Member Briefing September 18, 2024
US Industrial Production Rebound After Hurricane-Related Drop ‘Uninspiring’
Mining and manufacturing activity bounced back in August after hurricane-related disruption stymied output in July. In short: a return to normal, which in today's manufacturing climate is not great. The manufacturing sector continues to show signs that monetary policy is restrictive, even if the broader economy has been resilient in the face of tighter policy. Manufacturing production is up just 0.2% over the past year, straddling the zero line since the start of 2023, consistent with the ISM manufacturing index, a bellwether of sector growth. Manufacturing output rose 0.9% which more than offset the 0.7% dip in July. Factory output was boosted by a 9.8% surge in motor vehicle & parts production. At the risk of sounding repetitive, this too was a bounce-back after auto-production fell 8.9% in July.
There have been pockets of strength in over the past year including computer and electrical equipment. But with it both more expensive and challenging to borrow today it's no wonder why broad manufacturing activity has stalled. As the Fed eases policy, not just at tomorrow's meeting, but in the ensuing quarters, we expect easier monetary conditions to breathe some new life into manufacturing. There's also likely a growing need for capital as businesses simply need to replace worn-down equipment now that we're more than three years away from the post-pandemic boom.
Fed Meeting: CNBC Fed Survey Predicts A Quarter Point Cut With A Soft Landing Expected
Respondents to the CNBC Fed Survey are forecasting a more gradual approach to rate cuts than is currently priced into markets. The survey shows 84% of the 27 respondents, including economists, fund managers and strategists, see the Fed cutting by a quarter percentage point, with 16% seeing a half-point decrease. That compares with 65% probability of a half-point cut now priced into fed futures markets. The differences grow over time with survey respondents forecasting a year-end funds rate of 4.6% and 3.7% by the end of 2025.
The major difference could be that survey respondents appear less worried about the economy overall than futures markets, and more convinced the Fed has time to enact gradual rate cuts. Seventy-four percent said the September rate cut comes in time to preserve a soft landing, with just 15% saying it’s too late. Overall, the probability of a soft landing stands at 53%, about where it’s been since March, while the chance of a recession has ticked up to 36%, 5 points above its recent low in June, but well below the 50% level that prevailed for much of 2022 and 2023. The outlook for growth remained at 2% for this year and ticked down to 1.7% for 2025, two-tenths below the July survey, but still at or around economic potential and not a recession.
NY Fed Survey Shows Service Sector Activity Held Steady in September
Business activity was little changed in the New York-Northern New Jersey region, according to the September survey. The headline business activity index came in at 0.5. Twenty-seven percent of respondents reported that conditions improved over the month and 26 percent said that conditions worsened. The business climate index was similar to last month at -23.3, pointing to an ongoing worsening in the business climate.
- The employment index fell for a second consecutive month, retreating four points to 3.1, a sign that employment growth was minor.
- The wages index came in at 35.4, a level similar to the prior few months, signaling that wage increases were steady.
- The prices paid index fell five points to 45.3, indicating input price increases moderated.
- The prices received index rose seven points to 22.5, suggesting selling price increases picked up.
- The capital spending index was slightly positive at 3.7.
- The index for future business activity climbed seven points to 15.2.
- The index for the future business climate climbed to -1.6, pointing to some improvement in optimism compared to last month, though optimism remained subdued.
