|Chemical Shipment||Chemical Employment||Manufacturing PMI|
Running tab of macro indicators: 15 out of 20
Non-farm payrolls rose by 225,000 in January, a pace well above expectations. There were minor upward revisions to prior month’s gains. Notable job gains occurred in construction, health care, and transportation and warehousing, but manufacturing employment declined. Average wages rose 0.2% to $28.44, up 3.1% Y/Y. Labor force participation improved but the unemployment rate creeped up to 3.6%. This report signals a healthy labor market.
Light vehicles started the new year on an upswing with new vehicle sales rising to a 16.84 million unit seasonally adjusted annual rate. The light truck share of vehicle sales continued to grow: trucks now represent 75% of total vehicle sales.
Construction spending edged lower by 0.2% during December. A gain in spending on private residential projects offset declines in nonresidential and publicly-funded construction spending. Compared to a year ago, overall construction spending was 5.0% higher.
U.S. imports of goods and services grew at a faster pace than exports in December. As a result, the U.S. trade deficit in goods and services deepened by $5.2 billion from $43.7 billion in November to $48.9 billion in December; the U.S. surplus in services trade declined while the goods deficit increased in December. The 0.8% increase in exports in December largely reflects higher exports of crude oil and “other goods” (Census includes more than two dozen end-use categories and commodities in the “other goods” category) which were somewhat offset by a drop in exports of cars. Imports were up 2.7% in December reflecting increased imports of crude oil, nonmonetary gold, other petroleum products, and other goods. Overall, U.S. trade with the world flattened in 2019. Both imports and exports of goods and services grew by less than 1% in 2019. The U.S. deficit in goods trade decreased from $887 billion in 2018 to $866 billion in 2019 as goods imports fell 1.7% and exports fell 1.3%. Goods exports fell off in civilian aircraft and other petroleum products while exports of other goods increased. Imports of industrial supplies and materials declined as did imports of crude oil and capital goods. Imports of pharmaceutical preparations increased. The goods deficit with China decreased from $420 billion in 2018 to $346 billion in 2019 reflecting an 11% drop in U.S. exports to China and a 16% drop in U.S. imports of Chinese goods.
Wholesale sales fell by 0.7% in December following a 0.9% gain in November. The largest gains were in chemicals, furniture, farm products, and hardware. The largest declines were in machinery, metals, automotive goods, and paper. Wholesale inventories also declined, by 0.2% following a slight gain in November. Compared to a year ago, sales at the wholesale level were up by 0.5% while wholesale inventories were up 2.1% Y/Y. The inventories-to-sales ratio remained steady at 1.36, up from 1.34 a year ago. Inventories remain somewhat elevated.
The ISM PMI® rose 3.1 points to 50.9% in January. New orders and production are growing but employment contracting. Supplier deliveries are slowing at faster pace and the order backlog is contracting. Inventories are contracting and customers’ inventories are deemed too low. Exports and imports are once again growing. Only eight of the 18 industries are growing so the improvement into positive territory is mixed. Growth in global manufacturing improved in January as the JP Morgan Global Manufacturing PMI rose to 50.4, up from 50.1 in December. This was the highest reading in nine months. Rates of expansion in output and new orders accelerated, but remained consistent with only modest increases in both cases. The trends in employment and international trade volumes also moved closer to stabilization.
Factory orders finished the year strong, surging by 1.8% in December, ahead of expectations. The gain was led by a near doubling of orders for defense equipment, however. Performance in other categories was mixed with gains in nondurables, construction machinery, material handling equipment, and electric lighting offset by declines in civilian aircraft, computers, electronic equipment, and mining machinery. At the end of the day, core business orders (nondefense capital goods excluding aircraft) fell by 0.8%, following flat growth in November. Compared to a year ago, headline orders were flat, while core business orders were up 1.8% Y/Y. Manufacturing shipments rose 0.5%, the strongest monthly gain since September 2018. Inventories also rose, by 0.5%. Inventories were up 3.0% Y/Y while shipments were up by 0.6%. The inventories-to-shipments ratio remained stable at 1.40 compared to November, but was up from 1.35 a year ago.
The ISM Nonmanufacturing NMI rose 0.6 points to 55.5 in January, signaling expansion at a faster pace in the largely services sector. The business activity component surged and new orders and imports also rose at a faster pace. Employment and export order growth slowed, however, and inventories contracted. Twelve of the 18 nonmanufacturing industries reported growth during the month.
Global semiconductor sales eased 1.7% to $36.1 billion in December, a level off 5.5% Y/Y. For the year as a whole, sales were $412.1 billion, a decrease of 12.1% from 2018. Several semiconductor product segments stood out in 2019: memory and logic were the largest semiconductor categories by sales, each totaling $106.4 billion. Sales of memory products were down 32.6% in 2019 by dollar value, although unit volume increased slightly, however. Sales of optoelectronics products were a bright spot, increasing 9.3% in 2019. Ratification of the U.S.-Mexico-Canada Agreement (USMCA) and signing of the ‘phase one’ U.S.-China trade agreement are positive steps for this bellwether industry and important end-use market for chemistry.
