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Member Briefing September 30, 2024

September 30, 2024

Posted By: Harold King in Daily Briefing,

Top Story

Durable Goods Orders Flat in August

Durable goods orders edged slightly higher August, a development that was something of a surprise after a major surge in July had most forecasters braced for give-back. Remarkably, the scant gain in August came despite a slight upward revision that lifted the July orders increase to 9.9%. An expected drop in civilian aircraft orders of 7.5% was slightly offset by an 8.0% pick-up in defense-related aircraft spending. The non-defense aircraft category is much larger than defense spending. Orders for motor vehicles and parts increased a bit in August, though the 0.2% gain here is not nearly enough to offset back-to-back monthly decline in the prior months.

While the trend increase continued for orders of computer and electronics products, a new development in August is some signs of life in old-line manufacturing. Primary and fabricated metals orders both rose and demand for machinery lifted orders there by 0.5% in August.

Read more at Wells Fargo

Fed's Favored Inflation Gauge Shows Cooling Price Pressures, Clearing Way For More Rate Cuts

The Federal Reserve's preferred inflation measure on Friday provided the latest sign that price pressures are easing, a trend that is expected to fuel further Fed interest rate cuts this year and next. Prices rose just 0.1% from July to August, the Commerce Department said, down from the previous month’s 0.2% increase. Compared with a year earlier, inflation fell to 2.2%, down from 2.5% in July and barely above the Fed's 2% inflation target.

Excluding volatile food and energy costs, so-called core prices rose just 0.1% from July to August, also down from the previous month’s 0.2% increase. Compared with 12 months earlier, core prices rose 2.7% in August, slightly higher than in July. Friday's report also showed that Americans' incomes and spending ticked up only slightly last month, with both rising just 0.2%. Still, those tepid increases coincide with upward revisions this week for income and spending figures from last year. Those revisions showed that consumers were in better financial shape, on average, than had been previously reported. Americans also saved more of their incomes in recent months, according to the revisions, leaving the savings rate at 4.8% in September, after previous figures had shown it falling below 3%.

Read more at Wells Fargo

OECD Sees Global Growth Stabilizing At 3.2% This Year

The world economy was projected to grow 3.2% both this and next year, the Organisation for Economic Cooperation and Development forecast, nudging up its 2024 forecast from 3.1% previously while leaving 2025 unchanged. As the lagged impact of central bank tightening evaporates, interest rate cuts would boost spending going forward while consumer spending benefitted from lower inflation, the OECD said in an update of its latest economic outlook.

U.S. growth was expected to slow from 2.6% this year to 1.6% in 2025 though interest rate cuts would help cushion the slowdown, the OECD said, trimming its 2025 estimate from a forecast of 1.8% in May.
The Chinese economy, the world's second-biggest, was seen slowing from 4.9% in 2024 to 4.5% in 2025 as government stimulus spending is offset by flagging consumer demand and a real estate rut.
The euro zone would help make up for slower growth in the two biggest economies next year with the 20-nation bloc's growth forecast to nearly double from 0.7% growth this year to 1.3% as incomes grow faster than inflation.
The OECD hiked its outlook for the UK economy amid high wage growth, projecting the UK economy expanding by 1.1% in 2024 and 1.2% in 2025, up from May forecasts for 0.4% this year and 1% next year.

Read more at Reuters

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Policy and Politics

Will Hochul Try To Remove Eric Adams From Office?

With the indictment of New York City Mayor Eric Adams, Gov. Kathy Hochul finds herself in a uniquely powerful position: She could unilaterally decide to remove him from power thanks to a little-used state law. But despite the ever growing chorus of voices calling on Adams to step down amid new charges of bribery, wire fraud and soliciting donations from foreign nationals, Hochul is unlikely to take the nuclear option unless she gets key support from political power players.

