|Unemployment Rate||Chemical Shipments||Chemical Employment|
Running tab of macro indicators: 1 out of 20
In the week ending 2 May, initial unemployment claims were 3,169,000, a decrease of 677,000 from the previous week and down from the peak of 6,618,000 in the week ending 28 March. Continuing claims reached 22.6 million. Some 33.5 million have filed for unemployment since mid-March.
In April, non-farm payrolls fell sharply–by 20.5 million. This was in one month; keep in mind that during 2007-09 recession, the 8.7 million drop in jobs occurred over two years. The changes in these measures reflect the effects of the coronavirus pandemic and government efforts to contain it. Employment fell sharply in all major industry sectors, with particularly heavy job losses in leisure and hospitality. Average hourly and weekly earnings of production and nonsupervisory employees of $25.12 per hour rose in April and were up 7.7% Y/Y, reflecting that job losses were more centered in lower-income positions. With a 10-fold increase in temporary layoffs, a four-fold increase in permanent layoffs, and a lower labor participation rate (people have given up), the unemployment rate increased by 10.3 percentage points to 14.7%, the highest rate in the post-World War II period and the largest over-the-month increase in history. Although the unemployment rate peaked at 25% in the Great Depression of the 1930s, it has never increased this much in one month.
For the first time since August 2011, non-mortgage consumer debt fell (by 0.4%) in March as sharply lower credit card debt more than offset higher debt levels for installment debt (car payments, student loans, etc.). It was the largest decline in credit card use since 1989. Compared to a year ago, consumer debt was up 3.2%. Lockdowns and job losses that began in March kept consumers on the sidelines.
April light vehicle sales plunged to an 8.58 million unit pace that was actually better than expectations. Government-mandated lockdowns (with attendant loss of jobs and incomes) clearly had an effect, but offsetting this was deep discounting and shift to online retailing. Truck sales remained fairly resilient relative to automobiles. Lenders are offering loans for new vehicles that allow borrowers to delay making payments for up to four months as well as record amounts of financing at 0% interest rates for buyers with strong credit scores. High-frequency dealer data shows activity picking up across the country in late-April, and industry observers expect the further easing of economic restrictions to foster recovery.
Unsurprisingly, factory orders tumbled, by 10.3%, in March as Covid-19 spread to the U.S. and lockdowns were initiated to slow the spread. Durable orders fell 14.7% and nondurable orders were down 5.8%. Declines were posted in just about every industry sector. Unfilled orders (a measure of the manufacturing pipeline) fell 2.0%. Manufacturers’ shipments also fell (by 5.2%) with declines across most segments offset by gains in food, beverages, pharmaceuticals, and paper products. Inventories also continued to move lower, down 0.8%. The inventories-to-sales ratio rose to 1.46 in March from 1.40 in February. A year ago, the ratio was 1.36.
Wholesale trade fell 5.2% to $475.0 billion in March. Weakness was widespread although wholesalers of computer equipment, paper, drugs, chemicals, petroleum, and alcohol saw gains. At the same time, wholesale inventories fell 0.8% to $650.7 billion at the end of March. The March inventories-to-sales ratio for wholesalers rose from 1.31 in February to 1.37 in March. A year ago the ratio was 1.33 as inventories were off 2.0% Y/Y while sales
The ISM Non-Manufacturing Index (NMI) for the U.S. economy fell sharply in April, by 10.7 points, to a weak 41.8 reading, reflecting a strong contraction in private services, construction and mining industries. Eight out of ten sectors contracted. This is the first contraction reading since December 2009. All of the components contracted while supplier deliveries registered an all-time high.
The U.S. trade deficit in goods and services grew 11.6% in March to $44.4 billion as U.S. exports fell harder than imports. U.S. exports were down 9.6% to $188 billion and imports were down 6.2% to $232 billion in March. Weakness in U.S. goods exports reflects lower exports of crude oil, other petroleum products and fuel oil; autos and other vehicles; auto parts; and capital goods including industrial machinery, civilian aircraft, engines and parts. U.S. imports of consumer goods (including cell phones) and imports of autos and auto parts fell in March while imports of capital goods including computers and semiconductors rose. In services trade, travel and transport contracted notably.
