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October 2023 Economic Update Executive Summary
THE U.S. ECONOMY ADDED 336,000 JOBS, the unemployment rate held steady at 3.8% and wage growth continued to slow. Other September data showed: Manufacturing activity is still shrinking, but there are signs of improvement. The ISM’s purchasing managers’ index came in at 49, compared with 47.6 in August. The index for new orders, a predictor of future growth, registered 49.2, up from 46.8 in August. Consumer confidence fell amid worries about higher prices and the political environment. August data showed: Manufacturing output ticked 0.1% higher. Within durable manufacturing, motor vehicles and parts slumped 5%. Durable goods orders gained 0.2%, bolstered by defense aircraft and parts orders which advanced 19%. Appliances and components increased 1.1%.
The leading economic indicators index fell 0.4%, with declines in most of the components. The largest negative contributions were the ISM new orders and business conditions expectations readings. The core consumer price index, which excludes volatile food and energy, accelerated to 0.3% from 0.2% in July. Producer prices increased 0.7% as the cost of gasoline surged 20%, accounting for 60% of the increase. Retail sales increased 0.6% as a surge in gasoline prices boosted receipts at service stations by 5.2%. Still, the trend in underlying spending on goods slowed as Americans grappled with higher inflation and borrowing costs. Consumer spending increased 0.4%, bolstered by surging gasoline prices. Construction spending increased 0.5% with manufacturing plant projects shooting up 1.2%.
Metals & Commodities
URANIUM PRICES ARE LIKELY TO EXTEND A BLISTERING RALLY and end the year more than 50% higher as mounting worries over climate change accelerate a global shift to cleaner sources of energy, including nuclear power. Seventy-two countries have committed to net-zero targets. By 2030, copper and nickel demand could rise by 50-70%, cobalt and neodymium by 150%, and graphite and lithium six to seven-fold. All told, a carbon-neutral world in 2050 will need 35 million tonnes of green metals a year.
CHINA’S ECONOMY SHOWED TENTATIVE SIGNS OF IMPROVEMENT. Production rose 4.5% YOY in August. Retail sales added 4.6%. Exports declined 14.5% YOY in dollar terms. Manufacturing activity has also contracted for four straight months. Both measures exceeded the growth rates reported for them in July by 3.7% and 2.5%, respectively. The European Union fired a warning shot at China ahead of high-level trade talks, demanding that Beijing make progress to reduce its trade deficit, which hit €396bn last year.
Steel Industry Updates
NUCOR WILL PARTNER WITH HELION ENERGY TO DEVELOP A 500 MW FUSION POWER PLANT that would be placed at one of Nucor's steel mills by 2030, providing baseload zero-carbon electricity from fusion directly to a Nucor steelmaking facility. The UAW strike against the Detroit automakers is dealing a blow to the U.S. steel market. Purchases by automotive-related users began slowing during the summer as a strike appeared more likely. ThyssenKrupp Steel awarded a contract to SMS engineering group for the design and construction of a direct reduction steel plant, initiating one of the world's largest industrial decarbonization projects.
Energy Sector News
FORM ENERGY, A CUTTING-EDGE ENERGY STORAGE COMPANY, is building its main manufacturing plant on the former Weirton Steel mill property in the city of Weirton, WV. The plant will produce electricity grid batteries able to store electricity for 100 hours and will utilize iron, water and air rather than less abundant lithium. Vineyard Wind shipped the first GE Haliade-X Wind Turbine Generator to its new home thirty miles off the coast of Cape Cod, where it is being installed as the first of 62 offshore wind turbines.
PRIVATE EQUITY FIRM CARLYLE GROUP IS NEGOTIATING WITH MEDTRONIC to acquire a majority stake in two medical device businesses, its patient monitoring and respiratory interventions businesses, with a valuation of more than $7bn. Neuralink received approval to start the first human trial of its brain implant for paralysis patients. The study aims to test the safety and efficacy of its wireless, implantable brain-computer interface to enable people with paralysis to control external devices with their thoughts.
PRATT & WHITNEY PARENT RTX CORP TOOK A $3BN CHARGE and said hundreds of Airbus jets would be grounded to check for a rare manufacturing flaw. RTX now estimates it will have to pull a total of 600 to 700 engines off their Airbus A320neo jets for lengthy quality inspections between 2023 and 2026. Vietnam Airlines will sign an initial agreement to buy fifty Boeing 737 MAX jets in a deal valued at $10bn at list prices, but the Vietnamese airline’s financial situation may make it more difficult to fund a large order.
THE UNITED AUTO WORKERS STRUCK THE DETROIT THREE, calling it a "stand up" strike, as it will initially strike at certain specified locations at each OEM and then strike at additional locations over time as deemed necessary to apply more pressure in the negotiations. Ford Motors paused work on a $3.5bn battery plant in Michigan, citing concerns about its ability to competitively operate the plant. Ford forecast a full-year loss of $4.5bn for its EV unit and said it was slowing its EV production ramp up.
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