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Member Briefing November 12, 2024

November 12, 2024

Posted By: Harold King in Daily Briefing,

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What To Expect From October’s CPI Inflation Report

CPI figures for the month of October 2024 are scheduled to be released on November 13 at 8:30 a.m. ET. This is the earlier of two major inflation releases for the month, with Personal Consumption Expenditure Price Index being released on at 10 a.m. ET on November 27 as part of the Personal Income and Outlays report. The FOMC prefers the PCE as an inflation metric. However, CPI tends to have more market impact because it is released earlier and the CPI and PCE metrics are often aligned.

Nowcasts for October inflation currently project a 0.18% monthly increase in headline inflation and a 0.27% increase in core CPI. Those projections, from the Cleveland Fed’s model, would be broadly consistent with recent months. If they hold we would see headline inflation rise slightly and core inflation trend lower. Nowcasts for October inflation currently project a 0.18% monthly increase in headline inflation and a 0.27% increase in core CPI. Those projections, from the Cleveland Fed’s model, would be broadly consistent with recent months. If they hold we would see headline inflation rise slightly and core inflation trend lower.

Read More at Forbes

Supplier Group Report: Machine Tool Demand is Stalled

Machine tool demand fell -16% year-over-year during the third quarter of 2024, according to an economic summary issued by the trade group representing the German industry. That result combines with a -17% drop in domestic (German) orders and -15% fall in export orders. The German Machine Tool Builders’ Assn. (VDW) represents the world’s third-largest machine-tool manufacturing sector, with a net turnover of €15.4 billion ($16.5 billion) in 2023, and 64% of its products exported to markets in Europe and worldwide. It is among the largest segments in that country’s mechanical engineering industry, and it employs about 65,250 people.

Through nine months of 2024 activity, the VDW records that new orders are -23% lower than during the January-September 2023 period, with domestic orders down -10% and exports orders -28% versus the nine-month 2023 results. While totals for U.S. machine tool orders have been reported only through August, demand in the domestic (U.S.) market is somewhat better, down -11.5% compared with the January-August 2023 order total.

Read More at American Machinist

Import Cargo Could Surge Ahead of Potential Port Strike and Tariffs

As retailers face another potential East Coast/Gulf Coast port strike and tariff increases planned by President-elect Donald Trump, import volumes at the nation’s major container ports could be higher than previously expected for the remainder of this year according to the Global Port Tracker report released on November 8 by the National Retail Federation and Hackett Associates. An NRF study released this week found that tariff increases proposed by Trump could drive up consumer prices by as much as $78 billion a year. And the contract that The International Longshoremen’s Association made with the U.S. Maritime Alliance will be under formal negotiations next week. Hackett Associates Founder Ben Hackett said the potential for a January strike “can be seen in the continuing increases in U.S. imports from Asia, which have not fallen away as expected.”

And worries over higher tariffs are a global concern, he said. “We are witnessing elections around the world where discontent is leading to inward-looking policies that threaten trade with the almost certain potential for increasing tariffs,” Hackett said, in a statement. “In the United States, this is particularly true with the election of Donald Trump, but it is not much different in Europe, with the EU calling for tariffs to be applied to a growing number of products from China.”

Read more at Material Handling & Logistics

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Policy and Politics

What To Expect When President Trump Tries To Make Tax Cut Promises Reality, Even With GOP Sweep In Congress

In a recent appearance on CNBC, former Donald Trump Treasury Secretary Steve Mnuchin spoke as if the President-elect’s tax cut promises were a sure thing, legislatively speaking. But Trump promised much more to both individuals and businesses on tax policy. Tax cuts on tipped income, overtime pay, some Social Security taxes, tax cuts for first responders and the military, and Americans living abroad, and deductions for auto loan interest, among others. As a result, tax experts are not as confident as Mnuchin that it won’t be a slog, even in a GOP sweep scenario, to deliver on the tax cuts promised to both voters and businesses in a nation increasingly concerned about rising national debt and an economy in which bond traders have been pushing yields higher, at least in part, due to the deficit.

