Member Briefing September 4, 2024
ISM: Manufacturing PMI® at 47.2%. A ‘Slower Contraction’ in August Than July
"The Manufacturing PMI® registered 47.2 percent in August, up 0.4 percentage point from the 46.8 percent recorded in July. While still in contraction territory, U.S. manufacturing activity contracted slower compared to last month. Demand continues to be weak, output declined, and inputs stayed accommodative. This according to Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee. The overall economy continued in expansion for the 52nd month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy.)
- The New Orders Index remained in contraction territory, registering 44.6 percent, 2.8 percentage points lower than the 47.4 percent recorded in July.
- The August reading of the Production Index (44.8 percent) is 1.1 percentage points lower than July's figure of 45.9 percent.
- The Prices Index registered 54 percent, up 1.1 percentage points compared to the reading of 52.9 percent in July.
- The Backlog of Orders Index registered 43.6 percent, up 1.9 percentage points compared to 41.7 in July.
- The Employment Index registered 46 percent, up 2.6 percentage points from July's figure of 43.4 percent.
"Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and election uncertainty.” Fiore Added
US Pending Home Sales Gauge Drops to Lowest on Record
A gauge of pending US sales of existing homes sunk in July to the lowest level on record, as high prices and borrowing costs continue to scare buyers away. A National Association of Realtors index of contract signings fell 5.5% to 70.2 last month, the lowest in data back to 2001, the group said Thursday. The drop was larger than all estimates in a Bloomberg survey of economists and reflected declining sales in all four major regions. “The positive impact of job growth and higher inventory could not overcome affordability challenges and some degree of wait-and-see related to the upcoming US presidential election,” NAR Chief Economist Lawrence Yun in a statement.
While mortgage rates have declined this month to the lowest in over a year, high prices and limited inventory are deterring prospective buyers who might still be holding out for cheaper rates. The contract rate on a 30-year fixed mortgage is now below 6.5% in the wake of recent comments from Federal Reserve Chair Jerome Powell, who said last week “the time has come” for the central bank to cut interest rates. Lower borrowing costs would help ease one the least affordable housing markets in history. An index of US home prices by S&P CoreLogic Case-Shiller hit a fresh record on Tuesday, with prices up 5.4% in the year through June.
Preliminary Estimates of Q2 Corporate Profits Up Year on Year
Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the second quarter of 2024, according to the "second" estimate released by the U.S. Bureau of Economic Analysis. In the first quarter, real GDP increased 1.4 percent. The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.8 percent. The update primarily reflected an upward revision to consumer spending (refer to "Updates to GDP").
Economy-wide corporate profits rose 1.7% in the second quarter and are up 8% from Q2 2023. Domestic industry profits grew 2.7% from the previous quarter and are up 10.1% in the past year. Profits for domestic nonfinancial corporations increased by $29.2 billion, reversing a $114.5 billion decline. Profits for domestic nonfinancial corporations are up 1.3% in the past quarter and 6.4% in the past year. Profits from the rest of the world saw a 3.5% decline in the second quarter.
