|Chemical wholesale trade||Chemical railcar loadings||Headline producer prices|
Running tab of macro indicators: 12 out of 20
Non-mortgage consumer debt rose a larger-than-expected 0.4% ($17.9 billion to $4.15 trillion) in August. The gain was led by the non-revolving segment (car loans, student loans, etc.) which rose by $19.8 billion. Revolving balances (i.e., credit cards) actually decreased (by $1.9 billion). Consumer debt was up 5.0% Y/Y, above the 3.7% Y/Y gain in consumer spending as consumer appear to continue taking on additional debt.
Wholesale trade at $499.1 billion in August was essentially flat. A small gain was anticipated. Sales among automotive, metals, electrical, farm products, chemicals, and alcohol wholesalers gained. At the same time, wholesale inventories rose 0.2% to $688.7 billion at the end of August, leaving the inventory-to-sales ratio steady at a 1.36 months’ supply. A year ago, the ratio was 1.28. Sales were off 0.7% Y/Y while inventories were up 6.2% Y/Y, a clear imbalance.
Amid slowing economic activity and trade tensions, small business optimism further eased in September, with the NFIB index falling 1.3 points to a six-month low of 101.8. Looking at the details of the survey, hiring plans, capital spending plans, and expectations for the economy all fell. That said, optimism remains elevated, but suggests cooling economic activity.
Producer prices fell 0.3% in September, a larger-than-expected decline. The weakness was broad-based among goods and services. Excluding foods and energy, so-called core- PPI was unchanged in September after rising 0.4% in August. Headline prices were up 1.4% Y/Y and core prices were up 1.7% Y/Y, a three-year low. Inflationary pressures appear to be muted. Prices at the consumer level also came in a little below expectations. In their weakest reading since January, consumer prices were flat in September, following a 0.1% gain in August. Lower prices for energy and used cars offset higher prices for medical care and shelter. Compared to a year ago, headline consumer prices were up 1.7% Y/Y, while core consumer prices were up 2.4% Y/Y, both rate the same as a month earlier. The softer than expected price data give the Fed additional leeway to continue to cut interest rates. Driven by higher fuel prices, import prices rose by 0.2% in September, higher than expected. Prices for non-fuel imports edged lower by 0.1% following two months of flat growth. Prices for U.S. exports declined as prices of both agricultural and non-agricultural exports weakened. Compared to a year ago, both headline import and export prices were off 1.6% Y/Y.
The OECD composite leading indicators (CLIs) are designed to anticipate turning points in economic activity six to nine months ahead, and the August data continue to point to easing growth momentum in the United States and the Euro Area. This month’s assessment remains unchanged for all other major OECD economies and the OECD area as a whole. In Canada, the CLIs continue to point to stable growth momentum. This is also the case for the United Kingdom, albeit around historically low trend growth rates, and despite large margins of error due to Brexit uncertainty. In Japan, the outlook continues to point to stabilizing growth momentum. . In addition to the developed nations, the OECD has also developed CLIs for the six major 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. Here, the index was stable and up 2.5% Y/Y. Among major emerging economies, the CLIs continue to point to stable growth momentum in China (for the industrial sector) and Brazil. In India, the signs of easing growth momentum flagged in last month’s assessment have intensified, and similar indications are now emerging in Russia.
The oil and gas rig count fell for a seventh consecutive week, by five to 854 rigs. Concerns about oversupply of global markets remain and amid signs of weakening global demand, there are rumors of consideration of production cuts at the December OPEC meeting. Oil prices are off over 27% Y/Y.
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, fell by 1.2% to 32,610 railcars during the week ending 5 October (week 40). Loadings were up 4.0% 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 flat on a Y/Y basis.
Chemical wholesale trade rose 3.3% to $11.58 billion in August. This offsets a 1.4% decline in July. At the same time, inventories declined 3.1% to $12.41 billion at the end of August, pushing the inventory-to-sales ratio down from 1.14 to 1.07 months’ supply. A year ago, the ratio was 1.16. Sales were up 2.9% Y/Y while inventories were off 4.6% Y/Y. Clearly this stage of the supply chain has become more balanced.
Chemical producer prices fell 0.9% in September and follows a similar 1.0% decline in August. Weakness was across the board for both products and feedstocks, with coatings, other specialties, and consumer products posting nominal 0.1% gains. Chemical producer prices were off 3.1% Y/Y. Chemical import prices also continued to move lower for a fourth month in September, by 0.3%. Export prices similarly declined for a fourth month, by 0.2%. Compared to a year ago, chemical import prices were off by 5.6% Y/Y while export prices were higher by 2.8% Y/Y.
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16 October 2019
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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.