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Member Briefing September 3, 2024

September 3, 2024

Posted By: Harold King in Daily Briefing,

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Euro Zone Factories Stuck In A Rut As Asia Shows Tentative Signs Of Recovery

HCOB's final euro zone manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, stood at 45.8 in August, just ahead of a 45.6 preliminary estimate but well below the 50 mark separating growth from contraction. "The final August manufacturing PMI reading was yet another indication the recovery of the industrial sector will neither be immediate nor vigorous, as the euro zone index remains stuck in contractionary territory," said Riccardo Marcelli Fabiani at Oxford Economics.

The downturn in German manufacturing accelerated and in France activity contracted at the fastest pace since January. But in Britain factories had their strongest month in more than two years as demand at home offset a fall in exports, adding to signs of momentum in the economy.
China's Caixin/S&P Global manufacturing PMI rose to 50.4 in August from 49.8 in July, beating analysts' forecasts. The reading, mostly covering smaller, export-oriented firms, shows a more optimistic view than an official PMI survey on Saturday, which indicated an ongoing decline in manufacturing activity.
Factory activity in South Korea and Taiwan also expanded in August, while Japan saw a slower rate of contraction due in part to solid global demand for semiconductors.
India's manufacturing activity growth eased to a three-month low as demand softened significantly, casting another shadow over the otherwise robust economic outlook.

Read more at CNBC

U.S. Q2 GDP Revised Higher To 3.0% From 2.8%, Driven By Consumer Spending

U.S. Q2 GDP was revised to +3.0% from the advance estimate of +2.8% and vs. consensus of +2.8%. That compares with 1.4% growth in Q1 2024 GDP. The update primarily reflected an upward revision to consumer spending, the U.S. Department of Commerce said on Thursday. Personal consumption expenditures, i.e., consumer spending, rose 2.9% in Q2 according to the second estimate of GDP, up from 1.5% in Q1.

Consumer spending on both services and goods were revised upward. Within services, the largest contributor was nonprofit institutions serving households, led by nonprofit hospitals. In goods, the leading contributor was gasoline and other energy goods, the Commerce Department's Bureau of Economic Analysis said. KPMG US chief economist Diane Swonk noted that the upward revision to GDP "is what the Fed was aiming for. "Consumers discerning, not defeated," as the revision reflected cooler inflation and more discounting.

Read more at Seeking Alpha

Trade Deficit In Goods Widens Sharply To Highest Level In More Than Two Years, Could Impact Q3 GDP

The U.S. trade deficit in goods widened 6.3% to $102.7 billion in July, according to the Commerce Department’s advanced estimate released Thursday. That’s the largest deficit since May 2022. Economists polled by Econoday were looking for the deficit to widen to a $98 billion deficit from last month’s $96.6 billion gap. The larger deficit came from a jump in imports, which rose $6.1 billion to $275.6 billion. Exports were virtually unchanged at $172. 9 billion. Imports of consumer goods and autos have risen sharply, but a surge in imports of computer equipment and semiconductors has been the main driver, said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.

The report also showed a 0.3% gain in wholesale inventories in July. And advanced retail inventories were up 0.8%. Excluding autos, retail inventories were up 0.5%. The trade sector is going to continue to be a drag on GDP in the third quarter. In the April-June quarter, trade subtracted just under one percentage point from growth. “It is far too early in the quarter to predict the likely impact of net trade on third quarter GDP growth with any real confidence. But combining July’s advance goods trade data with some conservative assumptions about the rest of the quarter, and a penciling-in slight deterioration in the services trade balance due to the purchase of media rights for the Paris Olympics, tentatively points to net trade knocking somewhere in the region of 1% from headline GDP growth this quarter,” Allen from Pantheon said.

Read more at Forbes

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Policy and Politics

Empire Center: Most NYS Regions Still Haven’t Recovered Jobs Lost In Pandemic

Approaching the fifth Labor Day weekend since the COVID-19 outbreak of 2020, most regions of New York have yet to recover the private-sector jobs lost in the wake of pandemic lockdowns—and the Empire State trails far behind the rest of the U.S., according to the latest state and federal labor statistics. On a seasonally adjusted basis, the state Labor Department in July estimated total private employment at 8.4 million jobs, just 67,800 (0.8 percent) above the February 2020 level. While the nation as a whole recovered its pandemic job losses within two years of the March 2020 outbreak, New York didn’t match its pre-pandemic employment level until March of this year.

New York’s job recovery has also been among the weakest compared to other states. The Empire State’s employment growth since February 2020 ranked 39th out of 50 states. Among large industrial states, only Illinois ranked lower, with no net job growth during the period. By contrast, job growth came to 10 percent in Texas and 11 percent in Florida; even California, whose pandemic restrictions rivaled New York’s, has experienced three times New York’s rate of job growth.