Traditional GOP tax policy might be thought of as favoring more business tax cuts. But for corporations, the only certainty at this point, according to Rohit Kumar, co-leader of PwC’s national tax office and a former deputy chief-of-staff to Senate Majority Leader Mitch McConnell, is that the odds of a dramatic tax increase have been “taken off the table.” But for U.S. corporations, “I don’t think people can necessarily assume, when all is said and done, there is not revenue pressure that will show up on the corporate ledger,” he said. “Conservatives don’t have the stomach to do all of the 2017 cuts and keep campaign promises on the deficit,” said Dustin Stamper, head of the tax legislative affairs practice at Grant Thornton. “They are going to have to make some hard choices on priorities.”

Read more at CNBC

Top Senate GOP Defense Hawk Has Pentagon Budget Boost Plan

Sen. Roger Wicker, one of Capitol Hill’s most vocal defense hawks, will soon get the chance to pursue a larger Pentagon budget — and it stands a much better chance with Donald Trump headed back to the White House. The Mississippi Republican is poised to chair the Armed Services Committee after the GOP romped in Tuesday’s Senate elections. And he brings to the role a plan for tens of billions of dollars in new military spending to expand the Navy and Air Force, modernize the nuclear arsenal and ramp up defense manufacturing.

Wicker laid out his preferred roadmap for defense in the spring, urging the U.S. to make “a short-term generational investment” to deter an increasingly cooperative Russia, China, North Korea and Iran, which he has termed an “Axis of Aggressors.” The plan proposes a $55 billion hike over President Joe Biden’s most recent defense budget request, eventually ramping up to 5 percent of gross domestic product — which would bring annual military spending to more than $1 trillion. Within that, Wicker wants to expand shipyard and industrial capacity to more quickly achieve a 355-ship Navy and expand the Air Force by blocking the retirement of some aircraft and adding 340 fighters over five years.

Read more at Politico

What a Trump Second Term Could Mean For The IRA

President-elect Donald Trump said in September that he “will terminate” the Inflation Reduction Act and said at a May rally that he would issue an executive order to “make sure that [offshore wind] ends on day one,” indicating a potential significant shift from President Joe Biden’s energy policies. However, the clean energy tax incentives included in the IRA would bolster two of the goals laid out in Trump’s platform – energy independence and the onshoring of manufacturing – said Harry Godfrey, who leads Advanced Energy United’s federal investment and manufacturing working group.

“Trump’s [first term] approach on China, I think, shifted where the center of American policy is now when it comes to .... geostrategic economic approaches,” Godfrey said, adding that industrial policy like the IRA flowed from this shift and therefore has a place in a second Trump term.

Read more at Manufacturing Dive

Health and Wellness

WHO To Convene Emergency Meeting On Mpox On Nov. 22

The World Health Organization will convene a meeting of its Emergency Committee next week to determine whether mpox remains a global health crisis, it said in a statement on Monday. In August, the disease which continues to spread in Africa was classified by the U.N. health body as a public health emergency of international concern, which represents the highest form of alert. This followed the spread of a new variant of the virus, called clade Ib, in parts of the continent.

There have been 46,794 confirmed and suspected cases in Africa this year through Nov. 3, including 1,081 deaths, the WHO said in a report issues on Monday. The most affected country is the Democratic Republic of Congo, followed by Burundi and Uganda, it said. Mpox can spread through close contact. Usually mild, it is fatal in rare cases. It causes flu-like symptoms and pus-filled lesions on the body. Initial vaccine doses were allocated this month for the 9 African countries hardest hit.

Read more at Reuters

Transition 2024

Industry News

Why CEOs Are Taking Trump’s Tariff Threats in Stride

Listen to many economists and the tariff-paved road ahead for the global economy following the election of Donald Trump to another term in the White House is one destined for lower growth, higher inflation and plenty of turmoil. Then there’s the alternative version CEOs seem to have seized on. In earnings calls and interviews recently, plenty have projected doubt that Trump will deliver on all the tariffs he has threatened. And, if he does, they add, they are more than ready to adapt.

In a call with analysts Wednesday shortly after Trump’s victory being called by US media outlets Oliver Zipse, BMW’s CEO and chairman, dismissed any threat of tariffs hitting the German carmaker’s business as premature. “It might also only be that this is a verbal issue,” Zipse told analysts. Meanwhile, BMW shares tumbled on exactly those fears. Part of what is driving the sanguine response from many CEOs is that the world has changed since Trump’s first term. Companies have practice avoiding tariffs and realigning supply chains. These are core skills now, honed through the chaos of the pandemic and the advent of an era in which geopolitics can drive trade and investment more than cost efficiencies. We also live in an time in which the same CEOs who once backed big free trade agreements seem to accept protectionism.

