Member Briefing March 28, 2024
Mid-Atlantic Manufacturing Outlook Worsens
Even before the Key Bridge collapse, Manufacturing in the Mid-Atlantic region had slowed in March, with the Federal Reserve Bank of Richmond's composite manufacturing index reading -11, down from -5 a month earlier. The March reading marks the fifth consecutive month of contraction on the gauge and paints a worsening picture of regional factory activity. Data covering shipments, new orders, and employment all point to a downbeat outlook for the sector.
Firms were split about local business conditions, as the index hovered around 0. The index for future local business conditions, however, increased from 3 in February to 12 in March. Most firms continued to report declining backlogs as the index remained negative. The vendor lead time index returned to negative territory, decreasing from 4 to −17 in March. The capacity utilization index fell from −4 to −21. The average growth rate of prices paid and prices received decreased in March. Firms expect both growth rates to moderate further over the next 12 months.
Cocoa Prices Reach All-Time High: What This Means For Easter Baskets
The price of cocoa surged again Tuesday, topping $10,000 per metric ton for the first time, and some chocolate companies plan to respond to the increase by upping the cost of products, decreasing product sizes and advertising candies with less cocoa. This price is more than double what cocoa was trading for in January, as it fell just below $4,200, and almost five times more than what it was in March 2023, as prices topped out at $2,927, according to a report by the International Cocoa Organization (ICCO). Top chocolate makers Hershey and Mondelez have said they intend on hiking product prices to cover for the surging cocoa cost, meaning consumers will be paying more for chocolate in stores. Other companies like Mars have resorted to decreasing the sizes of their chocolates while selling them for the same price, or promoting candies with less cocoa—like hazelnut-based products.
About 70% of the world’s cocoa is grown in West Africa, international trade association CropLife International reports. The rising prices are a result of lackluster, weather-related crop yields in West Africa. El Niño—above-average sea surface temperatures in the Pacific Ocean that affects global climate patterns—has caused warmer temperatures and heavy rains in the region, which has resulted in a decline in crop yields.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- 7 Lebanese and an Israeli Killed in an Exchange of Fire Along the Lebanon-Israel Border - AP
- Behind Closed Doors, the U.S. Pushes to Shape, Not Stop, the Rafah Operation – WSJ
- Israel Has Agreed to Provide ‘Security Bubble’ for Gaza Pier Project - Politico
- Cease-Fire Negotiations Hit Stalemate As Israeli Team Reportedly Leaves Doha - Forbes
- As Israel's Politicians Squabble, Some Soldiers Voice Their Anger – Reuters
- The ‘No-Fail’ Mission to Protect the Red Sea Isn’t Working - Bloomberg
- 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
- 3 Ways Russia's Wartime economy is Set to Weaken After a Surprisingly Strong 2023 - Insider
- Russia Executed Ukrainian POWs, UN Report Says - Politico
- In a Secret Game of Prisoner Swaps, Putin Has Held Most of the Cards – WSJ
- Ukraine Electricity Imports Soar After Russian Attacks – Reuters
- Ukraine’s President Replaces a Top Security Official in Latest Reshuffle - AP
- Russia Struggles to Collect Oil Payments as China, UAE, Turkey Raise Bank Scrutiny - Yahoo
- 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
- Deadly Attack In Russia Brings Islamic Terrorism to the Fore – The Dispatch
- Satellite Images Show North Korea’s Increasing Isolation - WSJ
- Japan Steps Closer to Intervention as Yen Hits Lowest Since 1990 - Yahoo
- Julian Assange Staves Off Extradition to US for Now, UK Court Rules - CNN
- What is ISIS-K, the Terror Group Allegedly Responsible for the Moscow Concert Hall Attack? - Politico
- UN Reports a 35% Increase in People Affected by Violence in South Sudan - AP
- Milei to Cut 70,000 State Jobs, Boasting of Chainsaw Austerity – Bloomberg
- Six Presumed Victims of Baltimore Bridge Collapse All from Latin America – The Guardian
- 137 School Children Kidnapped by Gunmen in Nigeria Released, Undergoing ‘Psychosocial Counseling,’ Official Says - CNN
Policy and Politics
Hochul Offers Three-Day Budget Extender
Gov. Kathy Hochul officially ended the hope for an on-time budget on Wednesday evening. She announced she will deliver to lawmakers a spending extender until April 4 to keep the government running past the start of the new fiscal year on April 1. But if last year is any indication, the short timeline doesn't necessarily indicate that a deal is imminent. This is the third year in a row that state officials failed to approve a budget before the deadline, necessitating an extender.
