Member Briefing September 6, 2023
August Wrap - Manufacturing by the Numbers
Having the right data about your plant, your business, and the industry in general is essential if you want your company to thrive. This roundup highlights the reports, studies, surveys, and insights that are impacting the manufacturing industry that were released in August. Here are the stats.
- In July, economic activity in the manufacturing sector contracted for the ninth consecutive month, registering 46.4% - Institute for Supply Management
- New orders for manufactured goods increased in June by $13.4 billion or 2.3% to $592.0 billion - U.S. Census Bureau
- New orders of manufacturing technology totaled $411.3 million in June 2023, up 12.6% over May 2023 AMT – The Association For Manufacturing Technology
- The manufacturing industry has added 41,000 jobs since February 2023 - U.S. Bureau of Labor Statistics
- U.S. durable goods orders decreased $15.5 billion or 5.2% to $285.9 billion - U.S. Census Bureau
- Manufacturing activity in New York State fell 20 points in August - Federal Reserve Bank of New York
Total industrial production increased 1.0% in July, with manufacturing output rising 0.5% - U.S. Federal Reserve
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Egypt Buys Nearly Half a Million Tons of Russian Wheat in Private Deal – Reuters
- Is Ukraine Really Interested in Fighting Corruption? – The Economist
- Ukraine Has Lost Its First Challenger 2 Tank – Forbes
- Ukrainian Intercepts Show Russian Soldiers’ Anger at Losses, Disarray - Reuters
- Kim Jong Un 'to Visit Putin for Weapons Talks' - BBC
- Russian Pilot Who Defected With Mi-8 Helicopter Gives New Details in Interview - CNN
- Nobel-Winning Russian Journalist to Challenge 'Foreign Agent' Designation – Reuters
- Cuba Uncovers Russia-Ukraine War Trafficking Ring - BBC
- Putin Races Against the Clock, The Dangers of a Desperate Russia – Foreign Affairs
- 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
ISM: Manufacturing PMI Remains In Contraction Territory, China Bumps Higher
On September 1, the Institute for Supply Management released ISM Manufacturing PMI report for August. The report indicated that ISM Manufacturing PMI increased from 46.4 in July to 47.6 in August, compared to analyst consensus of 47. Numbers below 50 show contraction. The new Orders index declined from 47.3 in July to 46.8 in August, while Employment index grew from 44.4 to 48.5. Both indices remained in the contraction territory.
China's factory activity surprisingly returned to expansion in August, a private-sector survey showed on Friday, with supply, domestic demand and employment improving, suggesting official efforts to revive growth might be having some effect. The Caixin/S&P Global manufacturing purchasing managers' index (PMI) rose to 51.0 in August from 49.2 in July, beating analysts' forecasts of 49.3 and marking the highest reading since February. The 50-point index mark separates growth from contraction. Positive sentiment, however, hit an 11-month low. “Looking ahead, seasonal impacts will gradually subside, but the problem of insufficient internal demand and weak expectations may form a vicious cycle for a longer period of time," said Wang Zhe, an economist at Caixin Insight Group.
Here We WOTUS Again
On August 29, 2023, the Environmental Protection Agency (EPA) and Army Corps of Engineers (Corps) released a revision to the definition of water of the United States (WOTUS) that significantly curtails the agencies’ authority to require permits for development or work in certain waters and wetlands. Under the Revised WOTUS Rule, intrastate wetlands are jurisdictional only if they have a “continuous surface connection” to a traditional navigable water, impoundment, or a relatively permanent tributary to a traditional navigable water.
The Revised WOTUS Rule has two significant changes. First, it limits the extent of wetlands that are jurisdictional under the Clean Water Act (CWA).[3] Second, it eliminates the “significant nexus standard” under which waters that “significantly affect the chemical, physical or biological integrity of traditional navigable waters” were previously considered jurisdictional. Zippy Duvall, president of the American Farm Bureau Federation, commented, “We’re pleased the vague and confusing ‘significant nexus’ test has been eliminated as the Supreme Court dictated. But EPA has ignored other clear concerns raised by the Justices, 26 states, and farmers across the country about the rule’s failure to respect private property rights and the Clean Water Act.”
COVID Update – COVID-19, Flu and RSV: A Guide to this Fall’s Vaccine Options
A potent flu virus, resurgent COVID-19 and rebounding RSV are combining to prompt new warnings about the coming seasons when all three will be circulating. Based on case rates in Australia, UCHealth experts are predicting higher-than-average rates here for all three viruses. And flu season is arriving early. "This is why we're encouraging everyone, and especially kids, parents and grandparents, to get their vaccinations early," Michelle Barron, the senior medical director of infection prevention and control at UCHealth, said in a statement. Vaccines for all three are now available or coming soon.
