Ulbrich Economic Update - Number 44 (January 2024)
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January 2024 Economic Update Executive Summary
The Americas
THE FEDERAL RESERVE HELD INTEREST RATES STEADY IN DECEMBER and signaled that the historic tightening of U.S. monetary policy over the last two years is at an end and lower borrowing costs are coming in 2024. Other December data showed: Manufacturing activity contracted further, though the pace of decline slowed amid a modest rebound in production and improvement in factory employment. U.S. employers hired 216,000 workers while raising wages at a solid clip, casting some doubt on financial market expectations that the Fed would start cutting interest rates in March. Consumer confidence rose to a five-month high, with Americans growing more optimistic about current and future business conditions as well as the labor market.
November data showed: New orders for U.S. factory goods increased 2.6% amid a surge in demand for civilian aircraft. Industrial output was up 0.2% as production at U.S. factories and mining each rose 0.3%; utilities output fell 0.4%. Durable goods orders rose 5.4%, boosted by aircraft bookings. Motor vehicle and parts orders rebounded 2.8% as UAW strikes ended. U.S. producer prices were unchanged amid cheaper energy goods, and underlying inflation pressures were muted. The leading economic indicators index fell again. Consumer prices rose 3.1% from a year earlier, a slight slowdown. Retail sales rebounded 0.3% as the holiday shopping season got off to a brisk start. Consumer spending rose 0.2%, while Inflation as measured by the personal consumption expenditures (PCE) price index fell 0.1%, the first monthly decline in the PCE price index since April 2020. Construction spending rose 0.4% and was up 11.3% year-on-year in November.
Metals & Commodities
CHINA BANNED EXPORTS OF TECHNOLOGIES FOR PROCESSING RARE EARTHS. The new controls risk further straining geopolitical tensions between China and the U.S. and its allies over control of global resource and technology supply chains. Angola is leaving OPEC after disagreements over its production targets. The departure is a blow to OPEC but will not have a significant impact on the group’s ability to influence the market. Copper finished the year as the top performing industrial metal as production disruptions squeezed the supply of the essential commodity used in power lines, cars and household appliances.
Overseas
THE EUROZONE ECONOMY IS SET FOR ONLY MODEST GROWTH IN 2024 despite wages rising faster than inflation for the first time in three years, according to a Financial Times poll of economists. On average, the economists forecast the eurozone will grow by just over 0.6% in 2024. China’s fertility rate is estimated to have declined for a third straight year in 2023 with births a tenth lower than the previous year to well below 9 mn. Beijing sees a shortage of nearly 30 million manufacturing workers by 2025.
Automotive Trends
DETROIT RECENTLY CELEBRATED ANOTHER MILESTONE IN AUTOMOTIVE INNOVATION by installing the nation's first electrified wireless-charging public roadway for electric vehicles. The roadway enables EVs to charge their vehicles without stopping to plug them in. U.S. new vehicle sales are expected to rise just 1% to 15.7mn units in 2024, as demand is likely to come under pressure from high interest rates. EV market share is expected to rise slightly to 8% of total new vehicle sales, up from 6.9% in 2023.
Steel Industry Updates
JAPAN'S NIPPON STEEL CLINCHED A DEAL TO BUY U.S. STEEL for $14.9bn in cash, prevailing in an auction for the 122-year-old iconic steelmaker. The USW union is opposed to the sale to Nippon, fearing labor agreements will not be upheld. Washington will continue to suspend tariffs on EU steel and aluminum until March 2025, and Brussels will not re-impose its retaliatory measures, to allow more time for talks on creating a system to counter steel overcapacity and promote less carbon-intensive steelmaking.
Energy Sector News
TWENTY COUNTRIES SIGNED A PLEDGE AT COP28 TO TRIPLE NUCLEAR ENERGY CAPACITY BY 2050. The U.S., UK, UAE and Japan were among those signing. The decision will mean that nuclear energy could go from meeting 10% of the world's current electricity needs to almost a third within 25 years. U.S. offshore wind power hit a milestone in December. An 800-foot-tall turbine is now sending electricity into the grid from a commercial-scale offshore wind farm on track to become the country's first.
Aerospace Developments
LOCKHEED WON A CONTRACT TO DEVELOP AND DEMONSTRATE A NUCLEAR-POWERED SPACECRAFT. The project will represent a rapid advancement in propulsion technology to benefit exploration and national defense. The in-space flight demonstration will take place by 2027. The global airline industry left behind COVID-related turbulences and emerged from the storm in 2023, returning to profitability after three years of deep losses. Commercial airlines are expected to end 2023 with $23.3bn in net profit.
Medical Insights
DEXCOM WAS SELECTED BY WILLIAN BLAIR ANALYSTS AS THEIR TOP MEDTECH STOCK PICK FOR 2024, reflecting the expanding opportunity for its continuous glucose moniters (CGMs). The number of people in the U.S. eligible for treatment with the devices will grow from 4 million to 30 million. Becton Dickinson received FDA clearance for a device that collects blood from a fingerstick instead of from the vein. The MiniDraw Capillary Blood Collection System is cleared for sample collection at pharmacies.
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