Ulbrich Economic Update - Number 42 (November 2023)
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November 2023 Economic Update Executive Summary
The Americas
THE U.S. ECONOMY GREW AT THE FASTEST PACE IN NEARLY TWO YEARS last quarter on a burst of consumer spending. GDP accelerated to a 4.9% annualized rate, more than double the 2nd Qtr pace. Other October data showed: Manufacturing activity contracted sharply as new orders and employment slumped, likely reflecting strikes by the UAW against Detroit's Big Three car makers. Nonfarm payrolls increased by 150,000 jobs, and the unemployment rate rose to 3.9% versus September’s 3.8%. Consumer confidence declined for a third straight month amid persistent worries about inflation, higher borrowing costs and the political environment.
September data showed: Industrial output rose 0.3% amid a gain in motor vehicles and parts despite strikes in the automobile industry. Durable goods orders rose after two months of declines, suggesting the outlook is improving for U.S. manufacturers. Transportation equipment led the increase, rising 12.7%. The leading economic indicators index fell 0.7%, with negative or flat contributions from nine of the index's 10 components. Consumer prices increased 0.4%, boosted by higher costs for rent and gasoline. Year-on-year consumer prices have come down from a peak of 9.1% in June 2022. Retail sales increased 0.7% as households stepped up purchases of motor vehicles and spent more at restaurants and bars. Consumer spending surged 0.7% led by outlays on prescription medication, new light trucks and recreational goods and vehicles. Construction spending shot up 8.7% on a YOY basis but momentum is slowing as the factory building boom fades. The U.S. trade deficit expanded 4.9% to $61bn from a modestly revised $58bn in August.
Overseas
CHINA'S MANUFACTURING ACTIVITY UNEXPECTEDLY RETURNED TO CONTRACTION IN OCTOBER, casting a cloud over recent indicators that showed a nascent recovery in the Chinese economy. Overall global growth has remained low and uneven despite what the IMF called the "remarkable strength" of the U.S. economy. In its latest World Economic Outlook, the IMF left its forecast for global real GDP growth in 2023 unchanged at 3.0% but cut its 2024 forecast to 2.9% from its July forecast of 3.0%.
Metals & Commodities
CHINA IMPOSED EXPORT CONTROLS ON GRAPHITE, a material used in electric vehicle batteries, as Beijing hits back at US-led restrictions on technology sales to Chinese companies. China is by far the biggest processor of natural graphite and generated almost 70% of the world’s synthetic graphite last year. Citigroup has been buying large volumes of physical aluminum and zinc on the London Metal Exchange, in a bold metal-financing trade that has made it one of the biggest players in the market in recent months.
Steel Industry Updates
SWEDEN’S H2 GREEN STEEL IS IN TALKS WITH GOVERNMENTS IN CANADA TO BUILD A FACTORY. One plan would see H2GS build a “green iron” plant in northern Quebec with a giant electrolyzer powered by renewable energy that would supply the site with hydrogen. The iron would then be exported. A more ambitious scenario would include a full steel mill requiring as many as 2,000 workers. Cleveland-Cliffs reported better than expected 3rd Qtr earnings and revenues. The quarter was highlighted by a new record in automotive steel shipments. The company's unit cost/ton of steel dropped by $165/ton YOY as cost-cutting measures took effect.
Automotive Trends
GENERAL MOTORS AND THE UAW REACHED A TENTATIVE AGREEMENT winning record pay hikes to end six weeks of a coordinated strike against the Detroit Big Three automakers. The accord follows deals reached by the union with Ford and Stellantis. The Alliance for Automotive Innovation, representing GM, Toyota, Volkswagen, Hyundai and other major automakers, said the industry is against Cleveland-Cliff's proposed purchase of U.S. Steel, charging it would increase auto industry costs and slow EV sales.
Medical Insights
BEST BUY WILL SELL CONTINUOUS GLUCOSE MONITORS in the tech retailer’s first foray into prescription-based medical device sales. It plans to sell the Dexcom G7 CGM and eventually CGM systems from other manufacturers. Boston Scientific received FDA approval for its spinal cord stimulation device in painful diabetic peripheral neuropathy. The company expects its technology for providing fast-acting, paresthesia-free (numbness or tingling) pain relief to be a differentiating feature of its WaveWriter Alpha device.
Energy Sector News
HOLTEC FILED AN APPLICATION WITH THE NUCLEAR REGULATORY COMMISSION to secure re-authorization of the Palisades nuclear power plant in Michigan. Palisades was a safe and reliable power plant before it was shut down in May 2022. Holtec also plans to install two small modular reactors (SMRs), each with 300MW of capacity. The recipients of $7bn in federal grants for the development of seven regional hydrogen hubs were announced, advancing a key part of a plan to decarbonize the U.S. economy.
Aerospace Developments
NASA’S EXPEDITION TO AN ASTEROID BELT ORBITING THE SUN BETWEEN MARS AND JUPITER was launched in October and aims to reveal how the Earth and other rocky planets were formed. The eight-year venture will be the first chance for a craft to observe a predominantly metallic celestial object. Deliveries of Boeing’s 737 MAX jets fell in September to the lowest level in more than two years. Operations have been disrupted by snafus at a key supplier. Boeing had net losses of $2.2bn for 9 months of 2023.
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