Under the state’s Public Officers Law, she has the authority to remove the mayor of any city in the state – including New York City. The power is broad, containing no stipulations about the circumstances under which the governor can exercise that authority. But there’s very little precedent for using the power to remove a New York City mayor. Historically, it has only been used for that purpose once, when former Gov. Franklin Roosevelt initiated removal proceedings against former Mayor Jimmy Walker. Even then, Walker resigned before the removal process was completed. It would be a monumental decision by Hochul to try to remove Adams now.

Read more at City & State

What Do Immigrants Do for Government Budgets?

Among the benefits economists often say immigration brings to aging Western countries is a healthier public purse. Having more immigrants expands the supply of young, productive workers to pay the taxes that finance the pensions and healthcare of the elderly, the argument goes. New research shows the fiscal impact of immigration is not that simple. The fiscal benefits are clear for high-skilled immigrants, but less so, and possibly even negative, for the lower skilled, according to some studies.

in aggregate, the recent surge in immigrants will reduce the federal deficit, the Congressional Budget Office found; it indicated this was more so for higher- than lower-skilled migrants, although it said an increase in less-educated workers would also trigger stronger wage growth for the more educated people needed to work with them. Low-skilled immigrants, many claiming asylum, make up an unusually large share of recent arrivals on both sides of the Atlantic. The CBO didn’t estimate the impact of the surge on state and local budgets, but said it expected those costs to outweigh revenues.

Read more at The WSJ

NAM’s Timmons: White House Must Intervene in Ports Talks if Necessary

The White House should intervene in labor contract negotiations between the International Longshoremen’s Association and the U.S. Maritime Alliance, NAM President and CEO Jay Timmons told CNBC Friday. “We still have a few days left, and hopefully negotiations will continue and there will not be a strike,” Timmons told CNBC anchor Frank Holland on “Worldwide Exchange.” ILA members have vowed to go on strike at major East and Gulf Coast ports at midnight Monday if a labor deal is not reached. On Thursday USMX filed an unfair labor practice charge against the dockworkers’ union, telling the the National Labor Relations Board the ILA was refusing to negotiate.

“I think that’s the most important thing that can happen: Both sides come to the table, try to work something out. But if it doesn’t happen, I think it’s incumbent on the administration to take a hard look at invoking Taft-Hartley, [which] happened during the administration of George W. Bush,” he added, referring to the time in 2002 that then-President Bush invoked an emergency provision to reopen 29 West Coast ports where workers were striking.

Read more at Sourcing Journal

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Health and Wellness

Long COVID Changes Brain Structure, Scans Reveal

The extreme mental and physical fatigue brought on by long COVID may be a result of structural changes in the brain, new research suggests. These observable changes not only promise to improve the diagnosis of the chronic disease but could also open new avenues for potential treatments. Among the more than 200 symptoms associated with long COVID, brain fog and fatigue are two of the most widespread and long-lasting. A recent study, published in the journal Scientific Reports, found that nearly 90 percent of people with long COVID experienced fatigue, forgetfulness and brain fog.

In a new study published in the journal Psychiatry Research, researchers from the Complutense University of Madrid scanned the brains of 129 long COVID patients to evaluate changes in brain structure and function in these patients. Eighty-six percent of these patients suffered from chronic fatigue, which was highly correlated with other cognitive complaints like brain fog. Those who experienced fatigue also showed structural changes in their brains associated with how different brain regions were able to communicate. The regions affected included the frontal lobe—which is involved in things like planning, reasoning and problem-solving—and the temporal lobe, which is associated with memory and processing.

Read more at Newsweek

NYS COVID Update

The Governor updated COVID data for the week ending September 27^th.

Deaths:

Weekly: no data
Total Reported to CDC: no data

Hospitalizations:

Average Daily Patients in Hospital statewide: 1,019
Patients in ICU Beds: 121

7 Day Average Cases per 100K population

8.7 positive cases per 100,00 population, Statewide
10.9 positive cases per 100,00 population, Mid-Hudson

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Industry News

Boeing, Union to Resume Labor Negotiations

Boeing is due to resume negotiations with the International Association of Machinists and Aerospace Workers (IAM) on Friday, September 27, as the strike by 33,000 International Assn. of Machinists and Aerospace Workers enters a third week. The new round of discussion follows a report that surveys of striking workers showed no interest in an updated proposal that Boeing put forth, which it described as a “best and final” offer. “The union is ready for this opportunity to bring forward the issues that members have identified as critical to reaching an agreement,” according to a statement by an IAM local union official, ahead of the new negotiating session.

