|CAB||U.S. CPRI||Global CPRI|
The number of new jobless claims fell by 89,000 to 803,000 during the week ending 19 December. Continuing claims fell by 170,000 to 5.34 million and the unemployment rate for the week ending 12 December eased 0.2 percentage points to 3.6%.
In its third and final estimate, 3rd quarter GDP growth was revised slightly higher to a 33.4% seasonally adjusted annual rate. In this latest estimates, consumer spending and business fixed investment were revised higher, though offset by a downward revision to exports. This rebound in Q3 followed the record 31.4% decline during Q2. Compared to Q3 2019, GDP was down 2.8% Y/Y.
Consumer confidence deteriorated again in December as consumers’ assessment of current business and labor market conditions decreased sharply (from 92.9 to 88.6); the resurgence of COVID-19 cases remains a drag on confidence. That said, consumers’ expectations based on consumers’ short-term outlook for income, business, and labor market conditions improved this month. Plans to purchase appliances improved while plans for new autos and homes were pared back. For the first time since April, consumer spending fell in November, by 0.4%, a larger decline than expected. Spending declined across all major categories with the largest decline in durable goods. Personal income fell 1.1% following a 0.6% decline in October. The PCE deflator (a better measure of price trends as it accounts for changes in consumption patterns) was flat for a second month in a row. Excluding food and energy, the core-PCE deflator was also flat for a second consecutive month.
Existing home sales fell for the first time in five months, down by 2.5% in November. Sales eased or held steady in each of the four major regions. Inventories continued to decline (off 22% Y/Y) and represent an all-time low 2.3 months of stock at the current sales pace. The median sales prices was up 14.6% Y/Y. Compared to a year ago, sales were up 25.8%. Coming in below expectations, new home sales tumbled by 11.0% in November, the fourth consecutive decline following a surge of activity during the summer. Sales were lower in all regions, with the largest declines in the Midwest and West. At the end of November, inventories of unsold homes were 1.8% higher than at the end of October. At the current sales pace, that represents 4.1 months of inventory, up from a 3.6-month supply in October, but down from the 5.6-month supply a year ago. Compared to a year ago, new home sales remained ahead, by 20.8%.
The Richmond Fed reported that Fifth District manufacturing activity showed signs of improvement in December with the composite index rising from 15 in November to 19 in December, buoyed by increases in new orders and employment, while the third component – shipments — declined but remained positive. Indexes for local business conditions and capital spending were also positive, and manufacturers were optimistic that conditions would improve in the coming months. The Dallas Fed reported that expansion in Texas factory activity picked up in December. The production index, a key measure of state manufacturing conditions, rebounded from 7.2 to 25.5, indicating an acceleration in output growth. Other measures of manufacturing activity (new orders, capacity utilization and shipments) also point to stronger growth this month. Expectations regarding future activity remained positive in December. The Chicago PMI rose 1.3 points to 59.5 in December, leaving 4Q at the highest level since 4Q 2018. Among the main five indicators, employment saw the largest monthly gain, followed by order backlogs.
Our CAB leading indicator of the U.S. business cycle rose 0.7% in December following a 1.8% increase in November and a 0.7% gain in October. The diffusion index was stable at 71% in December. The CAB reading for November was revised upward by 0.24 points and that for October was revised upward by 0.89 points. These were highly volatile months for the data. As always, the latest month’s data are provisional and subject to revision. The CAB has four main components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators. In December, production-related indicators were positive. Despite strength in housing activity, trends in construction-related resins, pigments and related performance chemistry were mixed. Reflecting strength in manufacturing, resins and chemistry used in other durable goods were strong. Gains in plastic resins used in packaging and for consumer and institutional applications were positive and suggest further growth in retail sales. Performance chemistry for industry continued to expand. U.S. exports were positive, while equity prices increased, but at a slower pace. Product and input prices were modestly positive. Inventory and other supply chain indicators were positive. With eight consecutive months of gains, the December CAB reading is consistent with recovery in the U.S. economy.
The rig count rose by three to 350 rigs during the week ending 30 December. Amid mild weather and low draws on inventories, natural gas prices have declined. In the meantime, oil prices had edged up to around $50 per barrel on stimulus optimism.
According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, rose by 685 to 33,276 railcars the week ending 19 December (week 51), but then fell by 5,797 to 27,479 for the final week of the year (week ending 26 December). 2020 YTD was down 3.5% compared to 2019, but the 13-week moving average, which is used to smooth out volatility, was up for the third week in a row, by 1.5%.
The Chlorine Institute (CI) reported that production of chlorine was 30,732 tons per day in November, up 10.0% over the previous month; YTD production was down 8.9% Y/Y. The output of co-produced caustic soda rose to 32,622 tons per day, up 8.8% compared to October and YTD production was down 9.0% Y/Y.
The U.S. Chemical Production Regional Index (U.S. CPRI), which is measured as a three month moving average (3MMA), rose by 0.4% in November following a 1.1% gain in October and a 0.6% increase in September. During November, chemical output expanded in all regions, with the largest gains in the Gulf Coast and Midwest regions. Compared with November 2019, U.S. chemical production was off by 4.2%, the eighteenth consecutive month of Y/Y declines, but represents a continued improvement over the past several months. Chemical production remained lower than a year ago in all regions, with the largest year ago declines in the Northeast, Mid-Atlantic, and West Coast regions.
Chemical production (on a 3MMA basis) continued to improve in many segments including fertilizers, synthetic dyes & pigments, chlor-alkali, other inorganic chemicals, and organic chemicals. Production trends eased, however, in coatings, manufactured fibers, consumer products, adhesives, synthetic rubber and crop protection chemicals.
As nearly all manufactured goods are produced using chemistry in some form, manufacturing activity is an important indicator for chemical demand. The manufacturing recovery continued for a fifth consecutive month in November, with overall factory activity up by 0.7% (on a 3MMA basis). The trend in production rose in nearly all key chemistry end-use industries, with the strongest gains in iron & steel, aerospace, rubber products, paper, and structural panels, printing.
The Global Chemical Production Regional Index (Global CPRI), which is measured as a three month moving average, rose by 1.9% in November, a slightly faster pace than October, and continuing the global recovery that started in June following declining activity during the January through May period. During November, chemical production increased in most regions with the FSU the exception. Headline global production was up 3.7% Y/Y on a 3MMA basis and is now 2.9% above the pre-COVID peak last December. Global output stood at 122.0% of its average 2012 levels.
During November, global capacity rose 0.1% and was up 2.2% Y/Y. As a result, with improving production, capacity utilization in the global chemical industry rose 1.5 points to 82.9%. This is up from 81.7% last October and the pre-COVID peak last December but below the long-term (1987-2017) average of 86.5%.
Among chemical industry segments, November results were positive with gains across all segments. Considering year-earlier comparisons, growth was mixed, with gains in plastic resins, synthetic rubber, manufactured fibers, bulk petrochemicals & organics, inorganic chemicals, other specialties, agricultural chemicals and consumer products but off in coatings.
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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.