|Retail Sales||Industrial Production||Chemical Production|
Running tab of macro indicators: 16 out of 20
The number of new jobless claims decreased by a larger-than-expected 228,000 to 963,000 in the week ending 8 August, marking the first time below one million since mid-March. Continuing claims fell by 604,000 to 15.49 million and the unemployment rate for the week eased 0.4 percentage points to 10.6%.
Following two strong months of rebound, food service and retail sales posted a more modest 1.2% gain in July, coming in below expectations. With COVID-19 cases rising across parts of the U.S. during the month, the pace of reopening stalled and, in a handful of places, reversed. Core sales, excluding motor vehicle and gas station sales, were up 1.5%. Sales continued to rebound strongly at electronics and appliance dealers, as consumers spent their pandemic savings on big-ticket items. Sales also grew at retailers of food & beverage, health & personal care, clothing, miscellaneous categories, and at online & other non-store retailers. Restaurant sales also continued to expand, though at a slower pace compared to May and June. Compared to a year ago, retail sales were up 2.7%.
Business inventories fell 1.1% to $1,912.2 billion at the end of June. Retail and wholesale inventories were brought down while manufacturing inventories gained. The combined value of distributive trade sales and manufacturers’ shipments for June rose 8.4% to $1,394.0 billion. Gains were across the board. The total business inventories/sales ratio at the end of June was 1.37, down from 1.50 at the end of May, and below the June 2019 ratio of 1.39. Overall inventories were off 5.8% Y/Y and sales were off 4.3% Y/Y.
NFIB reported that small business optimism eased in July as coronavirus cases continue to surge across the country. After rebounding two months, the index fell 1.8 points to 98.8 in July, near the survey’s historical average. Overall, four of the 10 index components improved, five declined, and one was unchanged. Uncertainty increased and business owners continue to temper their expectations of future economic conditions as the public health crisis is expected to continue.
Producer prices advanced 0.6% in July, about double expectations and the largest gain since October 2018. This follows a 0.2% decline in June and a 0.4% gain in May. The gain was led by energy as well as trade with prices rising among all three stages in the supply chain. Import prices rose for a third consecutive month in July, up by 0.7%. The gain was largely on higher fuel prices. Export prices rose by 0.8% with gains in both agricultural and non-agricultural exports. Compared to a year ago, import prices were off 3.3% while export prices were off 4.4% Y/Y.
Consumer prices rose 0.6% in July, the same increase as in June. Higher prices for gasoline were a factor, but consumer prices less energy and food also rose 0.6%, the largest monthly increase since January 1991. One month does not make a trend but given the large amount of money creation, this warrants attention. Higher prices for vehicle insurance, shelter, communications, used vehicles and medical care were drivers. Headline prices were up 1.0% Y/Y and core prices up 1.6% Y/Y.
In line with expectations, industrial production rose 3.0%, the third monthly gain since lockdowns eased. Manufacturing production expanded by 3.4%, but remains around 8% below pre-pandemic levels. Mining output expanded by 0.8%, the first monthly gain in 2020. Within manufacturing, the largest gains were in motor vehicles, aerospace, wood products, furniture, textiles, printing, petroleum products, and chemicals (discussed in more detail below). Industrial production remained off 8.2% Y/Y. Capacity utilization continued to tighten, up 2.1 percentage points, to 70.6%. Capacity utilization remains well below last July’s 77.4% and the long-term average of 79.2%.
The rig count fell by four to 245 rigs during the week ending 7 August. There was an above average build in natural gas inventories, again leaving stocks at the upper limit of the five-year range. U.S. crude oil production last week fell to 10.7 million BPD, down from a record of 13.1 million in mid-March prior to the lockdowns and collapse of oil prices in May
For the business of chemistry, the indicators still bring to mind a yellow 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, was essentially flat W/W at 31,297 railcars the week ending 8 August (week 32). Loadings were down 2.8% Y/Y and down 5.0% YTD/YTD. Railcar loadings continue to show improvement, and have been on the rise for eight of the last 13 weeks. The 13-week moving average, which is used to smooth out volatility, was down an improved 9.8% Y/Y.
Chemical producer prices advanced 0.8% in July and follows a 0.6% gain in June. Among major segments, basic chemicals, specialty chemicals and consumer products advanced while agricultural chemicals fell back. Within basic chemicals, inorganic chemicals, bulk petrochemicals & organics, plastic resins, and manufactured fibers advanced while synthetic rubber prices declined. Feedstock prices advanced strongly (8.5%) and were up 18.8% Y/Y. Chemical prices were up 0.8% Y/Y. Prices for imported chemicals edged higher for a second month in July, up 0.2%. Export prices also rose, up by 1.3%. Compared to a year ago, import prices were off 5.6% while export prices were off 5.5% Y/Y.
Chemical production rose 0.5% in July. Gains occurred in basic chemicals, agricultural chemicals and consumer products but specialties were weak. Within basics, output of inorganic chemicals fell back while that for bulk petrochemicals & organics, plastic resins, synthetic rubber, and manufactured fibers rose. Within specialties, coatings output rose while other specialties declined. Overall production was off 6.7% from January and off 5.9% Y/Y on a 3MMA. Capacity rose 0.1% and with the gain in production, capacity utilization advanced 0.3 points to 74.7%. A year ago, it was 79.9%.
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National Economists Club Webinar
3 September 2020 – 12-1:00pm
The 10th ICIS World Surfactants Virtual Conference
16-18 September 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.