Global Headlines
Middle East
- Israel And Hamas: The Latest News – The Guardian
- Israel Sets New War Goal Of Returning Residents To The North - BBC
- Iran Gives Nuclear Program Update - Newsweek
- Disaster Averted In Red Sea As Burning Tanker Saved - BBC
- Palestinian Poll Finds Big Drop In Support For Oct 7 Attack - Reuters
- Hundreds of Hezbollah Operatives’ Pagers Explode in Apparent Attack Across Lebanon - WSJ
- What Weapons Does Lebanon's Hezbollah Have? - Reuters
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- Ukraine And Russia: The Latest News – The Guardian
- Explosions Rock Russian Air Base Hosting Putin's Nuclear Bombers - Newsweek
- One Million Are Now Dead or Injured in the Russia-Ukraine War - WSJ
- Putin Orders Expansion Of Russia’s Military To 1.5M Active Troops – The Hill
- Russia And Ukraine Exchange 206 Prisoners - BBC
- New EU Defense Commissioner Is All-In On Supporting Ukraine - Politico
- Putin Aiming for Victory in Ukraine by 2026: Defense Experts - Newsweek
- Ukraine's F-16 Fleet Gets a Boost as NATO Ally Prepares New Batch of Jets - Newsweek
- 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
Other Headlines
- Floods And Mudslides Kill More Than 200 In Myanmar - BBC
- Venezuela Relying On "Most Violent" Repression After Nicolás Maduro's Claimed Election Win, U.N. Experts Say - CBS
- Zimbabwe To Cull 200 Elephants To Feed People Left Hungry By Drought - Reuters
- Japan's Next Prime Minister: Old Guard, Young Blood Or First Woman? – Nikkei Asia
- EU Must Find Right Balance On Clean Tech Trade With China, Says Draghi - Reuters
- A Fire Is Raging At A Major Greek Oil Refinery. No Injuries Have Been Reported - ABC
- Who Works For Whom In The New EU Power Structure - Politico
- German Economic Expectations Darken Further - WSJ
- US Probes Uranium Imports From China To Prevent Circumventing Russian Ban - Reuters
Policy and Politics
Johnson Plans To Bring House GOP Short-Term Spending Measure To House Floor Today
Speaker Mike Johnson is aiming to bring his short-term spending plan to the House floor for a vote Wednesday, despite growing signs the measure lacks GOP support needed to pass. The GOP leader previously pulled the stopgap funding coupled with the SAVE Act — GOP legislation that requires proof of citizenship to vote in federal elections — after it became clear Republican opposition could tank the vote. Democrats are largely opposed to the plan, which would fund the government through March 28.
Johnson’s decision to push forward with his plan also comes after he met with former President Donald Trump over the weekend. Johnson has already heard concerns from vulnerable Republicans that a government shutdown would threaten their reelection prospects. The broader leadership implications: A loss of a House GOP majority if the battleground Republicans don’t pull through in November, which could have major consequences for Johnson’s own survival as party leader. Johnson has dismissed the idea of a shutdown, and centrists have also publicly stated it will not happen. Conservatives, however, have said Johnson has made clear this is his one-and-only plan and that he intends to fight for it.
Pentagon To Oversee $3 Billion Effort To Strengthen Microchip Supply, Intel First Awardee
The Pentagon announced today it will help lead a $3 billion U.S. Commerce Department initiative designed to make sure the U.S. military has access to a reliable domestic microelectronics supply chain. The first task order under what’s known as the Secure Enclave program was awarded to leading microchip developer Intel Corp. The funding will focus on improving commercial fabrication facilities and builds on work Intel has done through other DOD programs. The effort is funded through the CHIPS and Science Act.
The Secure Enclave project is focused instead on creating an end-to-end production capability that specifically addresses military requirements for advanced semiconductors. DOD will manage the program in partnership with the Commerce Department. Intel – which has sites in Arizona, New Mexico, Ohio and Oregon -- has been involved in several Pentagon efforts to address microelectronics supply. In 2020 it was selected to participate in DOD’s State-of-the Art Heterogeneous Integrated Packaging Program, which leveraged the company’s production capabilities. The goal of the effort is to demonstrate the ability to securely leverage state-of-the-art microelectronics technologies without depending on a closed security fabrication facility.
Gross Interest Payments On US Debt Topped $1 Trillion
The Treasury Department said in a recent statement that the U.S. paid about $1.05 trillion in gross interest on treasury debt securities in the current fiscal year. The figure is estimated to reach roughly $1.16 trillion in the 12-month period ending Sept. 30. By contrast, the Treasury Department said total outlays for net interest reached $843 billion in fiscal 2024, topping other big ticket items like national defense, for which outlays have reached $798 billion so far. Outlays were still higher, however, for two other highlighted functions: Social Security and Medicare.
The development comes in the backdrop of a heated fight over government funding in Washington ahead of a looming shutdown deadline later this month. House Republicans prepared for a major opening salvo in a budget showdown with Democrats last week, pushing to pass a partisan stopgap measure that would keep the government funded through next year, along with a proof-of-citizenship voting bill backed by former President Trump that was seen as dead-on arrival in the Senate.
Health and Wellness
Women More Likely To Skip Medical Care Due To Cost, Wait Times
According to a Deloitte survey, women are more likely to skip or delay medical care than men due to cost, wait times and negative previous experiences. Overall, half of women surveyed by Deloitte reported that they have skipped or delayed medical care during the past year compared with 37% of men. Women are 31% more likely than men to skip medical care due to cost while also paying $15.4 billion more than men in out-of-pocket medical expenses per year.
