Member Briefing March 20, 2024
IndustryWeek Earnings Call Survey: Industrial Leaders Expect Growth… Eventually.
A combination of confidence and a little caution is the theme of IndustryWeek’s latest survey of the quarterly earnings conference call transcripts of 50 members of the IndustryWeek U.S. 500 list of public companies. Questions about workforce availability, quality and—most pressingly these days—cost have overtaken inflation concerns as the most vocal pain point among the executive teams tracked for this overview. That the overall gauge still moved in a positive direction from the third quarter was due to encouraging comments about the availability of workers.
The headline number shows our inflation sentiment reading moving into positive territory for the first time since we launched this feature in mid-2022 thanks to many executive teams gladly proclaiming an end to the materials and transportation cost hikes of the pandemic-and-beyond era. A deeper reading of the data and accompanying commentary shows a growing split between the it’s-over camp and businesses still expecting mid-to-high, single-digit hikes in input costs in 2024—and not just in the form of wages and benefits.
U.S. Housing Starts Climbed in February
U.S. single-family homebuilding rebounded sharply in February, hitting the highest level in nearly two years, amid mild temperatures and a persistent shortage of previously owned houses on the market. Homebuilding could gain further momentum this year, with mortgage rates likely to continue their downward trend on expectations that the Federal Reserve will start cutting interest rates by June.
Housing starts rose 10.7% to a seasonally adjusted rate of 1.52 million. Economists polled by The Wall Street Journal had expected starts to increase less sharply to 1.43 million. Starts were 5.9% higher than the same month last year. December's housing starts were revised upward to 1.37 million from 1.33 million. Monthly housing starts data are volatile. February data came with a margin of error of 14.2%. Residential permits, which can hint at future home construction, also rose 1.9% on month to 1.52 million. Economists had expected permits to tick up to 1.49 million.
Global Headlines
Middle East
- Israel and Hamas: The Latest News – The Guardian
- The Dilemma Impeding an Israel-Hamas Cease-Fire - WSJ
- Gaza's Entire Population Facing Acute Food Insecurity, Blinken Warns - BBC
- Ground Incursion Needed to Destroy Hamas in Rafah, Netanyahu Says - Reuters
- A Snap Election May Well be an Option for ‘Bibi the Magician’ – Politico
- US Reports Death of Senior Hamas Military Leader Marwan Issa - BBC
- Ukraine Eyes 'Strong and Far-Reaching Step' Towards NATO Membership at July Summit – 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
- Austin: We ‘Won’t Let Ukraine Fail’ – Politico
- Graham Meets with Zelensky in Ukraine – The Hill
- Putin Claims Landslide in Russian Election and Scorns US Democracy - BBC
- Putin to visit China in May - Reuters
- Ukrainian soldier: Losses Are so Heavy Where He's Fighting, They Struggle to Recover Bodies – Yahoo
- Ukraine’s Impossible Choice: Conceding Territory or Lives - WSJ
- Germany Promises More Artillery Ammunition for Ukraine – Politico
- 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
- India Announces 6-Week General Elections Sarting April 19 with Modi’s BJP Topping Surveys -AP
- Mexico's Sheinbaum Holds Lead for June Election – Poll – Reuters
- First Flight of Americans From Haiti Lands at Miami International Airport to Escape Chaos - CBS
- Brazil: Police Accuse Bolsonaro of Fraud over Covid Vaccine Records - BBC
- Europe’s Soldiers Keep Quitting, Just When NATO Needs Them – Politico
- Protesters in Cuba Decry Power Outages, Food Shortages - CBS
- Hong Kong Approves New National-Security Law That Worries Foreign Executives - WSJ
- In Historic Shift, Bulgaria Seeks US Help to Escape Russia’s Nuclear Grasp - Politico
- Many Hospitals in China Stop Newborn Delivery Services as Birth Rate Drops – Reuters
- Ex-Army Generals Testify on Chaotic US Afghanistan Withdrawal - BBC
Policy and Politics
Business Tax Breaks Face ‘Now or Never’ Moment in Senate
U.S. businesses, big and small, have united behind a bipartisan bill to revive expired tax breaks for research and equipment spending, help that many see as critical to competing with foreign rivals or even surviving. The problem: They can’t get Senate Republicans—usually their allies—to budge. “Some of these provisions have been expired since the end of 2021,” said Neil Bradley, executive vice president of the U.S. Chamber of Commerce. “It’s kind of a now-or-never” moment, he said.
