Member Briefing March 19, 2024
Empire State Manufacturing Survey: Activity Continued to Decline
Business activity continued to decline in New York State, according to firms responding to the March 2024 Empire State Manufacturing Survey. The headline general business conditions index fell nineteen points to -20.9. Firms expect conditions to improve over the next six months, though optimism continued to be subdued.
- The new orders index fell eleven points to -17.2, and the shipments index moved down ten points to -6.9.
- The unfilled orders index held steady at -10.9, a sign that unfilled orders continued to fall.
- The inventories index was little changed at -12.9, suggesting that inventories were lower.
- The delivery times index came in at -1.0, indicating that delivery times held steady.
- The index for number of employees fell seven points to -7.1, and the average workweek index fell six points to -10.4.
- The prices paid index edged down four points to 28.7, indicating that input price increases slowed, and the prices received index was unchanged at 17.8.
- The index for future business conditions held steady at 21.6.
- The capital spending index was little changed at 11.9, suggesting capital spending plans remained somewhat soft.
American Manufacturers Seek Perfection as Quality Issues Mount
Imagine a world in which every product that leaves a factory is flawless, every time. What sounds like a plant manager’s dream is the end goal of zero-defect manufacturing, an idea that is gaining traction among industry executives. Surging recalls and high-profile problems have cast a harsh light on the quality of American manufacturing. But some companies say a combination of technology, training and focus can eliminate errors. Companies in industries as varied as pharmaceuticals and snack foods have announced zero-defect goals. More manufacturers say they are aiming for perfection as quality-control problems have mounted.
The zero-defects philosophy took shape in the early 1960s when defense contractor Martin sought to eliminate errors from Pershing missiles. The company had relied on inspections to find problems as small as a loose valve but refocused on prevention, exhorting workers with posters and rallies to do their jobs right the first time—followed by extensive audits. Many companies adopted the practices, but decades later quality control remains problematic. Robert Leachman, a professor of industrial engineering and operations research at the University of California, Berkeley, said while quality programs helped U.S. companies improve their products considerably in the 1980s and 1990s, the effort stalled when businesses began outsourcing much of their work to low-cost regions.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Israel Raids Gaza Hospital Where It Says Militants Regrouped - WSJ
- Netanyahu Vows to Defy Allies on Rafah Invasion - BBC
- Famine Imminent in Northern Gaza, Says U.N.-Backed Report – Reuters
- UNRWA Chief Says Israel Blocks Him from Gaza – Yahoo
- Netanyahu Blasts Schumer’s Call For Israeli Elections As ‘Totally Inappropriate’ - Forbes
- US Navy Aircraft Carrier Faces Relentless Battle Against Houthi Attacks - BBC
- 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
- Putin Claims He Agreed To Prisoner Swap For Navalny In First Public Comments About Opposition Leader’s Death - Forbes
- Landslide – Putin Wins 6th Term as Russian President - Reuters
- For Ukrainians More Putin Means More War - BBC
- Ukraine’s Victories Over Russia’s Black Sea Fleet Reopen Vital Grain Corridor - WSJ
- US DOD Pushes Back Against GAO on Ukraine Aid Tracking – Naval Technology
- Oil Prices Inch Higher Amid Attacks on Russian Energy Facilities - 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
- Machete-Wielding Militias Battle Gangs in Port-au-Prince as Haiti’s Elites Vie for Power – CNN
- North Korea Resumes Missile Tests, Raising Tensions With its Rivals After Their Military Drills’ End - AP
- Dozens of US Citizens Evacuate Haiti on First State Department Charter Flight – Miami Herald
- China Turns on the Charm for Foreigners but Its Allure Has Faded - WSJ
- Colombia Cops Seize 7.3 Million Gallons of Crude in Raids on Illegal Refineries – Reuters
- Who Is Vaughan Gething? What To Know About Europe’s First Black Government Leader. - Forbes
- India Bends Some of its Famously Rigid Trade restrictions To Lure More Industrial Production - WSJ
- India Announces 6-Week General Elections Sarting April 19 with Modi’s BJP Topping Surveys -AP
Policy and Politics
NYS Budget Talks: Disagreements of ‘Revenue Raisers’ Define the Early Going.
