|15.7 mm unit pace||to 60.8||1.4%|
|Light Vehicles Sales||ISM PMI||Global CPRI|
Running tab of macro indicators: 18 out of 20
he number of new jobless claims increased by 9,000 to 745,000 during the week ending 27 February. Continuing claims fell by 124,000 to 4.295 million and the unemployment rate for the week ending 20 February eased 0.1 percentage points to 30%. The data are skewed by the winter storm.
Total non-farm payroll employment rose by 379,000 in February, with most of the job gains occurring in leisure and hospitality, with smaller gains in temporary help services, health care and social assistance, retail trade, and manufacturing. Employment declined in education, construction, and mining. Average production worker hourly wages — at $25.19 per hour — were up 5.1% Y/Y. Both the unemployment rate, at 6.2%, and the number of unemployed persons, at 10.0 million, changed little in February. Although both measures are much lower than their April 2020 highs, they remain well above their pre-pandemic levels. The labor force participation rate remained steady at 61.4% in February. This measure is 1.9 percentage points lower than a year earlier.
The U.S. trade deficit rose by 1.9% in January to $68.2 billion. Exports rose by 1.0% to $191.9 billion while imports rose by 1.2% to $260.2 billion. Goods exports were up on higher external sales of industrial supplies and materials and capital goods. Auto and auto parts exports and transport and travel services exports were a drag in January. The January rise in imports was driven by pharmaceutical preparations which were up by $5 billion in the month. Imports of autos and transport and travel services were a drag.
Led by gains among all three main segments, construction spending rose by 1.7% in January. Compared to a year ago, spending was up 5.8% Y/Y. Over the past year, spending on residential projects has surged (up 21.0% Y/Y) as remote work and learning have boosted demand.
With winter storms across much of the nation, light vehicle sales fell 5.7% in February to an annual pace of 15.67 million units. Weakness was across all main segments, but especially in domestic automobiles and to a lesser extent, in domestic light-duty trucks, SUVs, crossovers, etc. Sales of foreign models did not suffer as much. Improving job creation and confidence along with vaccine roll-out will give legs to strong consumer incomes and provide tailwinds for this sector.
Factory orders rose for a 9th consecutive month in January, up by 2.6%. Gains were mixed, with the largest increases in civilian and defense aircraft, HVAC equipment, foundries, iron & steel, and electromedical and other electronic instruments. Orders for core business goods (nondefense capital goods, excluding aircraft) rose 0.4% in January and were up 8.3% Y/Y. Headline orders were up 1.3% Y/Y. Manufacturing shipments rose 1.9% and inventories edged higher by 0.1%. Compared to a year ago, inventories were off 0.2% Y/Y while shipments were up by 0.8% Y/Y. The inventories-to-shipments ratio continued to edge lower to 1.36 compared to 1.28 in December and 1.40 a year ago.
Global semiconductor sales rose 1.0% to $40.0 billion in January, a level up 13.2% Y/Y. January gains occurred in most markets as semiconductor production is on the rise to meet increasing demand and ease the ongoing chip shortage affecting the auto sector and others. Year-earlier gains occurred in every market.
With easing in new orders, production, and employment, the ISM Services PMI fell 3.4 points to a still very positive 55.3, a good rate of expansion. Inventories expanded and supply deliveries lengthened. Seventeen of the 18 industries expanded. Featuring strong gains in new orders, order backlogs, production, exports, and prices, the ISM Manufacturing PMI rose 2.1 percentage points to 60.8 in February, its highest level in three years. Supplier deliveries slowed and inventories contracted. Sixteen of the 18 industries expanded during the month. Looking more broadly, the JP Morgan Global Manufacturing PMI rose 0.3 points to 53.9, a slightly faster pace. Cost inflation is at this highest pace in nearly a decade and business optimism rose to an 81-month high. New orders intake eased but is still expanding as is employment.
The rig count rose by five to 401 rigs during the week ending 26 February. Crude oil stocks experienced their largest weekly gain on record, a reflection of the winter storm and oil refineries still operating well below normal rates.