The tax change causing the most pain started in 2022. It requires companies to deduct domestic research costs over five years instead of doing so immediately. Other changes affect capital expenses and interest deductions. Republicans aren’t lining up. Occasional dealmakers such as Thom Tillis (R., N.C.) and Mitt Romney (R., Utah) oppose the bill, while Steve Daines (R., Mont.), who runs the Senate GOP campaign arm, supports action this year. At a recent hearing, Tillis described calls from CEOs urging him to support the tax bill. But he said executives don’t have opinions on the child credit and that as a senator, he has to examine the entire legislation.
Fed Could Cut Rates Fewer Times Than Expected as Economy Keeps Growing, According to CNBC Survey
Forecasters in the CNBC Fed Survey are increasingly confident that the U.S. economy will avoid a recession and pull off a soft landing, and unlike past surveys, don’t even see growth slowing much below potential in the next couple of years. The potential downside of the better forecast: less Fed easing with the possibility that officials at their meeting this week forecast fewer rate cuts in 2024 than they did in December.
The March survey finds the average probability of a soft landing at 52%, up from 47% in the January survey, and the first time that it has been above 50% since the question was first asked in July. The probability of a recession in the next 12 months fell to 32%, the lowest since February 2022, and down from 39% in January and 63% in November. Respondents still see three cuts this year, on average, which would bring the funds rate down to 4.6%. Survey respondents never became as euphoric as futures markets about rate cuts and so they haven’t had to backtrack from the six cuts that the markets priced in. Even then, there are those who believe the Fed could be more hawkish at the upcoming meeting.
Funding Deal Reached, But Hurdles Remain for Avoiding Brief Shutdown
Speaker Mike Johnson and the White House locked in a deal on full-year funding for the Department of Homeland Security on Monday night, clinching the final piece of the funding puzzle. On Tuesday morning, leaders officially announced the deal, adding that staff would begin drafting text immediately. But as the weekend deadline on government funding approaches, a (brief) shutdown may still be in the cards. Six bills — Homeland Security, Defense, Financial Services-General Government Labor-HHS, Legislative Branch and State-Foreign Operations — that collectively fund about 70 percent of the federal government are in the package.
Negotiators and staff must still turn that agreement into legislative text, a process that inevitably takes some time and Johnson has promised members at least 72 hours to read and review legislation. Assuming the package does eventually pass the House, the rules of the Senate mean any one senator can slow down consideration. Leaders have been able to reach agreements on prior packages of amendment votes to placate conservatives displeased with the funding bills, but we'll see if one materializes here.
Health and Wellness
Measles Infections are on the Rise, With More Cases so far in 2024 Than All of Last Year - CDC Issues Alert
The country’s health agency warned doctors Monday about an increase in measles cases that in a little more than three months has equaled all of the U.S. cases last year. There had been 58 confirmed cases of measles in the U.S. this year as of Thursday, the Centers for Disease Control and Prevention said, compared to 58 in all of 2023. In the cases this year, 93% were linked to international travel, the agency said. Most of the cases involved children a year old or older who haven’t yet gotten measles-mumps-rubella, or MMR, vaccinations.
Measles is highly contagious, and unvaccinated people have a 90% chance of becoming infected if they are exposed. Late last month there was a large outbreak in Florida, and in January there was one in Philadelphia. Measles was declared eliminated in the U.S. in 2000, which means no continuous disease transmission for greater than 12 months or not constantly present in the country, according to the agency. The U.S. retains its “eliminated” status, but in 2019 there was a 27-year high, with 1,274 cases. Those outbreaks were all travel-related cases that then infected people who are unvaccinated or under-vaccinated in the U.S., the CDC has said
Election 2024
- Republican Vince Fong Advances to Runoff Election to Complete McCarthy Term - AP
- Trump-Backed Bernie Moreno Wins pivotal Ohio GOP Primary – USA Today
- Outside Groups Pledge $1 Billion To Biden—As Trump Reportedly Struggles To Fundraise - Forbes
- Will Trump And Biden Ever Debate? Trump Says He’s Game—After GOP Boycotts Organizer - Forbes
- Real Clear Politics Latest GOP Primary Polls – Real Clear Politics
- Real Clear Politics Latest General Election Polls – Real Clear Politics
- Latest Polls - FiveThirtyEight
Industry News
Sanders, UAW President Press Harder for Shorter Workweek: ‘This is Not a Radical Idea’
Sen. Bernie Sanders (I-Vt.) and Shawn Fain, the president of the United Auto Workers (UAW) wrote an op-ed in the Washington Post pressing ahead on the initiative to shorten workweeks without cutting pay. “Let’s be clear. This is not a radical idea: Belgium has already adopted a four-day workweek,” they wrote, referencing several other countries that have fully implemented or tested different schedules for its workers.