Read more at The Bureau of Economic Analysis
Global Headlines
Middle East
- Israel And Hamas: The Latest News – The Guardian
- Netanyahu Refuses to Budge on War Despite Protests Over Hostages - Yahoo
- Yemen’s Houthi Rebels Target Oil Tanker In The Red Sea. US Says Rebels Also Hit Saudi-Flagged Tanker - AP
- Israeli Attacks In Gaza Kill 33 Palestinians But Pauses Allow Third Day Of Polio Vaccinations - Reuters
- Netanyahu Condemns UK’s Decision To Suspend Some Arms Sales To Israel - Forbes
- Killing of Israeli American Hostage Prompts Outpouring of Grief Across U.S. - NYT
- Israel Announces Killing Of Hamas Militant Seen In October 7 Attack Video - VOA
- US captures ISIS leader in Syria – The Hill
- As Iran Threatens Israel, The Danger Of Tehran’s Long-Vaunted Missile Program Remains In Question - AP
- 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
- IAEA Chief Meets Ukrainian Energy Chiefs On Way To Nuclear Plant - Reuters
- Russian Missiles Strike Ukrainian Military Academy, Killing More Than 50 – France 24
- Russian Missile Strike Kills 41 People And Wounds 180 In Ukrainian City Of Poltava - AP
- Russian Missiles Target Kyiv On First Day Of School Year - BBC
- Zelenskyy Says Ukraine Plans To Indefinitely Hold Russian Territory It Has Seized - NBC
- Deadliest Russian Missile Strike This Year Highlights Ukraine’s Air-Defense Shortage - WSJ
- Russian Leader Putin Visits Mongolia, Defies International Warrant For His Arrest - VOA
- US Close To Agreeing On Long-Range Missiles For Ukraine; Delivery To Take Months - Reuters
- Two Ukrainian Top Guns Lobbied for F-16s. They Won’t Get to See if the Jets Help Fend Off Russia. - WSJ
- 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
- Pope Francis Begins Historic Asia Pacific Trip - BBC
- Brazil Economy Soars Past All Forecasts - Yahoo
- Venezuelan Strongman’s $13 Million Plane Seized, Flown to Florida – WSJ
- Venezuelan Judge Issues Arrest Warrant For Opposition’s Former Presidential Candidate - AP
- Burkina Faso Junta Faces Outcry After Militants Kill Scores In Barsalogho - Reuters
- European Officials Vow To Boost Defense Production, But Some Worry It Won’t Be Enough – Defense One
- Shortages and delays hit morale of Kenyan officers in Haiti - Reuters
- Gun Crime Soars As Brussels Becomes New Drug Trafficking Hub – France 24
- Bangladesh Floods Leave 71 Dead, Fears Of Waterborne Disease Rise – The Reuters
Policy and Politics
Former Aide to Hochul and Cuomo Is Charged as Chinese Agent
A former New York state government official who worked for former Gov. Andrew Cuomo and current Gov. Kathy Hochul was charged Tuesday with acting as an undisclosed agent of the Chinese government, federal prosecutors revealed in a sprawling indictment. Linda Sun, who held numerous posts in New York state government before rising to the rank of deputy chief of staff for Hochul, was arrested Tuesday morning along with her husband, Chris Hu, at their $3.5 million home on Long Island.
Prosecutors said Sun, at the request of Chinese officials, blocked representatives of the Taiwanese government from having access to the governor’s office, shaped New York governmental messaging to align with the priorities of the Chinese government and attempted to facilitate a trip to China for a high-level politician in New York, the indictment said. Hu is charged with money laundering conspiracy, conspiracy to commit bank fraud and misuse of means of identification.
4 Things That Could Complicate Congress’s Efforts To Avert Shutdown
Congress is staring down a deadline this month to prevent a government shutdown, as members on both sides of the aisle have made clear a stopgap of some kind will be needed to keep the lights on. Lawmakers have until Sept. 30 to pass legislation to prevent a funding lapse. And while November’s elections could make the chances of a shutdown less likely, leaders have their work cut out for them amid deep divides on spending.
Among the things that could complicate those efforts are: The Duration of the continuing resolution, the ‘Proof of Citizenship Voting Bill’, spending levels, and the Veterans Administration’s budget shortfall. Republicans and Democrats in both Houses remain far apart on these and other issues.
Europe’s Top Court Rebukes Competition Regulator, Curbing Powers
Europe’s top court rebuked European Union competition regulators for overreach in a ruling that is set to curb the bloc’s powers to target smaller takeovers. The European Court of Justice said Tuesday the EU’s competition authority lacked jurisdiction to review U.S. gene-sequencing company Illumina’s ILMN -1.78%decrease; red down pointing triangle takeover of cancer-test maker Grail and that the legal tool it relied on to look at the case was used improperly.