- Flu: Vaccine available. The virus is expected to circulate widely in October and peak in November, at least a month earlier than normal. The CDC recommends everyone older than six months get vaccinated and reports that those immunized were 40-70% less likely to be hospitalized or experience complications.
- RSV: Vaccine available. The FDA recently approved new vaccines targeted at older adults and others who are immunocompromised, as well as those 8-19 months old.
- COVID: Vaccine coming soon. Federal officials anticipate updated COVID-19 vaccines will become available to all Americans in mid-September. The new doses target the XBB.1.5 Omicron variant, the dominant summer strain, but experts say they will still protect "against the most serious outcomes" of the newer variants.
Top Job for Congress: Avoiding a Government Shutdown
House and Senate leaders of both parties say they have a clear road map to avoid a government shutdown in coming weeks: Pass a short-term patch, then take some time to negotiate on full-year spending. The Senate returns to Washington this week, and the House is back the next week. Lawmakers are almost certain to need an extension of their Sept. 30 deadline, when federal funds are set to run out, amid sharp disagreements over next fiscal year’s spending levels. If there is no deal, the federal government could partially shut down at the start of October, furloughing hundreds of thousands of federal workers and closing national parks, though critical services would continue to function.
To buy time, Senate Majority Leader Chuck Schumer (D., N.Y.) and House Speaker Kevin McCarthy (R., Calif.) have both said they want to pass a continuing resolution, a short-term deal to keep the government running. Such legislation would extend current funding levels for a few months until both chambers can reach an agreement on spending levels for the next fiscal year, pass it through both chambers and send it to President Biden for his signature. But some House Republicans are already crying foul, raising the prospect of more down-to-the-wire drama on Capitol Hill.
Despite Reports - Building that Burned on Port Jervis Not a KDC Kolmar Facility
A warehouse that burned in the city of Port Jervis over the weekend is not owned by KDC Kolmar as was reported widely in the press. The building t was the original structure that the company occupied in the 1950’s but has been abandoned for some 30 years. KDC no longer maintains ownership nor has any association with that building since the relocation of thier business that began in the late 60’s / early 70’s.
The company, which is a global provider of value-added solutions to some of the world’s leading brands in the beauty, personal care, and home care industries, helps with the creation, formulation, design, packaging and manufacturing of products.
Read more at Supply Chain Quarterly
Fed Official Signals Support for September Rate Pause
A senior U.S. Federal Reserve official said Tuesday that the U.S. central bank can afford to sit tight for now, while not ruling out another rate hike down the line to tackle inflation. The Fed has raised interest rates 11 times since March last year to control runaway inflation, raising its key lending rate in July to its highest level for 22 years. But despite making significant progress, inflation remains above the Fed's long-term target of 2%.
"There’s nothing that is saying we need to do anything imminent any time soon, so we can just sit there, wait for the data, see if things continue," Fed Governor Christopher Waller said in an interview with CNBC. Waller's comments follow a similarly cautious view to Fed Chair Jerome Powell, who told the Jackson Hole economic symposium in Wyoming at the end of August that the Fed would proceed "carefully" from now on. Investors and analysts overwhelmingly expect the Fed to pause its hiking cycle at its next rate-setting meeting on September 19-20, while keeping the prospect of another hike later in the year alive.
West Coast Ports Face Hurdles Winning Back Importers
West Coast ports have a new labor agreement in hand but they face big hurdles in their efforts to get U.S. importers to bring their supply chains fully back through the gateways. New manufacturing strategies along with geopolitical tensions and China’s lagging economic growth are casting clouds over the ports that have long been a linchpin of the U.S. trade economy, even as the gateways from Southern California to Seattle trumpet an end to the labor uncertainty that helped push millions of import containers to other ports.
Gene Seroka, executive director at the Port of Los Angeles, said in July he attributes about 15% of the lost cargo volumes to the diversion of trade to alternate gateways, and that experience suggests some percentage of that lost trade won’t return. “It will be an uphill climb,” Seroka said. “Our job now is to be absolutely relentless in going after every pound of freight possible.”
