Member Briefing October 17, 2023
Empire State Manufacturing Survey: Business Conditions Edged Lower
Manufacturing activity declined slightly in New York State, according to the October survey. The general business conditions index fell seven points to -4.6. Twenty-four percent of respondents reported that conditions had improved over the month, while twenty-nine percent reported that conditions had worsened. Here are some key numbers:
- The new orders index dropped nine points to -4.2.
- The unfilled orders index fell to -19.1, indicating that unfilled orders fell significantly.
- The inventories index remained below zero at -2.1, pointing to a small decline in inventories.
- The delivery times index moved down to -6.4, suggesting delivery times shortened.
- The index for number of employees rose six points to 3.1, and the average workweek index edged up to 2.2, indicating a slight increase in employment levels and hours worked.
- The prices paid index held steady at 25.5, while the prices received index fell eight points to 11.7, signaling a deceleration of input price increases.
- New orders and shipments are expected to increase, though less so than last month, and employment is expected to grow. The capital spending index was little changed at 9.6, suggesting that capital spending plans remained somewhat weak.
Firms rare more optimistic about the longer-term future than the near term (next 6 months.) as the index for future business conditions moved down three points to 23.1. However, less than half of respondents expect conditions to improve over the next six months.
War in Israel Headlines
- Israel and Hamas: The Latest News – CNBC
- Amid Turmoil in Israel, How American Companies are Responding – Human Resources Executive
- Israeli Strikes on Gaza Intensify as Humanitarian Crisis Deepens - Reuters
- Dozens of Countries Scramble to Identify More Than 150 Citizens Held Hostage in Gaza - Sky
- U.S. Push for Gaza Border Opening Stumbles as Humanitarian Plight Worsens - WSJ
- Middle East is ‘On the Verge of the Abyss,’ Says UN Chief – Politico
- Blinken and Austin Bolster US Support for Israel as Potential Ground Offensive in Gaza Looms - AP
- IMF, World Bank 'Impotent' on Israel-Gaza War Shock as Reforms Edge Forward – Reuters
- How the Israel-Hamas War Is Tilting the Global Power Balance in Favor of Russia, China - WSJ
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Putin Hammers Ukraine With West Distracted by Middle East Crisis – Politico
- Putin Claims Ukraine’s Seeing ‘Huge Losses’ in Troubled Counteroffensive - CNBC
- US Envoy for Ukraine Recovery Pritzker Reassures Zelenskiy - Bloomberg
- In Pictures: 600 Days of War in Ukraine - Reuters
- Putin and Russians Change Rhetoric on Russian Offensive on Avdiivka – ISW
- The New Wagner? Russian Mercenary Group Recruits Prigozhin’s Ex-Fighters – Politico
- Qatar Helps Ukrainian Children Return Home from Russia - Fox
- Russia’s Assault on a Key Eastern Ukraine City Reported to be Weakening - AP
- 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
Fastenal Leaders: Manufacturing Economy Still ‘Fairly Tepid’
Speaking to analysts after Minnesota-based Fastenal reported third-quarter profits of $296 million on sales of more than $1.8 billion (both figures were up slightly from 2022’s Q3), CEO Dan Florness and CFO Holden Lewis told analysts nothing much has changed from their vantage point since they reported second-quarter results. “I think aerospace is doing fairly well. I’m not getting a lot of feedback that anything else is really inflecting more favorably,” Lewis said. “I’m getting the feedback that everything else remains fairly tepid.”
That observation jibes with several high-level indicators: Year to date, new orders for manufacturing goods are up just 1.0% while new orders for capital goods have climbed 1.3% since the end of 2022. Similarly, the ISM Manufacturing Purchasing Managers’ Index has been in contraction territory since late last year but ticked up to 49.0 in September, hinting at a factory economy that is finely balanced but—carefully—trending higher. Similarly, machine tool demand is showing signs of improvement. Florness noted that demand from transportation customers is driving Fastenal’s business in continental Europe higher—although the company’s team there is “being very, very cautious about not getting ahead of anything.”
Conference Board: CEO Confidence Dips in Q4
The Conference Board Measure of CEO Confidence in collaboration with The Business Council fell to 46 in Q4 2023, down from 48 in the third quarter, as reported on Oct. 12. The Measure remained below a reading of 50, which indicates that CEOs maintain a cautious outlook regarding what’s ahead for the economy. A total of 136 CEOs participated in the Q4 survey, which was fielded from September 18 through October 2. CEO concerns about geopolitical risks subsided in Q4, while cyber, along with legal and regulatory uncertainty rose to the top. Note the survey was conducted prior to the terrorist attacks in Israel.
Compared to last quarter, CEOs’ view of current economic conditions was a tad less enthusiastic in the latest survey, and they carried forward a cautious outlook for the economy ahead. In Q4, 18% of CEOs reported general economic conditions to be better than they were six months ago, down from 28% in Q3. At the same time, future expectations became more pessimistic: While 19% of CEOs expect future conditions to improve, similar to last quarter, 47% expect general economic conditions to worsen over the next six months, up from 39% in Q3.
