|0.1%||2.2%||to 16.6 mil|
|Chemical Inventories||Chemical Wholesale Trade||Light Vehicle Sales|
Running tab of macro indicators: 8 out of 20
Non-mortgage consumer debt rose 0.2% to $4.15 trillion at the end of September. The gain was entirely in non-revolving credit (vehicle loans, student loans, etc.) as revolving credit (i.e., credit cards) declined. Consumer debt was up 4.9% Y/Y, which is in line with income gains but ahead of recent gains in consumer spending.
Wholesale trade was virtually unchanged at $498.6 billion in September. Weakness was centered in automotive, metals, electrical, paper, farm products, chemicals and petroleum. Total inventories of merchant wholesalers, except manufacturers’ sales branches and offices, fell 0.4% to $676.7 billion at the end of September. The inventory-to-sales ratio was unchanged at 1.36 but since sales were off 0.6% Y/Y while inventories were up 4.8% Y/Y, the ratio was up from 1.29 a year earlier. The imbalance lingers.
The ISM Nonmanufacturing NMI rose 2.1 points to 54.7, suggesting the nonmanufacturing sector expanded at an increasing rate. Thirteen of the 18 industries covered reported growth. The business activity/production component continued to accelerate, as did new orders, employment and supplier deliveries. Backlog orders contracted and new export orders fell to a neutral position. Nonmanufacturing activity expanded for the 117th consecutive month.
Factory goods orders fell by 0.6% in September after edging lower by 0.1% in August. The reading came in below expectations. New orders for business investment goods fell for a second month, by 0.6%. Compared to a year ago, business investment orders were off by 1.0% while headline factory orders were off 3.5% Y/Y. Shipments of manufactured goods fell 0.2% in September, following a 0.3% decline in August. Inventories were up by 0.3% in September and up by 2.5% Y/Y. The inventories-to-shipments ratio remained steady at 1.34 compared to August, but was off from 1.39 in September 2018.
After two good months, light vehicle sales were off to a slow start in the 4th quarter, with October sales easing to a 16.55 million unit pace. This was a level below expectations. Imported vehicles fared better than domestic vehicles and trucks, SUVs, crossovers, etc. fared better than passenger cards. With continued gains in jobs and incomes combined with low interest rates, the macroeconomic environment is sound. That said, sales have likely peaked but will remain at elevated levels.
The global manufacturing sector contracted for a sixth straight month in October according to the J.P.Morgan Global Manufacturing PMI™. The reading edged higher to 49.8, suggesting that while manufacturing activity continued to contract, it did so at a slower pace. Manufacturing expanded in only 13 of the 32 nations covered. The headline production measure moved higher for a second month to 50.3, a positive reading. New orders came in at 50.0, a neutral reading, and export orders and employment continued to signal contraction. Trade tensions continue to weigh on the global manufacturing sector.
With gains across all regions, global semiconductor sales rose 3.4% to $35.6 billion in September. The strongest gains were in China and the Americas. Sales, however, were off 14.6% Y/Y with weakness in every region.
The U.S. trade deficit narrowed in September as imports decreased more than exports. The September decrease in the goods and services deficit reflected a decrease in the goods deficit of $2.7 billion to $71.7 billion and a decrease in the services surplus of $0.1 billion to $19.3 billion. Goods exports were down $1.8 billion to $136.8 billion in September reflecting a significant drop in exports of agricultural goods (notably, soybeans) and a decline in autos and auto parts. Capital goods exports increased due to aircraft exports. US goods imports declined $4.5 billion to $208.6 billion in September reflecting a large drop in imports of consumer goods, capital goods (notably semiconductors) and autos and auto parts.
The oil and gas rig count fell by eight to 821 rigs.
For the business of chemistry, the indicators 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 5.4% to 31,755 railcars during the week ending 2 November (week 44). Loadings were down 1.4% Y/Y, down 0.1% 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 0.3% a Y/Y basis.
Chemical shipments were flat again in September. Higher shipments of agricultural chemicals were offset by lower shipments of coatings, adhesives and other chemicals. Chemical inventories edged lower by 0.1% during the month. Higher inventories of agricultural chemicals, coatings, and adhesives, were more than offset by lower inventories of other chemical products. Compared to a year ago, chemical inventories were flat, while shipments were off 0.7% Y/Y. The inventories-to-sales ratio for chemicals remained stable at 1.21 and was the same as a year ago.
Chemical wholesale trade fell 2.2% to $11.12 billion in September. This more than offsets a 1.4% gain in August. Total inventories of chemical merchant wholesalers, except manufacturers’ sales branches and offices, rose 0.4% to $12.72 billion at the end of September. The inventory-to-sales ratio rose from 1.11 to 1.14, fairly comparable to 1.13 a year earlier as sales were off 3.3% Y/Y while inventories were off 2.1% Y/Y. The imbalance lingers.
U.S. chemicals exports dropped 8.7% in September to $10.9 billion. The decline reflects drops in every category of chemicals including a 9.8% decline in petrochemicals exports. Year-to-date (January-September), U.S. chemicals exports are $103 billion which is down 2% compared to the same period in 2018. U.S. chemicals imports were down 2.6% in September to $8.0 billion. The decline largely reflects drops in imports of inorganics and petrochemical derivatives. Year-to-date (January-September), U.S. chemicals imports are $78 billion which is down 4% compared to the same period in 2018. The U.S. trade surplus in chemicals narrowed to $2.9 billion in September from $3.8 billion in August. Year-to-date, net exports of chemicals is $25 billion.
Third Quarter Trade Update
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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.