In a statement, Hochul said that she, state Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie have been negotiating for weeks, but haven't quite reached a deal. “While I believe a final agreement is within reach, I recognize many New Yorkers would like to spend the holiday weekend with family and loved ones,” Hochul said. Both legislative leaders indicated this week that they were “on the same planet” in terms of finding an agreement, though they also warned to expect a stopgap spending measure.
New York Pork - Earmarks in This Year’s Federal Spending Bills
The new federal budget finalized over the weekend — nearly six months late — contains more than $500 million for roughly 450 so-called “community projects” across New York state, according to an analysis by Spectrum News NY1. The funding, requested by members of the New York delegation, is designated for everything from food banks and community centers to infrastructure and public housing developments.
Funding for these so-called “earmarks” is included in the budget separate from the normal appropriations process. Earmark funding had been banned for several years because some lawmakers abused the process, steering money to pet projects, in some cases creating conflicts of interest. Earmarking was revived a few years ago, with strict new spending guidelines and more transparency to reduce the possibility of impropriety.
Some of the other Hudson Valley items making the cut in the new budget were:
- $8 million for new sidewalks in the Rockland County town of Ramapo, requested by Rep. Mike Lawler and both New York senators.
- $4.5 million for a prison education and reentry program through Bard College, secured by Rep. Ritchie Torres and both senators
- $4.1 million for an expansion of the Boys and Girls Club of Newburgh, secured by Rep. Pat Ryan
- More than $4 million to rehabilitate the Yonkers Greenway, secured by Rep. Jamaal Bowman and both senators
- $1.75 million for security enhancements, including new vehicular barriers, outside of the Metropolitan Museum of Art, secured by both senators
- Millions for YMCA programs and facilities in New Flushing, Greenpoint, Saratoga and Schenectady, secured by Rep. Grace Meng, Rep. Nydia Velazquez and Rep. Paul Tonko
Learn more at NY State of Politics
BlackRock's Fink Calls for National Effort to Avert U.S. Retirement Crisis in Annual Letter
BlackRock Chairman and CEO Larry Fink’s latest annual letter to CEOs and clients called for the financial equivalent of a moonshot to avert a looming U.S. retirement crisis. “Maybe once a decade, the U.S. faces a problem so big and urgent that government and corporate leaders stop business as usual. They step out of their silos and sit around the same table and find a solution,” said Fink in his annual letter, released March 26. "America needs an organized, high-level effort to ensure that future generations can live out their final years with dignity," he added.
Fink, whose views on industry trends carry added weight against the backdrop of BlackRock’s world-beating $10 trillion in assets under management, said he doesn’t pretend to have all the answers. But BlackRock’s work as an investment firm for 35 million Americans preparing for retirement “has given us some insight into how a national initiative to modernize retirement might begin.” Over the coming months, “BlackRock will be announcing a series of partnerships and initiatives” aimed at launching a broad discussion on retirement security, he said. Further details will be forthcoming at a later date, a BlackRock spokeswoman said.
Health and Wellness
CDC Report: Drug Overdoses Have Reached Record High - ‘Grim statistics'
Drug overdoses reached a new high last year in the U.S., according to a new report from the Centers for Disease Control and Prevention (CDC). Nearly 108,000 people died from drug overdoses in 2022, the agency said. This was a marginal increase from 2021, when 106,669 people died of drug overdoses. Over the past two decades, the rate of drug overdose deaths has spiked from 8.2 per 100,000 people in the year 2000 to 32.6 per 100,000 in 2022, per the CDC.
Overdoses are still the leading cause of death for adults in the country, largely driven by fentanyl, a synthetic opioid drug. The overdose rate increased for males between 2021 and 2022, and slightly decreased for females. Overdoses increased among adults ages 35 and older between 2021 and 2022, and they decreased among those aged 15 to 34.
Election 2024
- Arizona Becomes Ground Zero for 2024 Election Misinformation Fears – The Hill
- GOP Group Privately Warns Against All-in Biden Attacks - Axios
- 55 Things You Need to Know About Nicole Shanahan - Politico
- Who said it: Biden, Trump or someone from 'The Bachelor'? – ABC
- 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
Baltimore Harbor News
Carriers Begin to Reroute Following Baltimore Bridge Collapse
The collapse of the Bridge caused by it being struck by a cargo ship is likely to lead to legal wrangling and major claims activity, with reinsurers set to take a heavy hit. The collapse is expected to drive “one of the largest claims ever to hit the marine (re)insurance market,” John Miklus, American Institute of Marine Underwriters (AIMU) told IBA. “You've got various components to the loss,” Miklus said. “A big one is going to be rebuilding the bridge and all the loss of revenue and loss of tolls while that's taking place.”
