|Chemical capacity utilization – to 82.6%||Plastic Resin Production||OECD CLI+6|
Running tab of macro indicators: 15 out of 20
Consumers are starting 2020 on solid footing. As expected, headline restaurant and retail sales rose 0.3% in January. Within sectors, the performance was mixed. The largest gains were in building materials, restaurants, and miscellaneous retailers. There were declines in sales of clothing and accessories, health & personal care products, electronics & appliances, and in gas station sales. Compared to a year ago, retails sales were up 4.4%.
Consumer prices rose 0.1% in January, leaving overall prices up 2.5% Y/Y, a steady creeping of the year-earlier comparisons from the third quarter. Higher shelter prices were a factor as were higher prices for food, medical care, apparel, recreation, education, and airline fares. Gasoline and other energy prices declined as did used vehicles, prescription drugs and household furnishings and operations. Prices excluding food and energy (or core inflation) rose 0.2% in January after increasing 0.1% in December. Core prices were up 2.3% Y/Y. Import prices were flat in January as lower fuel prices offset higher prices for nonfuel imports, which rose 0.2%. Export prices declined by 0.2% with higher prices for agricultural and other exports. Compared to a year ago, export prices were up 0.5% while import prices were 0.3% Y/Y higher, the second month in a row that the Y/Y comparison has been positive.
Non-mortgage consumer debt rose by 0.5% ($22.0 billion) in December, the largest monthly gain since July. The gain was led by a surge in credit card balances. Non-revolving installment debt also grew, but at a slower pace than in recent months. Compared to a year ago, consumer debt was up 4.7%.
The NFIB’s index of small business optimism improved by 1.6 points to 104.3 in January, a showing above expectations. Owners expect increased sales, earnings, and higher wages for employees. NFIB chief economist Bill Dunkelberg noted, “Small businesses continue to build on the solid foundation of supportive federal tax policies and a deregulatory environment that allows owners to put an increased focus on operating and growing their businesses.”
Following a decline in November, business inventories edged higher by 0.1% in December as a large gain in manufacturing inventories offset a decline in wholesale inventories. Retailers’ inventories were flat for the month. Combined business sales edged lower with the same pattern – a gain in manufacturing sales offset declining wholesale sales while retail sales were flat. Compared to a year ago, business inventories were up 2.2% while sales were up 1.7% Y/Y. The inventories-to-sales ratio ticked higher to 1.40.
As expected, industrial production declined by 0.3% in January. Mild winter weather caused utility output to fall sharply for a second consecutive month, while mining output continued to gain. Manufacturing production retreated by 0.1% erasing a similar gain in December. Within manufacturing, performance was mixed. The largest gains were in vehicles, refining, plastic & rubber products, and construction materials. The larges declines were in aerospace, apparel, and machinery. Compared to a year ago, industrial production was off 0.8% Y/Y. Capacity utilization eased by 0.3 points to 76.8%, well below the 79.0% rate seen last January. Over the same time, overall industrial capacity was 2.0% higher, with the largest addition to mining sector capacity.
The latest reading of the OECD composite leading indicators (CLIs), which are designed to anticipate turning points in economic activity 6-9 months ahead, points to stable growth momentum, albeit below long-term trends, in the OECD area as a whole. Stable growth momentum remains the assessment for Japan, Canada and the Euro Area. In the U.S. and the United Kingdom, the CLIs are tentatively pointing to growth gaining momentum from below-trend. 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). As a result, the CLI for the OECD+6 is a good leading indicator for global economic activity. Prior to the COVID-19 outbreak, tentative signs of growth gaining momentum were also emerging in the industrial sector of China, but there is a high degree of uncertainty about near-term developments as the data underlying the CLIs, however, were collected before the WHO’s recent declaration of a public health emergency. As a result, the potential negative effects of the COVID-19 outbreak on global activity, particularly on supply chains and tourism linkages, are not taken into account. Amongst other major emerging economies, the assessment anticipated growth gaining momentum in Brazil, remaining stable in Russia, and decreasing in India. The CLI+6 improved 0.1% in December and is up 2.7% Y/Y.
The oil and gas rig count remained steady at 787 rigs. U.S. crude oil inventories rose for the third week. Oil prices rose this past week as traders speculated on supply cuts due to revised forecasts showing global oil demand falling in Q1 due to the COVID-19 (novel coronavirus) outbreak. Natural gas prices remained well below $2 as mild winter weather persists moving into the second half of February.
According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, fell by 365 to 32,670 railcars during the week ending 8 February (week 6). Loadings were up 2.8% Y/Y, up 2.2% YTD/YTD and have been on the rise for 7 of the last 13 weeks. The 13-week moving average, which is used to smooth out irregularities, was down 1.0% compared to last year.
According to data released by the ACC Plastics Industry Producers’ Statistics Group, U.S. production of major plastic resins totaled 7.8 billion pounds during December 2019, up 1.5% Y/Y. Total 2019 production was 87.9 billion pounds, up 1.9% percent increase as compared to 2018 year-end totals. Sales and captive (internal) use of major plastic resins were up 6.5% Y/Y, totaling 7.6 billion pounds during December 2019. Year-end sales for 2019 were 88.5 billion pounds, up 4.0% compared to 2018.
The Fed’s industrial production report indicates that chemical production rose 0.4% in January. This follows a 0.3% gain in December, and a 0.5% decline in November. A rise in production of inorganic chemicals, bulk petrochemicals & organic chemicals, plastic resins, synthetic rubber, manufactured fibers, and consumer products was only partially offset by weakness in agricultural chemicals, coatings, and other specialties. Production was off 0.8% Y/Y after a year in which the trade war affected chemicals, the largest exporting sector. Capacity was stable in January but the gain in output pushed the capacity utilization rate up by 0.3 percentage points to 82.6% in January.
Total chemicals trade between the U.S. and partners across the globe, contracted 4.5% in 2019 with U.S. chemical imports falling 6.7% from $109 billion in 2018 to $102 billion in 2019 and chemical exports falling 2.8% from $140 billion to $136 billion on Y/Y basis. The U.S. chemicals trade surplus increased from $31 billion to $35 billion as imports fell faster than exports in 2019. As growth in basic chemicals exports offset declines in specialties and consumer products, total chemical exports grew just 0.8% in the month of December. Looking at 2019 compared to 2018, with the exception of consumer products which grew 0.3%, declines were noted across all other sectors. Petrochemicals – which comprise more than half of U.S. chemical exports – fell by $2.9 billion or 3.6% in 2019. U.S. chemical imports increased by 1.2% in the month of December but were down notably (-18%) from the year before. Imports declined across all sectors with the largest Y/Y declines observed in bulk petrochemicals and intermediates (-$2.2 billion) and plastic resins (-$1.9 billion).
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“The Chemical Industry Outlook”
Joseph Chang – Global Editor of ICIS Chemical Business; Robert Westervelt – Editor-in-Chief of IHS Chemical Week; and Peter Young – CEO & President of Young & Partners
Société de Chimie Industrielle
19 February 2020
The Yale Club
New York, NY
WPC 2020: 35th Annual World Petrochemical Conference
24-27 March 2020
Hilton New Orleans Riverside
ADI Chemical Market Resources
14 April 2020
AgChem Summit 2020: Innovation in Action
28-30 April 2020
21c Museum Hotel
TZMI TiO2 Summit 2020
12-13 May 2020
Park Central Hotel
New York, NY
10th ICIS World Surfactants Conference
13-15 May 2020
Jersey City, NJ
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.