Member Briefing November 15, 2023
Inflation Was Flat in October Core CPI Hits Two-Year Low
Inflation was flat in October from the previous month, providing a hopeful sign that stubbornly high prices are easing their grip on the U.S. economy. The consumer price index, increased 3.2% from a year ago despite being unchanged for the month, according to seasonally adjusted numbers from the Labor Department on Tuesday. Headline CPI had increased 0.4% in September. Excluding volatile food and energy prices, core CPI increased 0.2% and 4%. The annual level was the lowest in two years, though still well above the Federal Reserve’s 2% target. Some key numbers:
- Energy prices declined 2.5% for the month.
- The food index increased 0.3%.
- Shelter costs, a key component in the index, rose 0.3%.
- New vehicle prices declined 0.1%, while used vehicle prices were off 0.8% and were down 7.1% from a year ago.
- Airfares, another closely watched component, declined 0.9% and are off 13.2% annually.
- Motor vehicle insurance, however, saw a 1.9% increase and was up 19.2% from a year ago.
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- Gaza Parliament and Other Hamas Buildings Seized, Says Israeli Army – France 24
- US, Britain Impose Sanctions on Hamas - VOA
- Israeli Forces Outside Main Gaza Hospital, Offer to Send in Incubators - Reuters
- Al Shifa Hospital Becomes Focus of Conflicting Narratives – France 24
- Israel Wants to Obliterate Gaza to Deter Iran, Hezbollah, Says Dutch Memo – Politico
- IDF Confirms Death of Captive Israeli Soldier Shown in Hamas Video - NYT
- More Attacks on US Forces Following Strike on Iran-Backed Targets in Syria - VOA
- Israel Dominates Battlefield With Technological Advantage Over Hamas - WSJ
- Israeli Military Says it Found Signs Hostages Were Held in Gaza Hospital - Reuters
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukraine Says Russians Intensify Bombardment of Avdiivka – Reuters
- Turkish MPs to Start Discussing Sweden’s NATO Bid - Politico
- Ukraine War Slips Toward Violent Stalemate - WSJ
- Russian Casualties in Ukraine 'Top 300,000' – The Telegraph
- Europe Opens F-16 Warplane Training Center for Ukrainian Pilots – Politico
- Ukraine's Trade Deficit Widens to $19.4 Bln in Jan-Sept - Reuters
- Ukraine’s Top General Believes Technology Can Defeat Putin’s Russia – Atlantic Council
- Artillery Blame Game Hits Brussels Over the Million Shell Pledge to Ukraine – Politico
- Finland Says Russia Leads Asylum Seekers to its Border – Reuters
- 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
Defense Manufacturers Fear Fallout From ‘Buy American’ Politics
The “Buy American” campaign, fueled by the promise of a domestic manufacturing boom and well-paying jobs right here at home, is gaining steam in Congress. Both versions of the can’t-fail National Defense Authorization Act contain provisions that require a certain percentage of American weapons be made domestically. Yet the politics is crashing into the reality facing the defense industry.
Already wobbling from the demands of arming Taiwan and Ukraine, American weapons makers have the added task of producing for Israel — while also rearming the U.S. after its shelves were raided to help other countries. The unprecedented race to build weapons has blown a hole in the system, forcing the Pentagon to seek more help from Europe and elsewhere to fill orders for desperate customers in Taipei, Kyiv and Jerusalem. The Aerospace Industries Association, which represents 340 U.S. firms, released a carefully worded statement when asked for its reaction to the Buy American push. Yet the message was clear: Go easy on us.
How Health Insurance Costs Are Reflected in inflation Calculation is Changing
Starting with today’s CPI report, the Bureau of Labor Statistics, which crunches these numbers, has changed how it calculates that last expense — health care — in ways that could recalibrate the CPI just a tad. For a lot of people, health insurance costs equal premiums. Those went up this year — by about 7% — according to the Kaiser Family Foundation. Yet the health insurance index as measured by the CPI went down this year.
That’s because it doesn’t track health coverage premiums, said Steve Reed, an economist for the CPI program at the BLS. “It’s a little more complicated than one might expect or hope,” he said. The calculation will now reflect a two-year average of the data, which will be updated more frequently. The change will likely bump the CPI up a hair for October, Rosner-Warburton said, but make the stats more meaningful in the long run.
COVID 19 Update - Report: America’s Trust in Scientists Drops in Wake of COVID-19 Pandemic
Public trust in scientists fell again in 2023 even as COVID-19 has faded into the background for many Americans, according to a new report. Survey results from Pew Research Center published on Tuesday found that confidence in scientists to act in the public’s best interest fell from 77% in 2022 to 73% as of last month. It’s a far drop from 87% in April 2020, which quickly declined to 84% by November 2020 as the pandemic worsened.
The share of Americans who report having a “great deal” of confidence in scientists also continues to decline, dropping from 39% in April 2020 to 23% in October. While overall trust in scientists has declined, it is generally one of the more trusted professions, according to the survey. It joins two other categories – medical scientists and the military – as the top three trusted professions. America’s confidence in journalists, business leaders and elected officials rank the three lowest categories. Notably, trust in every profession included in the survey has declined since early 2020.