Insurers face claims of as much as $3 billion following Tuesday’s collapse of the Francis Scott Key Bridge in Baltimore, with firms on the Lloyd’s of London market most exposed, Barclays Plc analysts said. Insurance claims for damage to the bridge alone could reach $1.2 billion, the bank said in a note, predicting further potential liabilities of $350 million to $700 million for wrongful deaths.
More Headlines
- Francis Scott Key Bridge Collapse Live Updates - NBC
- Here’s What We Know About The 6 Missing Workers Now Presumed Dead - Forbes
- London Insurers Face Baltimore Bridge Payouts Worth Billions – Insurance Magazine
- Baltimore Bridge Crash Investigators to Examine Whether Dirty Fuel Played Role in Accident - WSJ
- GM, Ford Will Reroute Baltimore Shipments After Bridge Collapse – Reuters
- How the Bridge Collapse in Baltimore Stands to Affect the Economy - Investopia
- Data Recorder Recovered from Ship in Baltimore Key Bridge Crash - Reuters
- What to Know About the Ripple Effects of the Baltimore Bridge Collapse – Axios
Xi Says US CEOs Should Invest in China, Economy Hasn’t Peaked
President Xi Jinping met with a group of American business executives in Beijing as China is seeking to restore confidence in the economy and keep relations with the US on a stable footing. The Chinese leader on Wednesday met with representatives from American business, strategic and academic communities, the official Xinhua News Agency said. State broadcaster CCTV named a number of executives present at the meeting and said Xi took a group photo with the participants before the event.
China is trying to show it welcomes foreign businesses, but whipsawing tensions with Washington, a shaky economic recovery and raids on consulting firms have damped investor enthusiasm. For global executives, the meeting was a chance to underscore interest in participating in the giant Chinese market despite deepening geopolitical tensions and moves in China to favor local competitors. China appears to be ramping up outreach to foreign investors as it seeks to achieve an annual growth target of around 5%, a goal deemed ambitious by some economists. The Ministry of Commerce in January pledged to hold a round-table meeting with foreign companies every month to hear and address their concerns.
In Charts: American Business Stalls in China
The decades long push by American companies into China is stalling. American firms in China are being squeezed by escalating geopolitical tensions, tit-for-tat measures on trade and exports, and China’s drive for self-sufficiency. Meanwhile, the Chinese market is becoming less attractive. The country’s economic growth fell to its slowest rate in decades last year; consumers there are spending less, especially on foreign brands; and its once-unstoppable export machine is faltering.
The result is many multinational companies are sending less from China, exporting fewer products there and seeing declines in their revenue from the country. The changes have prompted some firms to reduce their investment in China. American and other multinational firms had accounted for more than half of exports out of China. Now they make up less than a third. These charts show that trend.
Mortgage Demand Stalls, Even as Interest Rates Moderate
The usually busy spring housing market is underway, but mortgage demand isn’t moving. Application volume was essentially flat last week, dropping 0.7% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.93% from 6.97%, with points decreasing to 0.60 from 0.64 (including the origination fee) for loans with a 20% down payment.
Applications to refinance a home loan fell 2% for the week and were 9% lower than the same week one year ago. Mortgage rates today are still about a half a percentage point higher than they were at this time last year, so recent borrowers have no incentive to refinance. Anyone with an older mortgage than that likely has a rate that is half of what is currently being offered. Applications for a mortgage to purchase a home decreased 0.2% from the week before and were 16% lower year over year.
Apple Faces Mounting Antitrust Woes in US and EU: Here’s What Exactly It’s Being Accused of
Lately, Apple has been hit with major antitrust lawsuits from both the U.S. Department of Justice and the European Union. The iPhone maker is getting hit in different parts of its many businesses, which ranges from consumer electronics to streaming to software applications. March 25th Apple, along with Meta and Google owner Alphabet are the first to be probed by E.U. regulators as having too much power over the digital economy as companies that provide “core platform services.” The European Commission, the E.U.’s executive arm, has also designated Apple as a gatekeeper under its Digital Markets Act (DMA), which went into effect on March 7.
Under DMA, these companies must comply with E.U. laws that allow smaller or third-party companies to have more access to the digital market, or be fined up to 10 percent of their total worldwide annual turnover, or revenue. Apple specifically is being investigated for its issues with user choice, such as allowing users to uninstall apps from their phones or tablets. Last week the US DOJ alleged that Apple “suppresses technologies that would have increased competition among smartphones” in the U.S. They accused Apple of suppressing users’ access to alternative “super apps” or multiservice apps like China’s WeChat and Alipay, cloud streaming services, third-party messaging apps, smart watches and digital wallets.
