Member Briefing June 7, 2023
Census Bureau: Factory Orders Rise
New orders for manufactured products rose for the second month in a row in April, according to the U.S. Census Bureau. New orders inched up 0.4% in April, following a 0.6% gain in March. Overall, orders for new manufactured goods have declined 2.6% since peaking a year ago, and with factory orders (excluding transportation) down 4.3% over the past 10 months, manufacturing activity has contracted notably since last summer. Here’s a look at some of the numbers:
- Durable goods orders increased 1.1%, owing mostly to a rise in defense aircraft and parts orders.
- Excluding transportation equipment, factory orders dipped 0.2% in April, the third straight month of declines.
- New orders for core capital goods (nondefense capital goods excluding aircraft) rose 1.3% in April after two straight months of declines.
- Core capital goods orders totaled $73.982 billion in April, just under the record $73.985 billion in December and signifying 2.5% year-over-year growth.
- Core capital goods shipments rose 0.5% in April to $73.848 billion, just slightly under January’s record of $73.850 billion.
- Core capital goods shipments have risen 4.1% year-over-year
- Factory shipments: Factory shipments decreased 0.4% in April, the third straight month of declines.
- Overall, total factory shipments have declined 2.9%—or 4.2% excluding transportation equipment—since peaking a year ago.
Read more at The US Census Bureau
War in Ukraine Headlines
- Ukraine’s Counter-Offensive Appears to Have Begun – The Economist
- Ukraine’s Counteroffensive Appears to Have Started: Here’s What to Know – The Hill
- Kyiv Says Troops Advance on Eastern Front - BBC
- Dam Destroyed in Ukraine, Flooding War Zone - Reuters
- Factbox: What is the Kakhovka Dam in Ukraine - and What Happened? – Reuters
- Wagner Boss Rubbishes Russian Claims of Ukrainian Casualties - BBC
- Russia Says U.S.-Built F-16s Could 'Accommodate' Nuclear Weapons if Sent to Ukraine - Reuters
- Watch out Ukraine, Here Comes the Hungaro-Austrian Empire – 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
U.S. Manufacturing is Sluggish, With Some Bright Spots
On Monday, General Motors announced it’s making a $1 billion investment in two of its factories in Flint, Michigan — a nice sign for U.S. manufacturing. Overall though, the sector has been rather blah. Manufacturing was a cool spot in the hot May jobs report. Recent data from the Institute for Supply Management shows manufacturing contracted last month for the seventh month in a row.
Early in the pandemic, Americans famously bought a lot of stuff, and American factories were still playing catch-up until around late last year. “Backlogs are mostly what has sustained manufacturing,” said Jonathan Millar, an economist with Barclays. But those factory backorders have mostly been filled, and Millar said that higher borrowing costs for consumers are now putting a damper on demand.
Dockworkers Extend Job Actions Delaying West Coast Port Cargoes
Unionized dockworkers throttled cargo operations at several West Coast ports on Monday, extending job actions that have snarled imports at some of the country’s biggest trade gateways and prompting retailers to ask the Biden administration to intercede to keep goods moving. Port terminal operators said dockworkers deliberately withheld labor or slowed work at container terminals from Los Angeles and Long Beach, in Southern California, to the Port of Seattle.
Total Terminals International, at the Port of Long Beach, didn’t open its gates on Monday morning. Fenix Marine Services, a major terminal at the Port of Los Angeles owned by French ocean carrier CMA CGM, opened in the morning and closed a few hours later, citing “a disruption in our gate and yard operations.” People familiar with the contract negotiations say there is a substantial gap between the union’s demands and what employers are willing to pay and that rising frustration on both sides is impeding progress. The National Retail Federation and the National Association of Manufacturers are asking the Biden administration to try to push the parties toward a resolution.
COVID News: We’ve Reached the Point Where Almost Everybody Has Had COVID or Been Vaccinated
A new report from the Centers for Disease Control and Prevention suggests that nearly all Americans had some level of COVID antibodies in their system as of early last fall. The article, released last week, presents data from a CDC study tracking antibodies in about 143,000 blood donors nationwide. By the third quarter of 2022 — the most recent data available — an estimated 96.4% had COVID antibodies.
About 23% had antibodies from infection, while 26% had them solely from vaccination. Nearly 48% had immunity from both, and studies have shown that this hybrid immunity offers better protection against COVID-19 than a vaccine or infection alone. According to last week’s report, “low prevalence of infection-induced and hybrid immunity among older adults reflects the success of public health infection prevention efforts while also highlighting the importance of older adults staying up to date with recommended COVID-19 vaccination, including at least 1 bivalent dose.”
