|Chemical Production||Chemical Capacity Utilization||Industrial Production|
Running tab of macro indicators: 9 out of 20
Retail sales rose by 0.3% in October, slightly ahead of expectations and following a decline in September. Sales were mixed with gains in motor vehicles & parts, food & beverage, general merchandise, and non-store retailers, which were offset by lower sales of furniture, electronics, building supplies, and clothing. Restaurant sales were also lower. Compared to a year ago, headline retail sales were up 3.1%, a declining comparison. Business inventories for September were essentially flat with gains among manufacturers and retailers somewhat offset by a decline in wholesale inventories. At the same time, business sales fell 0.2% with wholesaler trade gains offset by falling manufacturing shipments and retail sales. Overall business sales were up 0.5% Y/Y while inventories were up 3.7% Y/Y. The imbalance lingers.
Consumer prices jumped by a larger-than-expected 0.4% in October, following flat growth in September. The gain was led by higher prices for energy and energy services (e.g., gasoline). Prices for food, used cars and trucks, medical supplies, and services also increased. Compared to a year ago, consumer prices were 1.8% higher while core consumer prices were up 2.3% Y/Y. Producer prices also rose by 0.4%, another gain above expectations and offsetting the 0.3% decline in September. The gain was led by higher energy and firming food prices. Excluding food and energy prices, so-called core PPI rose 0.3% in October. Led by lower prices for imported oil, import prices fell 0.5% in October. Nonfuel import prices were 0.2% lower. Prices for exports also softened, with the exception of higher prices for agricultural products. Compared to a year ago, import prices were off 3.0% with declines in prices for both fuel and nonfuel imports.
Confidence on Main Street improved in October as the NFIB Small Business Optimism Index rose 0.6 points to 102.4. Eight of the 10 index components increased led by plans for job creation, inventory investment, and capital spending. While lower than a year ago, the index remains historically high. The November Empire State Manufacturing Survey indicated that business activity was little changed with the headline general business conditions index at 2.9, roughly in line with its October level. New orders increased slightly, and shipments grew modestly. Delivery times were somewhat shorter and inventories declined. Employment continued to expand, and the average workweek was slightly longer. Input price increases continued to slow, while selling prices increased modestly. Optimism about the six-month outlook remained good, as capital spending plans picked up markedly.
Industrial production tumbled in October, down 0.8%, worse than expected. Compared to a year ago, industrial production was off by 1.1%. While utility output advanced, both mining and manufacturing production declined. The decline in manufacturing output was broad based with the largest declines in motor vehicles and parts (partly due to the GM strike), electrical equipment, computers, refined petroleum products, textiles, and apparel. There were several gains in production, including wood products, food & beverages, printing, and primary metals. The capacity utilization rate also fell by 0.8 percentage points to 76.7%. A year ago, capacity utilization was 79.3%. Overall industrial capacity was 2.2% Y/Y higher than last year.
The Organization for Economic Co-operation and Development (OECD) released its composite leading indicator (CLI) for September. The CLI program is designed to anticipate turning points (peaks and troughs) in economic activity relative to trend six to nine months ahead, and the latest data continue to anticipate stable below-trend growth momentum in the OECD area as a whole. Within OECD economies, stable growth momentum remains the assessment for Canada and is now also anticipated in Japan, with similar signs now also emerging in the Euro Area. On the other hand, the CLIs for the U.S. continues to point to easing growth momentum, which is now also the assessment for the United Kingdom, although large margins of error persist due to continuing Brexit uncertainty. 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. The OECD+6 was flat in September and is up 2.2% Y/Y. Among major emerging economies, the CLIs continue to signal stable growth momentum in China and Brazil and now, also, in Russia. In India, easing growth momentum remains the assessment.
The oil and gas rig count continued to fall (for a fourth straight week) by seven to 814 rigs. Oil prices edged lower as inventories rose for a third week. Natural gas prices also moved slightly lower. As colder weather has emerged, the heating season is getting underway and inventories rose by only 3 BCF, likely the last build of the year.
For the business of chemistry, the indicators bring to mind a yellow 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 2.9% to 30,826 railcars during the week ending 9 November (week 45). Loadings were down 1.9% Y/Y, down 0.2% YTD/YTD and have been on the rise for 7 of the last 13 weeks. The 13-week moving average, which is used to smooth out irregularities, was up 0.2% a Y/Y basis.
Led by weakness in bulk petrochemicals and organics, plastic resins, synthetic rubber, manufactured fibers, coatings, other specialties and agricultural chemicals, chemical production fell 1.3% in October. This follows a 0.5% decline in September. Gains occurred in inorganic chemicals and consumer products. Chemical production was off 1.6% Y/Y. The decline in output fostered a 1.0 percentage point decline in capacity utilization to 81.6%.
Chemical producer prices rose by 1.0%, with gains centered in inorganic chemicals, bulk petrochemicals & organics, and plastic resins. Prices were weak in synthetic rubber, manufactured fibers, coatings, other specialties, and agricultural chemicals. At the same time, feedstock prices declined. Prices were off 2.5% Y/Y while feedstocks were off 60.8% Y/Y. Import prices fell by 0.5% in October, the fifth consecutive decline. Export prices also declined, by 0.3%. Compared to a year ago, import prices were off 6.8% Y/Y while export prices were off 3.8% Y/Y.
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“Semiconductor Industry Perspectives and Cabot Microelectronics’ Role”
David Li -President and CEO, Cabot Microelectronics
Société de Chimie Industrielle
20 November 2019
The Yale Club
New York, NY
7th ICIS US Butadiene and Derivatives Conference
11 December 2019
Park Central Hotel
New York, NY
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.