Read More at The Empire Center

Environmentalists Worry N.Y.'S 2019 Climate Law Could End Up Paused Like Congestion Pricing

Later this week, Gov. Kathy Hochul will convene an energy summit with state officials and business leaders to discuss reaching New York’s self-mandated climate goals. But some critics argue that Hochul could be gearing up to announce a pause of this major green energy policy — calling it a potential congestion pricing 2.0. Hochul has been concerned with affordability. With congestion pricing, she argued paying $15 to drive below 60th Street in Manhattan is too much of a burden.

Reports released this summer slammed the state for falling behind on its clean energy goals. One audit released by state Comptroller Tom Dinapoli’s office criticized the Hochul administration for poor planning. “At the end of the day, the lights can’t go off, and it needs to be affordable. So I think this summit is part of that announcement to talk about the future and what we need to keep the lights on in this state,” Gavin Donohue, president of the Independent Power Producers of New York, Inc. said. “At the end of the day, the lights can’t go off, and it needs to be affordable. So I think this summit is part of that announcement to talk about the future and what we need to keep the lights on in this state,” he said. But others say slowing down a transition to renewable energy would be more costly in the long run.

Read more at New York State of Politics

Energy Expert Says New York Should Consider Climate Strategy Changes

Over the course of the 32 meetings from early 2020 to late 2022, New York's Climate Action Council developed a scoping plan to meet the state's energy and emission reduction goals. Phillips Lytle head of energy and sustainability Dennis Elsenbeck was one of only three members to vote against the final plan. In his dissent, Elsenbeck questioned the readiness of the power grid. "We made a lot of assumptions or at least the membership made a lot of assumptions that the electric system was actually prepared to become an electrified economy and that by any stretch of the imagination was not true," he said.

In a July report, the Public Service Commission suggested the state is unlikely to reach its legislatively mandated goal of 70% renewable electricity by 2030. The governor has since expressed openness to flexibility as critics have called for the state to push back deadlines or amend the 2019 Climate Leadership and Community Protection Act entirely. "To be honest, I give the governor a lot of credit that she is standing up and saying lets revisit, let's really look at the climate objectives realistically," he said. Elsenbeck is attending next week's energy summit in Syracuse and believes it is a good start toward still aggressive but, in his opinion, more feasible and strategic plans and goals, including better engagement of the private sector.

Read more at New York State of Politics

Health and Wellness

Surgeon General Urges More Governmental Support For Parents Amid Mental Health Struggles

The U.S. surgeon general has named increasing stress and declining mental health among parents as the latest critical public health issue facing the American public in a new advisory Wednesday, in which he calls on more support for parents and families from the government, schools, employers and community organizations. Surgeon General Vivek Murthy says there is an "urgent need" to better support American parents and caregivers as severe and prolonged stretches of extreme stress stand to have long-term impacts both on the mental health of parents and the children they raise.

The "tremendous pressures" on parents has “a profound impact on the health of our children and the health of society," Murthy said in a press release, specifically pointing to stress triggered by financial strain, time demands, parental isolation and loneliness and concerns about children’s health and safety. Murthy also warned that the children of parents who struggle with mental health are themselves more likely to develop depression and anxiety and other conditions. In the advisory, Murthy called on the government, schools, employers, social service systems and others to better support parents through policy changes, specifically calling out access to paid family leave and childhood education and childcare.

Read more at Forbes

NYS COVID Update

The Governor updated COVID data for the week ending August 23^rd.

Deaths:

Weekly: 42
Total Reported to CDC: 83,850

Hospitalizations:

Average Daily Patients in Hospital statewide: 1,157
Patients in ICU Beds: 116

7 Day Average Cases per 100K population

9.1 positive cases per 100,00 population, Statewide
11.0 positive cases per 100,00 population, Mid-Hudson

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Election 2024

Industry News

Threat of Strike This Fall Hangs Over U.S. Ports

Efforts to avoid a walkout by dockworkers at some of the nation’s busiest seaports are entering a crucial phase. Union officials representing 45,000 workers at ports from Maine to Texas will meet for two days in New Jersey starting Wednesday to discuss wage demands and prepare to strike on Oct. 1. Harold Daggett, the head of the union that represents dockworkers at U.S. East and Gulf Coast ports, this month said the International Longshoremen’s Association and employers are “at an impasse” over wages and that his members will walk out if the union doesn’t reach a new labor deal before the current multiyear contract expires on Sept. 30.

The union and the United States Maritime Alliance, which represents ocean shipping companies and port employers, have been talking informally for months, but still haven’t begun formal talks that will include thorny issues such as the use of automated machinery on the docks. The ILA is pushing for a 77% increase for workers over six years, according to a person familiar with the talks, far more than the 32% increase the International Longshore and Warehouse Union won for dockworkers at West Coast ports last year. Shipping industry officials as well as business groups representing major importers are concerned. Rolf Habben Jansen, CEO of German shipping line Hapag-Lloyd, said on a recent earnings call that the risk of a strike “has really gone up.”

