Member Briefing May 4, 2023
U.S. Factory Orders Rebound on Aircraft in March
New orders for U.S.-made goods rebounded in March, boosted by a jump in civilian aircraft bookings, but the overall manufacturing industry continued to struggle under the weight of higher interest rates. Factory orders increased 0.9% after decreasing 1.1% in February, the Commerce Department said on Tuesday. Orders increased 2.4% on a year-on-year basis.
- Orders for transportation equipment increased 9.0% after dropping 3.2% in February.
- Civilian aircraft orders soared 78.3% and motor vehicle orders fell 0.6%
- Excluding transportation, orders fell 0.7% for a second straight month.
- Orders for machinery declined 0.3%, but bookings for computers and electronic products increased 2.1%.
- Orders for electrical equipment, appliances and components rose 0.8%.
- Shipments of manufactured goods fell 0.1%. The inventory of manufactured goods at factories dropped 0.8%.
- Unfilled orders at factories rose 0.4%.
- Orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, declined 0.6% in March
- Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, dropped 0.5% instead of 0.4%
- Business spending on equipment has contracted for two straight quarters.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukraine’s Zelenskyy Visits International Criminal Court - AP
- Ukraine’s Allies to Tackle Russia Sanctions Loopholes and Up Pressure on Putin - Bloomberg
- Blast Causes Another Freight Train to Derail in Russia Region Near Ukraine - Reuters
- Zelensky Blasts U.S. Over Handling Of Ukraine Document Leaks - Forbes
- EU Envoys Seal Deal on Joint Ammunition Buying for Ukraine - Reuters
- Russia Claims it Foiled Ukraine Drone Attack on Putin Residence – The Hill
- Ukraine Says it Has Nothing to do With Kremlin Drone Attack – Reuters
- Bakhmut Defender Remembered by Comrades - BBC
- Publisher Asks UN Advocate to Press for US Reporter’s Release from Russia – The Hill
- Black Sea Grain Talks to Continue – Farm Policy News
- 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
Fed Raises Rates by Quarter Point, Signals Potential Pause
The Federal Reserve approved another quarter-percentage-point interest-rate rise and signaled it could be done lifting rates after that.The decision Wednesday marked the Fed’s tenth consecutive rate increase aimed at battling inflation and will bring its benchmark federal-funds rate to a range between 5% and 5.25%, a 16-year high.
In a hint that officials could pause rate increases after the latest move, they cut a phrase from their previous policy statement, in March, that said some additional policy increases might be appropriate. Instead, officials said in their new statement Wednesday they would monitor economic and financial-market developments and the effects of their earlier rate increases “in determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time.” The statement used language broadly similar to how officials concluded their interest-rate increases in 2006, with officials indicating any further change in rates was more likely to be an increase than a decrease.
ADP Survey: Most Employees Expect Raises this Year
workers' expectations for both pay and comprehensive benefits are high as they reel from months of persistent inflation, with employees expecting a bigger payday from their employers. And if they don't get it, employees may be ready to walk, new research indicates.
The overwhelming majority of workers (83 percent) expect a raise in 2023, and, on average, they foresee an 8.3 percent uplift, according to new data out from the ADP Research Institute's annual global survey of more than 32,000 workers. Some employees are expecting even more: Globally, 10 percent of workers expect a salary increase of more than 15 percent in the next 12 months, and 18 percent expect an increase between 10 percent and 12 percent in the next 12 months. Meanwhile, 50 percent of U.S. workers say they're underpaid. When asked to name the most important factor in a job, 61 percent of employees pointed to salary, followed by job security (43 percent), career progression (40 percent) and enjoyment of their work (37 percent).
COVID News – CDC Investigating COVID Outbreak After its Own Annual Conference
The Centers for Disease Control and Prevention (CDC) has confirmed it is conducting an investigation into several dozen COVID-19 cases linked to the agency’s annual conference that occurred in Georgia last week. The CDC’s three-day 2023 Epidemic Intelligence Service (EIS) conference began April 24 in Atlanta, where the agency is headquartered. The purpose of the meeting is for EIS members to share their work in improving public health.
