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Blog Home   |   Economic Trends

 

Blog Home   |   Economic Trends

Weekly Chemistry and Economic Trends (January 31, 2020)


0.7% 1.6% 2.1%
Global CPRIChemical Railcar LoadingsGDP

Macroeconomy & End-Use Markets

Running tab of macro indicators: 14 out of 20

Macro Table

As expected, consumer spending rose 0.3% in December. Growth in personal income slowed to a 0.2% gain (in part due to lower subsidy payments to farmers). Compared to a year ago, real disposable personal income was up 2.0% while consumer spending was ahead by 3.3% Y/Y. The large Y/Y comparison for consumer spending reflects the dip in December 2018 when the Federal Government was shut down. Led by higher energy prices, the price index for personal consumption expenditures (PCE) rose by 0.3% (the largest gain since April) and was up 1.6% Y/Y, the highest annual pace in a year. The core PCE price index was also up by 1.6% Y/Y, in line with recent gains.

The Conference Board reported that consumer confidence increased in January. This was above expectations and the index now stands at 131.6 (1985=100), up from 128.2 (an upward revision) in December. The gain was driven primarily by more positive consumers’ assessment of the current job market and increased optimism about the outlook, especially future job prospects. Plans to purchase homes and appliances improved while plans for auto purchases eased.

GDP

Real gross domestic product (GDP) increased at an annual rate of 2.1% in the 4th quarter of 2019, the same pace as the 3rd quarter. The increase in real GDP in the 4th quarter reflected positive contributions from consumer spending, government spending, residential fixed investment, and exports that were partly offset by negative contributions from inventory accumulation and business fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.

With weakness in the Northeast and the South offsetting gains in the Midwest and the West, December new home sales eased 0.4% to a 694,000 unit pace. Inventories of homes for sale rose slightly to 327,000 at the end of December, a 5.7-month supply. A year ago, months’ supply was 7.4. Sales were up 23.0% Y/Y and inventory off 5.5% Y/Y. With demand more pronounced at the low end of the market, the median sales price of $331,400 was up only 0.5% Y/Y.

Non Defense Capital

Headline new durable goods orders, led by transportation,increased 2.4% to $245.5 billion in December. This increase, up two of the last three months, followed a 3.1% November decrease. New orders for non-defense capital goods excluding aircraft (a proxy for business investment) decreased 0.9% to $68.6 billion, a level up 1.8% Y/Y. Strength in orders for fabricated metal products, communications equipment, and a few other segments was offset by weakness in primary metals, machinery, computers & related products, motor vehicles, and electrical equipment, appliances, and components. Shipments and unfilled orders were weak while inventories rose.

The Dallas Fed reported that Texas manufacturing activity picked up this month, with a large gain in production accompanied with other indicators pointing to an acceleration of activity. Perceptions of broader business conditions were largely unchanged but expectations were slightly more optimistic. The Chicago PMI is a good proxy for underlying plastics demand, and after months of gains, slipped further in to contraction and is at its lowest level since late-2015. All five major components of the headline index saw a monthly decline, with order backlogs leading the way lower, followed by new orders. We don’t normally report on the Richmond Fed manufacturing activity (we do monitor it) but the January survey indicates a large improvement in district activity.

Energy

Energy

The oil and gas rig count fell by two to 791 rigs. Oil prices eased this week on fears that the coronavirus outbreak will curb demand in China and elsewhere. Natural gas inventories fell by 201 BCF last week, the largest draw this season. Despite the draw, prices were continued to move lower. The Energy Information Administration released its 2020 Annual Energy Outlook this week. The U.S. continues to produce historically high levels of crude oil and natural gas. Slow growth in domestic consumption of these fuels leads to increasing exports of crude oil, petroleum products, and liquefied natural gas. In 2020, the U.S. is expected to become a net exporter of energy for the first time since 1953.

Chemicals

For the business of chemistry, the indicators bring to mind a yellow banner for basic and specialty chemicals

Chemical

According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, fell by 3.7% to 31,284 railcars during the week ending 25 January (week 4). Loadings were up 0.3% 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 1.6% compared to last year.

The U.S. Geological Survey reported that monthly production of soda ash in November was 1,020 thousand tons, up 1.0% compared to the previous month and up 2.3% Y/Y. Stocks rose 2.1% over October to 336 thousand tons at the end of the month, a 10-day supply. Ending stocks were up 8.7% Y/Y.

Soda Ash

Chemical industry respondents to the Texas Manufacturing Outlook Survey indicated that “Local regulatory agencies and the costs associated with wasteful fees to municipalities are an ongoing burden to business. Poor infrastructure in our primary location is not conducive to attracting and keeping quality employees.” And “A decrease in car sales has a negative effect on our customers’ volume.”

Global CPRI

Led by a large gain in China, the ACC’s Global Chemical Production Regional Index (Global CPRI) shows that global chemicals production grew by 0.7% in December, an acceleration from the 0.3% gain in November, and a reversal of the 0.2% decline in October. During December, chemical production increased in Latin America, the Former Soviet Union, Africa & the Middle East, and the Asia-Pacific region. Production fell in North America and Europe. Headline global production was up only 1.8% Y/Y on a 3MMA basis and stood at 118.5% of its average 2012 levels. For 2019 as a whole, global production was up 1.7%.

Among chemical industry segments December results were mixed with inorganic chemicals, bulk petrochemicals & organics, plastic resins, coatings, and other specialties showing gains. Production was soft in other segments. Considering year-earlier comparisons, growth was strongest in manufactured fibers, followed by synthetic rubber, plastic resins, other specialties, and coatings.

Global Chemical Capacity Utilization

During December, global capacity rose by 0.2% and was up 3.4% Y/Y. As a result, capacity utilization in the global chemical industry rose 0.4 points to 82.1%. This is down from 83.3% last December and below the long-term (1987-2017) average of 86.5%.


For More Information

ACC members can access additional data, economic analyses, presentations, outlooks, and weekly economic updates through MemberExchange.

In addition to this weekly report, ACC offers numerous other economic data that cover worldwide production, trade, shipments, inventories, price indices, energy, employment, investment, R&D, EH&S, financial performance measures, macroeconomic data, plus much more. To order, visit http://store.americanchemistry.com/.

Every effort has been made in the preparation of this weekly report to provide the best available information and analysis. However, neither the American Chemistry Council, nor any of its employees, agents or other assigns makes any warranty, expressed or implied, or assumes any liability or responsibility for any use, or the results of such use, of any information or data disclosed in this material.

Contact us at ACC_EconomicsDepartment@americanchemistry.com

Upcoming Events of Interest

“A 2020 Economic Outlook”
Jordan Frisby – Economist, Port of Houston
The Association for Industry Analytics
4 February 2020
Cyviz 5555 San Felipe St #1700
Houston, TX
www.aia-global.org

“Economic Outlook”
Kathy Bostjancic, Chief US 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
www.cmeacs.org

“Data Visualization with Tableau”
The Association for Industry Analytics
15 February 2020
University of Houston, Main Campus
Houston, TX
www.aia-global.org

“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
www.societe.org

WPC 2020: 35th Annual World Petrochemical Conference
IHS Markit
24-27 March 2020
Hilton New Orleans Riverside
New Orleans, LA
www.ihsmarkit.com

AgChem Summit 2020: Innovation in Action
28-30 April 2020
21c Museum Hotel
Durham, NC
www.agrochemicalsummit.com

TZMI TiO2 Summit 2020
12-13 May 2020
Park Central Hotel
New York, NY


Note On the Color Codes

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.

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