Member Briefing May 25, 2023
S&P Global: Manufacturing Activity Declined in May, Price Pressure Eases at Factories
Manufacturing activity declined in May, contracting for the sixth time in seven months, according to S&P Global. The dip follows a brief period of growth in April. The S&P Global Flash U.S. Manufacturing PMI dropped to 48.5 in May from 50.2 in April. It was pulled down by weaker new orders (down to 47.1 from April’s 50.2) and exports (down to 43.8 from 47.0 in April). Manufacturer output declined to 51.0 from 52.4.
Manufacturing hiring ticked up slightly in May, to 53.5 from 53.4, and the index for future output—which rose to a 12-month high, to 69.5 from 68.8—suggests that manufacturers are optimistic about production in the coming months. Supplier delivery times improved (up to 58.4 from 56.6) as supply chain challenges continued to ease. Input prices declined for the first time in three years, to 49.5 from 58.6.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- UN Concerned by Lack of Grain Ships Going to One Ukrainian Port - Yahoo
- Ukraine Says Russia Prevents Black Sea Grain Deal Port Operating - Reuters
- U.S. Distances Itself from Pro-Ukraine Incursion Into Russia that Involved American Military Vehicles - NBC
- Putin Evacuates Nine Villages in Belgorod as Fighting Continues – the Independent
- Anti-Putin Russians Say They Launched a Cross-Border Attack from Ukraine - CNN
- Rare Assault Inside Russia Stretches Into Second Day - NYT
- Russian Hypersonic Scientist Accused of Betraying Secrets to China - Reuters
- 20,000 Wagner Soldiers Died in Bakhmut Fighting, Chief Says – The Hill
- Wagner Chief’s Feud With Russian Military Cracks Putin’s Image of Control - WSJ
- EU Claims it’s Now on Track to Get Ukraine 1M Ammo Rounds - Politico
- Two Weeks at the Front in Ukraine – The New Yorker
- 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
While the United States is working to strengthen and secure semiconductor manufacturing, it cannot do it alone, and international cooperation is integral to the semiconductor supply chain, according to a senior State Department official. Ramin Toloui, assistant secretary for the Bureau of Economic and Business Affairs at the Department of State, noted that fostering relationships with allies and partners abroad will help build a robust and secure semiconductor ecosystem while the United States is also strengthening its own semiconductor manufacturing capabilities.
Toloui added that it is important to cooperate with partners on the global fab—or semiconductor fabrication facility—and semiconductor ecosystem. For example, while the U.S. is looking to have assembly, testing and packaging capabilities as part of that law, “we anticipate that there will still be components of that downstream supply chain—assembly, testing and packaging—that will be done in other countries, and we want to forge strong partnerships in order to do that,” Toloui said.
U.S. and China See Fragile Opportunity to Repair Ties
After months of recrimination, U.S.-China relations are entering a new phase likely to determine whether the two powers are able to restore high-level exchanges derailed by a Chinese balloon earlier this year. A first barometer of the chance for success is a dinner planned for Thursday in Washington, where Commerce Secretary Gina Raimondo will sit down with her Chinese counterpart, Wang Wentao. It will be the first cabinet-level meeting in Washington between the two countries during the Biden administration.
The planned bilateral meetings would represent a “thaw” in contacts as described by Biden—set in motion by an unexpected burst of diplomacy after months of at-times bitter sparring on the global stage. While Beijing has largely given Washington a cold shoulder in recent months, it now has its own reasons for detente. Chinese officials point to a priority for Beijing: paving the way for Chinese leader Xi Jinping to attend an annual summit of Asia-Pacific leaders to be held in San Francisco in November—and possibly a separate meeting with Biden.
COVID News: Future Pathogens with "Even Deadlier Potential" than COVID, WHO Chief Warns
The head of the World Health Organization urged countries across the globe to prepare for the next pandemic, warning that future health emergencies could be even worse than the COVID-19 pandemic. WHO director-general Dr. Tedros Adhanom Ghebreyesus's warning comes weeks after the group officially ended the COVID global health emergency. During a meeting of the World Health Assembly in Geneva, Switzerland, Tedros said COVID is still a threat — but not the only one we may have to confront.
"The threat of another variant emerging that causes new surges of disease and death remains, and the threat of another pathogen emerging with even deadlier potential remains," he said. "We cannot kick this can down the road," he said. "If we do not make the changes that must be made, then who will? And if we do not make them now, then when? When the next pandemic comes knocking — and it will — we must be ready to answer decisively, collectively and equitably."
