|Durable Goods Orders||New Home Sales||U.S. CPRI|
Running tab of macro indicators: 16 out of 20
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.
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
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.
For the business of chemistry, the indicators still suggest 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, 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.
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.
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.
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.
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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.