The oil and gas rig count fell by four to 787 rigs. Oil prices continued to ease compared to last week on fears that the coronavirus will curb oil demand in China, the world’s largest oil importing nation. Natural gas prices also moved lower due to the combination of near record production and weak demand from a mild winter.
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, rose by 5.6% to 33,035 railcars during the week ending 1 February (week 5). Loadings were up 1.9% Y/Y, up 2.1% 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 2.1% compared to last year.
The details in the ISM Manufacturing PMI suggest that the chemical industry was one of the eight that was expanding. New orders were expanding as were production and unfortunately inventories. That said, supplier deliveries were slowing. Customers’ inventories are deemed too low. Employment was contracting as were order backlogs. Export orders picked up but imports decreased. One chemical industry respondent noted that “Small signs of increased global demand in the chemical segment.”
Chemical shipments rose by 0.6% in December, following a 0.4% gain in November and a 0.1% decline in October. There were gains across many categories including coatings & adhesives, agricultural chemicals, and other chemicals. Chemical inventories declined, however, by 0.2%. Declines in inventories of coatings & adhesives and agricultural chemicals offset a small gain in other chemical inventories. Compared to a year ago, inventories were down 1.2% while shipments were off 0.9% Y/Y. The inventories-to-sales ratio for chemicals remained steady at 1.21 compared to November. This was the same level as a year ago. Inventories are relatively stable, but elevated compared to recent years.
Chemical industry employment (including pharmaceuticals) fell for a second straight month by 2,500 (-0.3%) to 850,100 in January. Production worker jobs also fell by 3,600 while supervisors and other non-production jobs rose by 1,100. Compared to a year ago, headline employment was up 6,100 jobs (0.7%) with production worker jobs up 200 jobs. Allowing for productivity gains, the decline in production workers and labor input suggest weaker production volumes, which contradicts the ISM report. Average hourly earnings were up 0.4% Y/Y at $25.62 per hour.
According to Census data, U.S. chemical exports increased by 1.0% to $12.5 billion in December while chemical imports increased 1.3% to $10.0 billion. Exports increased in organic and inorganic chemicals, fertilizers and in the “other” chemical materials and products category. Exports declined in dyes, tanning and coloring materials, essential oils and resinoids, and plastics in nonprimary forms. Exports of plastics in primary forms were flat. December import growth reflects gains in inorganic chemicals, dyes, tanning and coloring materials, plastics, and “other” chemical materials and products. Imports of organic chemicals, essential oils and resinoids, and fertilizers fell. As more details are released, ACC will provide an assessment on the 2019 annual trade performance.
Chemical wholesale sales surged by 4.8% in December, following a 4.0% decline in November. Wholesale inventories, however, were flat, following a decline the previous month. Compared to a year ago, wholesale sales were up 1.4% while inventories were off 5.6% Y/Y. The inventories-to-sales ratio fell sharply from 1.13 in November to 1.08 in December. This is well below the 1.16 ratio from a year ago.
Chemical industry construction spending fell by 5.3% in December to $32.5 billion, following a large gain in November. Chemical industry construction spending was ahead by 5.0% Y/Y. As a share of overall spending on manufacturing construction, chemicals represented 43.7%.
Equity prices started the year on a weak note. The benchmark S&P 500 index edged 0.2% lower in January. Chemical equity prices as measured by the S&P index for chemical companies also fell, by 6.9%.
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This week, ACC released updated figures on chemical industry investment projects. Since 2010, the chemical industry has invested $89 billion in new or expanded facilities in the United States. These 210 projects are completed and operating. Another 43 projects cumulatively valued at $27 billion are under construction, while 90 projects valued at $87 billion are in the planning phase. Total investment is $203 billion across 343 projects. Fully 69 percent of the total is foreign direct investment (or includes a foreign partner). To receive a copy of the updated list of announced projects, please email email@example.com.
ACC Economics & Statistics maintains this list and updates it regularly. Changes in totals include new project announcements as well any changes and/or updates to investment figures. The list is based on actual project announcements rather than conjecture of potential capital spending. The data are based on publicly available information, which is believed to be accurate, but have not been independently verified by ACC.
Kathy Bostjancic, Chief U.S. Financial Economist at Oxford Economics and Kevin Swift, Chief Economist at the American Chemistry Council
Chemical Marketing & Economics Group – ACS NY Section
11 February 2020
The Penn Club
New York, NY
“Data Visualization with Tableau”
The Association for Industry Analytics
15 February 2020
University of Houston, Main Campus
“The Chemical Industry Outlook”
Joseph Chang – Global Editor of ICIS Chemical Business;
Robert Westervelt – ditor-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
New Orleans, LA
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.