Read More at Bloomberg

Corning, Powerex Receive CHIPS Funding

The Biden-Harris Administration proposed up to $32 million for glass maker Corning and up to $3 million for Powerex under the CHIPS and Science Act to boost U.S. semiconductor manufacturing, according to a press release last Friday. Corning’s expansion in Canton, New York, will create 130 manufacturing jobs and over 175 construction jobs. Meanwhile, Powerex’s modernization in Youngwood, Pennsylvania, will create over 55 manufacturing jobs and 20 construction jobs. Both companies intend to utilize the advanced manufacturing investment credit for further capital investment, the release stated.

Corning’s facility will support U.S. lithography supply chains with vital glass components. The glass manufacturer pledged $300,000 per year for the duration of the proposed project to support the St. Lawrence County Childcare Training Program, which would help increase child care supply for the community, according to the release. As for Powerrex, the $3 million CHIPS funding will support the construction of its $15 million modernization and expansion of its production facility in Youngwood. The facility packages semiconductor power modules for defense applications including Lockheed Martin’s F-35 fighter jet, as well as commercial and industrial applications.

Read more at Manufacturing Dive

US FDA Lifts Clinical Hold On Novavax's Combo COVID-Flu Shot

The U.S. Food and Drug Administration has lifted its clinical hold on a late-stage trial of Novavax's COVID-influenza and its standalone flu vaccines after a safety concern was found to be unrelated to the combination shot, the company said. Shares of the vaccine maker, which is scheduled to report third-quarter results on Tuesday, rose nearly 17% to $10.39 on Monday. They pared their gains and were last up 2%.

The Maryland-based biotech announced the clinical hold last month after a participant who had received its COVID-influenza combination vaccine had reported symptoms of motor neuropathy, or damage to the nerve cells that control muscles or movement. Novavax's traditional protein-based COVID shot offers an alternative technology to messenger RNA-based rivals from Pfizer -BioNTech and Moderna but has failed to make a mark in the U.S. vaccine market. In May, Novavax signed a licensing deal worth at least $1.2 billion with French drugmaker Sanofi for the COVID vaccine, gaining access to much-needed liquidity.

Read more at Reuters

Business Aircraft Activity Sees 2.3% Rise In Oct.

Business aircraft flight activity rose 2.3% year over year (YOY) last month, thanks in part to the North American market eking out a 0.5% increase—versus a forecasted 2.7% decline—after charter activity turned positive, according to the latest TraqPak data from Argus International. The European market finished down 4.3% for the month, while the rest of the world saw a 20.8% YOY rise in aircraft utilization. Argus is predicting a 1.1% YOY decrease in North American business aircraft flying this month and a 1.8% increase in Europe.

By operational category, fractional flying in North America soared by 8.4% from a year ago, while Part 135 charter saw a marginal 0.2% gain and Part 91 declined by 2.3%, with gains in smaller aircraft and declines in larger aircraft. Aircraft categories were mostly positive in the region last month, but large-cabin jet flying fell 8.4% from a year ago. Light jets climbed by 2.5% from October 2023, followed by midsize jets and turboprops with 2% and 1.8% increases, respectively.

Read more at AIN

Sweden Selects Embraer Cargo Plane, Brazil Plans To Buy More Saab Fighters

Sweden has selected Embraer's C-390 Millennium as its next military cargo aircraft, while Brazil intends to buy more Gripen fighter jets from Swedish defense company Saab , the European country's government said. The letter of intent signed on Saturday comes after lengthy talks between the countries for Brazil to increase its existing Gripen orders and Sweden to tap the Embraer plane as replacement for its aging fleet of Lockheed Martin's C-130.

Brazil signed a contract in 2010 with Saab to buy 36 JAS 39 Gripen fighter jets. It now plans to extend the contract by 25%, the Swedish government said. In return, Sweden has selected Embraer's C-390 Millennium as its new military cargo aircraft and will now start the process of buying it. "Sweden carried out a very in-depth analysis, evaluated several competitors and interacted with current C-390 operators and customers. We are very happy," Embraer's defense head Bosco da Costa Junior told Reuters in an interview.

