American Chemistry MattersA Blog of the American Chemistry Council

American Chemistry Matters

* Required Field

Subscribe To ACC SmartBrief

Subscribe To ACC SmartBrief

Stay up-to-date and engaged with the latest industry-related news.


Blog Home   |   Economic Trends

 

Blog Home   |   Economic Trends

Weekly Chemistry and Economic Trends (June 19, 2020)


1.7%1.4%2.8%
Chemical ProductionSpecialty Chemical VolumesLeading Economic Indicators

MACROECONOMY & END-USE MARKETS

Running tab of macro indicators: 9 out of 20

Macro Table

Coming in a little better than expected, the number of new jobless claims fell by 58,000 to 1.508 million in the week ending 13 June. Continuing claims were 20.8 million and the advance unemployment rate for the week was 14.1%, continuing a downward trend.

After three months of decline, retail sales rose a larger-than-expected 16.8% (about 2X) to $446.8 billion in May.

This was the largest gain on record and left retail sales off 1.4% Y/Y. Gains were widespread among segments and included discretionary categories. However, sales are still below their February peak. Business inventories fell 1.3% to $1,981.2 billion at the end of April. Retail and manufacturing inventories fell but wholesale inventories gained. At the same time, the combined value of distributive trade sales and manufacturers’ shipments for April fell 14.4% to $1,184.8 billion. As a result, the total business inventories-to-sales ratio rose from 1.45 in March to 1.67 in April; a year ago the ratio was 1.39. Sales were off 18.4% Y/Y but inventories off only 2.2% Y/Y.

Housing Starts and Building Permits

Housing activity partially rebounded in May with housing starts up 4.3% following a 26.4% decline in April. Activity was higher in the Northeast and West, but continued to decline in the Midwest and South. Most of the gain was in the multifamily segment; single-family starts edged higher by only 0.1%. Forward-looking building permits rose 14.4% with an 11.9% jump in single-family permits. Despite strong underlying demand and low mortgage rates, the labor market is in turmoil and there is tremendous uncertainty about the recovery of private sector incomes. The NAHB housing market index (HMI) jumped 21 points to a 58 reading in June. This is the largest gain on record and pushed homebuilder optimism into positive territory. Gains occurred in all regions. Growing confidence likely points to a swift rebound in overall conditions.

Industrial Production

As many factories resumed at least partial operations, industrial production increased 1.4% percent in May. The gain was about one-half of expectations and industrial production in May was 15.4% below its pre-pandemic level in February. Manufacturing output — which fell sharply in March and April — rose 3.8% in May; most major industries posted increases, with the largest gain registered by motor vehicles and parts. Output of mining and utilities declined 6.8% and 2.3%, respectively. At 92.6% of its 2012 average, industrial production was off 15.3% Y/Y.  Capacity utilization for the industrial sector increased 0.8 percentage points to 64.8% in May, a rate that is 15.0 percentage points below its long-run (1972–2019) average and 1.9 percentage points below its trough during the 2007-09 recession.

The New York Fed, in its June Empire State Manufacturing Survey, indicated that business activity steadied after breaching record lows in April and May. The headline general business conditions index climbed 48.3 points to -0.2. New orders were unchanged from last month and shipments inched higher. Delivery times and inventories were little changed. Employment levels edged slightly lower and the average workweek continued to decline. Input price increases picked up and selling prices stabilized. Firms were notably more optimistic that conditions would be better in six months, with the index for future business conditions rising to its highest level in more than a decade. The Philadelphia Fed Business Outlook Survey indicated that activity in the region’s manufacturing sector expanded in June. The current activity index rose from -43.1 in May to +27.5 in June, the first positive reading since February. The indices for current shipments and new orders rose to positive readings this month and expectations for the future also rose with the future activity index rising from 49.7 to 66.3, its highest level in nearly 30 years.

LEI

Following a 6.1% decline in April, the Conference Board’s index of leading economic indicators (LEI) rose 2.8% in May. Improvement in unemployment insurance claims (which was responsible for about two-thirds of the gain in the index), building permits and stock prices offset continued weakness in manufacturing orders, consumers’ outlook, and the Conference Boards’ Leading Credit Index. The Conference Board notes that “the breadth and depth of the decline in the LEI between February and April suggest the economy at large will remain in recession territory in the near term.”

ENERGY

Energy

The rig count continued to collapse during the week ending 5 June, falling by five rigs to 277. Oil prices continued to advance on optimism about the recovery in global demand and an easing of trade tensions between U.S. and China. In addition, traders were optimistic that OPEC and its allies would adhere to an agreement to cut production. Natural gas inventories continued to build and remain near the top of the five-year historic range.