House Votes to Avert Government Shutdown
The House on Tuesday passed a stopgap bill to prevent a government shutdown, sending the unconventional two-step continuing resolution to the Senate and marking the first major hurdle Speaker Mike Johnson (R-La.) has cleared since winning the gavel. The chamber approved the short-term funding measure in a 336-95 vote, days before Friday night’s shutdown deadline. Two Democrats — Reps. Jake Auchincloss (Mass.) and Mike Quigley (Ill.) — and 93 Republicans opposed the bill.
The bifurcated bill would extend funding at current levels for some agencies and programs until Jan. 19 and all others through Feb. 2. It would also extend the authorization of programs and authorities in the farm bill until Sept. 30. The legislation now heads to the Senate, where it has support from both party leaders. Senate Majority Leader Chuck Schumer (D-N.Y.) on Tuesday said he will try to pass the continuing resolution quickly, highlighting the bipartisan desire to avert a shutdown ahead of next week’s Thanksgiving holiday.
Biden And Xi Will Reportedly Announce Deal To Crackdown On Export Of Fentanyl Chemicals
President Joe Biden and his Chinese counterpart Xi Jinping will reportedly announce a new agreement to crack down on the export of chemicals used to manufacture fentanyl at their summit meeting in San Francisco on Wednesday. Beijing has agreed to go after companies that both produce the drug and export the precursor chemicals used to make fentanyl. According to the CDC, fentanyl is 50 times more potent than heroin and 100 times more potent than morphine.
As part of the purported deal, the U.S. government has agreed to lift its sanctions against the Chinese government’s Institution of Forensic Science, which is accused of conducting mass surveillance and human rights abuses in the Xinjiang region. The report added that the deal is still being finalized. Previous efforts by the two countries to crack down on the fentanyl trade ran into a wall as bilateral relations between Beijing and Washington worsened in the past few years.
APEC 2023: What You Need to Know About San Francisco Summit
Leaders from the 21-member Asia-Pacific Economic Cooperation forum gather this week in San Francisco for the 30th APEC summit, where the spotlight will be on a rare meeting between the U.S. and Chinese presidents. APEC accounts for about 62% of global GDP and almost half of global trade. It is unique in grouping economies rather than nations, allowing participation of Chinese-ruled Hong Kong and democratically governed Taiwan, which China claims as its own. It does not though include India, the world's most populous country.
APEC operates on the basis of non-binding commitments with decisions reached by consensus and commitments undertaken on a voluntary basis. The leaders will gather from Wednesday to Friday, following preparatory meetings of senior finance officials and ministers. An annual APEC CEO summit runs from Tuesday to Thursday. San Francisco is getting a makeover and there will be group meetings, bilateral discussions (including between President Biden and Premier Xi) and lot’s of protests. Here is what you need to know.
Stellantis Offers Buyouts to Roughly Half of U.S. Salaried Workers
Chrysler parent Stellantis is offering buyouts to roughly half of its U.S. white-collar employees to reduce headcount and cut costs for the automaker’s North American operations. The voluntary separation packages will be offered to 6,400 of its 12,700 non-bargaining unit U.S. employees with five or more years of employment, the company said Monday. The latest buyouts come weeks after the automaker struck a tentative deal with the United Auto Workers union for new labor contracts covering its 43,000 unionized workers.
The move marks the latest cost-cutting efforts for the U.S. auto industry, as companies attempt to reduce costs amid economic concerns and billions of dollars in new investments for emerging technologies such as electric vehicles. Both General Motors and Ford Motor also have cut salaried workers over the past year. The tentative agreement between Stellantis and the UAW, which must still be ratified by union members, also includes voluntary buyouts.
Emirates Holds Off on Airbus A350 Order in Engine Rift
Emirates ruled out an immediate deal to buy Airbus A350-1000 jets on Tuesday, blaming a dispute with engine maker Rolls-Royce over the durability of its engines and leaving the European planemaker without a major showcase order at the Dubai Airshow. Speaking a day after placing a $50 billion order for Boeing 777X jets, the president of the Dubai airline, Tim Clark, said the A350-1000's engine would offer only a quarter of the time between maintenance visits compared to Emirates' needs.
Rolls-Royce said: "Emirates is a valued customer and we look forward to supporting their future fleet growth plans.” While airplane orders dominate headlines at air shows, airlines typically negotiate to buy the airplane and long-term repair services from the engine suppliers separately, meaning big-ticket plane announcements can hinge on unseen engine talks. Airbus Chief Commercial Officer Christian Scherer defended Rolls-Royce's Trent XWB-97 engine. Emirates has ordered 50 of the A350-900 version, which uses a different Rolls variant, but has yet to take deliveries.