The decision is expected to trigger a wider debate on how to handle deals that regulators believe could pose a threat to competition in Europe in the future, but where a company being acquired has little or no current revenue in the bloc. The EU had sought to expand its oversight of such deals to target so-called killer acquisitions, where a company buys a much smaller player to eliminate a source of potential competition, and takeovers of small but highly innovative companies. Business groups had complained that the EU’s approach created a fresh source of uncertainty for companies because it became more difficult to determine whether a transaction would attract scrutiny in Europe.
Health and Wellness
Feeling Suddenly Older? Scientists See Aging ‘Waves’ at 44 and 60
A growing body of research says the aging process might resemble rolling hills more than a slow and steady climb. Age-related changes—slowing metabolism, wrinkling skin—pile up over time but may crescendo at specific points in your life. In a study published in the journal Nature Aging in August, a team of Stanford scientists described “waves” of aging, where major biomolecular shifts happen in the body around ages 44 and 60. The researchers found people in their mid-40s, for example, had meaningful changes in biological markers and pathways related to their abilities to metabolize alcohol and fats. These types of changes can lead to gradual weight gain or greater sensitivity to that nightly glass of wine.
The Stanford team analyzed data from repeated collections of blood and stool samples and oral, skin and nasal swabs from 108 healthy people between the ages of 25 and 75. They tracked changes in more than 100,000 molecules and microbes, from proteins and RNA to standard lipid measures such as LDL and HDL over roughly two years and compared results between older and younger people. Increases or decreases in these markers, some of which were linked to age-related diseases and body changes, created the waves: 81% of the observed molecules changed in at least one wave. It is unclear what exactly is causing these biomolecular shifts, Snyder says, and it is possible that people’s behavior and other variables could have affected the results.
Election 2024
- House And Senate Republicans Are Starting To Panic About A Huge Money Gap With Democrats - Politico
- Trump Got Lucky in His Campaign. Then Harris Did. Will Her Luck Run Out? - WSJ
- 'A Dogfight': Harris And Trump Enter The Final Election Stretch After Labor Day - NBC
- New York Democrats Fear Abortion-Rights Amendment Is Faltering - Politico
- Harris Says US Steel Should Remain ‘American-Owned’—Echoing Biden’s Opposition To Nippon Steel Takeover - Forbes
- Trump’s Arlington Controversy Continues: Some Gold Star Families Defend Him—And Blast Harris—Amid Criticism - Forbes
- Don’t Trust the Election Forecasts - Politico
- RFK Jr. Must Remain On The Michigan Ballot, Judge Says - AP
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
Boeing’s Next Big Problem Could Be A Strike By 32,000 Workers
Boeing has experienced all manner of bad news in the last six years, and almost nothing but problems. Later this month it could add a strike by 32,000 workers to its list of woes. The contract between Boeing and the International Association of Machinists is due to expire at 11:59 pm PT on September 12. Without a new contract, the workers who build its planes in Washington state are set to start the first strike at the company in 16 years. And right now, the chances of a deal don’t look good, according to the head of the union local. The company said that wages for IAM members have increased 60% over the last 10 years due to general wage increases, cost-of-living adjustments and incentive pay. But the union is still angry over the earlier concessions.
“We’re far apart is on all the main issues — wages, health care, retirement, time off,” Jon Holden, president of IAM District 751, told CNN this past week. “We continue to work through that, but it’s been a tough slog to get through.” Boeing goes into these talks with a brand new CEO, Kelly Ortberg, who started the job on August 8. He issued a statement that he wants to “reset our relationship” with the union after meeting with Holden and other union leadership in his first week on the job.
New Boeing CEO Holds First Meeting With FAA Chief
New Boeing CEO Kelly Ortberg met this week with the head of the Federal Aviation Administration as the planemaker faces numerous regulatory issues and increased scrutiny, an agency official confirmed. Ortberg told employees on Friday in an email he had met with the FAA this week and discussed the company's safety and quality plan. FAA administrator Mike Whitaker in January barred Boeing from boosting production of its best-selling 737 MAX after a door panel blew out during a Jan. 5 flight on a new Alaska Airlines (ALK.N), opens new tab jetliner.