Read more at Material Handling & Logistics
COVID Update - Vaccine Stocks—Including Pfizer, Moderna, BioNTech And Novavax—Slide Amid Plummeting Demand
Stocks of Pfizer and other Covid vaccine makers like BioNTech and Moderna fell in premarket trading Monday after the company slashed its revenue forecasts last week, a change in fortune for the sector as demand for the pandemic-related products that propelled them to record profits last year plummets. Pfizer slashed its annual revenue forecast by 13% on Friday due to sliding demand for its Covid-19 products. Sales of the firm’s mRNA shot, produced jointly with BioNTech, and its antiviral drug Paxlovid helped it secure record profits last year but the firm has long warned about sliding demand as the world, and particularly the U.S., exits the pandemic this year.
The company cut its projections for Paxlovid by $7 billion and by around $2 billion for its Covid shots, which was greater than analysts expected. Pfizer said it was launching a $3.5 billion cost-cutting program covering jobs and expenses as it prepares for the hit to its revenues. Pfizer said it would take a write down of $5.5 billion in the third quarter due to shrinking demand for its Covid stock, most of which comes from inventory write-offs of Paxlovid worth $4.6 billion. The company also acknowledged a $900 million write off from Covid vaccine stock, a write-off BioNTech also flagged on Monday on account of its profit sharing agreement with Pfizer.
Jordan Builds Speakership Momentum as Opposition Falls
Opposition to House GOP Speaker nominee Rep. Jim Jordan (Ohio) is crumbling as Republicans return to Washington for a House vote to try to officially elect him. Four key lawmakers who signaled opposition to Jordan last week fell like a set of dominos Monday, giving the Ohio Republican a significant boost ahead of an expected floor vote Tuesday. Jordan now seems to be edging closer and closer amid a pressure campaign by his allies to win support for the conservative Republican and ally of former President Trump.
House Armed Services Committee Chairman Mike Rogers (Ala.) along with Reps. Ann Wagner (Mo.), Ken Calvert (Calif.) and Vern Buchanan (Fla.) were among the Republicans who flipped their support to Jordan on Monday, despite past statements indicating they would not do so. The shifts in stances came after some GOP lawmakers and outside conservative activists made an intense effort to lobby support for Jordan over the weekend in posts on social media. If all House members vote, Jordan can afford to lose only four Republicans.
Bill Ford Calls for Deal to End UAW Strike
Ford (F.N) executive chairman Bill Ford on Monday urged the United Auto Workers union to end a 32-day strike and reach a new labor agreement, and warned of the growing impact to the automaker and the U.S. economy. "We can stop this now," Ford said of the strike that expanded last week to shut down the Kentucky Truck plant. "I call on UAW colleagues ... We need to come together to bring an end to this acrimonious round of talks. The UAW did not immediately comment on Ford's remarks. On Friday, UAW President Shawn Fain accused Ford of trying to game the talks with inadequate offers and insisted Ford sharply boost compensation.
Ford, the great grandson of company founder Henry Ford, said Toyota, Honda, Tesla and other automakers "are loving this strike because they know the longer it goes on, the better it is for them." Ford has long portrayed himself and his family's company as the most union friendly in the industry, a message he repeated Monday. The union has called Ford "the enemy," Ford said. "It should be Ford and the UAW against Toyota, Honda, Tesla and all the Chinese companies" that want to enter the U.S, market, he added.
- Read more at Reuters
- Unifor ratifies GM Canada deal with 80.5% of voters in favor
- What to make of the UAW’s shifting strike tactics after the latest escalation
Home Sales on Track for Slowest Year Since Housing Bust
The highest mortgage rates in 23 years are dragging down home sales to their lowest levels since the subprime crisis period. Sales of previously owned homes in 2023 are expected to dwindle to a rate not seen since at least 2011, when the U.S. population was smaller and the country was still recovering from one of the worst housing crises ever, according to many economist forecasts. The speed at which mortgage rates have climbed is driving away all but the most committed home buyers. The average rate on a 30-year fixed mortgage rose to 7.57% last week, according to Freddie Mac.
Chen Zhao, economics research lead at real-estate brokerage Redfin, estimated that total existing-home sales in 2023 would amount to around 4.1 million, which would mark the smallest number of sales since about 2008, the year that Lehman Brothers collapsed and sparked the global financial crisis. Zhao said sales are unlikely to pick up much next year, with mortgage rates likely to remain at elevated levels.
U.S. to Tighten Curbs on China's Access to Advanced Chip Tech
The US plans to tighten sweeping measures to restrict China’s access to advanced semiconductors and chipmaking gear, seeking to prevent its geopolitical rival from obtaining cutting-edge technologies that could give it a military edge. The latest rules aim to refine and close loopholes from curbs announced last October, according to people familiar with the matter. The Biden administration is seeking to strengthen controls on selling graphics chips for artificial intelligence applications and advanced chipmaking equipment to Chinese firms.
