|New Home Sales||US CPRI||Global CPRI|
Running tab of macro indicators: 6 out of 20
In the week ending 18 April, initial claims for unemployment were 4.43 million, down from 5.24 million the prior week and a continuation of a historic labor market decline. The insured unemployment rate was 11.0% for the week, the highest level in the history of the series. Continuing claims reached 15.98 million. Some 26 million Americans have filed for unemployment during the past five weeks. The April employment report will likely feature the most pronounced monthly shrinkage of U.S. payrolls since the 1930s.
As shutdowns spread across the U.S. in March, existing home sales tumbled by 8.5% during the month. Sales were off in all major regions, with the sharpest decline in the West region where the initial U.S. outbreaks were located. Sales remained ahead 0.8% Y/Y. Inventories were 10.2% Y/Y lower at the end of March, but were up compared to February. As a result, the months’ supply rose to 3.4 months. New home sales also fell sharply, by 15.4%, with declines across all regions. While declines were especially pronounced in the Northeast and West regions (the first U.S. hotspots), sales in the South region were off by only 0.8%. Inventories of unsold homes rose by 2.8% pushing the months’ supply to 6.4 months (up from 5.2 in February). While construction is considered an essential business activity in many states, home buying demand has fallen sharply with the lockdowns and resultant recession.
With many segments of the manufacturing sector shuttered during the last half of the month, durable goods orders sank by 14.4% in March with declines across most categories except defense aircraft, communications equipment, and electrical equipment. New orders for motor vehicles and parts were down 18.4% during the month. With lockdown extensions into April, orders are set to decline further. Business investment orders (nondefense capital goods excluding aircraft) ticked slightly higher during the month and were down only slightly on a Y/Y basis. Headline orders, on the other hand, were off 14.7% Y/Y.
The Kansas City Fed’s latest Manufacturing Survey reported that business activity in the Tenth District decreased further, falling from -17 in March to -30 in April, the lowest reading in survey history. Measures of production, new orders, employment, and raw materials inventory all declined while supplier delivery times lengthened. At the same time, expectations for future activity improved but remained slightly negative at -6.
The rig count continued to collapse during the week ending 17 April, down 73 rigs to 527. U.S. crude stocks continued to grow, rising by 15.0 million barrels to 518.6 million barrel, further adding to a supply glut. The U.S. benchmark oil price (WTI) which was -$37.63 per barrel at one point on Monday as May contracts came due and commercial storage capacity was essentially full. It was the first time oil prices had ever gone negative and signals the high price of storage capacity in the U.S. with supply continuing to build and demand sharply lower.
For the business of chemistry, the indicators still bring to mind a red banner for basic and specialty chemicals.
According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, rose by 102 to 29,096 railcars during the week ending 18 April (week 16). Loadings were down 9.3% compared to the same week in 2019, but were up 0.9% YTD/YTD. Loadings 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 0.5% compared to last year.
The Chlorine Institute (CI) reported that production of chlorine was 34,562 tons per day in March, up 4.3% over the previous month; YTD production was up 4.6% Y/Y. The output of co-produced caustic soda rose to 36,762 tons per day, up 3.9% compared to February.
According to the American Chemistry Council (ACC), the U.S. Chemical Production Regional Index (U.S. CPRI) edged lower by 1.1% in March following a 0.1% decline in February and flat growth in January. During March, chemical output declined across all regions. The lower level of activity is directly related to supply chain disruptions and the lockdown of much of the U.S. economy during the second half of March. Compared with March 2019, U.S. chemical production was off by 2.4%, the tenth and highest consecutive month of Y/Y declines.
Chemical production was lower than a year ago in all regions, with the largest year ago declines in the Northeast, Mid-Atlantic, and West Coast regions.
Although the Department of Homeland Security has designated chemical manufacturers as essential, production has eased in many chemical segments. Supply chains tied to PPE and disinfection products have seen increased production, however.
Nearly all manufactured goods are produced using chemistry in some form. Thus, manufacturing activity is an important indicator for chemical production. With many factories shut down during the latter part of March, however, overall manufacturing activity fell by 2.2% (on a 3MMA basis) with declines across all industry sectors except computers & electronics.
Led by another large decline in China and other nations due to the COVID-19 coronavirus, ACC’s Global Chemical Production Regional Index (Global CPRI) shows that global chemicals production fell 3.1% in March, an acceleration from the 2.1% decline in February, and a 0.8% decline in January. During March, chemical production increased in the Former Soviet Union (FSU), was essentially flat in Europe, and declined elsewhere. Headline global production was off 4.2% Y/Y on a 3MMA basis and stood at 111.9% of its average 2012 levels.
During March, global capacity rose by 0.3% and was up 3.3% Y/Y. As a result, with the decline in production, capacity utilization in the global chemical industry fell 2.7 points to 76.9%. This is down from 82.9% last March, below the long-term (1987-2017) average of 86.5%, and at its lowest level since April 2009.
Among chemical industry segments, March results were decidedly negative across all segments. Considering year-earlier comparisons, growth was not present in any segments.
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28-30 April 2020
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12-13 May 2020
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3-15 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.