Just days after the conference several CDC staffers who attended the gathering tested positive for COVID-19. CDC spokesperson Kristen Nordlund confirmed to The Hill on Tuesday that about 35 people had tested positive as of May 2. “CDC is working with the Georgia Department of Health to conduct a rapid epidemiological assessment of confirmed COVID-19 cases that appear to be connected to the 2023 EIS Conference to determine transmission patterns in this phase of the COVID-19 pandemic,” Nordlund said.
NYS COVID Update
The Governor updated COVID data for the week ending April 21.
Deaths:
- Weekly: 54
- Total Reported to CDC: 79,467
Hospitalizations:
- Average Daily Patients in Hospital statewide: 684
- Average Daily Patients in ICU Statewide: 82
7 Day Average Cases per 100K population
- 60 positive cases per 100,00 population, Statewide
- 01 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
A Short-Term Fix Looks More Likely as US Debt-Limit Deadline Looms
Between now and June 1 — the date by which the Treasury Department could run out of sufficient cash — President Joe Biden and members of the House and Senate are scheduled to be in town at the same time for the sum total of one week. time is short and it’s unlikely the two parties will strike a grand bargain before the potential X-date advised by Treasury Secretary Janet Yellen Monday — raising the likelihood of a short-term fix.
Yet even a punt of the debt limit to later this year will be difficult in a Washington where Republicans and Democrats are in the “no-no-no” stage of negotiations. For two deeply entrenched parties, it could take the push of financial-market turmoil to force a compromise. Even a short-term extension would force a messy political choice: Either Republicans break their vow against approving a “clean” limit debt increase, or Democrats concede and set a precedent ahead of the main negotiation.
Its Official – Lawmakers Approve “The Bid Ugly” Omnibus Budget Bill
Over a month past the deadline to pass a new spending plan, state lawmakers were voting late into the night to finalize the $229 billion budget on Tuesday. After hours of debate, both chambers approved the omnibus bill known as “The Big Ugly” that contained some of the most controversial policy items in the budget, before moving on to pass the remaining four bills of the 10-bill package that make up the state budget.
The marathon sessions followed Gov. Kathy Hochul’s unveiling of a “conceptual agreement” on the fiscal year 2024 state budget during a surprise press conference last week. Although she made the announcement alone, leaders of both chambers said they were not caught off guard, and the Legislature began introducing amended bills a few days later. Among the policy issues settled are bail reform rollbacks, expansion of charter schools in New York City and an increase in the payroll mobility tax on big businesses in New York City to help the financially strained MTA. Here’s a guide to help navigate the biggest sticking points in the state budget and whether or not they’ve been included.
IMF Raises 2023 Economic Outlook for Asia, China and India Will Make up Half of Global Growth
The International Monetary Fund raised its forecast for Asia-Pacific, saying the region’s growth will be primarily driven by China’s recovery and “resilient” growth in India. This comes as the rest of the world braces for slower growth from tightened monetary policy and Russia’s invasion of Ukraine. The organization predicts Asia-Pacific’s gross domestic product to expand 4.6% this year, which is 0.3 percentage points higher than its forecast in October, according to its May regional economic outlook released Tuesday.
The IMF’s upgraded outlook would mean the region would contribute around 70% of global growth, it said. The region expanded 3.8% in 2022.On a country-basis, the organization raised its growth outlook for China, Malaysia, the Philippines, and Laos to 5.2%, 4.5%, 6%, and 4% respectively.
PacWest Says in Talks With Potential Partners, Pressure On Smaller Banks in the Spotlight
PacWest Bancorp said core deposits have increased since March and confirmed it’s in talks with several potential investors, seeking to calm markets after a 60% stock rout that made it the new focal point of concern over the health of US regional lenders. The turmoil at PacWest shows how investor angst still remains elevated after a string of failures and deposit outflows in the sector despite Federal Reserve Chair Jerome Powell’s assurance Wednesday that authorities were closer to containing the crisis.