World Bank Brightens View of Global Growth This Year, Downgrades 2024
The World Bank sees better global economic growth than previously estimated in 2023, thanks to resilient U.S. consumer spending and China’s faster-than-expected reopening in the early part of the year. The bank now projects the world’s economy will grow 2.1% this year, up from the 1.7% pace it forecast in January. The new estimate still marks a slowdown from last year’s 3.1% expansion.
The bank still expects slowing growth in the second half of this year and a muted expansion into next year, according to its forecast released Tuesday. It warned that stubbornly high inflation and interest-rate increases are weighing on economic activity around the world, particularly in developing countries. The bank forecasts growth of 2.4% next year—a pickup from this year, but not as much as its January estimate of 2.7%.
Markets Are Increasingly Looking for the Federal Reserve to Pause Rate Hikes Next Week
Markets are increasingly looking for the Federal Reserve to pause rate hikes next week, and, amid a blackout on Fed speakers, will be focusing heavily on economic data in the days ahead. Throwing markets a slight curveball on Tuesday, Australia's central bank raised rates, dashing expectations that they'd stand pat and sending the Aussie dollar higher. For the U.S. rates outlook, CME FedWatch tool shows that the probability of the Fed standing pat at the June 13-14 meeting is now at 82%. Just a week earlier it was at 36%.
There was no such drama for the ECB, with President Christine Lagarde on Monday cementing expectations of more rate hikes by reaffirming that it was too early to call a peak in core inflation despite "signs of moderation". The ECB is also due to meet next week.
New York Fed Says Global Supply Chain Pressures Further Abated in May
Supply chain pressures cooled again in May, New York Fed data showed, in a development that further eased what had been one of the key factors that had helped drive surging inflation pressures around the work. The New York Fed said on Tuesday that its latest Global Supply Chain Pressure Index stood at -1.71, from the revised -1.35 for April. The report said supply chain pressures were below average in all regions of the world considered in the index.
After peaking in December 2021 at a reading of 4.31, the New York Fed index has been steadily retreating as supply chain kinks generated by the coronavirus pandemic have gotten worked out. The index tipped into negative territory in February in a sign supply chain pressures had largely resolved themselves and have moved steadily lower since that point.
Read more at Avionics International
Musk's Neuralink Valued at About $5 Billion Despite Long Road to Market
Elon Musk's brain implant startup Neuralink, which was valued at close to $2 billion in a private fundraising round two years ago, is now worth around $5 billion based on privately executed stock trades described to Reuters by five sources with knowledge of the matter. Some purchases by bullish investors boosted the valuation in recent months, ahead of Neuralink's May 25 announcement that U.S. regulators had approved a human trial on its brain chip, the sources said.
Neuralink has won approval from the Food and Drug Administration to start testing its device in humans, one of a growing cadre of neurotech pioneers with goals of merging humans with machines to treat a range of medical conditions such as paralysis, blindness and depression—and enhance existing abilities like memory or allow us to interact with computers by thought alone.
Reuters Poll: Global Housing Outlook Brightens Despite Pressure From Higher Rates
The outlook for most major housing markets has improved slightly from three months ago despite high interest rates, according to Reuters polls of property analysts who were mostly split on whether affordability would worsen or not. House prices rose at a blistering pace across the developed world during the COVID pandemic - in some cases by more than 50% - but have fallen over the past year by modest amounts as central banks jacked up interest rates.
The Reuters polls of around 100 analysts taken May 15-June 5 showed house prices in the U.S., Canada, Germany, Australia and New Zealand either stagnating or falling less than analysts had predicted three months ago. The outlook was little changed for Britain and in India where prices have kept rising. "We find that very low housing supply, stronger household balance sheets...and support from rebounding immigration are all contributing to the recent house price resiliency," noted analysts at Goldman Sachs.
Legislators to Automakers: Don’t Touch That Dial! Inside the Fight over AM Radio
As car makers begin to drop AM radio from new models, there is a bipartisan push in Washington to preserve the century-old medium. Yesterday, a House committee held a hearing to query witnesses from the radio and auto manufacturing industries, as well as an emergency management official, on the value of keeping AM radio on the road as the 21st century rolls on. Lawmakers from both parties and houses of Congress have united behind the AM for Every Vehicle Act, which would require every new car to include AM radio for no additional cost.
The issue, car companies have argued, is new electric car batteries interfere with AM transmissions and that emergency warning systems can reach people through a multitude of means. In a statement to Spectrum News in May, the Alliance for Automotive Innovation — an industry trade group — argued that the Federal Emergency Management Agency’s emergency warning system can reach people via FM radio, internet-based radio, satellite radio and cell phones. The Alliance’s vice president for safety policy, Scott Schmidt, is expected to testify Tuesday.
