Ulbrich Economic Update - Number 39 (August 2023)

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August 2023 Economic Update Executive Summary

World Trade Market Graph

The Americas

THE AMERICAN ECONOMY EXPANDED AT AN ANNUALIZED RATE OF 2.4% IN THE 2ND QTR of 2023. Other July data showed: Nonfarm payrolls increased by 187,000 jobs, and the unemployment rate slipped to 3.5% from 3.6% in June. Manufacturing activity stabilized at weaker levels amid an improvement in new orders, but factory employment dropped to a three-year low. Consumer confidence soared to its highest level in two years, driven by a strong job market and a steady decrease in inflation. The Federal Reserve raised interest rates by 0.25% to the highest U.S. central bank policy rate in 16 years.

June data showed: Production at U.S. factories fell 0.3% in June but rebounded in the 2nd Qtr, expanding 1.5% as motor vehicle output surged 36.7% after two straight quarterly declines. Durable goods orders shot up by 4.7%. New orders for key U.S.-manufactured capital goods rose 0.2%, suggesting business spending on equipment could continue to grow after rebounding in the 2nd Qtr. The leading economic indicators index fell 0.7% and is now in decline for 15 months—the longest streak of consecutive decreases since 2007-08 during the runup to the Great Recession. Consumer prices cooled to the lowest rate in more than two years, as the CPI increased by 4% YOY. Producer prices rose 0.1%, and the annual increase in producer inflation of 0.1% was the smallest in nearly three years. Retail sales rose 0.2% amid declines in receipts at service stations and building material stores. Consumer spending, adjusted for inflation, increased 0.4% — the most since January.

Europe reduce CO2 emissions

Steel Industry Updates

THE EUROPEAN COMMISSION APPROVED €2.85BN IN AID to support Europe's two biggest steelmakers, ArcelorMittal and Thyssenkrupp, in their efforts to reduce CO2 emissions. The move highlights Brussels' efforts to help local industry decarbonize, acknowledging that heavy industries are unable to fund the transition on their own. ArcelorMittal lowered its 2023 steel shipments forecast, with global steel demand (excluding China) expected to grow 1% to 2%. The company reported 2nd Qtr core profit of $2.6 billion, half of the year-ago figure. U.S. service centers have worked down stainless inventories to 444,800 tons by July, 18% lower YOY.


THE IMF PREDICTS THAT MOST OF THE WORLD’S MAJOR ECONOMIES WILL SEE GROWTH IN 2023 except for Germany. According to the latest July estimates, real GDP could shrink in Germany by 0.3%. China’s economy grew more slowly in the 2nd Qtr, with GDP expanding 0.8% on the previous three months as falling exports, weak retail sales and a moribund property sector weighed on growth. The Chinese economy grew 6.3% YOY in the 2nd Qtr, primarily because of a low-base effect from last year.

Tesla Cybertruck

Automotive Trends

A GROUP OF MAJOR AUTOMAKERS IS FORMING A NEW COMPANY TO PROVIDE EV CHARGING in the U.S. to challenge Tesla. The group includes GM, Stellantis, Hyundai/Kia, Honda, BMW and Mercedes Benz, brands representing about half of U.S. vehicle sales. Tesla’s first Cybertruck rolled off the assembly line in July, nearly four years after the futuristic EV pickup prototype was introduced. GM’s 2nd Qtr revenue was $44.7bn, 25% more than in the same quarter YOY and a post-bankruptcy record.

Medical Insights

DEXCOM’S INTERNATIONAL MARKET SHARE GAINS ACCELERATED IN THE 2ND QTR, powering the company to 38% sales growth outside the U.S. and enabling it to raise its overall outlook for the full year. The development of new medicines that control blood sugar and drive weight loss started a debate about whether demand for blood glucose management solutions will continue to rise. Mizuho analysts have concluded that the diabetes space will remain one of the fastest-growing MedTech markets.

Nuclear Fusion Power

Energy Sector News

MICROSOFT SIGNED A POWER PURCHASE AGREEMENT WITH NUCLEAR FUSION STARTUP HELION in May to buy electricity from it in 2028. The deal was a vote of confidence for fusion, which hasn’t been commercialized. A Canadian utility is starting work to expand a nuclear plant, potentially building the world’s biggest nuclear facility as growing demand for clean energy spurs interest in atomic energy. A funding package to support nuclear power generated by small modular reactors was announced by the UK.

Metals & Commodities

INVESTMENT IN CRITICAL MINERALS IS CATCHING UP WITH CLEAN ENERGY AMBITIONS, according to the IEA, which warned that efforts to diversify sources of supply for metals such as lithium, nickel and cobalt have faltered. Investment in developing critical minerals rose 30% to >$40bn last year, building on a 20% increase in 2021. Saudi Arabia has launched its first significant foray into the mining industry with a deal to become a minority shareholder in Vale’s $26bn copper and nickel unit.

urban air taxis

Aerospace Developments

URBAN AIR-TAXIS CAN BEGIN SERVICE OVER U.S. CITIES AS SOON AS 2028 by adhering to existing flight rules for helicopters and other low-altitude aircraft, according to federal regulators. During initial phases, the taxis will have human pilots, rather than the robotic controllers the industry is eventually seeking. Hundreds of Airbus jetliners will require inspections after a new problem of metal contamination with their Pratt & Whitney engines surfaced, adding another potential airline disruption.

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