It’s reignited the debate over whether more US regional lenders will fall after this year’s collapse of SVB Financial Group’s Silicon Valley Bank, Silvergate Capital Corp., Signature Bank and most recently First Republic Bank. Smaller banks are under pressure after a year of interest-rate hikes hammered the value of their bond holdings and drove unrealized losses to an estimated $1.84 trillion. Trouble in commercial real estate is adding to the pain, while depositors take their money out to seek better returns elsewhere. These stresses have put the spotlight on these lenders, which typically have fewer resources to defend themselves.
Euro Zone Core Inflation Slows Unexpectedly in April
The headline inflation rate in the euro zone rose in April, according to preliminary data released Tuesday, remaining significantly above levels targeted by the European Central Bank but core price growth showed a surprise slowing. Headline inflation came in at 7% for last month, according to Eurostat, after it dropped to 6.9% in March. At the same time, core inflation, which excludes food and energy prices, stood at 5.6% in April — from 5.7% in March. Analysts polled by Reuters had estimated a figure of 7% for headline inflation and 5.7% for core.
The latest figures come just days before the ECB is due to announce a new monetary policy decision Thursday. Rather than providing some clarity on how much the central bank might raise rates by, the latest numbers have blurred the picture somewhat.
Call it a Draw – World Economist Evenly Split on Recession Happening in the Next 12 Months
The World Economic Forum released its latest chief economists outlook Tuesday. Looking in their crystal ball, 45% of those surveyed predicted a global recession in the next 12 months. Another 45% did not expect a recession. Yet the economists did unanimously agree on one thing: 100% said they expected changes in the structure of global supply chains over the next three years. Expected winners will be India (73% expect a positive effect), and Southeast Asia (63%), while the big loser, according the surveyed economists, will be China (72% expect a negative effect).
There are signs of nascent optimism, and the growth outlook has picked up across all regions. However, policy-makers, businesses and households continue to face headwinds, including persistent inflationary pressures and tighter financial conditions. According to a significant majority of the chief economists surveyed, recent turbulence in the financial sector is not a sign of systemic vulnerability, but further disruption is considered likely this year.
Read more and see the infographics at the World Economic Forum
Eighth-Graders Don’t Know Much About History, Test Scores Show
Eighth-graders’ test scores in U.S. history and civics fell to the lowest levels on record last year, according to Education Department data released Wednesday. In the first release of U.S. history and civics scores since the start of the pandemic, the National Assessment of Educational Progress, known as the Nation’s Report Card, showed a decline in students’ knowledge that reversed gains made since the 1990s.
According to the data, 13% of eighth-graders met proficiency standards for U.S. history, meaning they could explain major themes, periods, events, people, ideas and turning points in the country’s history. About a fifth of students scored at or above the proficient level in civics. The falling federal test scores in U.S. history and civics coincide with the downward spiral seen in other subjects tested since the pandemic. Federal test results released in October revealed the largest drop in math scores ever and a nationwide drop in reading that wiped out three decades of gains.
Oil Prices Continue To Slip Even As Crude Oil Inventories Decline
Crude oil inventories in the United fell this week by 3.939 million barrels, the American Petroleum Institute (API) data showed on Tuesday, with analysts expecting a 1 million barrel draw. The total number of barrels of crude oil gained so far this year is still more than 34 million barrels. This week, SPR inventory dropped for the fifth week in a row, losing 2 million barrels for the week to reach 364.9 million barrels—the lowest amount of crude oil in the SPR since October 1983.
