Member Briefing May 31, 2023
U.S. Manufactured Goods Orders Jumped Unexpectedly in April
Orders of big-ticket manufactured items defied expectations to rise again in April, fueled by a sharp rise in orders for defense aircraft, according to U.S. government data. Manufactured durable goods rose by 1.1% in April from a month earlier to $283.0 billion, the Commerce Department announced in a statement. April's figure built on a revised monthly increase of 3.3% in March and was far stronger than the median forecast of a 0.8% decline in a MarketWatch survey of economists.
The largest factor behind the surprise rise in durable goods orders was defense spending, with new orders of defense aircraft and parts increasing by almost a third from a month earlier. Orders for transportation equipment also increased, while those for nondefense aircraft and computers posted monthly declines. While the April data for durable goods orders was better than expected, downside risks remain going forward "given the hurdles companies are facing not only from higher borrowing costs, but also a further tightening in credit conditions going forward," High Frequency Economics chief U.S. economist Rubeela Farooqi wrote in a note to clients.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukraine and Allies Plan Peace Summit Without Russia - WSJ
- Ukraine’s Ex-Dutch F-16s Could Wreak Havoc On Russian Air-Defenses - Forbes
- Ukraine Strikes Moscow With Eight Drones, Russia Says - Reuters
- Moscow Drone Attack: Putin Says Ukraine Trying to Frighten Russians - BBC
- Lukashenko Offers Nuclear Weapons to Nations Willing ‘to Join the Union State of Russia and Belarus - CNN
- Lindsey Graham: Russia Issues Arrest Warrant for Top Republican - BBC
- Ukraine's Offensive and its Meaning for the War – War on the Rocks
- 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. Delivers Early Win in Asia Trade Pact, but Rifts Surface
The U.S. and 13 other Asia-Pacific nations agreed to expand supply-chain cooperation Saturday, delivering an early win in a new U.S.-led initiative to strengthen economic ties with the region’s friendly nations amid rising tensions with China. The supply-chain agreement is part of the Biden administration’s effort to work more closely with allies and friendly nations in the Asia-Pacific under a group called the Indo-Pacific Economic Framework, which covers issues such as digital trade, clean energy and tax policies, as a way to counter China.
But some trade officials questioned the Biden administration’s growing focus on protecting domestic jobs and bolstering U.S. manufacturing, saying these policies hurt smaller or less-wealthy nations that rely on trade to grow their economies. Under the new pact, the countries will begin working together to strengthen supply chains in critical sectors and set up a mechanism to prevent and respond to emergencies similar to the semiconductor shortages seen during the Covid-19 pandemic.
U.S. Consumer Confidence Dips to Six-Month Low, Labor Market Views Soften
The Conference Board's consumer confidence index slipped to 102.3 this month, the lowest level since last November, from an upwardly revised 103.7 in April. Economists polled by Reuters had expected the index to fall to 99 from the previously reported reading of 101.3. However, more households planned to purchase motor vehicles and other big-ticket items over the next six months, which could support economic growth this quarter.
The ebb in confidence reported by the Conference Board on Tuesday was concentrated among consumers aged 55 years and older, as well as among households with annual incomes in the $50,000-$99,000 range. Consumers expected inflation to stabilize at higher levels over the next year. Consumers were less optimistic on the labor market, with the share viewing jobs as "plentiful" falling to the lowest level since April 2021 and the proportion of those saying jobs were "hard to get" rising to a six-month high.
COVID News: Top Chinese Scientist Says Don’t Rule Out Lab Leak
The possibility the Covid virus leaked from a laboratory should not be ruled out, a former top Chinese government scientist has told BBC News. As head of China's Centre for Disease Control (CDC), Prof George Gao played a key role in the pandemic response and efforts to trace its origins. China's government dismisses any suggestion the disease may have originated in a Wuhan laboratory. But Prof Gao is less forthright.
A world-leading virologist and immunologist, Prof Gao is now vice-president of the National Natural Science Foundation of China after retiring from the CDC last year. In a possible sign that the Chinese government may have taken the lab leak theory more seriously than its official statements suggest, Prof Gao also tells the BBC some kind of formal investigation into the Wuhan Institute of Virology (WIV) was carried out. "The government organised something," he says, but adds that it did not involve his own department, the China CDC.