Automakers Lose About $6,000 on Every EV They Sell
U.S. automakers lose roughly $6,000 on every $50,000 EV they sell in America, according to a new report from analyst firm Boston Consulting Group (BCG). That figure comes hotly on the heels of similar sky-high losses from companies like Rivian and Lucid. Earlier this year, Rivian revealed that it lost $33,000 on every truck sold, while Lucid topped that figure with its eye-watering $400,000 losses on each car sold.
The report warned that those losses are likely to continue well into the next generation of supposedly cheaper, more efficient electric cars. BCG explains: “We also estimate that OEMs will only be able to close half of this cost gap by making the right technology choices; economies of scale as automakers ramp up production will help, too, but they won’t make up the difference. Then there is the impact of looming Chinese imports to consider; market prices will likely contract further, exacerbating the profitability challenge. At some point, it will become untenable for OEMs to lose money on every vehicle they sell.”
Volkswagen Chattanooga Workers Will Vote on UAW Representation April 17-19
The National Labor Relations Board announced March 25 that it would oversee an election at Volkswagen USA’s Chattanooga, Tennessee plant from April 17 to April 19. Volkswagen USA, in an unsigned statement released March 18 after the UAW officially called for the NLRB election, said simply that the company favors its employees’ rights and a private election. “We respect our workers’ right to a democratic process and to determine who should represent their interests. We will fully support an NLRB vote so every team member has a chance to vote in privacy in this important decision."
The election is the UAW’s third attempt to represent the Chattanooga plant, following failed votes in 2014 and 2019: It is Volkswagen’s only factory not represented by German metalworkers union IG Metall or a local equivalent, but to date this has yet to translate into a win for the UAW. Despite its record at the plant, the UAW says it currently has enough signed union cards to form a supermajority of 4,000 voting workers.
Rolls-Royce Invests in Large Engine Assembly and Testing
Rolls-Royce is investing in its assembly, test and shop visit capacity in the UK and Germany to address growing long-term demand for new civil large engines and improve customer aftermarket support services for its global Trent fleet. Rolls-Royce expects an annual increase of 7-9% of Rolls-Royce-powered aircraft in service for the remainder of the decade and forecasts engine flying hours to reach 120-130% mid-term compared to 2019 levels.
To prepare for this growth, Rolls-Royce is investing £55m and recruiting more than 300 front-line operations roles, split between its operations in Derby, UK, and Dahlewitz, Germany. About half of the investment and about two thirds of the jobs will be created in Derby. Expansion of engine build capacity in Derby will deliver over 40% more new engines per year from 2025 – compared with average deliveries over the last 10 years – and increase of services capacity. These investments follow last month’s announcement to invest £1bn in a continuous improvement programme for the Trent engine family.
GE Expands CapEx Plans to Europe
Having put forth a $450-million capital spending program for its U.S. manufacturing operations, GE Aerospace has outlined a further $70 million for new and updated capabilities at locations across Europe in support of its commercial aircraft engine programs. The company – which will comprise the core of the General Electric enterprise after the pending spin-off of the group’s renewable energy businesses – confirmed that the investments will be implemented during 2024 and aid in its capacity expansion efforts, targeting an extensive backlog of orders for CFM LEAP and GE9X engines.
GE manufactures the LEAP engines developed by its joint venture, CFM International. LEAP engines are installed in both the Boeing 737 MAX and Airbus A320neo narrow-body jets, the two highest-selling aircraft now in service. Together, Boeing and Airbus have order backlogs totaling about 10,000 aircraft for those twin-engine aircraft, to be delivered over the next decade.
Read more at American Machinist
New York Auto Show 2024 Begins Friday
Ushering in the latest automotive trends, the New York International Auto Show showcases an incredible collection of cutting-edge design and extraordinary innovation. More than two floors of displays from the world’s automakers feature the newest vehicles will be brought to the NYIAS. For more than a century New Yorker’s have visited the show in the millions to experience everything that the automobile industry has to offer and to get a glimpse into the future. It’s the one place where the information is comprehensive and engaging and where new technology can be explained and explored freely.
From the beginning, when the first New York Auto Show opened in November 1900 at the original Madison Square Garden, the annual exhibition of automobiles, and the pageantry they create, has been a hallmark of the industry. For 124 years, the New York Auto Show has given the world a glimpse into the future. Here, we take a journey back in time to celebrate and enjoy many of the notable moments that have occurred along the way.
Updates from the New York International Auto Show