|Plastic Resin Production||Chemical Producer Prices||Retail Sales|
Running tab of macro indicators: 12 out of 20
The holiday shopping season got off to a slow start with a weaker-than-expected 0.2% gain in headline retail sales in November. There were declines in several categories, including clothing, health & personal care, sporting & hobbies, department store and miscellaneous retail. Restaurant sales also decline in November. The best performing categories were electronics, nonstore retailers (i.e., online platforms) and motor vehicles. A late Thanksgiving (the traditional start to the holiday shopping season) resulted in fewer post-Thanksgiving days in the month compared to other years. Cyber Monday, for example, fell on December 2nd. Compared to a year ago, retail sales were up 3.3% Y/Y.
Consumer prices rose 0.3% in November and follows a 0.4% gain in October. The gain in the headline index was led by higher energy prices, but there also gains in prices for used cars and trucks and medical care services. Prices for new vehicles, the only major category to decline, continued to edge lower for a fifth month. Core consumer prices were up 0.2%. Compared to a year ago, core consumer prices were up 2.3% Y/Y while headline consumer prices were up 2.1% Y/Y. Producer prices were unchanged in November, as a gain in prices for final demand goods was offset by a decline in final demand services, which was led by a drop in wholesale margins. Compared to a year ago, headline producer prices were up 1.1% Y/Y, while core producer prices (excluding food and energy) were up by 1.3%, a declining comparison. Import prices rebounded in November, up 0.2% following a 0.5% decline in October. Compared to a year ago, import prices were off 1.3% Y/Y. Taken together, the trend in all three reports suggest that inflation pressures remain muted.
Combined business inventories grew by 0.2% in October, following a small decline in September. Inventories were higher across all three main segments. Combined business sales moved lower for a second month, off 0.1%, with declines in wholesale trade offsetting a gain in retail trade. Manufacturer sales were flat. The inventories-to-sales ratio remained steady at 1.40 compared to September, but was higher than the 1.36 ratio from last October. Compared to a year ago, inventories were up 3.1% Y/Y while sales were off 0.1% Y/Y.
The National Federation of Independent Business (NFIB) reported that its index of Small Business Optimism rose 2.3 points to 104.7 in November, the largest gain and highest reading since May 2018 and well above expectations. Overall, seven of the 10 components in the index advanced in November. Owners reporting it is a good time to expand increased as did those expecting better business conditions. Furthermore, the Uncertainty Index fell and more owners expect the economy to improve in the next few months.
The Organization for Economic Co-operation and Development (OECD) released its composite leading indicator (CLI) series for October. The OECD CLIs are designed to provide early signals of turning points (peaks and troughs) between expansions and slowdowns of economic activity and the latest report points to stable growth momentum in the OECD area as a whole but with growth remaining below trend in all major OECD countries and most large emerging economies. Stable growth momentum is anticipated in the Euro Area as well as in Japan and Canada. Signs of stabilizing growth momentum are now also emerging in the United States and the United Kingdom, where large margins of error remain due to continuing Brexit uncertainty. 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). Among major emerging economies, stable growth momentum remains the assessment for Brazil, Russia and China. On the other hand, the CLI for India continues to point to easing growth momentum. The CLI for the OECD+6 is a good leading indicator for global economic activity and was flat in October and with the year-earlier comparison continuing to improve, suggestive of stabilizing and potentially recovering global activity.
The oil and gas rig count continued to decline, falling by three to 796 rigs. Oil prices declined from a week ago, as higher inventories offset optimism related to a U.S.-China trade deal. Natural gas prices also moved lower as the heating season has gotten off to a comparatively slow start.
For the business of chemistry, the indicators 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, rose by 16.4% to 32,247 railcars during the week ending 7 December (week 49), more than offsetting last week’s drop of 13.0%. Loadings were down 1.6% Y/Y, down 0.4% YTD/YTD and have been on the rise for 8 of the last 13 weeks. The 13-week moving average, which is used to smooth out irregularities, is down 1.3% Y/Y.
According to statistics from the ACC Plastics Industry Producers’ Statistics Group, U.S. production of major plastic resins totaled 7.3 billion pounds during October 2019, an increase of 1.1% Y/Y. Year-to-date production was 73.1 billion pounds, up 2.6% Y/Y. Sales and captive use of major plastic resins totaled 7.7 billion pounds up 5.5% compared to last year and YTD sales and captive use was 74.0 billion pounds, up 4.0%.
Following a 1.0% gain in October, chemical producer prices retreated by 0.3% in November. Prices were mixed with gains in prices for agricultural chemicals, coatings, and other specialty chemicals that were offset by lower prices for organic chemicals, plastic resins, synthetic rubber, and inorganic chemicals. Prices for consumer products were flat. Feedstock prices were up 11.5% during the month, but 49.8% lower than November 2018. Compared to a year ago, chemical prices were down 3.0% Y/Y. For a sixth month, chemical import prices continued to slide in November, down 0.5%. Export prices were also lower, by 0.6%. Compared to a year ago, chemical import prices were off 7.4% Y/Y while export prices were down 4.0% Y/Y.
Chemical wholesale sales rebounded in October, up by 1.9%. Chemical wholesale inventories, however, fell by 1.6%. The inventories-to-sales ratio fell from 1.14 in September to 1.10 in October, which put the 1.11 ratio from a year ago. Compared to a year ago, sales were down 2.2% Y/Y while inventories were off 3.0% Y/Y. Inventories at the wholesale level are becoming more balanced.
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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.