Big Companies—From CVS To Yellow Corp.—Laid Off More Than 65,000 This Summer
More than 65,000 U.S. employees lost their jobs in major job cuts this summer, according to Forbes’ layoff tracker, as recession fears and economic uncertainty continued to prompt employers to re-adjust their head counts after more than 136,000 Americans were laid off in major layoffs over the first three months of the year (Forbes has been tracking the biggest layoffs this year).
Manufacturing jobs have also been targeted in recent rounds of cuts, including at Ford, which reportedly cut up to 1,000 employees, General Motors, which reportedly cut 940 positions, and automaker Nikola, which unveiled plans in June to lay off 120 employees in Arizona and another 150 at “multiple sites.” Last month, Tyson Foods conducted a round of cuts as it shut down four poultry facilities in Arkansas, Indiana and Missouri, while shipping giant FedEx implemented a round of layoffs affecting roughly 280 employees, and Anheuser-Busch parent AB InBev cut roughly 360 positions as its sales tanked over blowback to its decision to partner with trans star Dylan Mulvaney.
Facing Threats, U.S. Navy Struggles to Modernize Its Ships
The US Navy is assessing the capability of drones and other small systems to meet its needs while also pursuing an aggressive shipbuilding campaign with trusted partners such as HII. Tens of billions has gone to shipbuilding programs in recent years, but a smaller, mobile force model is also being considered.
The Navy fell below 300 battle force ships (the kind of ships that count toward the quoted size of the Navy and the Navy’s 355-ship force-structure goal) in August 2003, and has generally remained between 270 and 300 battle force ships since then. As of August 28, 2023, the Navy included 297 battle force ships. The Navy projects that under its FY2024 budget submission, the Navy would include 293 battle force ships at the end of FY2024 and 291 battle force ships at the end of FY2028.
Oil Edges Up on Prospect of Extended OPEC+ Supply Cuts
Oil prices edged higher on Monday on expectations that OPEC+ would keep supplies tight and speculation that the U.S. Federal Reserve will cease its aggressive interest rate hike campaign. Saudi Arabia has spearheaded efforts to support prices, making large voluntary output cuts as part of a production deal agreed by the OPEC+ producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia.
The kingdom is widely expected to extend its voluntary 1 million barrel per day (bpd) cut for a fourth consecutive month into October. Saudi Arabia's previous announcements have come ahead of its official selling prices, which typically emerge in the first week of the month. Russian Deputy Prime Minister Alexander Novak, meanwhile, has said that Moscow had agreed with OPEC+ partners on the parameters for continued export cuts in October.
Oil, Electricity Prices Rise
NYISO day-ahead power prices soared in Sept. 1 trading, reacting to the upcoming late summer heat wave. On the Intercontinental Exchange, Zone G on-peak for Sept. 5 delivery rallied double digits day on day to price near $79.50/MWh. Prices followed bullish demand fundamentals, as the NYISO forecast Sept. 5 peakload demand to rally over 40% from the Sept. 1 forecast to 27.69 GW. For PJM, prices were up on the Intercontinental Exchange during Sept. 1 morning trading. The National Weather Service predicted temperatures to be in the high 80s to low 90s F for Pittsburgh and Chicago Sept. 5.
On Friday, crude oil futures for October closed at $85.55, up $1.92/barrel from the previous day. The oil market has rallied for seven consecutive sessions, gaining a total of $6.66/barrel. As of Tuesday morning, crude oil futures for October are trading roughly $1.00 higher from Friday. Investors are focused on the US economic data due out later today for an indication on whether the Federal Reserve will raise interest rates further.
Engine Component Manufacturer Fined $298,250 by OSHA After Worker Suffers Finger Amputation
During a recent investigation, OSHA discovered that Air Starter Components Inc. failed to correct safety hazards. In 2022, a worker’s hand became caught in a polishing machine that was not equipped with required safety guards, resulting in the employee suffering a finger amputation. In a follow-up visit to the facility, the engine component manufacturer was cited for two repeat violations for failing to adjust bench grinders properly and for not posting 2022 OSHA injury and illness logs as required.
In addition, Air Starter Components was cited for four serious safety violations that included unguarded projected shaft ends, electrical equipment used beyond its safe limits, and extension cords used in place of required permanent wiring. The company faces $127,187 in penalties for these citations. In a recent quote, OSHA Area Director Mark Briggs said, “Rather than correcting the hazards we identified in 2022, Air Starter Components was still operating equipment without required safety guards and doing so resulted in another worker suffering a debilitating injury. Complying with safety standards is not optional. Employers who fail to follow required procedures will be held accountable.”