Despite significant common ground, in both one-house budgets, you’ll find areas where lawmakers are looking to restore cuts in areas where the governor hopes to reign in spending, or the Legislature even breaking new ground that the governor didn’t cover. Key differences include how to address the housing crisis, how to handle retail theft, and how to address an outdated school foundation aid formula. That extra money has to come from somewhere, and Blair Horner, executive director of NYPIRG, says that just might be where things start to get heated.
“I think the big stumbling block right out of the box is can they agree on revenue,” he said. “It’s going to be the available revenues because a lot of the changes both houses make in their one-house budgets are significant revenue raisers that they include that the governor doesn’t have.” Those revenue raisers include $2.2 billion in new taxes on the state’s corporations as well as the state’s very highest earners. The governor has called raising income taxes a “non-starter” while the Assembly and Senate have emphasized that they feel the hikes are relatively minor and targeted at the Empire State’s top most earners. That is in addition to a clash over reigning in Medicaid spending, or changing the program to net $4 billion more in revenue from the federal government, and from taxing insurers.
Read more at NY State of Politics
March Fed Meeting: The Top 3 Trends to Watch as Hotter Inflation Delays the Fed’s Rate Cuts
U.S. central bankers are widely expected to leave borrowing costs at their 23-year high of 5.25-5.5 percent. The main point of discussion, though, will be whether economic data has simply confirmed the Fed’s suspicions that it’s not yet time to reduce the key interest rate that influences virtually all financing costs that consumers pay — or whether it’s convinced them to rethink their rate cut plans entirely. Here’s what to look for as the Fed meeting starts today.
Inflation isn’t slowing as fast as it was in 2023. Officials are bound to agree that the reports underline their caution with rate cuts. Yet, the Fed targets a different index — one that doesn’t place as much weight on shelter. The Fed’s preferred personal consumption expenditures (PCE) index has thus improved much faster.
The Fed may start to rethink whether it can defeat inflation without slowing the economy
FASFA Mess - Schools Struggle to Get Aid Awards to Students Ahead of May Admissions Deadlines
The Department of Education has started sending Free Application for Federal Student Aid data to colleges but students should not expect their financial aid offers just yet. According to the FAFSA website, ED is only sending data to a small number of schools to ensure systems are working properly. The current timeline suggests the earliest most schools can send out financial aid offers will be the start of April. May 1 is usually the deadline for new students hoping to attend a four-year college to decide where they will enroll. Colleges require students to confirm attendance and generally submit a nonrefundable deposit as part of the process.
ED intends to send data out to more schools once it knows everything is working smoothly. But the department also said it will take two weeks to get colleges and universities the backlog of data for students who have already submitted their FAFSA. Once schools have the FAFSA data, they will need time to process the applications before they can send out financial aid offers to students, informing them of how much college will cost and how much aid they can expect to receive. In many cases, schools will also need to wait for their software vendors to update the programs they use to create financial aid awards in bulk.
Health and Wellness
How Bad Are Flu, COVID-19 and RSV? These Charts Show How Respiratory Viruses are Spreading in the US
Spring is nearly here, but the 2023-24 respiratory virus season isn’t over yet. Viral activity from flu, COVID-19 and RSV has fallen from the peak, but levels remain elevated. How active are the respiratory viruses? Where is activity highest? Which virus is most prevalent? Where do hospital admissions stand?
Here’s the situation and the answers to those questions in four charts.
NYS COVID Update
The Governor updated COVID data for the week ending March 8th.
Deaths:
- Weekly: 48
- Total Reported to CDC: 83,005
Hospitalizations:
- Average Daily Patients in Hospital statewide: 743
- Patients in ICU Beds: 92
7 Day Average Cases per 100K population
- 3.8 positive cases per 100,00 population, Statewide
- 5.3 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- 7 battlegrounds That Will Decide Who Wins the Presidency – The Hill
- Early Voting in New York’s Presidential Primary Begins March 23 – Mid-Hudson News
- Trump Threatens 100% Tariffs on Chinese Cars Made in Mexico - Bloomberg
- 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
Cutting Tool Orders Reports Show Mixed Bag For Manufacturing Growth
U.S. manufacturers ordered $204.5 million worth of cutting tools during January, 9.1% more than during December and 4.1% higher than the total for January 2023. The figures are supplied by the U.S. Cutting Tool Institute and AMT - the Assn. for Manufacturing Technology in the latest monthly Cutting Tool Market Report. “January cutting tool shipments are a good start to 2024 and indicate that the expected decline will not be as severe as some fourth-quarter predictions that were based on the contraction in durable goods spending,” stated Jack Burley, chairman of AMT’s Cutting Tool Product Group.
