|Chemical Production||Leading Economic Indicators||Specialty Chemical Market Volume|
Running tab of macro indicators: 14 out of 20
The number of new jobless claims rose by 45,000 to 770,000 during the week ending 13 March. Continuing claims fell by 18,000 to 4.124 million and the unemployment rate for the week ending 6 March rose 0.1 percentage points to 3.0%.
Amid several high-impact winter storms, housing starts tumbled by 10.3% in February, down for a second consecutive month. Starts were lower in all regions, except the West. The decline hit both single and multi-family projects. Forward-looking building permits also fell, by 10.8%, following three months of gains. Compared to a year ago housing starts were off by 9.3% Y/Y while permits were up 17.0% Y/Y.
With gains among manufacturers and wholesalers offsetting weakness among retailers, business Inventories rose 0.3% to $1,982.4 billion at the end of January. At the same time, business sales jumped 4.7% to at $1,568.5 billion. Gains occurred across the three main sectors. As a result, the inventory-to-sales ratio fell from 1.32 to 1.26. A year ago, the ratio was 1.38. Business sales were up 7.1% Y/Y while inventories were off 1.8% Y/Y, indicating tightening supply. That said, firms appear to be replenishing their inventories.
Coming off the stimulus-fueled sugar high in January and combined with slower activity from the winter storms, retail sales fell 3.0% in February. This was worse than expected and sales declined in every major category, except grocery stores. Compared to a year ago, retail sales were up 6.3% Y/Y. Spending is expected to strengthen in March as a new round of stimulus reaches households and Covid-restrictions are eased further.
Reflecting the disruptions from winter storms, overall industrial production tumbled by 2.2% in February, the first decline since September and well below expectations for a small gain. Utility production was up on strong heating demand, but mining and manufacturing fell sharply. Declines were broad based (except for gains in primary metals, aerospace, and textiles). The largest declines were in motor vehicles, oil & gas, refining, and chemicals. The latter three are concentrated along the U.S. Gulf Coast that was particularly hard hit. Motor vehicles has faced a shortage of semiconductors which is curbing production amid strong demand. Light vehicle assemblies fell to 9.00 million, the lowest level since June. Compared to a year ago, headline industrial production was off 4.2% Y/Y. Capacity utilization fell by 1.7 points to 73.8% in February and was off from 76.9% in February 2020.
U.S. import prices have been building up and advanced 1.3% in February following a 1.4% rise in January. Import prices have risen a substantial 3.0% over the past year. Fuel imports are driving the rising prices. Fuel import prices were up 11.1% while nonfuel import prices were up only 0.4% in February.
In its Empire State Manufacturing Survey, the New York Fed reported that business activity grew at a solid clip in New York State, with the headline general business conditions index climbing 5.3 points to 17.4, its highest level since November 2018. New orders increased modestly, and shipments were up substantially. Delivery times continued to lengthen, and inventories were somewhat higher. Employment levels and the average workweek both increased modestly. Input price increases continued to pick up, rising at the fastest pace in nearly a decade. Looking ahead, firms remained optimistic that conditions would improve over the next six months, anticipating significant increases in employment. Manufacturing conditions in the region strengthened further this month, according to firms responding to the Philly Fed’s March Manufacturing Business Outlook Survey. The indicators for general activity rose by 28.7 points to 51.8 its highest level in 50 years. New orders rose sharply, and the shipments and employment indexes also increased. Price pressures also rose, according to the surveyed firms. All of the survey’s indexes for future conditions increased, as the firms indicated more widespread optimism about growth over the next six months.
The Conference Board’s index of leading economic indicators (LEI) rose 0.2% to 110.5 in February and follows a 0.5% gain in January and a 0.4% increase in December. Six of the 10 indicators comprising the LEI expanded in February. Some measures such as manufacturing weekly hours in manufacturing, building permits, and consumers’ outlook for business and economic conditions showed signs of weakness. The winter storm and supply-chain disruptions may have affected the indicators, and these effects may prove transitory. The Conference Board expects economic growth should continue well into this year with the U.S. economy expanding by 5.5% in 2021.
ACC SURVEY OF ECONOMIC FORECASTERS
The rig count fell by one to 401 rigs during the week ending 12 March. The IEA released a report indicating that global gasoline demand peaked in 2019, as the shift toward EVs and higher fuel efficiency offset demand growth in emerging markets. The IEA sees oil demand reaching as much as 104 million BPD by 2026. A stronger dollar undermined the momentum in oil prices this week and fears of dwindling demand pushed oil prices lower yesterday.
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 slightly (by 380) to 29,971 railcars the week ending 13 March (week 10). Loadings were down 9.2% Y/Y and down 4.6% YTD/YTD. The 13-week moving average, which is used to smooth out volatility, was down 3.5% Y/Y.
The Chlorine Institute (CI) reported that production of chlorine fell significantly (by 28.2%) to 23,056 in February, as several manufacturers declared force majeure on chlor-alkali production as a result of the winter storms in the Gulf Coast. Year-to-date production was down 19.5%. The output of co-produced caustic soda fell to 24,417, down 28.5% over January and YTD production was down 20.2% Y/Y.
Reflecting the disruptions from winter storms, chemical production slumped by 12.1% in February, eclipsing the decline last April and during Hurricane Harvey in 2017. The most severe declines were in basic chemicals (off 20.7%) with notable declines in bulk petrochemicals & organic intermediates as well as plastic resins. Nearly all other basic chemical segments declined as well with manufactured fibers the exception. Despite weak coatings output, specialties gained on the back of other segments. Consumer products rose as well but agricultural chemicals fell as well. The decline in output pushed the chemical industry capacity utilization rate down 9.9 points to 71.7%.
U.S. chemical import prices have been building up and advanced 2.4% in February following a 2.2% rise in January and by 2.5% in December. Import prices were up 5.9% Y/Y in February.
After a solid start to the year, the winter storms affected U.S. specialty chemicals market volumes, but not nearly to the severe extent that these storms affected production of basic chemicals and synthetic materials. Volumes fell 4.1% in February, bringing activity back to 3Q 2020 levels. Of the 28 specialty chemical segments we monitor, only six expanded in February, off from 21 in January. Twenty-two segments declined. Thus, on a sequential (one-month change) basis, diffusion was 21%, off from 77% in January. Of the six segments rising in February, only foundry chemicals, rubber processing chemicals, and textile specialties featured gains of 1.0% or more.
During February, overall specialty chemicals volumes were off 7.6% on a year-over-year (Y/Y) basis, a slightly better comparison than in December. Volumes stood at 103.8% of their average 2012 levels in February. This is equivalent to 7.07 billion pounds (3.21 million metric tons). On a year-earlier basis, there were gains in five chemical segments: cosmetic additives, electronic chemicals, flavors & fragrances, food additives, and water management chemicals. On a year-earlier basis, diffusion was 18% in February.
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“Global Sustainability Trends and the Impacts Facing Society” Webinar
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24 March (1:00 – 2:00 pm)
Société de Chimie Industrielle
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.