Freeze or Cut? - Debt-Ceiling Fight Comes Down to Spending
Reining in government spending has become the central focus of negotiations over raising the debt ceiling, with House Speaker Kevin McCarthy (R., Calif.) under pressure from conservatives to secure deep cuts, while the White House has offered a spending freeze. Negotiations continued on Wednesday, but at a new location. For weeks, the talks have largely taken place in the Capitol, but McCarthy’s team traveled to the Eisenhower Executive Office Building on the White House grounds for Wednesday’s discussions. The White House and McCarthy haven’t said when they will talk again.
GOP negotiators have said that any deal with Democrats must result in lower discretionary spending next year than this year, calling it a critical step in starting to address the country’s growing debt, which now stands at $31.4 trillion. Democrats say the GOP demand to cut spending is unreasonable, particularly after the White House has signaled it could agree to freeze discretionary spending next year and increase spending by 1% in fiscal year 2025.
IMF Expects UK Economy to Avoid Recession
The UK economy is expected to avoid a recession this year, the International Monetary Fund has said, after it sharply upgraded its growth forecast. It now expects the UK to grow by 0.4% in 2023, whereas last month it forecast the economy would contract by 0.3%. Growth would be helped by "resilient demand" and falling energy prices.But the IMF said inflation "remains stubbornly high" and that higher interest rates will need to remain in place if it is to be brought down.
The IMF said faster-than-usual pay growth and global supply chains returning to normal after the pandemic had also contributed to its growth upgrade. However, it noted that the outlook for growth "remains subdued". The IMF forecasts the economy will grow by 1% in 2024, rising to 2% in 2025 and 2026.
Nvidia Earnings Report - AI Trend Drives Demand For Chips
Shares in US chip company Nvidia soared more than 25 percent Wednesday after an earnings report showed the artificial intelligence trend is fueling demand for its sophisticated chips. Net income for the fiscal quarter that closed at the end of April was $2.04 billion, up 26 percent from $1.68 billion in the same period a year earlier, Nvidia reported. More than half of Nvidia's revenue, some $4.28 billion, came from its data center business setting a new record high, according to the chip maker.
Nvidia specializes in graphics chips that have long been coveted by gamers but have become engines for the kind of complex computing processes involved in artificial intelligence. Nvidia said it expected revenue of about $11 billion in the current quarter, which seemed to drive investor enthusiasm for its shares.
Baby-Formula Makers Face FTC Investigation for Collusion
The U.S. Federal Trade Commission is investigating whether baby-formula makers colluded on bids for attractive state contracts, the Wall Street Journal reported on Wednesday. The FTC is looking into whether Abbott Laboratories (ABT) and other formula manufacturers have "engaged in collusion or coordination with any other market participant regarding the bidding", the WSJ report said, citing documents posted to FTC's website.
The FTC has sought information from Nestle (NSRGY), which makes the Good Start line of infant formulas, a company spokeswoman told the Journal, adding that the Swiss manufacturer has responded to the FTC. In February, Abbott said it received a civil investigative demand from the FTC related to a probe of the companies participating in bids for WIC formula contracts.
Tips for Keeping Manufacturing IT Systems Safe from Cybercrime
In March 2022, Wilson Tool Intl. in White Bear Lake, Minn., found itself locked out of its information technology (IT) systems. That included everything from the enterprise resource planning software to modeling software. Its information was being held for ransom. The company pulled together, going back to manual processes in some cases, and responded to customer requests as efficiently as it could. Eventually, it righted itself, and with the payment of the ransom, it got back control of its software and servers.
Cybersecurity threats can seem overwhelming for a small to medium-sized business, but that’s just part of the risk of being a part of a digitally connected world. Companies can’t afford to forego the modern conveniences associated with the internet, so it needs to be smart about how it goes about its business. Here are some other steps that small manufacturers can take to secure their own IT systems.
DOE Won’t Award $200M to Battery Company Criticized Over China Links
The Energy Department has scrapped a proposed $200 million grant to a Texas-based battery company whose connections to China had drawn criticism from lawmakers — in just the latest example of how the rivalry between Washington and Beijing is complicating President Joe Biden’s climate agenda. DOE had conditionally selected Microvast last year for the grant, which would have helped fund a factory for battery technology in Clarksville, Tenn. But the department said Monday that it has ended negotiations, for reasons it did not immediately explain.
Company officials have insisted that the Chinese government has no influence over its operations and that Republican attacks are purely for political points. DOE assured lawmakers in recent months it was conducting a due diligence review before any money went to the company, as is the department’s standard procedure.
Fresh off a closely divided union election, the UAW’s new leadership is more forthright than its predecessors in messaging about fighting for workers. But the shift from gas-powered to electric vehicles and a lack of union-organizing success in the South gives automakers their own leverage in September contract negotiations. Excluding unionization efforts at Ford and General Motors in the 1970s, the UAW has overall been unsuccessful at organizing workers at plants in the South.
