing chips.
The lion’s share of the allotments have been slated for Intel and other large chip makers, while other companies crucial to the chip-making supply chain have missed out. The gap underscores the crucial role that broad ecosystems of suppliers play in semiconductor manufacturing and the distance the U.S. still faces in building full supply chains. A Boston Consulting Group study projects the number of chips made in the U.S. will triple by 2032. That would only expand the U.S. share of global output to 14% from 12% in 2020.
Samsung Union Plans First-Ever Strike as Wage Talks Break Down
A labor union representing tens of thousands of workers at Samsung Electronics in South Korea has called a one-day strike this week, in what would be the first such walkout at the smartphone and chipmaking giant. The Nationwide Samsung Electronics Union (NSEU) said last week during a press conference streamed on its official Youtube channel that its 28,000 members — just under a quarter of the company’s total workforce in the country — would strike on June 7, following failed negotiations over pay and bonus arrangements.
Son Woomok, a union leader, told CNN that many NSEU members worked for Samsung’s flagship semiconductor unit. “We are demanding transparent and fair performance bonuses and wage increases,” he said in an interview. In a statement to CNN, a Samsung spokesperson said: “The company remains committed to engaging in good faith negotiations with the union, and is making every sincere effort to come to an agreement.”
FAA Greenlights Amazon Drone Delivery Beyond Visual Line Of Sight
The Federal Aviation Administration (FAA) has granted Amazon’s Prime Air drone program permission to conduct flights “beyond visual line of sight” (BVLOS), allowing the company to scale its drone delivery operation. To obtain the BVLOS approval, Amazon said it conducted several flight demonstrations showing how its drone used onboard detect-and-avoid technology to navigate away from obstacles such as aircraft, helicopters and a hot air balloon. These flights were conducted under the supervision of FAA inspectors to validate the system’s functionality.
With FAA clearance secured, Amazon is set to begin drone deliveries later this year in College Station, Texas, where the company began its drone deliveries in 2022. According to Amazon, this regulatory approval paves the way for it to reach customers in densely populated areas, laying the foundation for scaling operations across the United States.
Construction Spending Fell in April, Up Year on Year
Construction spending in the United States amounted to $2.09 trillion in April, falling 0.1% compared to the previous month's revised figure, the US Census Bureau revealed in a report on Monday. Year over year, however, the number jumped 10%. During the first four months of 2024, construction spending stood at $635.5 billion, surging 10.9% in comparison to the same timeframe in 2023. Private construction spending was down 0.1% month on month in April, amounting to $1.61 trillion, while public construction spending was at $487.1 billion, 0.2% lower on a monthly basis.
Single-family building remains the primary driver of residential spending. Single-family construction spending improved modestly over the month (+0.1%) and has surged 20% over the past year. Accounting for an upward revision to March data, single-family outlays have now increased for 12 consecutive months. Builders have been successful using price and rate incentives to lure buyers in the high-interest rate environment, leading to a trend improvement in single-family building this year. Conditions remain less favorable for multifamily construction amid rising apartment vacancies and tighter access to financing. Private multifamily outlays slipped 0.3% in April.
Japan’s New Aegis Destroyers to Feature Rolls-Royce Hybrid Engines
Japan’s Maritime Self-Defense Force has chosen Rolls-Royce‘s MT30 engines for its Aegis System-equipped vessels, marking the first use of twin MT30-powered hybrid electro-mechanical propulsion worldwide. This advanced propulsion system not only enhances speed but also offers operational benefits. Compared to older engines, it requires less maintenance, facilitating smaller crew requirements and more efficient vessel operation. The plans for the vessels were announced in August 2022. Construction is scheduled to begin in 2024, with the first vessel scheduled to be commissioned by the end of fiscal year 2027 and the other scheduled for the end of FY2028.
The MT30 engine is operational in various configurations worldwide, including mechanical, hybrid, and integrated-electric systems. Its use has been across multiple platforms, such as South Korea’s Daegu-class and Ulsan-class frigates, and Australia’s Hunter-class frigates. As Rolls-Royce aims to establish the MT30 as the engine of choice across the Pacific Rim within the next decade, this collaboration with Japan is a step forward. The deployment of these engines in the ASEV programme reinforces the strong partnership between Japan and Rolls-Royce.
Starliner Schedules New Launch This Week After Last Minute Cancellation—How To Watch
Boeing’s Starliner spacecraft is scheduled to launch at 10:52 a.m. EDT on Wednesday, June 5, from Cape Canaveral Space Force Station in Florida, Boeing and NASA said in a statement. Starliner had been slated to launch atop one of United Launch Alliance’s Atlas V rockets on Saturday but the mission was aborted with less than four minutes to go until takeoff after a ground launch sequencer—a computer controlling the launch countdown—triggered an automatic command to halt.
While there was another opportunity to launch on Sunday, Boeing delayed to give engineers more time to solve the problem as it was still unclear as to why the computer scrubbed the launch. Boeing said the ULA team has since identified and replaced a faulty ground power unit believed to be the cause of Saturday’s problem and NASA said ULA confirmed “all hardware is performing normally.” Boeing will live stream the launch on its website and NASA will also show the launch live on its website, NASA TV and social media channels, though it’s not clear yet when coverage of the mission will begin.
S&P 500 Has Best May Since 2009—But Only Thanks Again To These Stocks
The S&P 500 just stormed ahead to its best May in years, but the rally was highly concentrated in just a handful of stocks, as the richest stocks continued to get richer and the middle class got, well, richer but at a slower pace. For investors in individual companies, it was an uneven month: The S&P, which tracks the total change in market capitalization for its 500 members and is thus skewed toward larger companies, outperformed the equal-weighted S&P 500, which considers each of the 500 stocks equally, for the fifth consecutive month of 2024.
The equal-weighted S&P rose just 1% in May, extending the gap between the normal S&P (up 10% year-to-date including dividends, 39% dating back to the beginning of last year) and its equal-weighted counterpart (4%, 19%). Predictably, it’s the biggest stocks that drove the S&P 500’s rally, as Microsoft, Apple, Nvidia, Alphabet, Amazon and Meta, the six West Coast technology leaders who are the only American firms valued at over $1 trillion, tacked on a whopping $1.3 trillion in market cap this month, accounting for a ludicrous 76% of the index’s total gains. That pushes its weighting on the index from 28% at the beginning of the year to 30%, as the S&P inched toward its most top-heavy level since the Great Recession, according to Bank of America research tracking the discrepancy between the market cap-weighted S&P and its equal-weighted cousin.