Sanders introduced a bill to establish a standard four-day workweek in the U.S. without any reduction in pay. Over a four-year period, the bill would lower the threshold required for overtime pay from 40 hours to 32. It would also require overtime pay at a rate of 1.5 times an employee’s regular salary for workdays that are longer than eight hours and overtime pay at a rate of 2 times an employee’s regular salary for workdays longer than 12 hours. The op-ed points to the UAW strike last year, where workers for the Big Three automakers called for the introduction of “a four-day, 32-hour workweek at the same rate of pay,” among other benefits. They were unsuccessful in winning that demand, Sanders and Fain wrote, and “the struggle continues.”
Nvidia CEO Expects to Win Outsized Chunk of Data Center Spending
Nvidia's on Tuesday said its new flagship AI processor is expected to ship later this year and CEO Jensen Huang said he is chasing a data center market potentially greater than $250 billion. Huang and Chief Financial Officer Colette Kress answered questions from investors at the company's annual developer conference in San Jose, California. "We think we're going to come to market later this year," Kress said, referring to the company's new AI chip, which the company debuted on Monday.
Huang estimated that companies operating data centers will spend more than $250 billion a year to upgrade them with accelerated computing components that Nvidia specializes in developing. He said that market was growing by as much as 25% a year. Nvidia is shifting from selling single chips to selling total systems, potentially winning a larger chunk of spending within data centers. Nvidia is working with contract chip manufacturer TSMC to avoid bottlenecks in packaging chips that slowed shipments of its previous flagship AI processor, Huang said.
The Bank of Japan Ends its Negative Interest Rate Policy, Opting for its First Hike in 17 Years
Japan’s central bank raised its benchmark interest rate Tuesday for the first time in 17 years, ending a longstanding policy of negative rates meant to boost the economy. The Bank of Japan’s lending rate for overnight borrowing by banks was raised to a range of 0 to 0.1% from minus 0.1% at a policy meeting that confirmed expectations of a shift away from ultra-lax monetary policy.
It was the first rate hike since February 2007. The negative interest rate policy, combined with other measures to inject money into the economy and keep borrowing costs low, “have fulfilled their roles,” Bank of Japan Gov. Kazuo Ueda told reporters. The bank has an inflation target of 2% that it used as a benchmark for whether Japan had finally escaped deflationary tendencies. But it had remained cautious about “normalizing” monetary policy, or ending negative borrowing rates, even after data showed inflation at about that rate in recent months.
Justice Department is Reportedly Considering Antitrust Investigation Into the Proposed Purchase of U.S. Steel by Japan’s Nippon Steel
The Justice Department is seriously considering opening an antitrust investigation into the proposed purchase of U.S. Steel by Japan’s Nippon Steel, a massive $14.9 billion deal announced in December, Politico reported, citing three people with knowledge of the investigation, following months of bipartisan criticism. The White House first expressed skepticism only days after the deal was announced, with National Economic Advisor Lael Brainard stating President Biden “believes the purchase of this iconic American-owned company by a foreign entity—even one from a close ally—appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability.”
Former President Donald Trump also announced he would block the purchase after speaking to the Teamsters Union in January, telling reporters “I think it’s a horrible thing” and “I would block it instantaneously.” Nippon Steel is trying to salvage the deal and abate the fears of U.S. leaders, saying last week in a statement that the purchase will offer “clear benefits to U.S. Steel, union workers, the broader American steel industry and American national security.” U.S. Steel was founded in 1901 by industrialists including J.P. Morgan, Charles Schwab, Henry Clay Frick and Andrew Carnegie.
FedEx, Amazon Talk About Collaboration on Package Returns
Business imperatives in the beleaguered parcel sector appear to have FedEx taking another look at Amazon packages. The companies had a high-profile split five years ago when FedEx stopped hauling boxes for the e-commerce giant, betting at the time that it was better off filling its trucks with other customers’ goods. The companies last year discussed FedEx accepting returns of Amazon packages at its retail locations.
