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      Blog Home   |   Economic Trends

       

      Blog Home   |   Economic Trends

      Weekly Chemistry and Economic Trends (August 6, 2021)


      943,000 jobs14.8 million 1.2%
      PayrollsLight Vehicle Sales (SAAR)Chemical Shipments

      MACROECONOMY & END-USE MARKETS

      Running tab of macro indicators: 15 out of 20

      Macro Table

      The number of new jobless claims declined by 14,000 to 385,000 during the week ending 31 July. Continuing claims declined by 366,000 to 2.93 million (the first time under three million since the start of the pandemic lockdowns) and the insured unemployment rate for the week ending 24 July fell 0.3 percentage points to 2.1%.

      Total nonfarm payroll employment rose by 943,000 in July, a gain above expectations. Notable job gains occurred in leisure and hospitality, local government education, and professional and business services.  Manufacturing and construction jobs also gained. Moreover, the May and June gains were revised upwards. There was a solid gain in hours worked and average hourly earnings rose to 25.83 per hour, up 4.7% Y/Y. The household survey indicated that the unemployment rate declined by 0.5 percentage point to 5.4%, with the number of unemployed falling by 782,000. Labor force participation improved, and the number of employed people gained. The number of long-term unemployed (those jobless for 27 weeks or more) decreased by 560,000 in July to 3.4 million but is 2.3 million higher than in February 2020.

      Light Vehicles

      Amid higher prices and lean inventories, light vehicle sales fell to an annual pace of 14.8 million in July. Across types and origins, the weakness was widespread. The shortage of semiconductors is hampering assemblies and thus inventories on dealer lots and the situation will take some time to clear. Although economic fundamentals are good, consumer spending is reorienting towards services.

      Construction spending edged higher by 0.1% in June after easing in May. Spending on residential construction continued to grow while spending on nonresidential and publicly funded projects continued to decline. Compared to a year ago, construction spending was up 8.2% Y/Y, led by strong gains in the residential sector. Spending on new single-family homes was up nearly 52% Y/Y, reflecting strong demand for housing as the pandemic shifted working patterns.

      The U.S. trade deficit rose by more than expected in June, up $4.8 billion to a record $75.7 billion. Exports edged higher by $0.3 billion as increases in exports of crude oil and other industrial supplies offset lower exports of soybeans and other foods, feeds, and beverages. With surging demand in the U.S., goods imports rose by $4.3 billion, led by higher imports of industrial supplies and materials and capital goods. Imports of consumer goods and automotive vehicles, parts and engines declined.

      Wholesale trade rose 2.0% to $588.1 billion in June. This follows a 0.8% gain in May. Gains were across most segments, except for some weakness among equipment and alcohol wholesalers. Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, rose 1.3% to $717.6 billion at the end of June and follows a 0.8% gain in May. This pushed the inventory-to-sales ratio down slightly to 1.22. A year ago, it was 1.41. Sales were up 27.5% Y/Y and inventories up 10.5% Y/Y. Inventory imbalances are being corrected.

      ISM

      Indicating accelerating growth in the services sector, the ISM Services PMI rose 4.0 points to 64.1% in July, its highest reading ever. Across the board, industries reported increasing business activity. New orders, export orders, and employment also continued to grow. Inventories continued to contract for a second month and inventory sentiment remained weak.

      The ISM PMI for manufacturing eased 0.9 points to 59.5, the lowest level since January. New orders, production, and employment are growing as are backlogs, exports, and imports. Raw materials inventories are contracting again, and supplier deliveries are slowing at a slower pace. Prices are increasing. Customer inventories are deemed too low. Seventeen of 18 industries are expanding. The July reading of the JP Morgan Global PMI indicated manufacturing continued to expand at a robust clip at the start of the 3Q, with the headline easing 0.1 points to 55.4. The pace of increase in output and new orders eased again, as record supply chain constraints stymied growth and drove up input prices. Twenty-two of 29 nations expanded.

      Manufacturing New Orders

      Factory orders rose 1.5% in June, following a 2.3% gain in May. There were gains across a broad set of industries. Core business orders were up 0.7%. Compared to a year ago, headline factory orders were up 23.9% Y/Y while core orders were up 18.2% Y/Y. Manufacturers’ inventories continued to rise, up 1.0% as did shipments which were up 1.6%. As a result, the inventories to shipments ratio ticked down to 1.48. A year ago, it was 1.63.

      With gains in every region, global semiconductor sales rose 2.1% to $44.5 billion in June. Sales were up 29.2% Y/Y with year-earlier gains in every region and increasing across all major product categories.

      ENERGY

      Energy

      The rig count fell by three to 488 rigs during the week ending 30 July. Oil prices retreated slightly this week. With hot weather last week driving up demand for electricity for cooling, gas inventories rose by a smaller than usual 13 BCF.

      CHEMICALS

      For the business of chemistry, the indicators still bring to mind a green 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, rose by 3.9% to 32,971 railcars during the week ending 31 July (week 30). Loadings were up 5.4% Y/Y and up 5.9% YTD/YTD. The 13-week moving average, which is used to smooth out volatility, was up 14.1%.

      The ISM manufacturing PMI report indicated that the chemical industry is expanding. New orders, production, and inventories are growing as are backlogs, exports, and imports. Supplier deliveries are slowing at a slower pace. Customer inventories are deemed too low. Employment contracted. One chemical industry respondent noted that “Supply chains are slowly, very slowly filling up. Like a water hose, starting upstream and slowly flowing downstream. Rumor is a full return to ‘normal’ may be nearer to year’s end, but the situation is progressing. Transportation (equipment and drivers) is the current pinch point, more so than material shortages.”

      Chemical Supply Chain

      Chemical shipments rose for a fourth straight month in June, up 1.2%. Gains in the shipments of coatings & adhesives, and all other chemicals offset a small decline in agricultural chemical shipments. Chemical inventories also continued to rise for a seventh straight month, up 0.9%. Inventories were higher for coatings & adhesives, and all other chemicals while inventories of agricultural chemicals slipped. Compared to a year ago, shipments were up 13.9% Y/Y while inventories were off 6.4% Y/Y. The inventories-to-shipments ratio remained steady at 1.24 but was down from 1.33 a year ago.

      Wholesale sales of chemicals rose 0.3% in June and inventories rose by 1.8%, both building on gains in May. Compared to a year ago, sales were up 26.3% Y/Y while inventories were up 5.2% Y/Y. The inventories-to-sales rose from 1.10 in May to 1.12 in June. A year ago, the ratio was 1.34.

      Chemical Construction Spending

      Chemical construction spending slipped, down 1.3% in June to $29.1 billion. Compared to a year ago, however, chemical construction spending was up 0.2% Y/Y.

      Chemical industry (including pharma) employment expanded in July, up by 2,600 (0.3%), following an increase of 2,100 in June. Compared to July 2020, employment remained higher by 20,500 (2.4%). Production worker jobs fell by 0.2% in July, but supervisory and non-production employment rose by 1.1%. Average wages were up 3.3% Y/Y to $26.93. The average workweek remained steady at 41.6 hours. Combined with the reduction in production workers, the total labor input into the chemical industry edged lower by 0.2%, suggesting chemical production contracted in July in contrast to the ISM report.

      The benchmark S&P 500 index rose by 2.3% in July. Chemical equity prices, as measured by the S&P index for chemical companies ended lower, however, off 3.3% for the month. Equity prices are often a good indicator of future activity and represent one component of the leading economic indicators. Compared to the beginning of the year, chemical equities were up 13.7% while the S&P 500 index was up 17.0% year-to-date.


      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

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      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.

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