The US will also impose additional checks on Chinese firms attempting to evade export restrictions by routing shipments through other nations, and add Chinese chip design firms to a trade restriction list, requiring overseas manufacturers to gain a US license to fill orders from those companies. The updated restrictions will be published early this week, people familiar with the deliberations said. A spokesman for the National Security Council declined to comment, as did a spokeswoman for the Commerce Department’s Bureau of Industry and Security.
N.Y. Court of Appeals Judge Recuses Herself from Redistricting Case
New York’s highest court is set to hear oral arguments on Nov. 15 in the case concerning the state’s congressional political boundaries. First Department Presiding Justice Dianne T. Renwick is expected to join the seven-member panel as a result of the recusal of Associate Judge Caitlin J. Halligan, who was confirmed to the position in April following a contentious political fight in the Democratic Party. Halligan’s recusal, first reported by the New York Law Journal, offers a wrinkle in the upcoming redistricting case.
Renwick will be the lone judge on the Court of Appeals who did not vote on the initial redistricting case last year, which ended with a 4-3 split decision. DiFiore had been one of the four judges who ruled in favor of overturning the Democrat-drawn maps. The case, Harkenrider v. New York State Independent Redistricting Commission, is being waged by Democratic operatives and defended by GOP interests. Experts often acknowledge the case is as much about constitutional law as it is about power and politics in Washington, D.C. The boundaries drawn by a “special master” last year resulted in more competitive districts between the two major politic parties.
JPMorgan’s Dimon Warns Of ‘Most Dangerous Time’ In Decades Amid Huge Bank Earnings
JPMorgan CEO Jamie Dimon warned conflicts in Ukraine and the Middle East are creating “the most dangerous time the world has seen in decades,” as interest rate increases gave the bank an earning boost in the third quarter of the year. “The war in Ukraine compounded by last week’s attack on Israel may have far-reaching impacts on energy, food markets, global trade, and geopolitical relationships,” Dimon said. “This may be the most dangerous time the world has seen in decades.”
JPMorgan reported a $13.2 billion profit last quarter, up 35% on the same period last year. America’s biggest bank brought in $39.87 billion in revenue, up slightly on $39.63 billion forecast by analysts surveyed by FactSet. The bank’s momentum in the third quarter is the result of “years of investment” and consistency in clients, Dimon said, but warned global risks as well as high government debt levels increase the risk of “elevated” inflation and booming interest
Perception Deviates from Reality on Aviation Emissions
Business aviation has been caught in the crosshairs of strident environmentalists with their opprobrium manifested in disruptive and increasingly destructive protests, sometimes attacking and defacing business aircraft. This includes an incident in May at EBACE in Geneva where demonstrators knocked down fences around the show’s static park and chained themselves to private jets, causing costly damage.
“Business aircraft are portrayed as big polluters despite being responsible for less than 0.04 percent of global greenhouse gas emissions,” Robert Baltus, COO of the European Business Aviation Association (EBAA) said. Opponents ignore, often willfully, the industry’s pledge to reach net-zero carbon dioxide (CO2) emissions—relative to 2005 levels—by 2050. Business aviation's concerns were heightened last month with the formal adoption of the European Parliament’s first-ever sustainable aviation fuel (SAF) mandate. This calls for the scaling up of the use of SAF at EU airports, reaching 70 percent by 2050.
DiNapoli: Wall St. First Half Profits Total $13 Billion, Down From 2022
Wall Street’s 2023 first half profits of $13 billion were down 4.3% from the same period last year but tracked the industry’s return to pre-pandemic levels of revenue after record profits in 2020 and 2021, according to State Comptroller Thomas P. DiNapoli’s annual report on the performance of New York City’s securities industry. “The securities industry’s two years of record profits helped stabilize New York’s economy in difficult times,” DiNapoli said. “Since then the industry has maintained profits consistent with pre-pandemic levels. But these are volatile times in America and globally, and Wall Street’s relatively stable profits and employment levels could change quickly. Further declines could weaken New York’s tax revenue from the securities industry and have repercussions for our state and city budgets.”
New York state relies more heavily than the city on tax collections from Wall St. because of its greater dependence on personal income taxes. The industry accounted for $28.8 billion (27.4%) of all tax collections in State Fiscal Year (SFY) 2023, which ended March 31, 2023. About 89% of this came through personal income taxes.
Read more at The Comptroller’s website
A New California Law Could be the Beginning of the End of Greenwashing
Measuring, reporting, and reducing carbon emissions along the entire supply chain could become a new normal for large companies in the United States, courtesy of a new law in California that the federal government is also looking at. The law makes deeper reporting on emissions common practice but also accounts for companies not yet having full visibility into their suppliers’ practices. On October 7, California Gov. Gavin Newsom signed Senate Bill (SB) 253 into law. Under this new law, more than 5,300 companies that operate in California and make more than $1 billion in annual revenues will be required to report both their direct and indirect emissions. California’s law requires companies to measure and report Scope 1, 2 and 3 emissions.
- Scope 1: direct greenhouse gas (GHG) emissions a company generates
- Scope 2: indirect GHG emissions a company generates, such as buying energy/electricity for heating and cooling buildings.
- Scope 3: emissions generated up and down the company’s value chain by its suppliers