CHEMICALS

For the business of chemistry, the indicators still bring to mind a red banner for basic and specialty chemicals.

Chemical Table

According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, fell by 421 to 27,481 railcars during the week ending 13 June (week 24). Loadings were down 15.3% compared to the same week in 2019 and down 4.4% YTD/YTD, the 7th consecutive week of increasing declining comparisons. Loadings have been on the rise for 5 of the last 13 weeks. The 13-week moving average, which is used to smooth out volatility, was down 10.5% compared to last year.

According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, fell by 421 to 27,481 railcars during the week ending 13 June (week 24). Loadings were down 15.3% compared to the same week in 2019 and down 4.4% YTD/YTD, the 7th consecutive week of increasing declining comparisons. Loadings have been on the rise for 5 of the last 13 weeks. The 13-week moving average, which is used to smooth out volatility, was down 10.5% compared to last year.

The U.S. Geological Survey reported that monthly production of soda ash in March was 1,020 thousand tons, up 8.1% compared to the previous month and up 8.4% Y/Y. Stocks rose 6.5% over February to 326 thousand tons at the end of the month, a 10-day supply. Ending stocks were up 18.1% Y/Y. As the data is for March, any COVID-related production impacts are not yet reflected. The Chlorine Institute (CI) reported that production ofchlorine was 28,750 in May, up 9.4% over the previous month; YTD production was down 3.3% Y/Y. The output of co-produced caustic soda rose to 30,186, up 8.9% over April and YTD production was down 3.0% Y/Y.

Chemical Production

Chemicals production increased 1.7% percent in May with gains in inorganic chemicals, plastic resins, synthetic rubber, manufactured fibers and coatings, as well as agricultural chemicals and consumer products. Bulk petrochemicals & organics and other specialties were the only segments experiencing weakness. At 96.7% of its 2012 average, chemicals production was off 6.6% Y/Y.  Chemical industry capacity utilization increased 1.2 percentage points to 75.1% in May.

Total U.S. Specialty Chemicals

With the lifting of mandated government lockdowns showing up in a recovering U.S. economy, U.S. specialty chemicals market volumes rebounded 1.4% in May, an improvement from the record 12.5% decline in April, and declining activity since the peak in January. Of the 28 specialty chemical segments we monitor, 22 expanded in May, an improvement from all 28 declining in April. Thus, on a sequential (one-month change) basis diffusion was 79%, better than the 0% diffusion recorded in April.

During May, overall specialty chemicals volumes were off 14.4% Y/Y and volumes stood at 95.7% of their average 2012 levels in May. This is equivalent to 6.52 billion pounds (2.96 million metric tons). On a Y/Y basis, there was a gain in only two market and functional specialty chemical segments – cosmetic additives and electronic chemicals. On a year-earlier basis, diffusion was 7% in May, an improvement from April but much worse than at the start of the year.


For More Information

ACC members can access additional data, economic analyses, presentations, outlooks, and weekly economic updates through MemberExchange.

In addition to this weekly report, ACC offers numerous other economic data that cover worldwide production, trade, shipments, inventories, price indices, energy, employment, investment, R&D, EH&S, financial performance measures, macroeconomic data, plus much more. To order, visit http://store.americanchemistry.com/.

Every effort has been made in the preparation of this weekly report to provide the best available information and analysis. However, neither the American Chemistry Council, nor any of its employees, agents or other assigns makes any warranty, expressed or implied, or assumes any liability or responsibility for any use, or the results of such use, of any information or data disclosed in this material.

Contact us at ACC_EconomicsDepartment@americanchemistry.com

Upcoming Events of Interest

The 13th ICIS World Chemical Purchasing Conference
10-11 September 2020
Hyatt Boston Harbor
Boston, MA
www.icisevents.com/worldchemicalpurchasing

The 10th ICIS World Surfactants Conference
16-18 September 2020
Hyatt Regency
New Jersey, NJ
www.icisevents.com/worldsurfactants

FlexPO+2020
ADI Chemical Market Resources
22 September 2020
Houston, TX
http://flexpo.adi-cmr.com/


Note On the Color Codes

The banner colors represent observations about the current conditions in the overall economy and the business chemistry. For the overall economy we keep a running tab of 20 indicators. The banner color for the macroeconomic section is determined as follows:

Green – 13 or more positives
Yellow – between 8 and 12 positives
Red – 7 or fewer positives

For the chemical industry there are fewer indicators available. As a result we rely upon judgment whether production in the industry (defined as chemicals excluding pharmaceuticals) has increased or decreased three consecutive months.

Subscribe To ACC SmartBrief

Stay up-to-date and engaged with the latest industry-related news.