Read more at The WSJ

NLRB Rejects Amazon Challenges To Staten Island Union Win

The National Labor Relations Board on August 29 denied Amazon’s challenge to the election that saw its workers vote to unionize for the first time at a Staten Island, New York, warehouse in 2022. The ruling certifies the election, and allows the Amazon Labor Union (ALU) to act as a representative in bargaining wages and conditions for the warehouse’s roughly 8,000 workers. But, according to Bloomberg Law, the union, which recently joined forces with the International Brotherhood of Teamsters, faces a long road to reach the bargaining table with Amazon, which already plans to challenge the NLRB decision.

Workers at the Staten Island warehouse won 2,654 yes votes versus 2,131 no votes in the April 2022 election, hailed as a landmark by union leaders. Amazon argued in its filing with the NLRB that the vote was tainted by organizers and by the board’s regional office in Brooklyn that oversaw the election. The company called for a redo election, but pro-union experts said this was an effort to delay contract negotiations and potentially blunt some of the organizing momentum, according to the Guardian. Meanwhile, all attempts to unionize at other U.S.-based Amazon warehouses have failed.

Read more at Supply Chain Brain

Personal Consumption Expenditures Index, The Fed’s Favorite Inflation Indicator, Increased 0.2% In July, As Expected

Inflation edged higher in July, according to a measure favored by the Federal Reserve as the central bank prepares to enact its first interest rate reduction in more than four years. The Commerce Department reported Friday that the personal consumption expenditures price index rose 0.2% on the month and was up 2.5% from the same period a year ago, exactly in line with the Dow Jones consensus estimates. Excluding volatile food and energy prices, core PCE also increased 0.2% for the month but was up 2.6% from a year ago.

Core prices less housing increased just 0.1% on the month. As other inflation components ease, shelter has proven to be stubborn, again rising 0.4% in July, according to Friday’s report.
Elsewhere in the report, the department’s Bureau of Economic Analysis said personal income increased 0.3%, slightly higher than the 0.2% estimate, while consumer spending rose 0.5, in line with the forecast. Spending continued at a solid clip even though the personal savings rate fell to 2.9%, the lowest since June 2022.
From a prices standpoint, inflation changed little over the past month. The BEA said that goods prices fell by less than 0.1% though services increased 0.2%.
On a 12-month basis, goods also were off by less than 0.1%, while services jumped 3.7%. Food prices were up 1.4% and energy accelerated 1.9%.

Read more at CNBC

Nippon Steel Sweetens Offer For US Steel

Japan’s Nippon Steel Corporation this week promised to invest an additional US$1.3bn into United States Steel Corporation if its takeover of the iconic US steelmaker is allowed to go ahead, according to local reports. Pittsburgh-based US Steel’s shareholders accepted an offer last December from Nippon Steel to acquire their company in a cash deal valued at US$14.9bn, including debt. But a final deal has been held up by widespread political opposition to a foreign takeover of this important US asset, as well by opposition by United Steelworkers - the company’s main labour union.

This latest offer is aimed at sweetening the deal, with an additional US$1bn to be made available to improve the competitiveness of the Mon Valley Works in Pennsylvania by upgrading facilities to produce high-grade automotive steel and create additional jobs. The remaining US$300m would be invested in the Gary Works in Indiana to upgrade the blast furnace and extend the plant’s operational life by up to 20 years. Nippon Steel’s vice chairman Takahiro Mori said in a statement: “We seek to provide the highest-quality American-made steel products to American customers, fueled by American workers, while also securing American steel supply for the future.”

Read more at Yahoo Finance

Dell Beats Estimates As Server Sales Soar 80%, Riding AI Wave

Dell reported quarterly results on Thursday that beat Wall Street expectations, powered by an 80% increase in server sales. The stock rose more than 3% in extended trading. The company reported revenue of $25.06 billion vs. $24.53 billion expected. EPS was $1.89 adjusted, vs. $1.71 expected. Net income climbed 85% to $841 million, or $1.17 per share, from $455 million, or 63 cents per share, in the year-ago period. Revenue increased about 9% from $22.93 billion a year ago.Dell revised its full-year guidance to between $95.5 billion and $98.5 billion, a slight upward revision from the company’s previous forecast. Earlier this year, the company told investors to expect revenue between $93.5 billion and $97.5 billion for the full year, up from $88.4 billion in the prior year.