The labor action affects Boeing’s operations in Washington State and Oregon, and to a lesser extent in other locations, and it is predicted to be costing Boeing about $1 billion per month in lost revenue on two of its major commercial aircraft programs, the 737 MAX and 777. Reportedly, 737 MAX production has come to a full stop due to the strike, tying the labor impasse to Boeing’s other outstanding problem – quality and safety standards in the its aircraft manufacturing and assembly processes. The strike is also disrupting Boeing’s suppliers’ activities, with fuselage supplier Spirit AeroSystems reported to be planning layoffs as a result of reduced production volumes.

Learn more at American Machinist

China’s Industrial Profits Plunge By 17.8% In August From A Year Ago

China’s industrial profits plunged by 17.8% in August from a year ago in their largest decline in more than a year, National Bureau of Statistics data showed Friday. That followed a 4.1% year-on-year increase in July, the fastest pace in five months. Industrial profits data covers factories, mines and utilities in China. The 17.8% drop was the steepest since an 18.2% drop in April 2023, according to official data accessed through Wind Information. The statistics bureau attributed the large decline in August to a high base in the year ago period. In August 2023, the same monthly figure expanded 17.2% from a year ago.

“There is a long-running decline in China’s industrial profits which can only get worse with Beijing failing to address its overcapacity problem,” Shehzad Qazi, chief operating officer at China Beige Book, a U.S.-based research firm, said in an email. He expects the country to double down on exports manufactured goods, from electric cars to steel, to drive economic growth. Smelters and processors of metals other than iron saw the largest profit gains during that time. Also reporting significant profit gains for the period were electronic equipment manufacturers and the food processing industry, the statistics bureau said.

Read more at CNBC

Stellantis Cutting Jobs to Deal with Market Conditions

Automaker Stellantis is trimming almost 200 jobs at the Sterling Heights (Mich.) Automotive Assembly plant, a step that is likely to worsen its strained relations with the United Autoworkers union. The UAW earlier this month filed a grievance against Stellantis with the National Labor Relations Board alleging the company is reneging on commitments made in the 2023 labor agreement.

In a statement Stellantis confirmed it is reducing the UAW workforce at multiple locations as it works to address “continued intense external market conditions and, at the same time, (offer) customers vehicles they can afford. We are continuing to take the necessary actions to improve operations…including implementing indefinite layoffs of represented employees across its (sic) footprint”. According to a UAW report, the automaker will cut 191 workers at Sterling Heights, of whom 177 listed as temporary or supplemental workers. More supplemental workers are due to be terminated at the Toledo (Ohio) Assembly Complex. The Michigan plant assembles the RAM 1500 light pickups and the Ohio plant assembles Jeep Wrangler SUVs and Gladiator pickups.

Read more at American Machinist

Volkswagen Cuts 2024 Outlook (Again) As Car Demand Falters

Volkswagen cut its annual outlook for the second time in less than three months on Friday, citing a weaker-than-expected performance at its passenger car division as pressure on Europe's top automaker continues to rise. The lowered outlook is the latest from Germany's car giants, with Mercedes-Benz and BMW both downgrading their annual forecasts earlier this month as a result of weakening demand in China, the world's biggest car market. It also comes two days after Volkswagen kicked off crucial talks with IG Metall, Germany's most powerful union, over pay and job protection, a historic conflict that could lead to the first German factory closures in the carmaker's history.

