Member Briefing May 13, 2024
Consumer Sentiment Hits Lowest Level This Year As Inflation Weighs On Americans’ Wallets
Consumer sentiment fell to its lowest level of 2024 this month, according to a University of Michigan poll, as Americans react sourly to inflation that won’t go away during the election year, though the economy remains far from the recession braced for by many. The Michigan survey’s preliminary May index reading came in at 67.4, coming in far weaker than mean economist forecasts of 76 and registering its weakest level since November.
Americans’ average inflation expectations for 12 months ahead shot up from 3.2% to 3.5% and advanced for the long run from 3% to 3.1%, far above the typical 2% inflation target for the U.S. economy, indicating consumers are uneasy about the pace of price increases even as inflation subsides from its harshest level in four decades. May’s sentiment is about 14% higher than it was last year and is higher than it was for the entirety of January 2022 to July 2023, the time frame in which the Fed hiked rates from near zero to over 5%, the most expensive borrowing level since 2001.
Wholesale Inventories Fell in March
Wholesale inventories in the U.S. fell 0.4% in March, the Commerce Department reported Wednesday. Economists surveyed by the Wall Street Journal had forecast a 0.4% drop in March. Inventories are down 2.3% over the past year even as they rose 0.2% in February. The depletion of private inventories subtracted from the U.S. GDP in the first quarter. The economy slowed to a 1.6% annual rate from 3.4% in the fourth quarter. Inventories have only added to growth once in the past five quarters.
Inventories are goods produced for sale that have not been sold yet. Businesses tend to increase inventories when sales are rising. Sales in the month fell 1.3% after a 2% gain in February. Sales are up 1.4% over the past year. The inventory-to-sales ratio fell to 1.35 in March from 1.40 in the same month one year ago. The ratio reflects how long it would take a company to sell all the goods sitting on warehouse shelves. The lower readings compared to last year suggest it’s taking less time for companies to sell their goods.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- Palestinians Flee Expanded Rafah Fighting, as Hamas Resurges in Northern Gaza - WSJ
- Hamas Says Gaza Ceasefire Efforts Are Back at Square One - Reuters
- Cease-Fire Talks Hit Snag on How Many Hostages Would Be Freed in First Phase and Other Issues, Officials Say. - NYT
- U.S. Criticizes Israel Over Conduct in Gaza - Politico
- U.N. General Assembly Approves Measure Granting Palestine New Rights—Despite U.S. Voting No – Forbes
- She Watched Her Son in a Hamas Hostage Video. ‘My Heart Broke.’ - WSJ
- Protesters Return to Streets Across Israel, Demanding Hostage Release - 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
- Ukraine and Russia: The Latest News – The Guardian
- Russian Forces Attack Ukraine's Kharkiv Region, Opening New Front - Reuters
- It’s Possible The Russian Army Is Tricking The Ukrainian Army With A Fake Offensive - Forbes
- Ukraine Strikes Russian Oil Facilities, Including One Far Over the Border - NYT
- US Announces $400 Million Military Aid Package for Ukraine – The Hill
- Ukraine Gets HIMARS Boost in New $400M U.S. Package - Newsweek
- Zelensky Sacks Bodyguard Chief After Foiled Assassination Plot - CNN
- Ukraine's Seaborne Grain Exports Bounce Back to Near Prewar Levels - NYT
- 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
- British Economy Rebounds Strongly in First Quarter, Ending 'Technical Recession' – ABC News
- Survey Finds Growing Partisan Divisions on US Views of NATO, Ukraine – The Hill
- People Eating ‘Grass and Peanut Shells’ in Darfur, UN Says, as Hunger Crisis Engulfs Sudan - CNN
- Sri Lanka Looks to Indian Investment to Counter China – Nikkei Asia
- Georgia Protest Against ‘Russian Law’ Draws Tens of Thousands in Tbilisi – France 24
- Will an Authoritarian Government in Venezuela Allow a Fair Election? - NYT
- Argentina’s President Pledged Fiscal Shock Therapy. So Far, He’s Delivering Economic Pain. - WSJ
- US Sends Warship Through Taiwan Strait Near China, China Condems - Newsweek
- Pfizer and AstraZeneca Announce New Investments of Nearly $1 Billion in France - Reuters
Policy and Politics
Senate Approves Five-Year Civil Aviation Bill
The Senate on Thursday passed a civil aviation bill aimed at making U.S. air travel smoother and preventing runway collisions, overcoming a down-to-the-wire fight over takeoffs and landings at Washington, D.C.’s closest airport. In an 88-4 vote, lawmakers agreed to reauthorize the rules that govern the Federal Aviation Administration’s operations in a bill that contains dozens of provisions, including ones to address serious safety concerns that have emerged as travel demands strain the nation’s aviation infrastructure and workforce.