Alternatively, a case against growth is indicated by AMT’s recent U.S. Manufacturing Technology Orders report, which is an indicator of future manufacturing activity by job shops and OEMs. The low volumes of their orders suggests a lack of confidence in manufacturing demand growth. “Job shops are reporting business activity, and quoting has slowed down some,” AMT’s Burley offered. “However, large original equipment manufacturers in automotive, truck, and aerospace are still investing in new production lines. Overall, there is optimism within the industry for continued growth this year.”
Read more at American Machinist
National Association of Realtors Agrees to Slash Commissions in $418M Settlement
The National Association of Realtors (NAR) agreed on Friday to pay $418 million over roughly four years to resolve all claims against the group by home sellers related to broker commissions. The agreement must still be approved by a court. Almost 9 in 10 home sales are handled by real estate agents affiliated with NAR. The organization, the country's largest trade association, requires home sellers to determine a commission rate, typically 6%, before listing homes on its property database, known as the Multiple Listing Service, or MLS. The lawsuits argued that the structure harms competition and leads to higher prices.
The landmark deal will slash realtors' standard 6% sales commission fee, potentially leading to significant savings for homeowners. Fees could be slashed by up to 30%, the New York Times reported, citing economists. Standard commission rates in the U.S. are among the highest in the world. Housing experts expect the deal to shake up the housing market and even drive down home prices across the board.
Vistage Survey: Manufacturers Back Off on 2024 Pay Raises
More than half of manufacturing CEOs plan to either maintain or increase pay raises in 2024, according to data from CEO coaching and peer advisory organization Vistage. In 2024, nearly 300 CEOs at small- to mid-size manufacturing companies reported: 62% plan to either maintain or increase pay raises in 2024 (compared to 73% nationally). 33% will give smaller pay raises than they did in 2023. 4% don’t plan to give raises at all this year.
As quit rates continue to slow, the hiring landscape has improved, with 40% of manufacturing CEOs reporting it was easier to hire than at the start of last year, 49% reporting no change, and 11% reported it is more difficult The report also revealed: 48% of manufacturing CEOs plan to increase hiring in the year ahead (compared to 56% nationally). 10% report plans to decrease their workforce in the next 12 months.
Slide Show - US Cities with Notable Manufacturing Job Gains Since 2019
From the COVID-19 pandemic to the CHIPS Act, there have been several drivers of manufacturing job growth in recent years. Pharmaceuticals, computers and electronics, automobiles, aerospace and food and beverage manufacturing have given rise to job growth in the five years to 2023, according to a new Oxford Economics research briefing. During these turbulent and unpredictable years, these five industries have contributed to job gains in a number of U.S. cities.
The briefing, titled “Five sectors leading manufacturing job growth across US metros,” provides the data and identifies the factors which impacted the final figures. This slideshow shows where robust job growth took place between 2019 to 2023.
F-35 Certified for Full Rate Production
The U.S. Dept. of Defense confirmed that the F-35 Joint Strike Fighter program has achieved “full-rate production,” signifying the Pentagon has completed and approved the results of operational testing on the single-engine, Stealth-enabled aircraft. The Milestone C / Full Rate Production (MSC/FRP) classification means the F-35 program is “well positioned to efficiently produce and deliver the next generation of aircraft to meet the evolving needs of our services, partners, and Foreign Military Sales customers,” according to the Pentagon announcement.
