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      Blog Home   |   Economic Trends

       

      Blog Home   |   Economic Trends

      Weekly Chemistry and Economic Trends (June 25, 2021)


      2.3%5.9%4.6%
      Durable Goods OrdersNew Home SalesU.S. CPRI

      MACROECONOMY & END-USE MARKETS

      Running tab of macro indicators: 16 out of 20

      Macro Table

      The number of new jobless claims fell by 7,000 to 411,000 during the week ending 19 June, a level above expectations. Continuing claims decreased by 144,000 to 3.39 million and the insured unemployment rate for the week ending 12 June eased 0.1 percentage points to 2.4%.

      As widely expected, the “third” estimate of real gross domestic product (GDP) in the 1st quarter indicates that the economy increased at an annual rate of 6.4%, the same as the second estimate, and an acceleration from the 4.3% pace in the 4th quarter. The “third” estimate of GDP is based on more complete source data. Upward revisions to business investment, inventory change, and exports were offset by an upward revision to imports, which are a subtraction in the calculation of GDP.

      With falling affordability, existing homes sales eased 0.9% to a 5.8-million-unit pace in May. The Midwest was the only region to see a gain. This was the fourth monthly decline. Inventories rose 7.0% to 1.23 million at the end of the month, representing a 2.5-month supply, still a very low level. A year ago, months’ supply was 4.6 months. Low inventories have been a limiting factor for some time, but affordability is becoming an issue. Sales were up 44.6% Y/Y while inventories were down 20.6% Y/Y, helping to push the median sales price up 23.6% Y/Y to $353,300, a record high. New home sales fell for a second month, down 5.9% to a 769,000-unit pace. Sales were strongest in the Northeast and West. New home inventories rose 4.8% and now represent a 5.1-month supply, the highest since last May. Compared to a year ago, sales were up 9.2% while inventories were up 5.8% Y/Y.

      Existing and New Homes

      The Richmond Fed reported that Fifth District manufacturing activity expanded in June, with the composite index rising from 18 to 22. This was driven by an increase in the new orders while the other two components — shipments and employment — also remained in expansionary territory. Manufacturers continued to report shrinking inventories, growing order backlogs, and lengthening vendor lead times. Overall, respondents saw improvement in local business conditions and were optimistic that conditions would continue to improve in the coming months. The Kansas City Fed reported that Tenth District manufacturing activity remained strong, with the composite index rising one point to +27 in June.  The index of prices paid for raw materials and prices received for finished goods remained very high and price indexes vs. a year ago again posted record highs. Moving forward, district firms’ expectations for future activity increased to a survey record high.

      Durable goods orders in May increased $5.7 billion (2.3%) to $253.3 billion. This is the twelfth increase during the last 13 months and follows a 0.8% April decrease. Orders for non-defense capital goods excluding aircraft (a proxy for business investment), however, eased 0.1% in May. Orders for primary metals, communications equipment, motor vehicle and parts, and electrical equipment, appliances and components all improved while orders for fabricated metal products, machinery, and computers and electronics declined. There was a strong gain in aircraft orders, which are volatile month-to-month.