The measure directs $105 billion in spending over five years—including money from taxes paid by commercial airline passengers on tickets and fuel—on airport infrastructure projects and the FAA’s operations, which employ more than 40,000 people. It also includes nearly $20 billion in grants for airport upgrades. The White House supports the legislation, despite lawmakers’ decision to drop provisions that President Biden had advocated for on climate and conditions for airport service workers. In a statement, administration officials said the bill includes key consumer protections on ticket reimbursements for some travel disruptions. The measure now heads to the House where there is also widespread support.
Biden to Quadruple Tariffs on Chinese EVs
The Biden administration is preparing to raise tariffs on clean-energy goods from China in the coming days, with the levy on Chinese electric vehicles set to roughly quadruple, according to people familiar with the matter. Higher tariffs, which Biden administration officials are preparing to announce on Tuesday, will also hit critical minerals, solar goods and batteries sourced from China, according to the people. The decision comes at the end of a yearslong review of tariffs imposed by former President Donald Trump on roughly $300 billion in goods from China.
Whether to adjust the Trump-era levies divided Biden economic advisers for years, with trade officials pushing for higher duties and others, such as Treasury Secretary Janet Yellen, calling for lowering tariffs on consumer goods while focusing duties on strategic sectors. Officials are particularly focused on electric vehicles, and they are expected to raise the tariff rate to roughly 100% from 25%, according to the people. An additional 2.5% duty applies to all automobiles imported into the U.S. The existing 25% tariff on Chinese electric vehicles has so far effectively barred those models, often cheaper than Western-made cars, from the U.S. market. Biden administration officials, automakers and some lawmakers worry that wouldn’t be enough given the scale of Chinese manufacturing.
The Liberal International Order is Slowly Coming Apart
At first glance, the world economy looks reassuringly resilient. America has boomed even as its trade war with China has escalated. Germany has withstood the loss of Russian gas supplies without suffering an economic disaster. War in the Middle East has brought no oil shock. Missile-firing Houthi rebels have barely touched the global flow of goods. As a share of global GDP, trade has bounced back from the pandemic and is forecast to grow healthily this year. Look deeper, though, and you see fragility.
For years the order that has governed the global economy since the second world war has been eroded. Today it is close to collapse. A worrying number of triggers could set off a descent into anarchy, where might is right and war is once again the resort of great powers. Even if it never comes to conflict, the effect on the economy of a breakdown in norms could be fast and brutal.
Read more at The Economist (subscription)
Health and Wellness
How Helpful Are Mental-Health Chatbots?
Chatbots are still no substitute for a human therapist, researchers say. Not only do some of these tools have trouble helping patients in crisis, they don’t always offer a sufficient level of personalization or provide advice that is guaranteed to be accurate. Yet researchers are homing in on some of the supporting roles that chatbots and artificial intelligence could play in mental-health care. For instance, chatbots are showing promise in helping people determine whether they need care and connecting them to the proper resources, in lifting people’s moods and in practicing skills taught in cognitive-behavioral therapy.
Newer chatbots that use AI technology based on large language models are capable of more humanlike conversation, opening up new possibilities for applications in mental-health care. For example, some of these newer tools can mimic the way humans console or offer empathy to the point where it can be difficult to tell if a response is coming from a human or AI. Yet, some experts worry about the lack of regulations, safety protections or even best practices around the use of such technology for mental-health purposes. They are particularly concerned about chatbots offering advice, saying a suggestion that may be useful for one person could actually hinder another.
NYS COVID Update
The Governor updated COVID data for the week ending May 10th.
