Ulbrich Economic Update - Number 51 (August 2024)
Download the 16 page Economic Update for the full details of recent economic trends impacting all industries across the globe, as well as the summer PMA Triannual Report which provides a snapshot of the latest association activities and member benefits. Continue for the Executive Summary.
The Americas
THE U.S. IS "NO LONGER AN OVERHEATED ECONOMY" with a job market that has cooled considerably from its pandemic era extremes, Fed Chair Powell said in remarks to Congress in July. U.S. worker productivity growth accelerated 2.3% in the 2nd Qtr, keeping the increase in labor costs in check and further brightening the inflation outlook. Other July data included: The U.S. economy grew 2.8% (annualized) in the 2nd Qtr amid solid gains in consumer spending and business investment, and inflation pressures subsided. The U.S. unemployment rate jumped to near a three-year high of 4.3%, amid a significant slowdown in hiring. Services sector business sentiment returned to expansion, potentially quelling recent market concerns on an ongoing recession.
June data showed: Factory orders dropped 3.3%, but orders for non-defense capital goods excluding aircraft increased 0.9%. U.S. factories increased output 0.4%. Motor vehicle and parts production rose 1.6% after being unchanged in May. Mining output rose 0.3% and utilities output increased 2.8%. Industrial production advanced 0.6%. Durable goods orders fell 6.6%, pulled down by a 20.5% drop in transportation orders. Producer prices rose 0.2%, boosted by a 1.9% surge in margins received by wholesalers and retailers. The narrower measure of PPI, which strips out food, energy and trade services, was unchanged. Consumer prices were flat as cheaper gasoline and other goods offset higher costs for rental housing. Retail sales were unchanged as a 2.0% drop at auto dealerships was offset by strength elsewhere. A cyberattack at software systems provider CDK hit operations at many dealerships. Consumer spending increased 0.3%. Wages increased 0.3%.
Overseas
CHINA’S EXPORTS GREW AT THE FASTEST PACE IN MORE THAN A YEAR IN JUNE, as trade remained a rare bright spot for China’s economy despite tensions with Europe and the U.S. The heightened exports activity could be the front-loading of shipments to avoid the U.S. tariff increases coming into effect in August. The European Investment Bank’s new president, Nadia Calviño, has signaled openness to fund fresh nuclear projects and take on more risk as part of a pivot by the world’s largest multilateral lender.
Steel Industry Updates
CLEVELAND-CLIFFS INTENDS TO BUY STELCO, CANADA’S BIGGEST STEELMAKER. Stelco operates the Lake Erie steel plant and the Hamilton mill. It is a major supplier to the automotive sector. The administration’s new tariffs will apply to steel and aluminum shipments diverted through Mexico to prevent China from circumventing existing levies. No coal-based steelmaking projects were permitted by China in the first half of this year for the first time since announcing its major climate neutrality goals in 2020.
Automotive Trends
FORD WILL INVEST $3BN TO BUILD ITS HIGHLY PROFITABLE SUPER DUTY F-SERIES PICKUP TRUCK at a plant in Ontario, shifting focus at the site after previously delaying plans for an electric sport utility vehicle from 2025 to 2027, citing slower than expected growth in EV demand. Car repossessions rocketed higher in the 1st Half of 2024, a sign of rising consumer distress as the Federal Reserve weighs interest rate cuts. The average interest rate for a new car loan is currently 7.3% and 11.5% for a used car loan.
Metals & Commodities
KAZAKHSTAN WILL INCREASE ITS MINING TAX ON URANIUM by 50% in January. Then in 2026, a graduated structure based on output would see the tax rate go to 18%. A mining group led by a former executive at Russia’s Rusal is seeking to buy copper miners and establish a leading producer of the metal after an inaugural $300mn deal for a Turkish mine. University of Alberta scientists found a super alloy of aluminum and nickel that could be the key ingredient for hydrogen engines of the future.
Energy Sector News
BECHTEL BROKE GROUND FOR AN ADVANCED NUCLEAR REACTOR that uses sodium instead of water as a coolant. Bechtel is the engineering and construction partner for the Natrium Demonstration Project for TerraPower, which is chaired by Bill Gates and specializes in nuclear energy technology. Construction on Sunrise Wind, a 924-megawatt offshore wind project developed by Oersted, is underway. The project will provide enough clean energy to power about 600,000 New York homes. Rio Tinto will develop an 80MW solar farm to supply renewable energy to its operations in Western Australia, displacing 11% of the natural gas currently used.
Medical Insights
ABBOTT LABORATORIES RAISED ITS ANNUAL PROFIT FORECAST on double-digit growth in sales of its CGMs and strong demand for heart devices. Medical devices sales jumped 10.2% to $4.73bn in the 2nd Qtr. Dexcom lowered its sales growth forecast for this year to 11-13% vs. a previous forecast of 17-21% and now expects 2024 revenue to be $200mn to $300mn less. Dexcom shares tumbled 41% following the announcement. Dexcom reported 2nd Qtr sales of $1.0bn (+15% YOY) and net income of $143.5mn (+24% YOY).
Aerospace Developments
GE AEROSPACE IS DEVELOPING A HYBRID ELECTRIC DEMONSTRATOR ENGINE that will embed electric motor/generators in a high-bypass commercial turbofan to supplement power during different phases of operation, a kind of “Prius of flight”. Romania expects to sign an agreement with the U.S. to purchase 35 latest-generation F-35 fighter jets this fall from Lockheed Martin for $6.5 bn. June was the busiest month ever at U.S. airports and there are no signs of Americans' appetite for air travel waning.
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