Even when excluding maternity-related health care expenses, women require an average of 9.9% more health care services than men, according to Deloitte. Deloitte also found that women are more likely than men to avoid or delay mental health services due to cost. In addition, women are financially less prepared for unforeseen medical expenses, with 44% saying they are either not prepared or slightly prepared to pay $500 for an unexpected medical emergency
NYS COVID Update
The Governor updated COVID data for the week ending August 23rd.
Deaths:
- Weekly: 46
- Total Reported to CDC: 83,980
Hospitalizations:
- Average Daily Patients in Hospital statewide: 1,048
- Patients in ICU Beds: 109
7 Day Average Cases per 100K population
- 8.4 positive cases per 100,00 population, Statewide
- 9.8 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
Election 2024
- U.S. Authorities Were Warned About Suspected Trump Gunman - WSJ
- Assassination Attempt Suspect Didn’t Fire Gun Or Have Trump In Line Of Sight, Secret Service Head Says - Forbes
- Federal Debt Is Soaring. Here’s Why Trump and Harris Aren’t Talking About It. - WSJ
- Pelosi Blamed New York for House Losses. Hochul Wants Another Chance. - NYT
- Trump Praises Secret Service Response To Apparent Assassination Attempt - ABC
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Real Clear Politics Electoral Map
- Latest Polls - FiveThirtyEight
Industry News
New York Comptroller: Sales Tax Collections Up 3.8% In August
Local sales tax collections in New York grew by 3.8% in September compared to the same month in 2023, according to data released Tuesday by state Comptroller Tom DiNapoli's office. DiNapoli said collections reached $1.85 billion, which is up $68 million year over year. In New York City, collections totaled $793 million, an increase of 4.4%, or $33 million. County and city collections in the rest of the state totaled $945 million, an increase of 3.5%. Most counties in the state experienced year-over-year increases.
“Growth in local sales tax collections improved in August, year over year, after being flat in July,” DiNapoli said in a statement. “While this growth is certainly encouraging, local officials must keep in mind sales tax revenues can be volatile and budget cautiously.” Monthly sales tax collections are from the cash distributions made to counties and tax-imposing cities by the state Department of Taxation and Finance, and the amounts are based on estimates of what each municipality is due.
Read more at NY State of Politics
US Retail Sales Ticked Up Last Month
Retail sales ticked up 0.1% from July to August, after jumping the most in a year and a half the previous month, the Commerce Department said Tuesday. Online retailers, sporting goods stores, and home and garden stores all reported higher sales. The data indicate that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and the higher interest rates intended to combat those rising prices. Average paychecks, particularly for lower-income Americans, have also risen sharply since the pandemic, which has allowed many Americans to continue spending even as many necessities became more expensive.
In August, sales jumped 1.4% for online retailers in August and rose 0.7% at health and personal care outlets. Yet they were flat for restaurants and bars, a sign that consumers are holding back from some discretionary spending. Gas stations reported a 1.2% drop in sales, which mostly reflected a decline in prices last month. Auto sales also ticked lower.
UAW Fears Stellantis Wants To Move Dodge Durango Production From Detroit To Canada
The United Auto Workers says it's worried Stellantis NV wants to move Dodge Durango SUV production from Detroit to Canada, adding that the company has refused to share any information about its vehicle plans or investments recently. The union said it filed an unfair labor practice charge with the National Labor Relations Board on Monday, which it said was prompted by its Durango concerns and inability to get more details from Stellantis. The filing alleged the automaker in recent months has been illegally "refusing to provide the Union with relevant information."
In its 2023 labor contract with Stellantis, the union secured certain vehicle and investment commitments at a number of U.S. plants. The Durango is built at the Detroit Assembly Complex, and the contract states that the full-size SUV will continue being built there — including after the next-generation gas and electric versions are introduced in 2026. But the Windsor Star recently reported that Durango production was expected to move to the Windsor Assembly Plant by 2026, citing product projections by Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions. In a Monday statement, Stellantis declined to directly address the Durango production location.
Boeing, Union Negotiators To Meet As Striking Workers Dig In
Negotiators at Boeing and its largest union are due to resume talks over a labor contract on Tuesday, as the planemaker seeks to bring a swift end to a strike that is costing the indebted company an estimated $100 million a day. More than 30,000 Boeing factory workers in the Seattle area went on strike on Friday after overwhelmingly rejecting their first full contract offer in 16 years, which included a 25% pay increase spread over four years but removed an annual performance bonus. Analysts expect it will take time to rebuild trust and bring another deal to workers who are venting frustration built up over a decade of stagnant wages and rising living costs.