Deaths:
- Weekly: 17
- Total Reported to CDC: 83,286
Hospitalizations:
- Average Daily Patients in Hospital statewide: 432
- Patients in ICU Beds: 29
7 Day Average Cases per 100K population
- 2.6 positive cases per 100,00 population, Statewide
- 3.3 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- Nikki Haley Is Huddling With Donors and Won’t Endorse Donald Trump Yet - WSJ
- Biden-Trump Gaffe Tracker: Biden Calls WNBA Player Candace Parker ‘One Of The Greatest All-Time Coaches’ - Forbes
- Corporate America Is Sitting Out the Trump-Biden Rematch - WSJ
- Trump Denies Nikki Haley Up For Running Mate Slot Amid Vice President Rumors - Forbes
- 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
Key Bridge: Investigators Probe Whether Crew, Companies Broke 1830s Steamboat Law
The federal investigation of the crash of a containership into a bridge outside the Port of Baltimore is taking a dark turn. Criminal investigators are looking at whether the crew or companies behind the vessel violated a centuries-old seaman’s manslaughter statute in the collision that killed six workers. The statute cites neglect or misconduct by a ship’s officer or crew that leads to death and can also be applied to the companies that own or charter a vessel.
The Federal Bureau of Investigation has been investigating the March 26 accident. A focus of the probe has been on electrical issues the ship had at dock with power to refrigerated containers. The Dali remains at the accident site, where authorities plan to use explosives to dislodge bridge wreckage that is trapping the vessel and blocking the shipping channel. Safety investigators are preparing a preliminary report on the accident that could be released as soon as next week.
China’s Exports Return to Growth in April, Boosting Economy
China’s customs agency released data Thursday that showed exports rose in-line with expectations in April, while imports surged ahead of forecasts. Chinese imports from the U.S., European Union and Russia rose last month, despite a drop in exports to all three. Worldwide, China’s exports rose by 1.5% year-on-year in April in U.S. dollar terms, while imports climbed by 8.4%, the data showed. Exports were expected to have grown by 1.5% year-on-year, and imports up by 4.8% from a year ago, according to a Reuters poll. In March, exports and imports both fell year-on-year.
China’s imports from the U.S. climbed by 9% in April from a year ago, while exports dropped by nearly 3%. The U.S. remains China’s largest trading partner on a single-country basis. By volume, China’s exports of cars, LCD panel displays and home appliances rose, while exports of cellphones fell slightly. Exports of ships also dropped. China’s imports of crude oil and natural gas rose, as did that of steel, plastics, medicines and automatic data processing machines and parts. Imports of cosmetics dropped.
Dollar’s Strength Dents US Companies’ Earnings
A host of U.S. companies are faced with a problem they had not expected to confront this year: a rising dollar. many market participants believed the dollar would fall on the back of interest rate cuts that both investors and the Federal Reserve had penciled in for 2024. Those cuts are yet to come, and the U.S. dollar index, which measures the greenback's strength against a basket of currencies, is up 4% in 2024 and has climbed about 16% in the last three years.
A strong U.S. currency makes it more expensive for multinational companies to convert foreign profits into dollars, while also hurting the competitiveness of exporters' products. Companies guarding against dollar strength must also devote resources to hedging strategies that offset the effects of the rising currency on their bottom lines. All told, every 10% year over year rise in the dollar shaves some 3% from S&P 500 earnings, according to estimates from BofA Global Research.
Climate Protesters Try to Break Into Tesla’s Germany Factory, Multiple People Arrested
Climate protesters angry about Tesla’s plans to expand its Berlin-Brandenburg Gigafactory in Germany tried to break into the plant on Friday, according to a statement from local police. “Multiple unauthorized people are trying to enter the ground of the Tesla factory,” Brandenburg police said via X Friday. “We are in the process of preventing this.” Since Monday, a camp has been set up near the Tesla grounds at its Brandenburg plant, with participation increasing since Wednesday and peaking on a German bank holiday Thursday, police said.
Tesla is pursuing a major expansion for its battery and car assembly factory in Brandenburg, Germany, about 32 miles south of Berlin. Tesla’s planned expansion includes designs for a rail freight depot and storage facilities that could help it avoid reliance on other logistics providers and avoid production pauses due to parts shortages. Locals in February voted against authorizing the factory expansion. However, the vote was nonbinding and Tesla and local officials still intend to push ahead. Climate protesters have expressed concerns about Tesla’s plans, which entail cutting down approximately 250 acres of forest in a rural community of fewer than 8,000 residents near a nature conservation area.
Daimler Sets 2027 Target for Self-Driving Truck Launch in the US
We've been hearing about self-driving trucks for years now, but their development feels far behind that of self-driving cars, an industry that itself has faced problems in recent times. Now, however, Mercedes-Benz subsidiary Daimler Truck has revealed its first autonomous truck demonstrator ahead of what the company says will be fully driverless freight hauling by 2027.
