|Consumer Spending||New Home Sales||U.S. CPRI|
Running tab of macro indicators: 11 out of 20 (This would normally suggest a yellow banner but the effects of the winter storm are at play and likely transitory)
The number of new jobless claims fell by 97,000 to 684,000 during the week ending 20 March. It was the first time in a year that claims came in below 700,000 and while a positive development, claims remain above their last cycle peak of 665,000 during the Great Financial Recession. Continuing claims fell by 264,000 to 3.87 million and the unemployment rate for the week ending 13 March eased 0.2 percentage points to 2.7%.
Personal incomes fell back in February (by a 7.1% pace) after “stimulus” monies (called “government social benefits to persons” in the report) were deposited in January when a 10.1% gain was registered. Wages and salaries were essentially flat. The savings rate eased 6.2 percentage points to 13.6% in February. Consumer spending fell 1.0% in February and reflects the end of the stimulus as well as the effects of the winter storms. Spending for goods fell but spending for services improved, reflecting the easing of lockdowns. The PCE measure of inflation eased to 0.2%, off from 0.3% in January and 0.4% in December. A similar pattern is found in the measure excluding food and energy.
Amid historically low inventories and disruptions from winter storms, existing home sales fell 6.6% in February. At of the end of February, housing inventory remained at a record-low of 1.03 million units, down a record 29.5% Y/Y. Properties typically sold in 20 days, also a record low. The median sales price was up 15.8% Y/Y. Compared to a year ago, however, sales were up 9.1% Y/Y. New home sales also fell sharply, by 18.2% as weather-related disruptions and relatively lean inventories curbed sales activity. Sales declined across all regions of the country. The number of unsold homes at the end of February edged higher but remain off from a year ago. At the current sales pace, the inventory of unsold homes represents a 4.8-month supply, up from 3.8 months in January, but below the 5.5-month supply a year ago. The median sales price continued to grow, up 5.3% Y/Y. Compared to last February, new home sales were up 8.2% Y/Y.
In its third and final estimate, the Bureau of Economic Analysis reported that Q4 GDP rose by 4.3%, an upward revision that followed a 33.4% rebound in Q3. This final estimate is based on more complete source data and reflected upward revisions to private inventory investment and state and local government spending that were partially offset by downward revisions to nonresidential fixed investment and consumer spending. Compared to a year ago, Q4 GDP was off 2.4% Y/Y.
Durable goods orders fell 1.1% in February, partially offsetting the 3.5% gain in January and the 1.2% gain in December. Weakness was widespread among industries although orders for electrical equipment, appliances and components did feature a nominal gain. Orders for non-defense capital goods excluding aircraft (a proxy for business investment) eased 0.8% during February, but were up 8.5% Y/Y. Headline shipments fell 3.5% in the month and were flat compared to a year ago. By comparison, durable orders were up 2.3% Y/Y.
The Richmond Fed reported that Fifth District manufacturing activity expanded in March with the headline index rising three points to 17, driven by a sharp increase in shipments while new orders and employment held steady. Businesses reported lengthened vendor lead times, as this index rose 15 points to 61 in March, breaking a 25-year-record for the third month in a row. Supply chain issues abound! Survey respondents were optimistic that conditions would continue to improve in the coming months. The Kansas City Fed reported that Tenth District manufacturing activity grew solidly compared to a month ago (up two points to +26) and to a year ago with positive expectations for future activity. Growth was driven by primary metals, machinery, transportation equipment, furniture, and miscellaneous manufacturing. Shipments, new orders, and order backlogs expanded at a faster pace in March and supplier delivery time was very high as well. Growth in production and employment remained positive, but slightly slower than in recent months.
The rig count eased by nine to 410 rigs during the week ending 19 March. The fallout from the Suez Canal blockage rippled through the energy industry, with the cost of renting tankers rising and shippers starting to plot alternative routes for supplies of oil and LNG.
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 by 1,569 to 31,540 railcars the week ending 20 March (week 11). Loadings were down 8.6% Y/Y, down 5.0% YTD/YTD and the 13-week moving average, which is used to smooth out volatility, fell 4.4%.
According to data from the ACC Plastics Industry Producers’ Statistics Group, U.S. production of major plastic resins totaled 5.4 billion pounds during February 2021, a decrease of 35.7% compared to the prior month, and a decrease of 25.2% compared to the same month in 2020, reflecting plant outages that results from the cold weather last month in the Gulf Coast. Year-to-date production was 13.6 billion pounds, down 9.4% Y/Y. Sales and captive (internal) use of major plastic resins totaled 6.9 billion pounds during February 2021, down 11.8% compared to the prior month, and down 3.9% Y/Y. Year-to-date sales and captive use was 14.8 billion pounds, a 2.1% decrease as compared to the same period in 2020.
The U.S. Chemical Production Regional Index (U.S. CPRI), which is measured as a three month moving average, fell by 3.6% in February following a 0.7% gain in January and a 1.3% increase in December. During February, chemical output fell in all regions as winter storms disrupted chemical production in the Gulf Coast and other parts of the country that rely on raw materials from the Gulf Coast. The CPRI for the Gulf Coast region fell 5.8% compared to January, the largest monthly drop since September 2008, and the second largest drop in the series which goes back to 1988. Compared to February 2020, U.S. chemical production remained off by 3.8% on a year-over-year basis, the twenty-first consecutive month of Y/Y declines, and a deterioration compared to recent progress. Chemical production was lower than a year ago in all regions.
As measured on a three-month moving average (3MMA) basis, chemical production fell sharply in most categories, except consumer products, manufactured fibers, fertilizers and other specialty chemicals. The largest declines were in petrochemical and other organic chemicals, plastic resins. There were also smaller declines in the production of inorganic chemicals, coatings, adhesives and pesticides.
As nearly all manufactured goods are produced using chemistry in some form, manufacturing activity is an important indicator for chemical demand. Following six consecutive months of gains, the manufacturing recovery stumbled in March, with overall factory activity off by 0.4% (on a 3MMA basis). The 3MMA trend in manufacturing production was mixed with gains in the output of food & beverages, aerospace, machinery, semiconductors, iron & steel, foundries, plastic products, rubber products, paper, structural panels, textiles & apparel, and furniture.
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‘The Supply Chain and Logistics Crisis: Challenge, Impact, Solutions’ Webinar
Mike Andaloro – President and COO, BDP International and Glenn Riggs – SVP, Corporate Strategy & Business Development, Odyssey Logistics
7 April (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.