The coronavirus pandemic continued to weigh on global manufacturing in April, with the JPMorgan Global Manufacturing PMI falling 7.5 points 39.8, its lowest level since March 2009. The downturn in the headline index was softened by the recent relative resilience of the China PMI, a measure to be taken with a grain of salt. Output fell sharply as did new orders, in many nations at the fastest pace on record. The impact also reverberated through supply chains, with supplier lead times lengthening to a record length. Global manufacturing employment fell at the quickest pace in almost 11 years in April. All of the nations covered saw staffing levels decline, with almost all also seeing accelerated job losses.
The rig count continued to collapse during the week ending 1 May, down another 57 rigs to 406. Crude oil inventories rose by 4.6 million barrels 532.2 million barrels last week, a slower pace than in recent weeks and below expectations. Refinery capacity utilization from 69.6% rose to 70.5% but total U.S. oil demand was off 27% Y/Y. Crude inventories were at near record levels and this week likely breached a new record. A storage crisis is approaching. Amid weak demand, there was a larger than normal 109 BCF build in natural gas inventories, which was up 52% Y/Y and 21% above the five-year average.
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, rose by 1,671 to 29,739 railcars during the week ending 2 May (week 18). Loadings were down 15.2% compared to the same week in 2019 and down 1.2% 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 2.4% compared to last year, the second consecutive decline.
According to data from the ACC Plastics Industry Producers’ Statistics Group, U.S. production of major plastic resins was 8.0 billion pounds in during March 2020, up 6.4% compared to the same month in 2019. Year-to-date production was 23.0 billion pounds, a 6.4% increase Y/Y. Sales and captive (internal) use of major plastic resins was 7.8 billion pounds in March, up 6.0% Y/Y and YTD sales and captive use was 22.9 billion pounds, a 5.5% Y/Y.
Like most industries, chemical industry (including pharma) employment tumbled, by 3.7% (31,100 jobs), in April. Production workers fell by 4.1% (22,000), implying a 3.0% (9,100) decline in supervisory and non-production workers. The average workweek declined to 39.7, suggesting the total labor input fell 1.7%, which confirms the ISM report last week that stated the chemical industry contracted. Compared to a year ago, total industry employment was down 3.5% (29,300). Average hourly earnings rose 3.0% Y/Y.
Chemical shipments fell 1.9% in March as lockdowns began, oil prices collapsed, and business uncertainty arose. Declines were posted in nearly every segment. Chemical inventories eased 0.1% and the inventories-to-sales ratio rose to 1.23 in March from 1.22 in February; a year ago, it was 1.22. Shipments were off 2.8% Y/Y and inventories were off 2.7% Y/Y.
U.S. chemicals trade grew by 13.1% in the month of March driven by both higher imports and exports. Trade expanded in every sector of chemicals. Exports were up 10.4% to $12.0 billion in March but were down 0.7% on a Y/Y basis. Petrochemicals, which comprise over half of U.S. chemical exports, rose 9.9% in March. Specialty chemicals exports were also strong, rising 13.8% in the month. Imports were up 17.1% to $8.8 billion in March but they were down 8.6% on a Y/Y basis. Petrochemical imports were up 18.7% in March. Imports of specialty chemicals also accelerated, increasing 13.7% in March. As imports growth outpaced exports, the chemical trade surplus fell $0.1 billion to $3.3 billion in March.
Sales of chemical products at the wholesale level rose 1.2% in March, following a decline in February. Wholesale inventories of chemical products fell for a third month, by 1.9%. Compared to a year ago, wholesale sales were off 1.2% while inventories were off 9.8% Y/Y. The inventories-to-sales ratio fell to 1.13 from 1.16 in February and 1.24 a year ago.
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CANCELLED – TZMI TiO2 Summit 2020
12-13 May 2020
POSTPONED – 10th ICIS World Surfactants Conference
13-15 May 2020
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.