|Housing Starts||Industrial Production||Chemical Production|
Running tab of macro indicators: 16 out of 20
With rising COVID-19 cases and partial lockdowns, the number of new jobless claims rose by 31,000 to 742,000 during the week ending 14 November. Continuing claims fell by 429,000 to 6.372 million and the unemployment rate for the week ending 7 November decreased 0.3 percentage points to 4.3%. Both measures are at their lowest levels since March.
Headline food service and retail sales rose 0.3% in October, a bit below expectations and the slowest pace in six months. With COVID cases surging across the country last month, restaurant sales edged lower for the first time since April. Outside the restaurant sector, sales were mixed. Sales were higher at motor vehicle dealers, electronics & appliance stores, building material & garden centers, gas stations, and non-store retailers (largely online platforms like Amazon). Sales were lower in apparel & accessories, furniture, food & beverage, sporting good & hobby stores, and general merchandise stores. Compared to last year, headline sales were up 5.7% as lower household spending on services has boosted sales of goods.
Business inventories rose 0.7% to $1,932.8 billion at the end of September. There were gains across all three levels (retailers, wholesalers and manufacturers) of the supply chain. The combined value of distributive trade sales and manufacturers’ shipments rose 0.6% to $1,465.1 billion in September. Again, there were gains across all three sectors. The inventory-to-sales ratio was stable at 1.32 in September and off from 1.40 a year earlier. Sales were up 0.8% Y/Y and inventories down 4.7% Y/Y.
Following five months of gains, import prices edged lower by 0.1% in October. Lower prices for imported fuels offset higher nonfuel prices, especially industrial supplies and materials and foods, feeds, and beverages. Export prices rose 0.2%, the lowest monthly gain since May. Higher prices for agricultural exports more than offset flat prices for nonagricultural exports. Compared to a year ago, import prices were off 1.0% while export prices were off 1.6% Y/Y.
Existing home sales continued to rise for a fifth consecutive month in October, up by 4.3% to a 6.85 million unit pace, the highest pace since February 2006, a 14-year high. All regions saw growth with the largest gains in the Midwest. Inventories were off 19.8% Y/Y to 1.42 million, representing a record low 2.5-month supply. Compared to a year ago, sales were up 26.6%. Reflecting tight inventories, the median sales price was up 15.5% Y/Y.
Fostered by pandemic-related de-urbanization, housing starts jumped 4.9% to a 1.53 million unit pace in October. Led by single-family activity, gains occurred in the Midwest, the South and the West but the Northeast was weak. Starts were up 14.2% Y/Y. Building permits were stable at 1.545 million units. That permits exceed starts is encouraging. Permits were up 2.8% Y/Y. Homebuilder confidence continued to set new highs in November. The NAHB/Wells Fargo Housing Market Index rose from a record 85 in October to 90 in November with gains across all three components (current sales, future sales, and buyer traffic).
Following a 0.4% decline in September, overall industrial production rose by 1.1% in October, the largest gain since July. Manufacturing output rose 1.0% following flat growth in September. Within manufacturing, there were broad gains with the largest gains in the output of nonmetallic mineral products, primary metals, electrical equipment (including appliances), aerospace, paper, printing and plastic & rubber products. Compared to a year ago, industrial production remained off by 5.3% Y/Y. Capacity utilization continued to tighten, up 0.8 points to 72.8%. This remained off from 77.0% a year ago as the industrial sector slowly recovers during the pandemic. Compared to a year ago, overall capacity was up 0.2%.
The New York Fed’s Empire State Manufacturing Survey indicated that business activity expanded in New York State, though only slightly, according to firms responding to the November 2020 survey. The headline general business conditions index fell 4.2 points to 6.3, pointing to a slower pace of growth than in October. There was a small increase in new orders and shipments were modestly higher. Inventories moved lower, and delivery times were steady. Employment levels and hours worked both rose. Input prices increased at about the same pace as last month, while selling price increases picked up. Looking ahead, firms remained optimistic that conditions would improve over the next six months. Manufacturing activity in the region continued to grow this month, according to firms responding to the Philly Fed Manufacturing Business Outlook Survey. The survey’s current indicators for general activity (down 6.0 points to 26.3), new orders, and shipments remained positive for the sixth consecutive month but fell from their readings in October. Employment increases were more widespread this month. Most future indexes also moderated this month but continue to indicate that firms expect growth over the next six months. The Kansas City Fed reported that District manufacturing activity continued to grow modestly in November. Manufacturing activity remained below year ago levels, but expectations for future activity remained solid. Prices paid for raw materials and finished goods continued to expand compared to a month ago and a year ago. District firms expect prices for both raw materials and finished goods to increase further in the next six months.
The index of leading economic indicators (LEI) rose 0.7% in October and follows a 0.7% gain in September and a 1.6% gain in August. There were widespread gains (seven out of 10) among the components. The LEI has moderated in recent months and may suggest continued growth that may moderate in the final months of 2020. This Tuesday we will released our latest CAB leading indicator which will provide insight into what the November data are saying.
The rig count rose by 12 to 309 rigs during the week ending 20 November. This is the ninth weekly gain. Natural gas stocks are well above last year’s levels and combined with mild weather, natural gas prices have edged down.
For the business of chemistry, the indicators still bring to mind a green banner for basic and specialty chemicals.
Chemical import prices rose for a fifth month by 0.8% in October. Prices of exported chemicals also rose, by 0.7%. Compared to a year ago, import prices remained lower by 1.7% while export prices were down 1.5% Y/Y. Noting continued uncertainty related to the pandemic, the EIA is forecasting continued declines in oil and gas production in 2021. Natural gas production is expected to decline by 3.3% while crude oil is expected to be off by 2.5%. Production of natural gas plant liquids, however, are expected to increase by 3.1%.
According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, fell by 2.2% to 31,932 railcars the week ending 14 November (week 46). Loadings were up 1.6% Y/Y, and down 4.4% 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 3.0%.
The Chlorine Institute (CI) reported that chlorine production was 27,939 tons per day in October, up 2.0% over the previous month but down 8.1% compared to October of last year. YTD production was down 9.5% Y/Y. The output of co-produced caustic soda rose to 29,971 tons per day, up 2.6% over September and YTD production was down 9.4% Y/Y
Following a nominal decline in September due to the hurricanes, chemical industrial production jumped 2.2% in October. Gains were across the board as inorganic chemicals, bulk petrochemicals & organics, plastic resins, synthetic rubber, manufactured fibers, coatings, and other specialties all increased; agricultural chemicals and consumer products increased as well. Compared to a year ago, production was off 3.8%. Chemical capacity was stable. The gain in production pushed chemical capacity utilization up 1.7 points to 78.7%. A year ago, capacity utilization was at 81.9%.
U.S. specialty chemicals market volumes increased 1.2% in October, up from a revised 0.1% gain in September, and 1.1% gain in August. Of the 28 specialty chemical segments we monitor, 25 expanded in October, up from nine in September. Thus, on a sequential (one-month change) basis, diffusion was 89%, up from 34% in September. Of the 25 segments rising in October, 18 (too many to mention) featured gains of 1.0% or more.
During October, overall specialty chemicals volumes were off 6.5% Y/Y, a better comparison than in September. Volumes stood at 104.4% of their average 2012 levels in October. This is equivalent to 7.11 billion pounds (3.23 million metric tons). On a year-earlier basis, there were gains in five chemical segments: cosmetic additives, electronic chemicals, flavors & fragrances, plastic compounding, and water management chemicals. On a year-earlier basis, diffusion was 20% in October, an improvement from 11% the prior month.
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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.