|Retail Sales||Industrial Production||Chemical Production|
Running tab of macro indicators: 1 out of 20
In the week ending 9 May, initial unemployment claims were 2.98 million, a decrease of 195,000 from the previous week’s revised level. Some 36.2 million people have filed for unemployment since mid-March but keep in mind that more than one-third have since found new jobs and continuing claims are 22.8 million. This suggests an insured unemployment rate of 15.7% for the week.
As expected, consumer prices fell for a second month in April (by 0.8%) as sharply lower oil prices and lower demand for many categories of goods and services created slack. Prices for “food at home” rose, however, by the largest gain in over 45 years. Compared to a year ago, headline consumer prices were up 0.3%, while core consumer prices were off 0.9% Y/Y. Producer prices for final demand goods and services fell more than expected in April, down 1.3%, the third consecutive decline. Much of the decline is attributed to the 19.0% decline in energy prices, however prices for core goods was off 0.4% and prices for final demand services was off 0.2%, reflecting depressed demand; an exception was wholesale and retail margins, which expanded. Compared to a year ago, producer prices were off 1.2% while core goods prices were off 0.3% Y/Y. Import prices also declined (by 2.6%) on lower oil prices in April. Prices for nonfuel imports fell, following flat growth in March. Export prices were also sharply lower. Compared to a year ago, import prices were down 6.8% and export prices were off 7.0% Y/Y.
Coming in worse than expected, headline restaurant and retail sales fell 16.4% in April and follows a slightly upwardly revised 8.3% decline in March. Except for sales via online platforms (up 8.4%), nearly every segment posted double-digit declines. Sales at building material and garden centers was off by only 3.5%. Restaurant sales fell another nearly 30% in April and were half of February’s sales. Compared to a year ago, headline retail sale were off 21.6%. Excluding restaurant sales, it was a 17.8% Y/Y decline. In all, an abysmal report reflecting the sharp pullback in this key segment of consumer spending.
Business inventories fell 0.2% to $2,012.5 billion at the end of March, while the combined value of distributive trade sales and manufacturers’ shipments (or business sales) fell 5.2% to $1,386.1 billion. This pushed the inventory-to-sales ratio up to 1.45. A year ago, it was 1.38 as overall inventories were down 0.3% Y/Y and sales were down 4.9% Y/Y.
In line with expectations for an unprecedented decline, industrial production tumbled 11.2% in April, following a 4.5% decline in March. Mining output contracted for a third month. Electric output contracted, but natural gas output rose, reflecting some unseasonably cool weather. Manufacturing output fell for a fifth straight month, by 13.8%. Many sectors posted double digit declines. Motor vehicle output was off 71.7% (following a 30.0% decline in March). Other large contractions were in aerospace, primary metals, furniture, petroleum textiles, and printing. For a second month, every single major manufacturing sector declined. Compared to a year ago, industrial production fell 15.0%. The capacity utilization rate also fell sharply to 64.9%, the lowest level since 1919. Compared to a year ago, overall industrial capacity was up 1.8%.
Small business optimism took another dive in April, falling 5.5 points to 90.9, with owners expressing certainty the economy will weaken in the near term, but expecting it to improve over the next six months. The Index has fallen 13.6 points over the last two months, with nine of 10 Index components declining in April and only one improving.
The New York Fed’s Empire State Manufacturing Survey indicated that business activity continued to deteriorate significantly in New York State. The headline general business conditions index climbed 29.7 points, but remained well below zero at -48.5. New orders and shipments continued to decline sharply, though not as bad as in April. Delivery times were slightly shorter, and inventories were slightly lower. After plunging last month, employment levels and the average workweek fell further in May. Input prices were slightly higher, and selling prices continued to decline modestly. While current conditions remained extremely weak, firms grew more optimistic that conditions would be better six months from now.
The Organization for Economic Co-operation and Development (OECD) released its composite leading indicator (CLI) for April and the data show that most major economies collapsed by unprecedented levels as lockdown measures for the global coronavirus pandemic continued to have a severe, adverse effect on trade and production, as well as consumption and confidence. The OECD CLI is designed to provide early signals of turning points (peaks and troughs) between expansions and slowdowns of economic activity. In addition to the developed nations, the OECD has also developed CLIs for the major six OECD non-member economies (Brazil, China, India, Indonesia, Russian Federation and South Africa). As a result, the CLI for the OECD+6 is a good leading indicator for global economic activity and on this measure fell 2.8% in April, leaving it off 2.3% Y/Y.
The rig count continued to collapse during the week ending 8 May, falling by 34 rigs to 372. In the second week of March the rig count was 790, and with the fall of oil prices, the rig count has fallen by half in just eight weeks, the rapidity of the decline paralleling that of other indicators of the real economy. According to the EIA weekly inventory figures, U.S. production has fallen by nearly 1.0 million BPD or 7% in only five weeks, the second-sharpest decline in U..S. production ever outside of hurricane-related activity. For the first time in 16 weeks, U.S. crude oil inventories fell. Amid signs that oil consumption is improving in some countries and combined with additional production cuts by Saudi Arabia, Kuwait and the UAE, oil prices firmed this week.
For the business of chemistry, the indicators still bring to mind a red 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 977 to 28,762 railcars during the week ending 9 May (week 19). Loadings were down 10.1% compared to the same week in 2019 and down 1.6% YTD/YTD. Loadings have been on the rise for 5 of the last 13 weeks. The 13-week moving average, which is used to smooth out irregularities, was down 3.4% compared to last year, the third consecutive decline, and the largest negative comparison in more than a decade.
Chemical prices fell 2.1% in April and follows a 0.1% gain in March. Weakness was across the board except for a 0.2% gain in consumer products and coatings prices. Pronounced monthly declines were experienced in feedstock prices as well as prices for bulk petrochemicals and organics, plastic resins and synthetic rubber. Compared to a year earlier, chemical prices were off 5.0% with feedstock prices off 45.5% Y/Y. The report also noted that the prices index for chemical wholesaling services advanced. Chemical import prices fell in April by 2.3% and were off 6.0% Y/Y. Export prices declined 2.7% and were down 6.2% Y/Y.
The Federal Reserve Board reported that chemicalsindustrial production fell 5.1% in April and follows a 1.5% decline in March. All segments declined during the month and production was off 7.7% Y/Y. Our measure of capacity utilization rate fell 4.8 percentage points to 72.8%; a year earlier it was 82.4%.
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Webinar: COVID Market Impacts: Supply Chain Disruptions in Materials Markets
Dr. Kevin Swift, Chief Economist – American Chemistry Council
19 May 2020 11:00 AM EDT
ADI Chemical Market Resources
22 September 2020 (rescheduled from April 14)
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.