The two sides didn’t reach a deal, but the developments come as FedEx has sought to boost parcel volumes amid an industry slump and Amazon seeks to improve the customer returns experience. The discussions show how significant returns have become in the parcel and e-commerce sectors. Amazon is seeking partners to cope with the costs and complications of reverse logistics. At the same time, FedEx is looking for more volume as shipment counts sag.
Walmart Plans To Fill 100,000 Jobs By Doubling Certificate Programs—And Slashing Degree Options
In 2018, Walmart launched a brand new education perk, offering $1-a-day tuition benefits for roughly 30 different college degrees from places that now include the likes of Spelman College and the University of Arkansas. (It dropped the fee altogether in 2021.) More than five years later, amid increasing efforts by employers to drop four-year diploma requirements for jobs, the retail giant is now cutting the number of degrees it offers workers from 30 to just eight—while doubling the number of short-form certificates employees can earn instead to more than 50 options.
Last week, Walmart announced it is revamping the program to focus on skills that are in-demand, adding certificates in areas like generative AI or data-driven decision making rather than paying for workers to earn degrees in fields with few jobs at the company. In doing so, it hopes to “fast track” employees into some 100,000 jobs like software engineering or pharmacy technicians the company expects to need to fill over the next three years, Walmart senior vice president Lorraine Stomski told Forbes in an exclusive interview. “We’ve got to accelerate the upskilling of our associates so they can be ready to apply those roles,” she says. The changes have “shifted the focus and emphasis in the portfolio.”
Unilever Plans To Shed 7,500 Jobs and its Ice Cream Business Which Includes Ben & Jerry’s Brand
Unilever said it will cut around 7,500 jobs worldwide as part of the turnaround, the bulk of which will be office-based roles. The cuts, which represent nearly 6% of Unilever’s global workforce of 128,000 people, are part of a wider cost saving strategy the company hopes will save €800 million ($868 million) over the next three years. Unilever said it had “identified additional efficiencies” to help it reach this goal including investing in technology, fostering a “leaner and more accountable organization” and launching a “comprehensive productivity program.”
The company will also spin off its ice cream unit—which includes well known brands like Wall’s, Magnum and Ben & Jerry’s—as part of the restructuring, which it says will help it “become a simpler, more focused company.” The turnaround plan is part of a broader restructuring from CEO Hein Schumacher to jumpstart growth at the sprawling conglomerate, which makes products including Hellmann’s mayonnaise, Axe and Dove grooming products and Domestos and Cif cleaning products.
Airbus CEO Is Not Happy With Boeing's Troubles
At the “Europe 2024” conference in Berlin, Airbus CEO Guillaume Faury expressed concern over maintaining the aerospace industry’s safety reputation. "I am not happy with the problems of my competitor,” he said in reply to questions about Boeing’s technical problems, according to Reuters. “They are not good for the industry a whole." Faury added: "We are in an industry where quality and safety is top priority.”
At the “Europe 2024” conference in Berlin, Airbus CEO Guillaume Faury expressed concern over maintaining the aerospace industry’s safety reputation. "I am not happy with the problems of my competitor,” he said in reply to questions about Boeing’ technical problems, according to Reuters. “They are not good for the industry a whole." Faury added: "We are in an industry where quality and safety is top priority.”
Stanley Looks to Replicate the Water-Bottle Hype Among Guys
Stanley has spent the past few years turning a vacuum-insulated, 40-ounce water bottle into one of the most-desired womenswear accessories on the planet. Now it is widening its focus to include the customer it was first designed for more than 110 years ago—men. The company, which is owned by Chicago-based HAVI, next year plans to release new products geared toward guys beyond its current male audience of outdoor enthusiasts.
The new Stanley man might not require a steel canteen to take into the wilderness, but he might want a sleek water bottle to take from the office to the gym to date night in a wine bar, according to Jenn Reeves, Stanley’s vice president of global brand marketing. “He’s not a fashionista, but he cares about how he’s put together. He’s into grooming and how he looks, and into sports,” Reeves said. That hypothetical male customer wants water bottles that are a little sleeker and subtler than the brightly colored giant flasks coveted by Stanley’s female audience, she said.