Debt Limit Deal on Track to Clear key hurdle ahead of final House vote
The House Rules Committee is now on track to advance the bipartisan debt deal to the floor for a vote Wednesday after Rep. Thomas Massie helped the GOP lock down a simple majority. As lawmakers returned to Washington to avert a economy-rattling default this week, McCarthy and his allies worked to lock down the 218 votes needed for passage. But first, they needed to avoid a possible procedural pitfall involving some of the most vocal conservatives in his party. “I want to see the rule, but I anticipate voting for this rule,” Massie said. “And when people want to express their ideology, the floor of the House on the actual final passage of the bill is the place to do that.”
The House Rules Committee advanced the bipartisan debt deal to the floor for a vote Wednesday after Massie helped the GOP lock down a simple majority of at least seven of the panel’s votes. His show of support is defused an effort by some conservatives, including fellow committee member Rep. Chip Roy (R-Texas), who had hoped to use their power on that panel to block the debt plan from receiving a full House vote.
China’s Fading Recovery Reveals Deeper Economic Struggles
China’s era of rapid growth is over. Its recovery from zero-Covid is stalling. And now the country is facing deep, structural problems in its economy. The outlook was better just a few months ago, after Beijing lifted its draconian Covid-19 controls, setting off a flurry of spending as people ate out and splurged on travel. But as the sugar high of the reopening wears off, underlying problems in China’s economy that have been building for years are reasserting themselves.
The property boom and government overinvestment that fueled growth for more than a decade have ended. Enormous debts are crippling households and local governments. Some families, worried about the future, are hoarding cash. Economists say these worsening structural problems are hobbling China’s chances of extending the growth miracle that transformed it into a rival to the U.S. for global power and influence.
NYS Suburban Democrats Lost in 2022 Yet Now They Wield all the Power
The 2022 state legislative elections in the suburbs weren’t quite an extinction event for Democrats, but it was a close call. They lost four state Senate seats on Long Island after entering the cycle holding six of the nine. The Hudson Valley fared better, but only just. Republicans flipped one state Senate seat and won a new district created through redistricting (not to mention the congressional bloodbath). The remaining Democratic state senators in the region won by the skin of their teeth.
But the electoral losses and close calls didn’t seem to hamper the influence that suburban Democrats had during the legislative session in Albany. In fact, it may have had the opposite effect as, particularly during the extended budget season, members from the suburbs of New York City managed to rack up some significant victories, killing the governor’s housing plan, carving themselves out of a transit-related tax hike and securing another tweak to bail reform in order to give judges greater discretion to set bail.
Home Price Declines Likely Over For Now, S&P Case-Shiller Says
Home prices rose in March, a second consecutive month of increase, as low inventory fueled competition. And higher prices are here to stay for now, according to S&P Dow Jones analysts. After seasonal adjustment, prices increased 0.4% in March, according to the S&P CoreLogic Case-Shiller Indices. Home prices in March were 0.7% higher than they were one year ago.
Higher mortgage rates are discouraging sellers who feel locked in by their low rates, causing inventory to shrink and increasing competition among buyers, which increases home prices. The Case-Shiller 10-city composite gained 0.6% in March and was down 0.8% year-over-year. The 20-city composite increased 0.4% in March and fell 1.1% from March of last year.
More High-School Grads Forgo College in Hot Labor Market
More high-school graduates are being diverted from college campuses by brighter prospects for blue-collar jobs in a historically strong labor market for less-educated workers.The college enrollment rate for recent U.S. high-school graduates, ages 16 to 24, declined to 62% last year from 66.2% in 2019, just before the pandemic began, according to the latest Labor Department data. The rate topped out at 70.1% in 2009.
Acute labor shortages after the Covid-19 pandemic hit forced employers to offer better pay, benefits and working conditions to attract and retain workers, such as giving employees greater flexibility to set their own hours. Demand for blue-collar workers is high and expected to remain that way, given an aging workforce and a pandemic slowdown in immigration. Some young people are pursuing other forms of job training besides college. The number of apprentices has increased by more than 50%, according to federal data and the Urban Institute, a Washington, D.C., think tank.
The ‘Big Stay’: More Workers Are Hunkering Down And Staying In Their Current Jobs
Fewer people are quitting their jobs in 2023, which signifies that the United States is phasing out of its Great Resignation era. According to the ADP Research Institute, the rate of Americans quitting their jobs is down by 5% from this time last year. Job openings in the U.S. have also fallen 20% from 2022. "The Big Quit of 2022 could be easing into the Big Stay of 2023," wrote Nela Richardson, ADP chief economist, in her research institute data summary.