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 3,904 (16.4%) to 27,768 railcars the week ending 27 February (week 8), still reflecting the weather-related chemical plant shutdowns in the Gulf Coast. Loadings were down 18.4% Y/Y, down 3.1% YTD/YTD and the 13-week moving average, which is used to smooth out volatility, dipped to 0.6% compared to last year, the first negative Y/Y comparison in 2021.
According to data from the ACC Plastics Industry Producers’ Statistics Group, U.S. production of major plastic resins totaled 8.3 billion pounds during January 2021, up 2.5% compared to December, and an increase of 5.4% compared to the same month in 2020. Sales and captive (internal) use of major plastic resins totaled 7.9 billion pounds during January 2021, down 3.8% compared to the prior month, and up 0.1% Y/Y.
The details of the ISM PMI report indicate that the chemical industry expanded during February. New orders, production, order backlogs, exports, imports, and employment all expanded. Inventories expanded as well but customer inventories were deemed too low. Supplier deliveries slowed. One industry respondent noted: “Supply chains are depleted; inventories up and down the supply chain are empty. Lead times increasing, prices increasing, [and] demand increasing. Deep freeze in the Gulf Coast expected to extend duration of shortages.”
Chemical industry (including pharma) employment continued to rebound, up by 600 (0.1%) in February, following a 6,900 gain in January. The industry is still off by 3,400 jobs compared to pre-COVID levels. Compared to last year, employment remained lower by 4,800 (0.6%). In February, production worker jobs were steady and a 0.2% gain in supervisory and non-production workers. Average wages were up 3.1% Y/Y to $26.33. The average workweek edged up by 0.3 hours. Combined with the steady number of production workers, the total labor input into the chemical industry rose by 0.7%, suggesting chemical production expanded in February, which is in consistent with the ISM survey. The data, however, were collected prior to the winter storm and revisions may be in order.
Chemical shipments rose for a ninth consecutive month in January, up 2.0%. Chemical shipments rose by 1.6% in December and 1.2% in November. There were strong gains in the shipments of agricultural chemicals, coatings & adhesives, and other chemicals. Chemical inventories were flat in January, following gains of 0.3% gain in December and 0.2% in November. Inventories other chemicals rose, while agricultural chemical and coatings & adhesives inventories declined. Compared to a year ago, chemical inventories were off by 0.9% while shipments were ahead by 1.7% Y/Y. The inventories-to-sales ratio continued to move lower to 1.12 in January (from 1.14 in December). This was down from 1.15 a year ago and inventories were tighter than they have been more than six years going into February. The winter storm likely drew on these even more.
Chemical industry construction spending rose by 5.9% in December to $29.5 billion, following a revised decline in December. Chemical industry construction spending was ahead by a modest 0.1% Y/Y. As a share of overall spending on manufacturing construction, chemicals represented 45.0%.
The benchmark S&P 500 index rose by 2.6% in February. Chemical equity prices, as measured by the S&P index for chemical companies also ended higher, up 2.4% for the month. Equity prices are often a good indicator of future activity and represent one component of the leading economic indicators. Compared to the beginning of the year, chemical equities were down 0.3% while the S&P 500 index was up 1.5% year-to-date.
With improving activity across nearly all nations, our Global Chemical Production Regional Index (Global CPRI) shows that global chemicals production rose 1.4% in January, a slightly slower pace than December, and continuing the global recovery that started in June following declining activity during the January through May period. During January, chemical production increased in all regions. Headline global production was up 9.5% year-over-year (Y/Y) on a 3MMA basis. Keep in mind that output a year ago was off due to the onset of the Covid-19 pandemic. Global output stood at 129.0% of its average 2012 levels. Among chemical industry segments, January results were positive with gains across all segments. Considering year-earlier comparisons, production gains occurred in all segments.
During January, global capacity rose 0.1% and was up 2.0% Y/Y. As a result, with improving production, capacity utilization in the global chemical industry rose 1.1 points to 87.5%. This is well above last January and above the long-term (1987-2019) average of 86.3%.
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“Discussion Group: Perspectives on China and the U.S. – What will Change?” Virtual Even
11 March (4:00 – 5:00 pm)
Société de Chimie Industrielle
“Global Sustainability Trends and the Impacts Facing Society” Webinar
Marcello Boldrini – Senior Vice President & President of the Chemical Segment, Kraton
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.