|Small Business Optimism||Chemical Trade||Chemical Railcar Loadings|
Running tab of macro indicators: 14 out of 20
The number of new jobless claims fell by 48,000 to 709,000 during the week ending 7 November. Continuing claims fell by 436,000 to 6.786 million and the unemployment rate for the week ending 31 October decreased 0.3 percentage points to 4.6%. Both measures are at their lowest levels since March.
Following an acceleration during the summer months, consumer prices were unchanged in October. Prices for food, new vehicles, and energy services rose, but were offset by falling prices for energy commodities, apparel, and medical care. Core consumer prices were also essentially flat. Compared to a year ago, headline consumer prices were up 1.2% and core prices were up 1.6% Y/Y, both representing a deceleration compared to the previous two months. Producer prices rose 0.3% in October, slightly higher than expected. This follows gains of 0.4% in September and 0.3% in August. There was a large increase in prices for fresh and dry vegetables. Prices for gasoline, meats, chicken eggs, and thermoplastic resins and materials also moved higher. Excluding food and energy, core producer prices were flat. Compared to a year ago, headline producer prices were up 0.5% while core prices were up 0.8% Y/Y, both comparisons higher than a month ago.
The NFIB index of small business optimism remained unchanged at 104.0 in October. This is still a historically high reading. Four of the 10 components improved, five declined, and one was unchanged. Owners are looking to hire, reporting a historically high level of job openings in October. Real sales expectations in the next three months increased three points to a net 11% expecting gains but owners expecting better business conditions over the next six months declined five points to a net 27%. All of the data was collected prior to the election, and a six-point increase in the NFIB Uncertainty Index to 98 was likely driven by the election and uncertain conditions in future months due to the COVID-19 pandemic and possible government mandated shutdowns. The uncertainty reading was the highest reading since November 2016.
The rig count rose by four to 297 rigs during the week ending 6 November. Both OPEC and the IEA this week cut their forecasts for oil demand this year and were cautious about demand recovery in 2021. The rise in COVID-19 cases weighs on potential economic activity and oil demand but Monday’s vaccine announcement may be factor (suggesting a return to economic normalcy and a recovery in oil demand) behind the recent rise in oil prices.
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 6.9% to 32,636 railcars the week ending 7 November (week 45), the highest weekly count since the end of March. Loadings were up 5.9% Y/Y, and down 4.6% on a YTD basis compared to 2019. Loadings have been on the rise for 6 of the last 13 weeks. The 13-week moving average, which is used to smooth out volatility, was down 3.6%.
Chemical prices rose 1.3% in October, the fifth and largest gain since the lockdowns eased. Feedstock prices rose 1.5%. Chemical prices firmed across nearly all categories, with the largest gains in inorganic chemicals and agricultural chemicals. Prices for consumer products, manufactured fibers and coatings, however, were lower. Compared to a year ago, chemical prices remained off by 1.6% Y/Y, an improving comparison.
U.S. chemicals trade began the year with momentum, expanding 4% in the first quarter to $58 billion total chemical imports and exports. As the COVID health crisis took hold, inducing economic recession in the U.S. and in external markets, U.S. chemicals trade dropped off by 8% in the second quarter. Total chemicals trade contracted by another 1% in the third quarter. Lockdowns and supply chain disruptions interrupted the flow of goods trade particularly at the end of the first quarter and thoroughly through the second quarter. As partial recovery began and economic lockdowns were lifted mid-year, the environment for trade in goods began to improve.
Following a 13% decline in the second quarter, U.S. chemical exports rose 1% to $30 billion in the third quarter, supported by basic chemicals. Compared to the same quarter in 2019, however, exports remained at relatively low levels in Q3 and were down 13%. Compared to 2019, YTD/YTD comparisons across all sectors were negative: total chemicals -10%, agricultural chemicals -6%, consumer products -12%, basic chemicals -11% (petrochemicals down 11% including plastic resins -11%), and specialties -8%.
Following a 1% decline in the second quarter, U.S. chemical imports fell another 4% to $23 billion in the third quarter. Q3 chemical imports were down 7% compared to the same quarter in 2019. Compared to 2019, YTD/YTD comparisons across all major sectors were negative: total chemicals -8%, agricultural chemicals -18%, consumer products -4%, basic chemicals -10% (petrochemicals down 14% including plastic resins -17%), and specialties -1%.
The U.S. chemicals trade balance remains a surplus but has narrowed notably this year. Quarterly net exports were stable at an average $9 billion over Q2 2019 through Q1 2020 but narrowed to $5 billion in Q2. Quarterly net exports improved to $6 billion in the third quarter. US plastic resin exports have been a stable positive contributor to the US net exporter position.
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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.