Brent crude was trading down $3.93 (-4.96%) Wednesday at $75.38—down roughly $5.40 per barrel from this same time last week. WTI was trading at $71.62 shortly after the data release. Gasoline inventories rose by 400,000 barrels after falling in the week prior by 1.919 million barrels. Distillate inventories fell by 1 million barrels after increasing by 1.693 million barrels in the week prior.
Inside GE Appliance's State-of-the-Art Water Heater Assembly Plant
A variety of manufacturers produce electric and hot water heaters for residential applications, including GE Appliances, a Haier company. To increase production capacity, it recently invested $70 million in a state-of-the-art manufacturing plant in Camden, SC. The 265,000-square-foot facility also serves as the company’s Center of Excellence for water heater manufacturing. The building originally housed a Haier refrigerator factory that opened in 2000.
After deciding to become more active in the water heater market, GE Appliance management earmarked the Camden plant for a massive renovation and retooling effort. The investment included advanced systems for metal fabrication and welding, plus robots for material handling and processing. “We cleared out all of the existing equipment all the way down to the concrete floor,” says Tom Zimmer, executive director of water heating for GE Appliances. “Then, we built a state-of-the-art factory that’s one of the first new gas water heater plants built in the U.S. in decades.”
Read more at Assembly Magazine
FedEx Freight to close 29 locations, furlough more workers
FedEx Freight is closing 29 locations in its network and enacting another round of temporary furloughs as demand continues to fall. Operations in affected places will be consolidated to other locations, effective Aug. 13, according to an emailed statement. FedEx Freight’s statement did not say what types of locations would be affected by the consolidation, It also did not specify how many employees would be affected by the decision, but said the unit help them “find other open positions where possible.”
“We continuously review our network to ensure we have the right design to address changing market dynamics,” FedEx Freight said in the statement. “Through that process, we identified opportunities to consolidate operations in several locations to improve customer service levels and improve efficiencies with fewer touchpoints, while lowering our cost to serve.”
Read more at Supply Chain Dive
General Dynamics Calls Out Supplier Honeywell for Late Deliveries
Aerospace and defense giant General Dynamics reported its first quarter where an airplane delivery was missed as a result of supply chain issues, noting late shipments from supplier Honeywell. General Dynamics received 21 out of 24 expected deliveries during the quarter, CEO Phebe Novakovic said during a Q1 earnings call. The CEO specified that two aircraft did not deliver due to late engine deliveries, while the one remaining large-cabin aircraft was plagued by registration delays.
Aerospace and defense giant General Dynamics reported its first quarter where an airplane delivery was missed as a result of supply chain issues, noting late shipments from supplier Honeywell. General Dynamics received 21 out of 24 expected deliveries during the quarter, CEO Phebe Novakovic said during a Q1 earnings call. The CEO specified that two aircraft did not deliver due to late engine deliveries, while the one remaining large-cabin aircraft was plagued by registration delays.
Your Next Personal Assistant? Inflection AI, Startup From Ex-DeepMind Leaders, Launches Pi — A Chattier Chatbot.
Named Pi for “personal intelligence,” Inflection’s first widely released product — made available today for global users, but only in English at first — is supposed to play the active listener, helping users talk through questions or problems over back-and-forth dialog it then remembers, seemingly getting to know its user over time. While it can give fact-based answers, it’s more personal than OpenAI’s GPT-4, Microsoft’s Bing built on top of it or Google’s Bard, without the virtual companionship veering into unhealthy parasocial relationships reported by some users of Replika bots.
“It’s really a new class of AI — it’s distinct in the sense that a personal AI is one that really works for you as the individual,” Mustafa Suleyman cofounder and CEO of startup Inflection AI said. Eventually Pi will help you organize your schedule, prep for meetings and learn new skills. Suleyman’s vision for Inflection stemmed from the insight that small-talk between people and chats with AI bots typically didn’t go beyond surface-level — the equivalent of discussing a ski trip, or the weather, but not people’s real-life problems. “When we set out on this project a little over a year ago, I had the core question, what makes for a great conversation?” he said.