Read more at Reuters

“Concerning Absence of Urgency.” Canadian Port Strikes Get Nasty

Strikes are continuing on each of Canada’s coasts shutting down many of the busiest ports in the country. As the actions are dragging on, the unions and employers are trading barbs while government officials and businesses express frustrations. Labor experts however are saying it appears the employers are “playing hardball” on both coasts. On the West Coast, the B.C. Maritime Employers Association has been saying for nearly two weeks it has made its last, best offer. They assert it provides a 19 percent pay increase for median pay, 16 percent improvement in pension entitlements, and provides for a large lump sum payment and “does not require any concessions from the union.”

The dispute in Montreal is also growing more contentious. About 320 longshore workers have been on strike at two of the largest container terminals which account for 40 percent of the port’s volume. They went on strike on October 31. The East Coast Marime Employers Association on November 7 submitted what it is calling its “final, comprehensive offer” to the Longshoremen’s Union local. They said it provides a 20 percent pay increase over six years, starting with three percent in the first four years as well as improvements in pension plan and benefits.

Read more at Maritime Executive

Inside the Audacious Plan to Reopen Three Mile Island’s Nuclear Plant

At a small gathering for CEOs last year, OpenAI co-founder Sam Altman made a stunning pronouncement: Future data centers for some artificial-intelligence models would require as much power as a large city. Reopening an existing nuclear plant could address several problems. Tech companies need power 24/7 for AI and prefer clean-energy sources. But accessing the nation’s packed grid is difficult in many places, and the intermittence of power from new wind and solar projects makes them an imperfect solution.

What ensued was months of engineering work, including the frantic restoration of a training simulator that had been cannibalized for parts. It also involved a grueling meeting with Pennsylvania Gov. Josh Shapiro, whose support would be critical in greenlighting a politically sensitive project that had become synonymous with nuclear disasters. Engineers determined that a restart of Three Mile Island could be done but not without challenges. The main transformer needed replacement. Because of the yearslong lead time for such switchgear, Constellation started talking to suppliers about how to jump the line.

Read more at The WSJ

Hyundai Is Bringing Back Buttons Because Touchscreens Are ‘Annoying’

Screens inside new cars are better than ever. They’re huge, they have great resolution and the software behind them is usually snappy and well thought out. But after years of shoving what are essentially TVs on dashboards, it turns out that people don’t really like dealing with them, especially if accessing often-used features like climate control or volume settings means digging through menus on a screen while driving.

That’s dangerous, but it’s also very annoying, as Hyundai Design North America (HDNA) found out through the magic of focus groups. It’s cool having a big screen–or even several screens–inside a car. It’s even a pretty well-disguised cost-cutting measure, despite few automakers admitting it. But it’s really distracting to have to go through a menu or a slide-out bar to change the temperature or skip the current song. With a simple physical button or knob–and no, those shiny haptic surfaces aren’t the same thing–you can just reach out and do what you want without even looking.

Read more at Inside EVs

When Automation is Worth Taking Big Risks

There were few complaints. People weren’t returning products and demanding refunds. But Hubert Dubois, general manager of Quebec, Canada-based custom kitchen cabinet manufacturer Fabridor knew there was a problem. They were losing customers. It was a difficult problem to quantify because repairing doors built from medium-density fiberboard (MDF) is easier than returning them and quicker than waiting for a fresh run. But when complaints did come in, they were always based on quality issues. Too many QA checks would tank productivity. Error correction paused production. Hubert Dubois, general manager of Fabridor, decided the answer lay with robotics.

Fabridor is a high mix/low yield job shop, which made ROI projections difficult. Dubois predicated the pitch on saving one position per shift by switching to automation. Deploying a pair of sanding robots would cost a little less than $288,000 when in the past five years Fabridor had posted 5% profit annually off about $5 million in gross income. The robots represented a significant financial risk. “We know that our productivity has increased 25%... but we believe that when we’re at full capacity, it’s going to be much higher than that. We believe this number is going to go up another 20% at least,” he says. Dubois also says it will take years before he knows definitively whether adopting automation staunches the flow of lost customers. But qualitative feedback is easier to come by.

Read more at IndustryWeek

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