As noted, the MSC/FRP designation recognizes that the F-35 program leaders demonstrated “control of the manufacturing process, acceptable performance and reliability, and the establishment of adequate sustainment and support systems.” This is significant because cost-overruns, the availability of spare parts and systems, and software updates have been frequently cited by the Pentagon in its disputes with the F-35 program leader, Lockheed Martin. The F-35 is a series of fighter jets deployed for ground attack and combat, and available in three variants, for the U.S. Air Force, U.S. Marine Corps, and U.S. Navy, as well as the defense forces of 17 other nations. It is by far the largest and most expensive U.S. defense program, with Lockheed subject to steady scrutiny for cost overruns and the readiness of aircraft for service.
Read more at American Machinist
Gap Inc. Gets a Lift from Retooled Sourcing Strategy
Procurement improvements helped raise Gap Inc.’s profitability in the fourth quarter. Lower commodity costs and “more effective sourcing strategies” helped drive a 5.3 percentage point spike in the apparel company’s gross margin year over year, CEO Richard Dickson said on the company’s earnings call. Margins also got a boost from leaner inventory and fewer price discounts. Breaking down Q4 further, lower commodity costs and reduced air freight costs boosted merchandise margins by 3 percentage points.
The company’s cost of goods sold (which also includes occupancy expenses) shrank by 6.8% YoY in Q4, according to its earnings release. Inventory fell by 16%, which gave the company an operational boost and helped reduce markdowns. Gap’s supply chain is among the company’s top priorities for Richard Dickson, who was named CEO last summer.
Read more at Supply Chain Dive
GM Announces a Management Shake-up as it Loses 2 Key Executives
General Motors said last week it is losing both its head of manufacturing and its newly hired head of software. GM's Executive Vice President of Global of Manufacturing and Sustainability Gerald Johnson, 61, is retiring after 44 years with GM, the automaker said. Johnson was a key figure this past fall during the negotiations for a new contract with the United Auto Workers union. GM also announced that Mike Abbott, 51, executive vice president of Software and Services, will be leaving the company due to health reasons. Abbott, the former vice president of engineering for Apple’s Cloud Services division, joined GM in May 2023 to take over managing GM's entire software systems, including those in its vehicles.
Jens Peter (JP) Clausen will replace Johnson, GM said in a statement. Clausen is an industrial leader with vast expertise in global manufacturing, product engineering and scaling operations. Clausen, 52, will join GM on April 2. He comes from Tesla, where he spearheaded the rapid scaling of electric vehicle propulsion systems at Tesla’s Gigafactory 1 and played a crucial role in making EVs more accessible, GM said.
Read more at The Detroit Free Press
As Electric-Vehicle Shoppers Hesitate, Hybrid Sales Surge
Hybrids, which combine a gas engine with a battery-propelled motor to boost fuel efficiency, have been a small but steady slice of the U.S. car market since the Toyota Prius ushered in the technology more than two decades ago. In recent years, they have taken a back seat to fully electric vehicles, as automakers introduced many EVs to challenge Tesla. But car brands have been methodically expanding their hybrid offerings—partly to help meet tougher tailpipe-emissions rules—and for some, they have become a competitive edge.
The number of hybrid models on sale in the U.S. grew 40% over five years, to about 70 for the 2024 model year, Cox Automotive estimates. “Hybrids now have very few compromises compared to their gas alternatives,” said Andrew Frick, head of Ford Motor’s gas and hybrid vehicle business. U.S. sales of hybrids jumped 50% in the first two months of the year. That surge outpaced EV sales, which grew 13%, in both growth and volume. Hybrids flew off dealer lots in 25 days on average, nearly three times faster than EVs and twice as fast as gas-powered cars, according to research site Edmunds.
UAW Says Workers at VW Tennessee Plant File for Union Election
The United Auto Workers said Monday that workers at Volkswagen's Chattanooga, Tennessee, assembly plant are seeking an election to unionize, setting up a critical test for UAW President Shawn Fain's unprecedented campaign to expand the union's reach to foreign-owned automakers in the southern United States. The UAW said a supermajority of eligible workers at the VW plant have signed union cards in about three months. The workers have filed a petition with the National Labor Relations Board seeking a vote to join the union. It would be the third time in ten years that the UAW has sought to represent VW Chattanooga workers.
VW, which says about 4,100 workers at the plant that produces the Atlas and ID.4 are eligible to join a union, said previously the company respects "our workers' right to decide the question of union representation. And we remain committed to providing accurate information that helps inform them of their rights and choices."