The "Big Stay" is a term used to describe the trend of workers hunkering down and remaining in their current jobs for more extended periods of time. This trend contrasts the Great Resignation, which saw a record number of workers—4 million each month—quitting their jobs in 2021 for better pay and benefits, work flexibility, an enhanced work-life balance and career advancement.
Shenzhou 16 Lifts Off in 'New Stage' of China Space Program
China’s Shenzhou 16 spacecraft docked with the Tiangong space station at around 4.29pm on Tuesday, marking the start of a five-month mission by a team of three astronauts, including the country’s first civilian to join a mission beyond the Earth’s atmosphere.
The spacecraft docked with the station’s Tianhe core module 400km (248 miles) above Earth – less than seven hours after it launched from the Jiuquan satellite launch centre in the Gobi Desert in northern China. The China Manned Space Agency (CMSA) declared the launch a success about 19 minutes after the craft blasted off at 9.31am on Tuesday. The crew will carry out in-orbit tests and experiments to study novel quantum phenomena, high-precision space time-frequency systems, the verification of general relativity and the origin of life, according to state news agency Xinhua.
ChatGPT in the Current Manufacturing Landscape
Despite the phenomenal advancement in AI, industry leaders face a long journey to digitally transform the manufacturing sector. Manufacturers should start small by automating repetitive operational tasks, like material data management and reporting, according to Jagadish Bandla, enterprise performance CTO at global consulting firm Deloitte. This incremental deployment lets enterprises reallocate teams toward enabling successful generative AI implementations. The goal is to have generative AI capabilities reduce design and development timelines of parts and components and slash raw material use through materials discovery, Bandla said.
While manufacturers have the opportunity to creatively use ChatGPT's advanced capabilities to their advantage, there are inevitably risks and challenges. ChatGPT and other generative AI technologies can create inaccurate or hallucinated information, i.e., when models create confident-sounding outputs not grounded in any of the original training data. In the manufacturing sector, this flaw could cause physical damage and injure people. Experts believe that the right approach could help mitigate these concerns.
The 'Exploding' Demand for Giant Heat Pumps
Heat pumps are increasingly popular with some homeowners but domestic devices are relatively small and tend to have outputs of several kilowatts or so. German firm MAN Energy Solutions (MAN ES) biggest commercial heat pump is thousands of times more powerful - with a total heating capacity of 48 megawatts (MW). It can produce temperatures of up to 150C and heat thousands of homes, not just one. The company recently installed two of these machines in the port city of Esbjerg, in Denmark.
In this installation, the heat pumps' CO2 refrigerant will absorb a small amount of heat from seawater. Compressors boost the temperature of the CO2 and the system can then transfer this heat, providing water of up to 90C to a district heating system serving 27,000 households. Veronika Wilk at the Austrian Institute of Technology and colleagues have studied the use of heat pumps for industrial applications, to provide heat in pharmaceutical, food or paper factories, for example. So long as they don't require very high temperatures beyond 200C, companies are increasingly turning to heat pumps.
Toyota, Daimler to Merge Japanese Truck Units in Advanced Tech Push
Toyota Motor Corp. and Daimler Truck Holding AG said Tuesday they will merge their truck subsidiaries in Japan by the end of 2024 to speed up the development of advanced environmental and safety technologies and share the hefty costs. Toyota's subsidiary Hino Motors Ltd., and Mitsubishi Fuso Truck and Bus Corp., a subsidiary of the German company, will operate under a holding company to be set up by the two parent companies.
As part of new joint projects, the four automakers will share their technology to develop new zero-emission systems, such as hydrogen-powered commercial vehicles. Forming alliances is becoming more important for commercial vehicle makers in particular, as their production volumes are smaller than traditional automakers, and they find it difficult to produce economies of scale on their own.
World’s Steel Output Remains Flat
Global raw steel production fell by 3.7 million metric tons from March to April, -2.3% to a total of 161.4 million metric tons, the first month-to-month decrease for 2023. The year-to-date total roughly equal to the four-month output total for 2022. Year-to-date raw-steel output for January-April is now 622.7 million metric tons, or +0.1% above last year’s comparable total. As usual, global raw-steel output – as reported each month by the World Steel Association – shows the dominance (57.4% of total output) of the Chinese steel industry in shaping the overall trend.
World Steel’s monthly summary covers steel production in 63 countries representing 97.0% of global steel capacity. U.S. steelmakers produced 6.6 million metric tons (7.3 million short tons) during April, -1.5% less than during March and -5.3% less than in April 2022. For the year to-date, the U.S. steel industry has produced 25.1 million metric tons (27.7 million short tons), -4.1% less than during the first four months of 2022.