Crude Oil Prices Rise 2.5% After Saudi Arabia Says It’s Cutting 1 Million Barrels A Day
Global crude oil prices rose sharply on Monday after Saudi Arabia announced plans to unilaterally cut its oil production by 1 million barrels per day while other oil-producing nations under OPEC+ said they will extend cuts until 2024, in an effort to shore up tumbling crude prices. The global benchmark Brent Crude Futures index rose past $78 per barrel early Monday morning—up nearly 2.5% since Friday. The U.S. West Texas Intermediate benchmark surged even higher, rising 2.6% to $73.60 per barrel.
After briefly rising to nearly $85 per barrel in April, global oil prices have seen a slump that has kept them below $80 per barrel for more than a month. Crude oil prices have fallen more than 30% from the same point last year. This has helped keep gasoline prices in the U.S. around $3.55 per gallon, down significantly from $4.84 per gallon a year ago. The slump in energy prices has also helped inflation in the Eurozone drop to its lowest level since the start of Russia’s invasion of Ukraine.
Companies That Embraced Social Issues Have Second Thoughts
CEOs spent the past few years adjusting to a world in which investors, customers and employees expected corporate leaders to align themselves with social causes. Today, that has made companies targets in the U.S. culture wars, where one step can turn a social-media storm into a corporate crisis that cripples businesses and wrecks careers. Some CEOs are rethinking how—or whether—to weigh in on sensitive political or social matters, with trans and other LGBT issues particularly in the spotlight.
Executives are finding out how easy it is to leave everyone unhappy. After a Bud Light promotion with a transgender social-media influencer sparked a boycott of the beer, the brewer put two marketing executives on leave and still took a hit on sales, while also rankling employees and supporters of the LGBT community. Days after Target’s LGBT retail displays sparked a social-media backlash and confrontations with store employees, the company said it would remove certain items and move some displays to less-visible locations, drawing criticism from LGBT supporters.
Hit With a Price Increase? Seven Tips for Negotiating with Suppliers
The last couple of quarters have been particularly busy for price increase asks across the board, with nearly every supplier, all industries, looking to shore up margins. Those refusing an increase risk moving the back of the line for capacity, and missing key shipping dates. Those accepting an increase risked tough conversations with end customers, whose forecasts (and fixed contracts) did not account for sudden changes.
The resulting strain on supplier-customer relationships can last for years and put all business at risk. There are no ‘one size fits all’ method to negotiating price increases Each situation is different - total deal size, total capacity of a supplier consumed, availability of a backup (BATNA) plan, relationship history, competitive environment—all are among the endless backdrops that set the stage for variety of unpredictable performances. Assuming a supplier comes at you with an “across the board” increase, here are a few approaches she considers.
Washington State Imposes Warehouse Quota Law
Washington has joined the steadily lengthening list of states imposing restrictions on production quotas on employees working in warehouse distribution centers, an effort originally launched in California and New York State as a result of labor unions’ largely unsuccessful campaign to organize Amazon. Attorneys Kathryn Barry, Sherry Talton and Peter Montine of the law firm of Jackson Lewis say the Washington law, which will go into effect on July 1, 2024, strongly resembles New York’s law which will become effective this July 19.
The new law defines “quota” broadly as “a work performance standard, whether required or recommended, where an employee is assigned or required to perform at a specified productivity speed, or perform a quantified number of tasks, or to handle or produce a quantified amount of material, within a defined time period and under which the employee may suffer an adverse employment action if they fail to complete the performance standard.”
Read more at Material Handling & Logistics
NASA’s Psyche Asteroid Mission is on Track for 2023 Launch
An independent review board gave NASA’s Psyche mission the green light and its seal of approval following a scathing review in 2022. The Psyche mission, which will head to the asteroid belt, was originally set to launch in October, but it was put on hold due to issues with the spacecraft’s software. The issue was ultimately corrected, but not in enough time to make the launch window. An independent review board was convened to determine what exactly happened.
The board’s review revealed workforce issues at NASA’s Jet Propulsion Laboratory (JPL) that led to the delay. However, since then, the review board has noted that JPL and the Psyche team have taken the steps to turn the project around and ensure that it can make it to the launch pad. Psyche is set to explore a metallic core of an asteroid that is 140 miles wide and located in the main asteroid belt between Mars and Jupiter. Had it launched as originally scheduled, the spacecraft would have arrived at its destination in early 2026; however, now teams have to find an alternate route to the target, putting its arrival in 2029.