Volkswagen now expects a profit margin of around 5.6% in 2024, down from 6.5-7% previously and below the 6.5% LSEG estimate, while sales are expected to fall by 0.7% to 320 billion euros ($356.7 billion) after the company had initially expected an increase of up to 5%. The German carmaker, which owns majority stakes in Porsche AG and truck giant Traton, also cut its outlook for global deliveries to around 9 million, down from a prior forecast of a rise of up to 3% from 9.24 million vehicles in 2023.

Read more at Reuters

The U.S. Wants To Triple Nuclear Power By 2050

The U.S. needs to at least triple its nuclear fleet to keep pace with demand, slash carbon-dioxide emissions and ensure the nation’s energy security, said Mike Goff, acting assistant secretary for the Office of Nuclear Energy at the Department of Energy. The U.S. currently maintains the largest nuclear fleet in the world with 94 operational reactors totaling about 100 gigawatts of power. The fleet supplied more than 18% of the nation’s electricity consumption in 2023.

The U.S. needs to add 200 gigawatts of nuclear, Goff told CNBC in an interview. This is roughly equivalent to building 200 new plants, based on the current average reactor size in the U.S. fleet of about a gigawatt. Recently shuttered coal plants, those expected to retire, and currently operating plants with no estimated shutdown date yet could provide space for up to 174 gigawatts of new nuclear across 36 states, according to a Department of Energy study published earlier this month.

Read more at CNBC

Bosses Are Firing Gen Z Workers In Record Time

Companies are axing Gen Z workers just months after hiring them fresh from college, a new report has found. Six in ten employers had already fired some college graduates they had recruited earlier in the year, a survey conducted by Intelligent.com found. One in seven the employers said they also might not hire fresh college grads next year after finding a raft of problems with young workers.

Business leaders listed concerns in areas such as communications skills and professionalism that made them wary of hiring Gen Z. They also said the workers of that age are often unmotivated and need to be constantly told what to do - rather than using their initiative - is another issue. Three-quarters of companies surveyed said some or all of their recent graduate hires were unsatisfactory in some way. A half said their Gen Z hires had a lack of motivation, making them difficult to work with.

Read more at The Daily Mail (UK)

Pentagon Makes Early Pick of Northrup Grumman For Hypersonic Interceptor Developer

The Missile Defense Agency has chosen Northrop Grumman to design an interceptor capable of defeating hypersonic weapons in the glide phase of flight, the agency announced Wednesday. MDA director Lt. Gen. Heath Collins revealed earlier this summer that the agency would soon choose between Raytheon and Northrop who were competing to design the Glide Phase Interceptor, or GPI. MDA made the decision in favor of Northrop together with the Japanese government, which is signed on to co-develop the capability.

The company’s win comes after it recently lost another big MDA competition to develop the Next-Generation Interceptor that will replace interceptors that make up the Ground-Based Midcourse Defense System. That system is designed to defend the continental U.S. from intercontinental ballistic missile threats from North Korea and Iran. Lockheed Martin was chosen earlier this year in another early downselect. MDA director Lt. Gen. Heath Collins revealed earlier this summer that the agency would soon choose between Raytheon and Northrop who were competing to design the Glide Phase Interceptor, or GPI.

Read more at Defense News

Blue Origin’s New Glenn Completes Second Stage Hotfire

Earlier this week, Jeff Bezos’ space company Blue Origin successfully test-fired the second stage of its next generation rocket, the New Glenn. The test lasted about 15 seconds and the company reported success for both the engine fire and the different subsystems it was testing. The test marks a milestone for the company in making a play for Earth’s orbit. Although it has successfully launched rockets 26 times (including eight launches with space tourists like William Shatner), all of those flights have been suborbital–in space, yes, but never making a trip around the planet or putting up a satellite.

Blue Origin states that it is still on track to launch the big rocket for the first time in November. But getting to that point still requires putting together the first and second stages of the rocket, which can be tricky the first few times. It also has to hope the weather cooperates–Hurricane Helene is likely to delay the timing of launches in Florida, as will any hurricanes or tropical storms that crop up in the remaining months of the year.

Read more at Blue Origin

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