The truck showing off the self-driving tech was a fully-electric version of Daimler's Freightliner Cascadia models, packed with long-range sensors that allow it to view the surrounding environment, writes The Verge. A powerful computer analyses the data and makes driving decisions based on this information. Daimler says it will only start producing the autonomous Freightliner once the company believes it is safe enough to begin testing on public roads, which will involve safety drivers being behind the wheel at all times. The company said it envisions more advanced, future models that lack steering wheels and other traditional controls.
NLRB Vows to Fight Texas “Joint Employer” Ruling
The National Labor Relations Board will appeal the recent ruling of a Texas federal judge who sided with business groups in the fight against the agency’s “joint employer” rule, it said this week. The NLRB filed a notice of appeal over U.S. District Judge J. Campbell Barker’s March ruling, which granted summary judgment to business organizations. Under a final rule issued by the NLRB last October, companies would be considered “joint employers” of franchise and contract workers if they have control over certain working conditions, such as schedule, pay and supervision—even if that control is indirect or goes unused.
Business groups sued the NLRB last November and called on the court to stop enforcement. Barker ruled in the groups’ favor, vacating the rule. The NLRB said it would appeal the ruling to the 5th Circuit. President Biden last Friday vetoed a congressional resolution to repeal the “joint employer” rule. The NAM believes the rule could make it more difficult for manufacturers to hire temporary workers, which could “create new disruptions in the workplace” and “exacerbate manufacturers’ ability to respond to changing market demands, including efforts to address acute workforce needs.”
GM Will Pull The Plug On Chevy Malibu To Make Room For 2nd-Generation Bolt
General Motors announced Wednesday it will shut down production of the Chevrolet Malibu for the second time in the car's 60-year history, as the Detroit automaker shifts its focus to electric vehicles. GM said it will stop manufacturing the gas-powered Chevy Malibu in November, allowing the company to invest $390 million at its Fairfax Assembly Plant in Kansas for the Chevrolet Bolt EV. GM plans to pause production of the Cadillac XT4 early next year in Kansas to make room for both the Bolt EV and XT4 on the same assembly line when production resumes in late 2025.
This is the second time the Chevy Malibu has been removed from GM's lineup. In 1983, the company phased out what had been one of the nation's best-selling mid-size sedans since 1964, to make room for the front-wheel drive Celebrity. The Malibu was resurrected in 1997, also as a front-wheel-drive vehicle. Besides the Corvette, the Malibu was Chevrolet's last remaining car offered in the United States. GM ended production of the Chevrolet Camaro last year.
Cyberattack Cripples Major U.S. Health Care Network
Ascension, a major U.S. health care system with 140 hospitals in 19 states, announced late Thursday that a cyberattack has caused disruptions at some of its hospitals. "Systems that are currently unavailable include our electronic health records system, MyChart (which enables patients to view their medical records and communicate with their providers), some phone systems, and various systems utilized to order certain tests, procedures and medications," Ascension said in the statement.
"Our investigation and restoration work will take time to complete, and we do not have a timeline for completion," the nonprofit health care system said. Ascension also runs more than 40 senior living facilities. The cyberattack on Ascension is just one in a series that have hit U.S. health care organizations. In February, Change Healthcare, a subsidiary of health care giant UnitedHealth Group, was hit by a ransomware attack that disrupted billing at pharmacies nationwide and compromised the personal data of up to a third of Americans, CNN reported. To try to protect patients' data, UnitedHealth paid $22 million to the criminals behind the attack, CEO Andrew Witty told Congress this month.
Read more at US News and World Report
The Post‑Pandemic Shift in Retirement Expectations in the U.S.
One of the most striking features of the labor market recovery following the pandemic recession has been the “Great Resignation,” or the surge in quits from 2021 to mid-2023. The authors highlight a related labor market condition: a persistent change in retirement expectations, with workers reporting much lower expectations of working full-time beyond ages 62 and 67. This decline may affect the labor market for years to come and have important macroeconomic implications.
The pandemic-induced change in retirement expectations may continue to affect the labor market in years to come. It also can have important macroeconomic implications when consumers act on their expectations in making consumption and saving decisions. To the extent that these expectations signal actual future retirement behavior, they also have implications for future decisions by consumers about the timing of claims for social security benefits and the receipt of those benefits.