$52B Order Expands Emirates’ Boeing Orders to 205 Jets
Emirates Airline booked a reported $52-billion order with Boeing for a total of 95 new wide-body jets, nearly doubling its total orders with the jet-builder to 205 new aircraft. The carrier ordered 55 new 777-9 aircraft, 35 777-8s, and five more 787 Dreamliners; it also converted a previous order for 30 787-9s to 20 7878 and 10 787-10 aircraft. The announcement was the most significant among several orders for wide-body aircraft reported by Boeing at the opening of the annual Dubai Air Show, including 90 737 MAX jets to be supplied to SunExpress; 30 787-9 Dreamliners for flyDubai; four 787-9s for Royal Jordanian; and two 787-9s for Royal Air Maroc.
The 777X is the forthcoming update to Boeings long-range, twin-engine 777 series, with the first deliveries now anticipated in 2025. The new design incorporates composite wings with folding wingtips, a larger cabin and more seating capacity than the previous version, and powered by twin GE9X turbofan engines. GE Aerospace simultaneously announced that Emirates had ordered a total of 202 GE9X engines to power the newly planned jets, as well as a long-term service package for those engines. With a listed value of $42 million, the engines for the new jets could add an estimated $8.5 billion to Emirates’ commitment.
Read more at American Machinist
When It Comes To Home Buying, The Suburbs Are Roaring Back
Country roads are taking homebuyers home…back to the suburbs. Last year saw an exodus to the countryside among homebuyers, but it appears to have been a blip. Possibly due in part to a return to the office, home buying in the suburbs returned to its pre-Covid rate of 50% of total sales, according to an annual survey from the National Association of Realtors.
The housing market is largely returning to its state before the pandemic, but higher interest rates and tight inventory have put home buying out of reach for many. The average household income of buyers surged from $88,000 in 2022 to $107,000 in 2023. Even if builders over-responded to the temporary shift to the country, they’re likely to find buyers eager for a slice of anything in this market.
More Americans are Yanking Money from Their 401(k) Plans to Pay the Bills
A growing number of cash-strapped Americans are cracking their nest eggs for emergency funds. The number of 401(k) plan participants taking hardship distributions increased by 13% between the second and third quarters, according to an analysis by Bank of America of its clients’ employee benefit programs. That figure now stands at 18,040, the highest level in at least the past five quarters since Bank of America started tracking this data.
Lisa Margeson, managing director of Bank of America’s retirement research and insights group, said the rising number of 401(k) hardship distributions could be caused by high inflation and the rising cost of living. As Covid-era savings shrink, more and more consumers are turning to a costly way to borrow: Credit cards. Despite record-high rates, credit card balances have swelled by $148 billion over the past year to $1.08 trillion, according to a report from the New York Federal Reserve released Wednesday.
Global EV Sales Stay Strong, China Hits Record Despite End of Subsidies
Electric-vehicle sales are seeing continued strength globally with China reporting record monthly sales in October despite the end of subsidies, according to market research firm Rho Motion. China ended an 11-year subsidy scheme for EV purchases in 2022, but some local authorities have continued to offer aid or tax rebates to attract investments as well as subsidies for consumers. EV sales in China, the world's largest auto market, increased 29% year-to-date in September.
The global EV market showed 34% growth in the same period. EV sales grew 26% in European markets, where cutting of subsidies has weighed on demand as seen in Germany where business subsidies were done away with in September, according to Rho Motion. EV sales in North America were up 78% so far this year. "The North American market continues to have a strong 2023, with Tesla still taking the lion's share of demand as legacy automakers temper ambitions of scaling production," Rho Motion said.
Exxon to Start U.S. Lithium Production
Exxon Mobile aims to become a leading producer of lithium for electric vehicle batteries through a drilling operation the oil giant is launching in Arkansas, the company announced Monday. Exxon earlier this year purchased 120,000 acres of a geological site in southern Arkansas called the Smackover Formation that is rich in lithium. The company will start producing battery-grade lithium at the site as soon as 2027, and aims to supply enough of the mineral to support the manufacture of 1 million electric vehicles annually by 2030.
Discussions with potential customers such as electric vehicle and battery manufacturers are ongoing, Exxon said in a statement. The lithium operation comes as the major oil companies are under pressure to address climate change. While Shell and BP have focused on renewables such as wind and solar, Exxon is investing $17 billion through 2027 to reduce emissions with a focus on carbon capture, hydrogen and biofuels.
Home Depot Sales, Earnings Fall but Top Analyst Estimates
Home Depot reported a decline in third-quarter sales, with consumers pulling back on high-dollar purchases and deferring major home-improvement projects. Same-store sales, which adjust for store openings and closings, fell 3.1% during the quarter but didn’t decrease as much as analysts expected. The Atlanta-based company logged 2.4% fewer transactions during the quarter, and the average size of those tickets edged lower as well.
Third-quarter revenue fell 3% to $37.71 billion, topping analyst forecasts, according to FactSet. Home Depot posted earnings of $3.81 billion, or $3.81 a share, down from $4.24 a share in the year-ago quarter but above analyst projections. Sales are now expected to fall 3% to 4% for 2023, compared with a prior range for a 2% to 5% decline. The company now expects earnings to fall 9% to 11% this year, compared with previous guidance for a 7% to 13% decline.