American Chemistry MattersA Blog of the American Chemistry Council

American Chemistry Matters

* Required Field

Subscribe To ACC SmartBrief

Subscribe To ACC SmartBrief

Stay up-to-date and engaged with the latest industry-related news.


Blog Home   |   Economic Trends

 

Blog Home   |   Economic Trends

Weekly Chemistry and Economic Trends (March 27, 2020)


0.2%0.2%0.5%
Consumer Spending (Feb)U.S. CPRI (Feb)Global CPRI (Feb)

MACROECONOMY & END-USE MARKETS

Running tab of macro indicators: 12 out of 20

Macro Table

We don’t normally report on this, but new unemployment claims are a great real time indicator, and for the week ending 21 March, new claims rose by 3.001 million, from 282,000 to 3.283 million, a record high five times higher the last record set in October 1982. Nearly every state providing comments cited the coronavirus as affecting claims. States continued to cite services industries broadly, particularly accommodation and food services. Additional industries heavily cited for the increases included the health care and social assistance, arts, entertainment and recreation, transportation and warehousing, and manufacturing industries

New Unemployment

The third and “final” estimate of 4th quarter real GDP indicated that the economy still increased at a 2.1% annual pace and still up 2.3% Y/Y. Not much changed with this estimate. Personal income increased 0.6% in February, the same increase as in January. Wages and salaries, the largest component of personal income, increased 0.5% in February, also the same increase as in January. Although incomes were robust, consumer spending eked out a 0.2% gain in February, with weakness in durable goods and non-durable goods offset by a gain in spending for services. With lockdowns across the nation, the March figures will turn decidedly negative. Measures of inflation remain contained. 

New home sales fell 4.4% to a 765,000 unit pace in February. Gains in the Northeast and the South were offset by weakness in the Midwest and West. Prior months’ activity was revised upwards. New houses for sale at the end of February eased slightly to 319,000, resulting in months’ supply rising to 5.0 months. A year ago, it was 6.1-month supply as sales were up 14.3% Y/Y and inventories off 6.7% Y/Y. The median sales price of new houses sold in February was $345,900, a level up 7.8% Y/Y.

Despite early supply disruptions related to the coronavirus, durable goods orders rose 1.2% in February. The gain was led by an increase in orders for motor vehicles & parts, defense capital goods, and electrical equipment. These gains were partially offset by declines among other categories. Following a 1.0% gain in January, core durable orders (a proxy for business investment) were 0.8% lower. Compared to a year ago, headline durable orders were up 3.0% Y/Y while core orders were up 1.5% Y/Y.

Federal Reserve

We don’t normally report on these regional surveys but in light of rapidly developing events, will look at these near real time indicators. The Richmond Fed reported that Fifth District manufacturing activity remained fairly flat in March, with the composite index remaining close to 0, rising from −2 in February to +2 in March. Shipments and new orders were above their February values, but employment decreased. Manufacturers reported weakening local business conditions and a decrease in backlog of orders. Survey respondents were pessimistic, expecting weaker business conditions and a drop in shipments and new orders in the coming months. The Kansas City Fed reported that Tenth District manufacturing activity contracted sharply(down 22 points from +5 to -17) with production, new orders, employment, and raw materials inventories all falling. Expectations for future activity fell to levels last seen in early 2009.

Next week, our Chemical Activity Barometer (CAB) will provide an early (and provisional) look at March. The current month’s data are based on limited high-frequency data and the full month’s data available for February that month’s reading was revised down significantly.

ENERGY

Energy

Reflecting the collapse of oil prices, the oil and gas rig count fell by 20 to 770 rigs. Oil inventories rose for the ninth consecutive month and natural gas inventories were drawn down at a roughly typical pace for the week. Oil prices gained earlier in the week as it was apparent a “stimulus” package would be enacted but slid yesterday among signs that the decline in fuel demand and economic activity would be even more extensive.

CHEMICALS

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

Chemical table

Any COVID-related production impacts have yet to present in the railcar loadings data, which rose to the highest weekly level since December 2018. According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, rose by 1,459 to 34,471 railcars during the week ending 21 March (week 12). Loadings were up 12.3% Y/Y, up 3.7% YTD/YTD and have been on the rise for 6 of the last 13 weeks. The 13-week moving average, which is used to smooth out irregularities, was up 3.3% compared to last year.

Chemical Railcar

The U.S. Chemical Production Regional Index (U.S. CPRI) edged lower by 0.2% in February, following a 0.1% gain in January and a 0.2% decline in December. During February, chemical output declined across all regions, except the Gulf Coast. Compared to February 2019, U.S. chemical production was off by 1.8% on a year-over-year basis, the ninth consecutive month of Y/Y declines. Chemical production was lower than a year ago in all regions, with the largest year ago declines in the Mid-Atlantic, West Coast, and Northeast regions.

US CPRI

Chemical production was mixed over the three-month period. There were gains in the three-month moving average output trend of organic chemicals, plastic resins, chlor-alkali, other inorganic chemicals, other specialty chemicals, synthetic rubber, and manufactured fibers, and. These gains were offset by declines in the output of industrial gases, coatings, adhesives, fertilizers, synthetic dyes & pigments, crop protection chemicals, and consumer products.

Nearly all manufactured goods are produced using chemistry in some form or another. Thus, manufacturing activity is an important indicator for chemical production. On a three-month-moving average basis, manufacturing activity was flat in February, following gains in December and January. Output expanded in several chemistry-intensive manufacturing industries, including food & beverages, appliances, construction supplies, fabricated metal products, computers & electronics, semiconductors, refining, foundries, oil & gas extraction, plastic products, rubber products, paper, structural panels, printing, and furniture.

Led by a large decline in China (and some other nations) due to the COVID-19 coronavirus, our Global Chemical Production Regional Index (Global CPRI) shows that global chemicals production fell 2.4% in February, an acceleration from the 0.8% decline in January.  During February, chemical production increased in the Former Soviet Union (FSU), was flat in Europe, and declined elsewhere. Headline global production was off 1.5% year-over-year (Y/Y) on a 3MMA basis and stood at 115.0% of its average 2012 levels.

Global CPRI

During February, global capacity rose by 0.3% and was up 3.3% Y/Y. As a result, with the decline in production, capacity utilization in the global chemical industry fell 2.1 points to 79.3%. This is down from 83.2% last January, below the long-term (1987-2017) average of 86.5%, and the first time below 80% since August 2009. Among chemical industry segments, February results were decidedly negative across all segments. Considering year-earlier comparisons, growth was present in only plastic resins


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

Data Visualization with Power BI
The Association of Industry Analytics (AIA-Global)
8:00 am – 5:00 pm | 11 April 2020
Venue TBD (Houston, TX area)
www.aia-global.org

“The Role of Private Equity and the Chemical Industry” (webinar)
Samuel Feinstein – Partner, Apollo Capital Management
Société de Chimie Industrielle
1:00 – 2:00 pm | 15 April 2020
www.societe.org

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

CANCELLED – TZMI TiO2 Summit 2020
12-13 May 2020
Park Central Hotel
New York, NY
www.tzmi.com

POSTPONED – 10th ICIS World Surfactants Conference
13-15 May 2020
Hyatt Regency
Jersey City, NJ
www.icisevents.com

FlexPO+2020
ADI Chemical Market Resources
22 September 2020
Houston, TX
http://flexpo.adi-cmr.com


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.

Subscribe To ACC SmartBrief

Stay up-to-date and engaged with the latest industry-related news.