Boeing and union negotiators are not expected to discuss details of a new offer at the meeting, which is more about setting out the rules of future talks, another source with knowledge of the mediation said. A prolonged strike could cost Boeing several billion dollars, fraying the planemaker's already strained finances and threatening a downgrade of its credit rating, analysts say. The strike is halting production of Boeing's strong-selling 737 MAX jets, along with its 777 and 767 widebody aircraft, delaying deliveries to airlines.
Report: Petroleum and Chemical Top Manufacturing Sector Offenders of Clean Air Act Compliance
A recent report on Clear Air Act (CAA) penalties from Mapistry, a software company in the EHS sector, delved into specific subsectors in manufacturing. At the top of the list was petroleum products manufacturing which had 1,410 notices of violation (NOV) issued in 2023. The number was almost twice as many as the chemical industry, which had 770 NOV. With regard to penalties, the chemical industry received the most penalties (231), followed by oil (227). Industries like computer and electronics, leather, and apparel manufacturing received the fewest NOVs relative to the number of businesses in their subsector.
The high penalty density and number of NOVs may be due to stringent regulatory scrutiny, inherent environmental risks, and the large scale of their operations, the report noted. Regulatory agencies might impose stricter compliance standards on high-risk industries due to their environmental impact, resulting in more inspections and enforcement actions. However, the use of older technologies and less efficient processes in these industries can also play a significant role in contributing to higher rates of non-compliance.
Yellow Loses Pension Ruling, Upending Shareholder Bankruptcy Bets
A bankruptcy judge ruled that failed trucker Yellow can’t escape its pension withdrawal liability, dealing a blow to other creditors and sending shares in the remnants of the business spiraling downward. Judge Craig Goldblatt, in a ruling late Friday, said Yellow is liable for billions of dollars in unfunded pension benefits for its 22,000 workers after it went out of business last year. Eleven pension funds say they are owed $6.5 billion because Yellow withdrew early from their plans.
The decision will severely limit how much Yellow can pay out to unsecured creditors, ranging from one of the country’s biggest railroads to a slew of mom-and-pop businesses. It will also hit hedge fund MFN Partners, which bought a roughly 42% stake in Yellow shortly before it filed for bankruptcy protection. Yellow had argued that the company shouldn’t have to pay a withdrawal liability, in part, because the plans received $41.1 billion in federal aid during the Covid pandemic. Judge Goldblatt rejected those arguments. He also rejected the size of some of the pension claims, which will be determined later.
Ozone Layer On Road To Recovery Despite Volcano Eruption, UN Weather Body Says
The world's ozone layer is on "the road to long-term recovery" despite a destructive volcanic eruption in the South Pacific, the World Meteorological Organization said on Tuesday, after efforts to phase out ozone-depleting chemicals. On current trends, the ozone layer is on track to recover to 1980 levels by around 2066 over the Antarctic, 2045 over the Arctic and 2040 for the rest of the world, the United Nations agency said.
The ozone layer protects the earth from the sun's ultraviolet radiation, which is linked to skin cancer and other health risks. The Montreal Protocol, which came into effect in 1989, agreed to phase out chlorofluorocarbons and other ozone-depleting substances, and its success "stands out as a powerful symbol of hope" at a time when multilateral cooperation has come under strain, said U.N. Secretary-General Antonio Guterres in a statement. CFCs have been largely replaced by hydrofluorocarbons, which do not cause ozone depletion but are a powerful climate-warming greenhouse gas.
Study: Truck Driver Detention a Big, Problem
It has been known for some time that making truck drivers wait excessively before they can deliver freight at shipper facilities is not just an annoyance, but creates serious safety and economic consequences as well, knowledge that has been bolstered by new research recently released by the American Transportation Research Institute (ATRI). Although driver detention has decreased slightly in the last few years, the overall costs of being detained at customer facilities for more than two hours at a time is substantial, ATRI points out.
In fact, the issue has been a continuing challenge since the origins of the for-hire trucking industry in the 1930s. It has become a safety issue because of stricter modern hours-of-service (HOS) regulations limiting driver work hours. Over the years, truckers’ representatives have continued to complain to the government about aid. Detention can take many forms and the causes are varied, the researchers found. It can be caused by scheduling issues on the customer’s part, inadequate parking and dock space, inadequate staffing at customer facilities, or upstream delays in production. The causes are many and varied.
Read more at Material Handling & Logistics