      Survey of Economic Forecasters US

      SURVEY OF ECONOMIC FORECASTERS

      • By mid-June, reopening has accelerated in much of the U.S. and the economy is heating up. Supply chain disruptions persist in many sectors of the economy and prices are rising across many segments. However, among ACC’s panel of forecasters, expectations for many indicators continue to rise for 2021. Moving into 2022, forecasters expect the rebound to continue, though at a slower pace.
      • Compared to last month’s survey, growth expectations for GDP and business investment have continued to improve for 2021 as the recovery accelerates into Q2. U.S. GDP is expected to grow 6.5% in 2021, the fastest pace in more than three decades, with a 7.6% gain in consumer spending, and an 8.6% gain in business investment. Growth shifts lower in 2022 with a 4.3% gain in GDP, the same as last month’s survey.
      • Industrial production, which continued to rebound in May, is expected to rise 5.5% in 2021 (the same as last month) and 4.3% in 2022, a deceleration compared to last month’s survey.
      • Expectations for housing starts edged slightly higher with 1.60 million in 2021 and 1.57 million in 2022. Reflecting several supply chain disruptions, expectations for light vehicle sales eased to 16.8 million in both 2021 and 2022.
      • The unemployment rate is expected to continue to ease, averaging 5.5% in 2021 and 4.2% in 2022.
      • With surging demand from reopening and ongoing supply chain disruptions, expectations for consumer price inflation rose sharply. Consumer prices are expected to grow by 3.3% in 2021 and 2.6% 2022.
      • Compared to last month, expectations for interest rates (10-year treasury) were the lower for 2021 and 2022.

      ENERGY

      Energy

      he rig count rose by nine to 470 rigs during the week ending 18 June. Despite a recovery in the rig count from the lows of last year, oil and gas production has not appreciably improved. Additions to natural gas stocks during the past two weeks have been below normal, and stocks are well from this time last year.

      CHEMICALS

      For the business of chemistry, the indicators still suggest a green banner for basic and specialty chemicals.

      Chemical Table

      According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, fell by 1.7% to 32,401 railcars the week ending 19 June (week 24). Loadings were up 14.0% Y/Y, a continuing trend reflective of last year’s COVID-related closures. Loadings were up 5.2% YTD/YTD and the 13-week moving average, which is used to smooth out volatility, was up 15.1%. The inflated Y/Y comparisons will likely continue for several months.

      Chemical Rail Car Loadings

      The Chlorine Institute (CI) reported that production of chlorine was 28,827 tons per day in May, down 8.0% over the previous month; YTD production was down 9.4% Y/Y. The output of co-produced caustic soda fell to 30,746 tons per day, down 7.2% compared to April and YTD production was down 9.8% Y/Y. Chlor-alkali operating rates dropped to 74% during May as two major planned outages coincided with two major unplanned outages.

      Chlor-Alkali

      ACC’s U.S. Chemical Production Regional Index (U.S. CPRI), which is measured as a three-month moving average (3MMA), rose by 4.6% in May following a 1.2% decline in April and a 3.4 fall in March. During May, chemical output rose in all regions reflecting capacity restoration after the winter storms along the Gulf Coast. Compared with May 2020, U.S. chemical production remained off by 0.5%, the twenty-fourth consecutive month of Y/Y declines, reflecting the lingering impact of March’s freeze damage. Chemical production was lower than a year ago in all regions, except the Gulf Coast which turned slightly positive. Note that the U.S. CPRI includes the Federal Reserve’s recent benchmark revision, and the base year is now 2017.

      US CPRI

      Chemical production was mixed in May (3MMA) with an improving trend in the production of organic chemicals, plastic resins, chlor-alkali, adhesives, coatings, fertilizers, crop protection chemicals, other specialty chemicals, and miscellaneous inorganic chemicals. These gains were offset, however, by continued weakness in synthetic rubber, synthetic dyes & pigments, manufactured fibers, and consumer products.

      As nearly all manufactured goods are produced using chemistry in some form, manufacturing activity is an important indicator for chemical demand. Following a small decline in April, manufacturing output rose in May, by 1.0% (on a 3MMA basis). The trend in manufacturing production was mixed with gains in the output of food & beverages, appliances, aerospace, machinery, fabricated metal products, computers & electronics, semiconductors, oil & gas extraction, refining, iron & steel products, foundries, rubber products, paper, printing, and furniture.


      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

      “Specialty & Agro Chemicals America”
      8-10 September 2021
      Belmond Place | Charleston, SC
      Chemicals America, Inc.
      https://charleston.chemicalsamerica.com/

      “Americas Chemicals and Polymers Conference” Virtual Event
      14-15 September 2021
      Wood Mackenzie
      www.woodmac.com/events/americas-chemicals-and-polymers-conference


      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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