Ulbrich Economic Update - Number 43 (December 2023)

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December 2023 Economic Update Executive Summary

Americans planning big-ticket purchases

The Americas

THE UAW UNION SAID THAT 64% OF WORKERS VOTED TO RATIFY NEW CONTRACTS with the Detroit Big Three automakers. The votes lock in the UAW's agreements with the automakers through April 2028. Other November data showed: Manufacturing activity remained subdued, with factory employment declining further as hiring slowed and layoffs increased, more evidence that the economy was losing momentum. Nonfarm payrolls increased by 199,000 jobs and the unemployment rate fell to 3.7% versus October’s 3.9%. Consumer confidence rose after three straight monthly declines, with Americans planning big-ticket purchases like motor vehicles and houses over the next six months.

October data showed: New orders for U.S. factory goods fell 3.6%, marking the biggest monthly drop in three and a half years. Industrial output dropped 0.6% as production at U.S. factories fell 0.7% and utilities output dived 1.6%. Durable goods orders dropped 5.4%, as orders for motor vehicles and parts fell along with bookings for civilian aircraft. Transportation equipment orders plunged 14.8%. The leading economic indicators index fell, marking 19 months of consecutive decline. Consumer prices overall were flat but still higher by 3.2% from a year earlier. Retail sales fell for the first time in seven months, dropping 0.1%. Consumer spending rose 0.2%, while the annual increase in inflation was the smallest in more than 2-1/2 years, signs of cooling demand that bolstered expectations the Fed's interest rate hikes are over. Construction spending increased 0.6% amid strong gains in single-family homebuilding. The U.S. trade deficit widened 5.1% to $64.3bn as exports of goods and services fell 1.0% to $258bn.

FDI China Turns Negative


FOREIGN DIRECT INVESTMENT INFLOWS FOR CHINA HAVE FALLEN TO NEGATIVE FIGURES for the first time since the data was first published in 1998. Foreign investors are pulling out money at a faster rate than they are investing there. Major banks expect global economic growth to ease in 2024, squeezed by elevated interest rates, higher energy prices and slowdown in the world's two largest economies. The global economy is forecast to grow 2.9% this year, with next year's growth slowing to 2.6%.

Steel Industry Updates

CLEVELAND-CLIFFS BEGAN CONSTRUCTION OF A PIPELINE THAT WILL PUMP HYDROGEN to Blast Furnace No. 7 at Indiana Harbor Works in East Chicago, IN. The pipeline will allow the steelmaker to replace coke with hydrogen in the steelmaking process. U.S. Steel is in talks with the USW to end production at its steel blast furnaces in Granite City, IL. USS plans to sell the two blast furnaces to SunCoke Energy to propel the use of pig iron, a raw material needed to make steel in its mini-mills, with the loss of 1,000 jobs.


Automotive Trends

THE UAW IS LAUNCHING A PUSH TO ORGANIZE THE ENTIRE NONUNION AUTO SECTOR IN THE U.S. after winning new contracts with the Detroit Big Three. The UAW said workers at 13 nonunion automakers were announcing simultaneous campaigns across the country to join the union, including at Tesla, Toyota, VW, Hyundai, Rivian, Nissan, BMW and Mercedes-Benz. GM said its new labor deals after a lengthy strike will cost $9.3bn. Ford estimated the new contract will add $850 to $900 in labor costs per vehicle.

Medical Insights

EVIDENCE THAT MEDICATIONS LIKE WEGOVY AND OZEMPIC can support significant weight loss is driving reassessments of the growth prospects of multiple niches of the medtech industry, including cardiovascular disease, diabetes and orthopedics. Medtronic CEO Geoff Martha was the latest medtech executive to downplay the effects of weight loss drugs on the industry, telling investors on a 3rd Qtr earnings call that the recent jump in interest for the medications will not slow the company’s growth.


Energy Sector News

THE FIRST INTERNATIONAL STRATEGY TO COMMERCIALIZE NUCLEAR FUSION POWER will be revealed by the U.S. at the UN climate summit in Dubai (COP28). Fusion could have an important advantage over today’s nuclear fission plants that split atoms, as it does not produce long-lasting radioactive waste. Heirloom Carbon Technologies opened the first commercial plant in the U.S. to pull carbon from the atmosphere. Although current operations are small, HTC plans to expand the capture with more plants.

Metals & Commodities

A PROLONGED SLIDE IN COPPER PRICES is undermining the world’s shift to renewable energy sources. Mining firms will need to dig up gigantic amounts of new copper to supply the transition to renewables, but demand is slumping right now from manufacturers and builders. The result of that timing mismatch is a temporary surplus that is keeping copper prices low and discouraging new investment. U.S. reliance on Russia’s nuclear fuel poses a critical threat to national security and climate goals, said Kathryn Huff, Assistant Secretary for Nuclear Energy, urging Congress to provide funds to rebuild a domestic supply chain and restrict Russian imports.

NASA X59 Supersonic Jet
Image Source: NASA

Aerospace Developments

BOEING OPENED THE DUBAI AIRSHOW WITH A FLURRY OF ORDERS led by a whopping $52bn (at retail) widebody commitment from Emirates Airline, while teasing the possibility of more as China moves closer to a deal for the 737 MAX. NASA's experimental supersonic jet is sporting a red, white and blue color scheme ahead of its first flight in which it will quietly shatter the sound barrier over Earth. The X-59 program has the potential to reshape rules that currently prohibit the flight of supersonic jets over land.

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