|Chemical Railcar Loadings||Small Business Optimism||Chemical Wholesale Trade|
Running tab of macro indicators: 6 out of 20
In the week ending 4 April, initial claims for unemployment were 6.606 million, a decrease of 261,000 from the previous week’s revised level and a level above expectations. The previous week’s level was revised up by 219,000 from 6.648 million to 6.867 million. The four-week moving average was 4.266 million, an increase of 1.599 million from the previous week’s revised average of 2.667 million.
The NFIB’s measure of small business optimism fell 8.1 points in March to 96.4, the largest monthly decline in the survey’s history. Nine of the 10 Index components declined, evidence that economic disruptions engendered by the coronavirus pandemic are escalating on Main Street as small businesses struggle to keep their doors open. The small business sector is anticipating and bracing for continued economic disruptions going forward. Thus ends a 39 month historic run.
The last hoorah, consumer credit rose by a larger-than-expected $22.3 billion (0.5%) in February, nearly double January’s $12.1 billion gain Revolving balances rose by $4.2 billion and non-revolving balances rose by $18.1 billion. Consumer credit was up 4.5% Y/Y,
Consumer prices declined 0.4% in March, the largest decline since January 2015, another period where oil prices collapsed. A sharp decline in the gasoline prices was a major cause of the monthly decrease as were lower prices for airline fares, lodging away from home, new vehicles, and apparel also contributing. Overall energy prices fell 5.8% while gasoline decreased 10.5%. Food prices gained. Core consumer prices (excluding food and energy) fell 0.1%, its first monthly decline since January 2010. Headline prices were up 1.5% Y/Y while core prices were up 2.1% Y/Y.
Producer prices fell by 0.2% in March, following a 0.6% decline in February. Many analysts expected a larger decline. Higher prices for core goods and trade services offset lower prices for energy and transportation/warehousing services prices. Food prices were flat. Compared to a year ago, headline producer prices were up 0.7% Y/Y while core prices were up 1.0% Y/Y.
Total wholesale inventories fell 0.7% to $655.8 billion at the end of February. Sales of merchant wholesalers, except manufacturers’ sales branches and offices fell 0.8% to $500.7 billion in February. Weakness was fairly widespread. The headline inventory-to-sales ratio was stable at 1.31 and off slightly from 1.34 last year. Headline inventories were off 1.3% Y/Y and sales were up 1.1% Y/Y.
The Semiconductor Industry Association (SIA) reported that global semiconductor sales fell 2.4% to $34.5 billion in February. Demand in China fell significantly and also fell in Other Asia/Pacific and the Americas. Sales increased in Japan and Europe. Global sales were up 5.0% Y/Y. The full impact of the coronavirus pandemic on the global market has yet to be captured in available sales numbers and the March data will likely be much worse.
The Organization for Economic Co-operation and Development (OECD) released its composite leading indicator (CLI) for March, which recorded the largest drop on record in most major economies in line with the considerable economic shock caused by the coronavirus pandemic and its immediate impact on production, consumption and confidence in the wake of lockdown measures. The OECD CLI is designed to provide early signals of turning points (peaks and troughs) between expansions and slowdowns of economic activity. In addition to the developed nations, the OECD has also developed CLIs for the major six OECD non-member economies (Brazil, China, India, Indonesia, Russian Federation and South Africa). As a result, the CLI for the OECD+6 is a good leading indicator for global economic activity and it featured its second monthly decline, down 0.9% for the month.
Commercial oil inventories in the U.S. climbed for the twelfth straight week and are up 13.2% from their February low. The last two weeks have seen very large inventory builds. Natural gas inventories also rose strongly with a 218 BCF build, the first build of the season and the largest for this particular week in at least 25 years. The size of the build likely reflects lower industrial and commercial demand due to coronavirus lockdowns.
OPEC and its allies apparently reached an agreement in principle to cut oil production by 10 million BPD for a two months. The group met with representatives from the 13 OPEC countries and 10 allies, led by Russia. Mexico, however, is objecting to the agreement.
For the business of chemistry, the indicators still bring to mind a yellow banner for basic and specialty chemicals, but with a distinctly orange cast.
According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, fell by 2,432 to 30,274 railcars during the week ending 4 April (week 14) the largest week-over-week decline for a non-holiday week since May 2019. Loadings were down 6.4% Y/Y, up 2.4% YTD/YTD and have been on the rise for 5 of the last 13 weeks. The 13-week moving average, which is used to smooth out irregularities, was up 2.3% compared to last year.
The U.S. Geological Survey reported that monthly soda ash production in January was 954 thousand tons, down 7.4% compared to December and down 4.6% Y/Y. Stocks fell 4.8% over the previous month to 275 thousand tons at the end of the month, a 9-day supply. Ending stocks were down 4.8% Y/Y.
US chemicals trade contracted 3.3% in February to $18.4 billion. Chemicals exports were up 1.3% to $10.8 billion in February as exports of basic chemicals, consumer products and agricultural chemicals all rose. Following a large increase in January, chemical imports were down 9.3% to $7.5 billion in February reflecting notable declines of imported petrochemicals and derivatives. Imported specialty chemicals also declined notably. The US surplus in chemicals exports increased by $904 million to $3.4 billion in February.
Chemical prices edged higher by 0.1% in March, following a 0.2% decline in February. Prices were higher for agricultural chemicals and plastic resins which saw a 1.7% monthly gain. These were partially offset by lower prices for inorganic chemicals, synthetic rubber, manufactured fibers, coatings, other specialty chemicals, and consumer products. Compared to a year ago, producer prices for chemicals were off 3.0% Y/Y.
Chemical wholesale inventories fell 0.8% to $12.34 billion at the end of February. Sales of merchant wholesalers, except manufacturers’ sales branches and offices fell 0.9% to $10.60 billion in February. The inventory-to-sales ratio was stable at 1.16 and off slightly from 1.19 last year. Inventories were off 7.2% Y/Y and sales were off 5.2% Y/Y.
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“US Manufacturing: Crisis and Beyond” (webinar)
Cliff Waldman (New World Economics), Kristin Dziczek (Center for Automotive Research), and Don Leavens (National Electrical Manufactuers Association)
National Economists Club
3:00 – 4:00 pm | 14 April 2020
“The Role of Private Equity and the Chemical Industry” (webinar)
Samuel Feinstein – Partner, Apollo Capital Management
Société de Chimie Industrielle
1:00 – 2:00 pm | 15 April 2020
POSTPONED – AgChem Summit 2020: Innovation in Action
28-30 April 2020
CANCELLED – TZMI TiO2 Summit 2020
12-13 May 2020
POSTPONED – 10th ICIS World Surfactants Conference
13-15 May 2020
ADI Chemical Market Resources
22 September 2020
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.