|Light Vehicle Sales||ISM Manufacturing PMI||Global CPRI|
Running tab of macro indicators: 17 out of 20
The number of new jobless claims fell by 33,000 to 779,000 during the week ending 30 January. Continuing claims fell by 193,000 to 4.592 million and the unemployment rate for the week ending 23 January eased 0.2 percentage points to 3.2%.
Following downwardly revised data for November and December, growth in non-farm payrolls resumed in January, up by 49,000, in line with low expectations for slow growth. In January, notable job gains in professional and business services and in both public and private education were offset by losses in leisure and hospitality, in retail trade, in health care, and in transportation and warehousing. Manufacturing employment declined. Average weekly hourly wages for non-supervisory workers were up 5.2% Y/Y, a pace that has accelerated, largely reflecting changes in the mix of those still employed. The unemployment rate fell by 0.4 percentage points to 6.3%, its lowest level since April 2020 but are still well above pre-pandemic levels (by 5.7 million). Labor force participation eased slightly and the average duration of unemployment rose to 26 weeks.
Led by gains in light duty trucks, SUVs, crossovers, etc. as well as imported automobiles, total light vehicle sales rose from a 16.23 million unit pace in December to a 16.63 million unit pace in January. The only segment that was weak was domestic automobiles. This is close to pre-pandemic levels. Consumer incomes are rising and savings are high and will likely support sales going forward.
U.S. trade in goods and services contracted notably in 2020. Exports were down 15.7% Y/Y and imports were down 9.5% Y/Y. As a result, the U.S. trade deficit deepened to $678.7 billion in 2020, a 12-year high. The 2020 goods deficit – at $915.8 billion – was a record high. Imports of goods fell 6.6% in 2020 while exports fell 13.2%. December imports of goods grew by 1.5% and were the highest since October 2018 with imports of autos, parts and engines being the highest on record. December exports of goods were up 4.7% – exports of foods, feeds and beverages were the highest on record and exports of consumer goods were the highest since November 2019.
Led by continued gains in spending on residential projects, overall construction spending rose for a third straight month, up 1.0%. Spending on publicly-funded construction projects also rose, but privately-funded nonresidential construction spending continued to decline. Compared to a year ago, overall construction spending was up 5.7% driven by a 20.7% Y/Y gain in residential spending.
Factory orders ended the year on a strong note, up 1.1% in December, following strong gains in October and November. Orders expanded in most manufacturing segments, with the largest gains in ships & boats, mining & oilfield machinery, turbines & power generating equipment, metalworking machinery, electric lighting equipment, and industrial machinery. Compared to a year ago, new orders were up 1.1%. Unfilled orders (a pipeline of future activity) eased by 0.3% following flat growth in November. Factory shipments grew 1.7% in December, with strong gains across both durable and nondurable segments. Manufacturing inventories rose by 0.3%, following a 0.8% gain in November. The inventories-to-shipments ratio edged lower to 1.39 (from 1.41 in November). Compared to a year ago, inventories were off 0.5% while shipments were up 1.8% Y/Y.
The ISM Services PMI gained 1.0 points to 58.7, a level indicating stronger growth in services. New orders accelerated (as did imports) and most other measures of business activity were indicating expansion. Inventories, however, contracted. Fourteen of 18 industries reported growth. The ISM Manufacturing PMI eased 1.8 points to 58.7, a level indicating still solid growth for manufacturing, just at a slightly slower pace than in December. New orders, production and employment are all growing. Supplier deliveries are slowing at a faster rate and the backlog is growing as are raw materials inventories as are exports and imports. Customers’ inventories are deemed too low. Prices stiffened. Of the 18 manufacturing industries, 16 reported growth in January. The J.P. Morgan Global PMI eased 0.3 points t0 53.5. This is still improving performance for global manufacturing, just at a slower pace. Production and new orders expanded again, extending growth to seven months. New exports orders and employment eased to near stalling speed. Of the 30 nations covered, 23 expanded.
The rig count rose by six to 383 rigs during the week ending 29 January. A major winter storm fostered a large drawdown of natural gas stocks and prices gained for the week. Improving economic growth (and oil demand) along with continued OPEC production cuts led to higher oil prices as well.
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, rose by 1,883 to 34,023 railcars the week ending 30 January (week 4). Loadings were up 3.0% Y/Y, up 4.4% YTD/YTD and the 13-week moving average, which is used to smooth out volatility, was up 3.8%.
Chemical industry (including pharma) employment continued to rebound, up by 10,500 (1.2%) in January, following a 1,500 gain in December. The industry is still off by 3,400 jobs compared to pre-COVID levels. Compared to last year, employment remained lower by 4,100 (-0.4%). In January, there was a 0.3% gain in production workers and a 2.8% gain in supervisory and non-production workers. Average wages were up 3.2% Y/Y to $26.39. The average workweek edged lower by 6 minutes to 41.1 hours. Combined with the gain in the number of production workers, the total labor input into the chemical industry rose by 0.1%, suggesting chemical production expanded in January, which is in consistent with the ISM survey.
Equity prices started the year on a weak note. The benchmark S&P 500 index edged 1.1% lower in January. Chemical equity prices as measured by the S&P index for chemical companies was also lower, by 2.6%.
The ISM PMI report indicated that the chemical industry was one of the strongest growing in January. New orders, production, employment, inventories, and order backlogs all expanded. Exports and imports gained. Supplier deliveries slowed. Customers’ inventories are deemed too low. One chemical industry respondent noted: “Business remains strong. Manufacturing running at full capacity.”
The U.S. Geological Survey reported that monthly production of soda ash in November was an estimated 837 thousand tons, down 9.1% compared to the previous month and down 17.1% Y/Y. Stocks rose 6.0% over October to 320 thousand tons (est.) at the end of the month, an 11-day supply. Ending stocks were down 4.8% Y/Y.
Chemical industry construction spending fell by 3.4% in December to $28.1 billion, following a large gain in November. Chemical industry construction spending was off by 15.4% Y/Y. As a share of overall spending on manufacturing construction, chemicals represented 44.1%.
Chemical shipments rose for an eighth consecutive month in December, up 0.7%. Chemical shipments rose by 1.2% in November and 1.8% in October. Shipments of agricultural chemicals and other chemicals rose; shipments of paints and coatings moved lower. Chemical inventories also rose, by 0.4%, following gains of 0.2% and 0.4% in November and October, respectively. Inventories of paints and other chemicals rose, while agricultural chemical inventories declined. Compared to a year ago, chemical inventories were off by 1.0% while shipments were off by 1.2% Y/Y. The inventories-to-sales ratio edged lower to 1.15 in December (from 1.16 in November). This was the same as a year ago and inventories are roughly balanced.
With improving activity across nearly all nations, our Global Chemical Production Regional Index (Global CPRI) shows that global chemicals production rose 1.8% in December, a slightly slower pace than November, and continuing the global recovery that started in June following declining activity during the January through May period. During December, chemical production increased in most regions with Latin America the exception. Headline global production was up 6.8% Y/Y on a 3MMA basis. Global output stood at 126.7% of its average 2012 levels.
During December, global capacity rose 0.1% and was up 2.1% Y/Y. As a result, with improving production, capacity utilization in the global chemical industry rose 1.5 points to 86.0%. This is up from 82.1% at the pre-COVID peak last December but below the long-term (1987-2019) average of 86.3%.
Among chemical industry segments, December results were positive with gains across all segments. Considering year-earlier comparisons, production gains occurred in all segments.
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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.