Whitaker said in May he planned to travel to Seattle in September to meet with the company about its quality efforts. Whitaker has said the agency will continue its increased on-site presence at Boeing and fuselage supplier Spirit Aerosystems for the foreseeable future.
Volkswagen Could Close Plants In Germany For The First Time In History
Volkswagen is weighing whether to close factories in Germany for the first time in its 87-year history as it moves to deepen cost cuts amid rising competition from China’s electric vehicle makers. In a statement Monday, the German automaker, one of the world’s biggest car companies, said that it could not rule out plant closures its home country. Other measures to “future-proof” the company include trying to terminate an employment protection agreement with labor unions, which has been in place since 1994. “The European automotive industry is in a very demanding and serious situation,” said Volkswagen Group CEO Oliver Blume. “The economic environment became even tougher, and new competitors are entering the European market. Germany in particular as a manufacturing location is falling further behind in terms of competitiveness.
Volkswagen’s cost-cutting plans will face heavy resistance from labor representatives, which hold almost half the seats on the company’s supervisory board, the body that appoints executive managers. IG Metall, one of Germany’s most powerful unions, on Monday blamed mismanagement for the firm’s shortcomings and vowed to fight to protect jobs. “Today, the board presented an irresponsible plan that shakes the very foundations of Volkswagen, massively threatening jobs and locations,” IG Metall lead negotiator Thorsten Groeger said in a statement.
A U.S. Port Strike Looms, And It Would Be ‘Devastating’ For Supply Chains
A potential strike at U.S. seaports on the East Coast and Gulf of Mexico is threatening to further disrupt supply chains. The International Longshoremen’s Association (ILA), which represents roughly 45,000 dockworkers at three dozen seaports from Texas to Maine, have threatened to walk off the job on Oct. 1 if they don’t reach an agreement on a new contract with the United States Maritime Alliance (USMX) of shipping companies. A work stoppage at the ports could back up cargo there for weeks or even months, experts warn, with implications far beyond the U.S. On Wednesday and Thursday this week, the ILA will hold ‘wage scale meetings’ in New Jersey for the union’s wage scale delegates to review master contract demands. The ILA urged that it would also use the meetings “to establish strike committees from Maine to Texas to be ready for 1 October”.
John Lash, group VP of product strategy at supply chain platform e2open, told The Loadstar that, while a potential strike “is bound to increase delays and drive up costs”, there would be “winners and losers”. He added: “On the sharp end of the stick are shippers that will pay more to move their goods through more distant ports. The winners are likely to be carriers, with longer moves and higher rates for cargo in/out of the east coast, and a tightening of general capacity, which can lead to rate hikes for all lanes.”
U.S. Crude Oil Falls More Than 3%, Erases 2024 Gains As China Demand, OPEC Output Hike Loom
U.S. crude oil futures fell more than 3% on Tuesday, erasing all gains for the year, as OPEC+ is poised to increase production in the coming weeks and China’s economy remains soft. OPEC+ delegates have indicated that the group is still planning to increase oil production in October, sources told Reuters and Bloomberg. Manufacturing in China, meanwhile, fell to a six-month low in August, according to data released over the weekend. China is the world’s largest importer of crude oil. And manufacturing activity in the U.S. was slower than expected last month, according to a report from the Institute for Supply Management Tuesday.
West Texas Intermediate October contract: $70.97 per barrel, down $2.58, or 3.48%. Year to date, U.S. crude oil has fallen 1%.
Brent November contract: $74.42 per barrel, down $3.10 or 4%. Year to date, the global benchmark has dropped 3.47%.
RBOB Gasoline October contract: $2 per gallon, down more than 8 cents, or 4.21%. Year to date, gasoline has fallen 4.6%
Natural Gas October contract: $2.09 per thousand cubic feet, down 3 cents, or 1.55%. Year to date, gas has declined 16.7%.
