|Housing Starts||Industrial Production||Chemical Production|
Running tab of macro indicators: 17 out of 20
The number of new jobless claims rose by 13,000 to 861,000 during the week ending 13 February. Continuing claims fell by 64,000 to 4.494 million and the unemployment rate for the week ending 6 February was stable at 3.2%.
Fueled by new stimulus checks to households, retail sales started the year on a strong note with a 5.3% gain in January, well above expectations. Amid rising COVID cases and new restrictions after Thanksgiving, retail sales had fallen by 1.0% in December. In January, sales rose in nearly every segment, with double-digit monthly gains in sales at department stores, electronics & appliances, furniture & home furnishings, and online retailers. Compared to a year ago, sales were up 7.4%.
Business inventories rose 0.6% to $1.972 trillion at the end of December, with widespread gains among sectors. The combined value of distributive trade sales and manufacturers’ shipments rose 0.8% to $1,494 trillion, a level up 2.5% Y/Y. Inventories were off 2.6% Y/Y. The inventory-to-sales ratio was stable at 1.32 in December but off from 1.39 a year earlier.
Producer prices increased 1.3% in January, the largest since the index began in December 2009. Two-thirds of the gain can be attributed to higher prices for services, a sector hammered by COVID lockdowns, which are now being lifted. Pressure is mounting in goods prices as well, led by higher gasoline, iron and steel scrap, oilseeds, industrial chemicals, diesel fuel, and light motor trucks prices. But excluding food and energy, prices rose 1.2% in January and, compared to a year ago, were up 2.0% – a higher pace than the 1.7% Y/Y gain in headline producer prices.
Existing home sales continued to gain, rising 0.6% in January. Inventories continued to move lower, however, with a 1.9-month supply on hand at the end of the month. As a result of tight supplies, the median selling price was up 14.1% Y/Y. Existing home sales were up 23.7% Y/Y as low mortgage rates and new patterns of remote work and learning have fueled demand.
Coming off the fastest pace since 2006, homebuilding slowed in January with housing starts off by 6.0%. Single family starts fell 12.2%. Homebuilding eased in every major region except the Northeast. Forward-looking building permits rose, however, by 10.4% with a 3.8% gain in permits for single-family homes. Compared to a year ago, permits were up 22.5% Y/Y while housing starts were off by 2.3% Y/Y. Despite rising lumber prices and other supply-side pressures, homebuildersentiment gained slightly in February, with the NAHB/Wells Fargo sentiment index rising one point to 84.
Industrial production climbed 0.9% in January, the fourth consecutive increase. Solid gains in manufacturing and mining output offset weaker utility output. Manufacturing output is only slightly below pre-COVID levels. Gains in January were broad based with the largest increase in the output of primary metals, electronics & appliances, petroleum products, aerospace, and fabricated metal products. Compared to a year ago, overall industrial production remained off by 1.8%. Capacity utilization tightened, up 0.7 points to 75.6%, still well below the 76.9% operating rate from a year ago. Overall industrial capacity edged lower by 0.1% Y/Y.
In its Empire State Manufacturing Survey report, the New York Fed reported that business activity grew modestly in New York State, with the headline general business conditions index climbing 8.6 points to 12.1, its highest level in several months. New orders increased, and shipments edged higher. Delivery times lengthened, and inventories grew. Employment levels and the average workweek both increased. Input prices rose at the fastest pace in nearly a decade, and selling prices increased significantly. Looking ahead, firms remained optimistic that conditions would improve over the next six months, and capital spending plans expanded noticeably. Regional manufacturing activity continued to grow according to firms responding to the Philadelphia Fed’s February Manufacturing Business Outlook Survey, with the headline current measure easing 3.4 points to a still very good 23.1 reading. The survey’s current indicators for new orders and shipments also eased from January’s readings but remained elevated. Additionally, employment increases were more widespread this month. Most future indexes moderated this month but continue to indicate that firms expect growth over the next six months.
SURVEY OF ECONOMIC FORECASTERS
The rig count rose by five to 396 rigs during the week ending 13 February. The winter storm left much of Texas and several other states without power. Oil and gas wells, pipelines, and refineries were shut-down and spot natural gas prices soared. Oil prices rose as well. The effects of the storm will be felt for weeks.
For the business of chemistry, the indicators still bring to mind a green 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, fell by 326 (1.0%) to 33,255 railcars the week ending 13 February (week 6). Loadings were up 2.4% Y/Y, up 3.8% YTD/YTD and the 13-week moving average, which is used to smooth out volatility, was up 3.7%.
Chemical prices rose 1.6% in January, the eighth consecutive gain. Compared to December, prices were up in all major segments except manufactured fibers and consumer products. The largest sequential gains were in bulk petrochemicals & organics, plastic resins, synthetic rubber, and agricultural chemicals. Compared to a year ago, chemical prices were up 3.4%. Chemical import prices have been on the rise since January last year. The import price index for chemicals jumped 2.0% in December and another 1.5% in January. Following 22 months of declines, Y/Y comparisons in the chemicals imports price index turned up in December 2020, rising by 0.1%, and then rose by 2.2% in January. Prices for chemical exports rose 1.7%, 2.1% gains in both November and December. Following 20 months of declines, Y/Y comparisons in the chemicals exports price index turned up in November 2020 and have continued to gain through January when the Y/Y comparison was 5.5%.
Chemical industry industrial production climbed 0.7% in January, the fourth consecutive solid increase. Gains were concentrated in basic chemicals and synthetic materials as well as specialties. Gains were broad-based with only coatings soft during the month. Output in agricultural chemicals and consumer products fell during the month. Compared to a year ago, chemicals industrial production reached pre-COVID levels. Capacity utilization tightened, up 0.5 points to 81.7%, still off from the 81.9% operating rate from a year ago. Overall industrial capacity edged higher by 0.2% Y/Y.
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“JP Morgan: What’s Ahead in Chemicals” Webinar
Chris Power – Managing Director & Global Co-Head of Chemicals, JP Morgan Securities; Evan Junek – Managing Director, Corporate Finance Advisory, JP Morgan Investment Bank; and Brian Orkin – Investment Partner, Arsenal Capital (moderator)
4 March (11:00 am – 12:15 pm)
Chemical Marketing & Economics
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.