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 (May 22, 2020)


11.3%3.1%4.4%
Specialty Chemical VolumesU.S. CPRILeading Economic Indicator

MACROECONOMY & END-USE MARKETS

Running tab of macro indicators: 1 out of 20

macro table

The number of new jobless claims fell to 2.98 million in the week ending 16 May, the seventh week of falling claims. Some 38.4 million people have filed for unemployment since mid-March but keep in mind that more than one-third have since found new jobs, been called back, etc. and continuing claims are 25.1 million. This suggests an insured unemployment rate of 17.2% for the week.

With lockdowns keeping potential buyers and sellers on the sidelines, existing home sales fell 17.8% to 4.33 million units in April, the slowest pace in nearly a decade. The data represent closings that were largely transacted during February and March, meaning that further declines are likely. The inventory of unsold homes continued to fall, pushing prices up 7.4% Y/Y to a new record high of $286,800. Record-low mortgage rates will provide some support to home sales, but the severe disruptions to the labor market and confidence may hold consumers back

Housing Starts and Building Permits

Despite being designated an essential industry in many states, homebuilding activity collapsed in April. Housing starts fell 30.2% to an 891,000 pace, more than expected and the slowest pace in five years. Chemistry-intensive single family starts fell 25.4% with double digit declines across all regions. Forward-looking building permits similarly fell, down 20.8% for the month. Compared to a year ago, permits were down 19.2% Y/Y while housing starts were off by 29.7% Y/Y. Before Covid-19, housing was expected to be a bright spot on an otherwise lackluster outlook. Following a record decline in April, homebuilder confidence bounced back in May. The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) rose by 7 points to 37. This suggests that while homebuilders remain pessimistic, they are less so compared to last month. Housing demand is expected to strengthen as stay-at-home orders are removed.

The Business Outlook Survey prepared by the Philadelphia Federal Reserve indicated that activity in the region’s manufacturing sector continued to be weak, with the measure of current activity at -43.1, a better reading than the -56.6 reading in April but still negative. Despite remaining well below zero, the survey’s current indicators for general activity, new orders, shipments, and employment rose this month after reaching long-term low readings in April. Firms surveyed expect the current slump in manufacturing activity to last less than six months, as the broadest indicator of future activity strengthened further from last month’s reading; furthermore, the firms continue to expect overall growth in new orders, shipments, and employment over the next six months.

The LEI and Industrial Production

The index of leading economic indicators (LEI) fell 4.4% in April and follows a 7.4% decline in March and a 0.2% decrease in February. The continued erosion in the index was broad-based (except for stock prices) and follows the largest decline in its 60-year history. The drop in the LEI does not suggest a fast rebound for the U.S. economy. That said, the diffusion index (% of components rising) improved from 10% to 40%. Next week, our CAB leading economic indicator will provide an early look at May.

Survey of Economic Forecasters US

SURVEY OF ECONOMIC FORECASTERS

  • Due to the rapid spread of Covid-19 and subsequent lockdowns of huge parts of the global and U.S. economies, expectations are for the steepest contraction in U.S. GDP since the post-WWII demobilization.
  • We expect sharp contractions in consumer spending and business investment with rebounding activity into 2021 as lockdowns are lifted and business activity resumes.
  • Housing starts and vehicle sales also deteriorate significantly before improving in 2021.
  • With unemployment rates climbing during Q2, the average unemployment rate for 2020 will reach new records before easing into 2021.
  • With slack demand for many goods and services, growth in consumer prices are expected to be weak in 2020 before edging higher in 2021.
  • Interest rates (10-year treasury) have touched record lows in 2020, but are expected to gradually increase through the forecast horizon.
  • Global expectations for GDP, trade volumes, and industrial production have fallen to lows not seen since the 1930’s, but growth rebounds in most parts of the world in 2021.
Survey of Economic Forecasters Global

ENERGY

Energy

The rig count continued to collapse during the week ending 15 May, falling by another 35 rigs to 337. For the second week, U.S. crude oil inventories declined, evidence that demand is picking up. Mobility and related high-frequency data confirm steadying demand. As a result, oil prices rose during the week, pushing up the oil-to-gas ratio, thus indicating renewed Gulf Coast competitiveness.

CHEMICALS

For the business of chemistry, the indicators still bring to mind a red banner for basic and specialty chemicals.

Chemical Table

According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, fell by 385 to 28,377 railcars during the week ending 16 May (week 20). Loadings were down 1.3% compared to the same week in 2019 and down 2.6% 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 volatility, was down 4.6% compared to last year, the third consecutive decline, and the largest negative comparison in more than a decade.

The Chlorine Institute (CI) reported that production of chlorine was 26,282 in February, down 24.0% over the previous month; YTD production was 8.3% Y/Y. The output of co-produced caustic soda rose to 27,709, down 24.6% over January and YTD production was down 6.8% Y/Y.

US Specialty Chemical Market Volume

With the effects of the coronavirus pandemic and mandated government lockdowns further showing up in the U.S. economy, U.S. specialty chemicals market volumes fell 11.3% in April, accelerating from a 4.0% decline in March, and a 0.5% decline in February. As recently as January, activity improved. Of the 28 specialty chemical segments we monitor, none expanded in April. Thus, on a sequential (one-month change) basis diffusion was 0%, the same as in March, and off from 48% in February and 63% in January.

During April, overall specialty chemicals volumes were off 14.5% on a year-over-year (Y/Y) basis. Volumes stood at 95.6% of their average 2012 levels in April. This is equivalent to 6.51 billion pounds (2.95 million metric tons). On a Y/Y basis, there was a gain in only one market and functional specialty chemical segment – electronic chemicals. On a year-earlier basis, diffusion was 4%, much worse than earlier in the year.

US CPRI

The U.S. Chemical Production Regional Index (U.S. CPRI) tumbled by 3.1% in April following a 1.0% decline in March and a 0.4% decline in February. During April, chemical output declined across all regions, with the steepest decline in the Gulf Coast. The lower level of activity is directly related to supply chain disruptions and the lockdown of much of the U.S. economy during April. Compared with April 2019, U.S. chemical production was off by 5.3% on a 3MMA Y/Y basis, the eleventh and highest 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 Northeast, Mid-Atlantic, and West Coast regions.

Despite being designated an essential industry by the Department of Homeland Security production fell across all chemical segments. Within several major segments, however, production of some chemical materials was up including supply chains tied to PPE and disinfection products. As nearly all manufactured goods are produced using chemistry in some form, manufacturing activity is an important indicator for chemical demand. With many factories shut down during the month, however, overall manufacturing activity fell by 6.3% (on a 3MMA basis) with declines (in some cases quite steep) across all industry sectors.


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

How are you planning for the road ahead?
Chemical Industry Forum Webinar
ICIS
2 June 2020 at 9:30 am CDT
Registeration Link

A Future of South Louisiana Industry
2020 Power Breakfast: A Webinar
Louisiana Business Inc.
9 June 2020: 8:30 am CDT
Business Report

FlexPO+2020
ADI Chemical Market Resources
22 September 2020 (rescheduled from April 14)
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.