UAW Makes Gains At Auto Suppliers — But It Could Come At A Cost
The United Auto Workers (UAW) is securing unprecedented wage increases and benefits at automotive supplier factories, driven by the hardline negotiations inspired by UAW President Shawn Fain. This success marks a significant win for workers but raises concerns among suppliers about the long-term impact on their financial stability. In Michigan and beyond, workers at supplier plants, including major tier-one companies like Magna International Inc. and American Axle & Manufacturing, have won wage increases double or more than the typical 3% annual bump. Additionally, the union has secured better health and safety benefits and increased signing bonuses.
However, unlike the UAW’s master agreement with the Detroit Three automakers, which covers all unionized locations, deals with suppliers are negotiated on a per-plant basis. This approach, while beneficial for workers, has some executives worried. Many suppliers have been struggling with narrow profit margins due to industry challenges, including supply chain disruptions and the slow adoption of electric vehicles. Executives from several large auto suppliers have expressed concerns that the aggressive negotiations could push companies too far, potentially leading to job losses. “Somebody’s got to pay for it,” said one local union leader, hinting at the potential for workforce reductions.
GM Delays Next Lithium Commitment
General Motors is delaying its scheduled second investment in an ambitious lithium-mining project in Nevada. The decision follows GM’s recent one-year postponement of the production start for an EV battery plant joint-venture with Samsung SDI. The automaker announced in January 2023 that it had made a $650-million equity commitment to Lithium Americas, based on that company’s plan to extract lithium ore from clay at a site called Thacker Pass.
GM now has agreed with the miner to extend the date for the second, $330-million share purchase until December 20, 2024. From the start, GM’s second investment has been subject to specific conditions, including execution of a $2.26-billion, U.S. Dept. of Energy loan. At the time of the initial investment automakers like GM were anxious to secure raw materials for the batteries needed to support a wide-scale conversion of passenger and commercial vehicles to electric models – as anticipated by their own production programs. Now, as EV sales have leveled, and the scope of federal incentives to buyers is coming into question, automakers have started to adjust their electrification plans accordingly, aiming to offer more lower-cost models and more hybrid-electric options.
Read more at American Machinist
Survey: Companies Making Progress on Sustainability Fundamentals
There is progress on the sustainability front according to the Business Sustainability Index form EcoVadis. On August 28, the group said that companies of all sizes a are making measurable progress on a broad spectrum of sustainability challenges.The Index explores the trends behind the 125,000+ supplier sustainability ratings (~38,000 in 2023 alone). It looks at how these suppliers, spanning all global regions and major industries, are performing on four core assessment themes: environment, labor & human rights, ethics and sustainable procurement.
The score trends give a view into how large purchasing organizations are leveraging ratings in their supply chains to reduce risk, build resilience, prepare for compliance with ESG reporting and due diligence laws. It also reflects how suppliers are also reducing operational risks, enhancing efficiency, saving costs, collecting better data and enhancing their relationships with business partners.
Read more at Material Handling & Logistics
Rise of the Pint-Size Startup Is Reshaping the U.S. Economy
Small businesses are job creators. New businesses aren’t creating as many of them. The average number of people employed by the youngest businesses fell sharply during the pandemic, accelerating a decadeslong slide. The rise of these smaller ventures is one of the first signs of how pandemic-inspired businesses have reshaped the economy. Businesses launched between March 2020 and March 2021 had, on average, 4.6 employees, compared with 5.3 employees a year earlier, according to Census Bureau data. That figure was 5.8 at the turn of the century and had been declining gradually until Covid-19 spurred a sharper drop.
There are different reasons these new businesses are smaller. At some new companies, pandemic-related headwinds have slowed hiring. At others, entrepreneurs have chosen to keep their operations small out of a desire for a better work-life balance. But the lower head counts also reflect more fundamental changes. The rise of remote work, the expansion of the gig economy and the proliferation of software tools all make it easier for entrepreneurs to operate with a leaner staff.