|Specialty Chemical Volumes||U.S. CPRI||Leading Economic Indicators|
Running tab of macro indicators: 15 out of 20
Producer prices advanced 0.5% in January, an acceleration from a 0.2% gain in December and a 0.1% decline in November, leaving headline prices up 2.1% Y/Y. Nearly all of the gain is attributable to higher prices for services. That said, prices less foods and energy (or core producer prices) rose 0.5% and were up 1.7% Y/Y as prices for vegetables, iron and steel scrap, jet fuel, instrumentation, and grains moved higher. Inflation pressures seem to be mounting at this stage of the supply chain.
Existing home sales fell 1.3% in January to a seasonally adjusted annual rate of 5.46 million units. A sharp decline in the West offset slightly higher sales in the rest of the country. The median price was up 6.8% Y/Y to $266,300. Inventories of existing homes rose 2.2% and now represent a 3.1-month supply, up from 3.0 months in December. Inventories remain very lean. Compared to a year ago, existing home sales were up 9.6% while inventories were down 10.7% Y/Y.
Led by weaker single-family activity, housing starts eased 3.6% to a 1.57 million unit pace in January and were up 21.4% Y/Y. Activity rose in the Northeast and West but fell in the Midwest and South. The more forward-looking building permits rose 9.2% to a 1.55 million unit pace, up 17.9% Y/Y, with gains in every region. The NAHB/Wells Fargo Housing Market Index (HMI) eased one point to 74, indicating that homebuilder sentiment remains strong due to strong demand, low mortgage rates and a solid jobs market and is supportive of further gains in housing. Supply-side headwinds such as shortages of labor and buildable lots remain in place.
The Empire State Manufacturing Survey indicated that general business conditions improved in February, with business conditions index moving up 8.1 points to 12.9. The new orders index shot up 15.5 points to 22.1, and the shipments index climbed 10.3 points to 18.9. Delivery times lengthened, and inventories jumped sharply. Employment expanded only modestly and the average workweek was little changed. Input price increases slowed somewhat, and selling price increases picked up. Optimism about the six-month outlook was fairly stable and capital spending plans remained firm. The Philadelphia Fed Manufacturing Business Outlook Survey reported improvement in manufacturing activity in the Philadelphia region. The current activity index rose by 19.7 points to 36.7, its highest reading in three years. The component indices for new orders and shipments accelerated. Inventories rose following a decline in January and delivery times lengthened. Employment growth slowed. Looking ahead over the next six months, expectations continue to improve.
The Conference Board Leading Economic Index® (LEI) rebounded 0.8% in January from a 0.3% decline in December. In January, eight of the 10 component indicators increased. Strength has become slightly more widespread. The LEI suggests that the expansion in economic activity will continue in the short term, but at a moderate pace. Next week, our Chemical Activity Barometer (CAB) will provide an early (and provisional) look at overall business cycle trends in February.
Survey of Economic Forecasters
Each month, ACC’s Economics & Statistics department collects forecasts from a number of economic professionals who have a track record for accuracy and expert knowledge of manufacturing. The data presented in the above tables are averages of their forecasts. The latest forecasters’ survey results — including the range of responses; historical data from 1994 through 2019; forecasts from 2020 through 2024 and beyond; as well as forecasts for other major nations — are available on MemberExchange for ACC members.
In light of the Covid-19 coronavirus, our forecasters have become more pessimistic about global economic prospects. This is especially the case for world economic growth, trade and industrial production.
The oil and gas rig count rose by one to 788 rigs. In the most recent week, U.S. crude inventories grew slightly while natural gas inventories were drawn down faster than the usual pace. Oil prices edged higher as fears about the impact of COVID-19 eased. At the same time, abundant supplies and relatively mild winter have fostered soft natural gas prices.
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, fell by 205 to 32,465 railcars during the week ending 15 February (week 7). Loadings were up 0.4% Y/Y, up 1.9% YTD/YTD and have been on the rise for 6 of the last 13 weeks. The 13-week moving average, which is used to smooth out irregularities, was down 0.9% compared to last year.
Chemical producer prices eased 0.4% in January and follows a 1.2% decline in December, leaving prices off 3.3% Y/Y. Feedstock prices fell 11.7% during January. Weakness was centered in inorganic chemicals, plastic resins, manufactured fibers, and agricultural chemicals. Gains occurred in bulk petrochemicals and organics, synthetic rubber, coatings, other specialties, and consumer products
U.S. specialty chemicals market volumes started 2020 on a good note, with a 0.5% headline gain in January following a 0.7% gain in December. Of the 28 specialty chemical segments we monitor, 18 expanded in January, up from 15 in December. Nine markets declined in January and one was flat. During January, large market volume gains (1.0% and over) occurred in antioxidants, catalysts, cosmetic chemicals, electronic chemicals, mining chemicals, plastic compounding, printing ink, and rubber processing chemicals. On a sequential (one-month change) basis, diffusion was 66%, up from 55% in December. During January, the overall specialty chemicals volume index was up 0.3% on a Y/Y 3MMA basis. Year-earlier comparisons eased since 3rd quarter 2018 and were negative through December. The index stood at 113.8% of its average 2012 levels in January. This is equivalent to 7.75 billion pounds (3.52 million metric tons). On a Y/Y basis, there were gains in 11 market and functional specialty chemical segments. Compared to last year, volumes were down in 16 segments and was flat compared to a year ago. On a year-earlier basis, diffusion was 41%, an improving comparison.
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Contact us at ACC_EconomicsDepartment@americanchemistry.com
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Debnil Chowdhury – Head of US Refining, IHSMarkit
The Association of Industry Analytics
26 February 2020
Cyviz Experience Center
“China and Coronavirus: Current and Future Impact on the Chemical Industry”
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Complimentary Webinar for Members & Non-Members – 2:00-3:00 PM
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27 February 2020
WPC 2020: 35th Annual World Petrochemical Conference
24-27 March 2020
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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
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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.