Dell has emerged as a top vendor for servers that can handle artificial intelligence workloads, especially those based around Nvidia chips, as demand skyrockets from cloud providers. Earlier this year, Nvidia CEO Jensen Huang called out Dell founder Michael Dell as the person to contact to place orders for systems that include the company’s new chips. AI sales are in the company’s Infrastructure Solutions Group, which makes servers and systems for data centers. It’s the company’s fastest-growing unit. Overall ISG sales rose 38% to $11.65 billion, ahead of StreetAccount expectations of $10.44 billion.

Read more at CNBC

Apple iPhone 16 And iPhone 16 Plus: Everything We Know So Far

Apple is set to reveal its latest products in a keynote on Monday, September 9 and a new report suggests that everything is on schedule. The iPhone 16, iPhone 16 Plus, iPhone 16 Pro are expected to be unveiled, then go on sale on Friday, September 20. The iPhone 16 and 16 Plus will at first glance resemble the iPhone 15 and iPhone 15 Plus, at least from the front. Turn them round, though, and the most noticeable change seems set to be a reorientation of the two rear cameras, which will probably be vertical, not diagonal. This will mean, among other things, that users can shoot spatial video, that gorgeous 3D format you can play back on the Apple Vision Pro. Right now, only the iPhone 15 Pro and Pro Max can tackle this.

While current models have different processors for the Pro and non-Pro handsets, it looks like Apple will put the A18 chip in all the class-of-2024 phones. That’s because of one of the big advances this year: Apple Intelligence, the company’s artificial intelligence platform, which needs a fast chip to work. It’s also thought that the next chips will double down on avoiding thermal issues and overheating, which—briefly—dogged the current iPhone 15 Pro. Things will be confirmed on September 9, but expect the new iPhones to be on sale on Friday, September 20, with pre-orders opening a week before.

Read more at Forbes

Lockheed Assigned $5B for F-35 Program

Lockheed Martin Corp. has drawn three new awards from the U.S. Dept. of Defense, totaling $5.11 billion and all relating to the F-35 Joint Strike Fighter program, the single-engine aircraft in use by the U.S. Air Force, U.S. Marine Corps, and U.S. Navy, as well as defense forces in 19 other nations. The three different F-35 models represent the largest and most expensive U.S. defense program, led by Lockheed and involving 1,650 manufacturing partners.

More than 1,000 F-35 jets have been delivered to date, and the manufacturers are now developing a comprehensive update to the aircraft to incorporate more advanced weapons systems and strategic capabilities, including new aircraft propulsion and data acquisition and processing systems. The largest award, a $3.91-billion firm-fixed-price contract, calls for Lockheed to design, develop, integrate, test, produce, and deploy an F-35 training and simulation system. The same award will cover modifications/upgrades, and sustainment of the training and simulation system.

Read more at American Machinist

GM Delays Indiana Battery Factory in Latest EV Pullback

General Motors GM 0.03%increase; green up pointing triangle said it would delay the start of production at a planned battery plant in Indiana by about a year, to 2027, the company’s latest downshift in its move to electric vehicles. The Detroit-based automaker and Korean partner Samsung SDI 006400 -0.84%decrease; red down pointing triangle disclosed the new timeline for the plant in a news release Tuesday, as they formalized plans to move forward with the $3.5 billion factory in New Carlisle, Ind.

GM and its Detroit rival Ford Motor have delayed or canceled several electric-vehicle models, and production targets over the past year as U.S. consumers have been slower to embrace EVs than the automakers had once expected. GM in July said it would delay plans for a new Buick electric vehicle and push back the opening of an EV truck factory for the second time. It also abandoned a goal of having enough factory capacity in North America to make one million EVs in 2025. GM Chief Executive Mary Barra has said the company is still positioning itself for an all-electric future, even if it is slower to materialize than her team originally expected.

Read more at The WSJ

State Sets Record For Tourism In 2023 As Industry Booms Locally

Governor Kathy Hochul announced on Wednesday that the state set a record with 306.3 million visitors, while also setting new historic highs for direct visitor spending and total economic impact associated with the state’s tourism industry. Tourism in the Hudson Valley and the Catskills played a large role in the windfall. Visitors to the state contributed to a record-high $88 billion in direct spending and supported a historic $137 billion in total economic impact across the state. The data was compiled in a series of reports by Tourism Economics and represents significant gains over the then-record-setting numbers from 2022.

According to the report, tourism in Hudson Valley generated $614 million in state and local taxes in 2023. Sales, property, and hotel bed taxes contributed $346 million in local taxes. Westchester County constituted 42.2 percent of the region’s tourism tax base. Meanwhile in the Catskills last year, visitor spending and tourism-related employment grew to $2.5 billion. Traveler spending was up most in Sullivan County by nine percent relative to 2022 levels. Ulster County represents 42 percent of the region’s tourism sales, with $1,033 million in direct tourism spending.

Read more at Mid-Hudson News

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