Location of new electric-vehicle and battery-assembly plants matters for the UAW, as workers are reassigned and some existing plants either retooled or closed. It’s one bargaining chip automakers can use in negotiations, says Steve Silvia, a labor relations professor at American University and author of the new book The UAW’s Southern Gamble.Another automaker tactic is withholding card-check union recognition—meaning that the automaker does not agree to stay neutral in any union organizing efforts. Card-check union recognition was on display recently at the GM/LG Ultium Cells LLC plant in Youngstown, Ohio, where 98% of workers voted to join the UAW, and GM leadership stayed neutral in the effort.
Study: The Most Popular College Majors Aren’t the Highest-Paying
The HEA Group, founded by Michael Itzkowitz, a former Education Department official under Obama, compared Department of Education data and looked at average salary numbers four years after students graduated with an undergraduate degree. The study found that some of the most popular college bachelor’s degrees don’t always lead to high-paying jobs. In fact, only three of the top ten most popular majors had average salaries over $50,00: business administration, registered nursing, and accounting. The lowest-paying major of the group was teacher education and professional development.
For those who want to pursue one of the more lucrative bachelor’s degrees, it helps to be interested in science, technology, engineering and mathematics (STEM). Four of the top earning degrees – operation research, naval architecture and marine engineering, computer science and marine transportation – had average salaries over $100,000, followed by computer engineering ($99,063). The highest-paying major, operations research, had an average salary of $112,097.
Shipping’s Boom to Bust
Boxship owners are losing money on once-lucrative trans-Pacific routes from Asia as weaker demand for apparel, furniture and electronics cuts into ocean carriers’ earnings. It is an ominous sign as the shipping industry approaches its peak season. Demand normally rises during the summer and early autumn as retailers bring in higher levels of merchandise for crucial selling periods, such as the year-end holidays.
Average daily freight rates from Asia to the U.S. West Coast across the Pacific are at roughly $1,500 per 40-foot container, compared with more than $14,000 a year ago, according to the Freightos Baltic Index. The cost to send a box from Asia to Europe is at roughly $1,400, compared with nearly $11,000. Shipping companies now face the same uncertainty that surrounds some of their biggest customers, such as Amazon.com, Walmart and Home Depot. A number of retailers have said in recent weeks that they remain cautious about the financial health of consumers, but also pointed to progress in reducing bloated inventories.
Exxon Joins Hunt for Lithium in Bet on EV Boom
ExxonMobil, a company feeding the very fossil fuel habit that the world is trying to kick, is now getting into the business of extracting another geological resource: lithium. The oil titan has acquired drilling rights to land believed to be rich in lithium, a crucial metal in electric vehicle batteries, in the southern US state of Arkansas. Exxon Mobil paid $100 million to buy the rights for a 120,000-acre tract from an exploration company named Galvanic Energy, according to the newspaper. The land is reportedly in the Smackover formation of Arkansas, where there is known to be brine rich in lithium.
The world’s oil giants have profited wildly from oil and gas revenues over the last two years, and they have no plans to give that income up. But Big Oil also knows it cannot afford to miss the shift to “Big Shovel,” a phrase used by Daniel Yergin, an energy and geopolitics expert, to describe the mining boom that will power the shift from a fuel-intensive energy system to a critical minerals-intensive one.
Boeing CEO Predicts Supply Chain Pressure Through 2024
Boeing Chief Executive Dave Calhoun on Tuesday said it could take until the end of 2024 to iron out sector-wide supply chain problems that have hampered global jetliner production. "Priority one for the two airplane manufacturers is stability," Calhoun told the Qatar Economic Forum, referring to Boeing and its main European rival Airbus. "We have to resolve the supply chain issues and the surprise associated with it; and we have to resolve it sort of once and for all," Calhoun told the Bloomberg-organised event in Doha.
Calhoun's latest projection on the speed of recovery in the supply chain echoes comments by Airbus Chief Executive Guillaume Faury, who told France Inter last month that production would regain pre-pandemic levels at the end of 2024 or even in 2025.
Port Authority Seeks Federal Grant to Incentivize Airlines to Service Stewart
As Frontier Airlines prepares to drop its service to Florida from New York Stewart International Airport on July 2, the airport’s parent organization has applied to the US Department of Transportation for a grant to subsidize new airline service at the Newburgh area facility. Port Authority director of airline attraction Alex Minton told the Stewart Airport Commission on Tuesday they would like to provide service to hub airports.
“We applied for a grant to attract service to cities like Chicago, Charlotte, or Washington, D.C., which would allow customers to connect onward to a host of destinations that we know they were traveling to already,” he said.