|Specialty chemicals down||U.S. CPRI||Durable goods orders|
Running tab of macro indicators: 9 out of 20
Existing home sales fell 2.2% to a 5.38 million unit pace in September. This follows two months of gains. Sales fell across all regions but were up 3.9% Y/Y. At the same time, inventories held steady at 1.83 million units, a 4.1 months’ supply, up slightly from August but down from 4.4 months’ supply a year earlier. Inventories were down 2.7% Y/Y. Median sales prices of $272,100 were up 5.9% Y/Y. New home sales also fell, by 0.7%, to a 701,000 unit pace in September. With 321,000 new home for sale at the end of September, that represents a 5.5-month supply, the same as August, but lower than the 6.4-month supply a year ago. The median new home price was off 8.8% Y/Y. Sales edge lower in all regions except the Midwest. Compared to a year ago, new home sales were up 15.5% Y/Y.
Durable goods orders fell 1.1% to 248.2 billion in September. This follows three consecutive gains. The September weakness was centered in aircraft but there was weakness in fabricated metal products, motor vehicles, and computers and electronics as well. Orders for non-defense capital goods (a proxy for business investment) fell 0.5% in September and were up only 0.3% Y/Y. Headline orders were off 4.0% Y/Y. Overall shipments declined, unfilled orders were flat but inventories gained.
SURVEY OF ECONOMIC FORECASTERS
Every month, the Economics & Statistics Department of the American Chemistry Council (ACC) collects forecasts from a number of economic professionals who have a track record for accuracy and expert knowledge of manufacturing. The data presented in the accompanying table are averages of their forecasts.
Expectations for the current year have continued to deteriorate over the past month. Our economists continue to expect the economy to rise by 2.3% in 2019, down 0.1 points from last month. Consumer spending is now expected to rise 2.5%, off 0.1 points from last month. Expectations for business investment also weakened, and is now expected to expand by 2.7% this year, down 0.1 points from last month. Expectations for light vehicle sales improved by 100,000 to 16.9 million units. Expectations for 2018 housing starts also improved, by 20,000 to 1.26 million units. Industrial production is expected to expand by only 0.8% in 2019, the same as last month. Industrial output is a more meaningful benchmark than GDP for comparing performance of basic and specialty chemicals. The unemployment rate is expected to average 3.7% for the year the same as last month. The yield for the 10-year Treasury note is now expected to average 1.96% slightly higher than last month’s survey. Inflation is expected to average 1.8% for the year, the same as last month.
Looking ahead, expectations for 2020 remained mostly steady compared to August, though down from expectations several months ago. Economic growth is still expected to decelerate to a 1.8% pace, the same as last month. Growth will be led by consumer spending, which is anticipated to increase by 2.2%, the same as last month. Capital formation is essential for long-term growth. Business investment is expected to gain by a weaker further by 1.7%, 0.2 points lower than last month’s survey. Overall consumer prices are projected to rise 2.0% in 2020 (the same as last month) and the unemployment rate is expected to average 3.8% (the same as last month). The 10-year Treasury note yield is expected to average 2.15% in 2020, a little higher than last month’s survey. Turning to the real economy, light vehicle sales are expected to come in at 16.4 million units (lower than last month’s survey) and housing starts are expected to rise to 1.28 million units, up by 20,000 from last month’s forecast. The forecasters expect a 0.6% gain for industrial production in 2020, unchanged from last month.
Given the slowdown (and recession in some nations) in Europe, Asia and other regions, forecasters are increasingly concerned about global trade growth prospects. Trade tensions foster uncertainty and create headwinds to business investment. Forecasts for economic growth in Europe and many emerging markets have been reduced.
The latest forecasters’ survey results — including the range of responses; historical data from 1994 through 2018; forecasts from 2019 through 2024 and beyond; as well as forecasts for other major nations — are available on MemberExchange for ACC members.
The oil and gas rig count fell by five to 850 rigs. With rising exports, falling imports, and higher refinery throughputs, U.S. crude oil inventories declined for the first time in six weeks. Coupled with reports that OPEC is considering deeper production cuts, oil prices rose above $61 per barrel on Thursday. Natural gas inventories continued to gain, posting another above average build. EIA is projecting natural gas inventories will reach 3,792 BCF by the end of October, about 17% ahead of year ago levels.
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 2.8% to 31,720 railcars during the week ending 19 October (week 42). Loadings were up 3.1% Y/Y, flat 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 0.4% a Y/Y basis.
The U.S. Chemical Production Regional Index (U.S. CPRI) rose by 0.3% in September, following declines of 0.2% in August and 0.7% in July. During September, chemical output was up across all regions, with the largest gain in the Gulf Coast region. Compared to September 2018, U.S. chemical production was off by 1.8% on a year-over-year basis, a improving (less negative) year ago comparison than in August. Chemical production was lower than a year ago in all regions, with the largest year ago declines in the Gulf Coast, Midwest, and Mid-Atlantic regions.
Chemical production was mixed over the three-month period. There were gains in the production three-month moving average output trend in plastic resins, chlor-alkali, pesticides, industrial gases, organic chemicals, consumer products, synthetic dyes & pigments, adhesives, and coatings. These gains were offset by declines in the output of synthetic rubber, miscellaneous inorganic chemicals, fertilizers, manufactured fibers, and other specialty chemicals.
Nearly all manufactured goods are produced using chemistry in some form or another. Thus, manufacturing activity is an important indicator for chemical production. On a three-month-moving average basis, manufacturing activity edged lower in September, off by 0.1%. Output expanded, however, in several chemistry-intensive manufacturing industries, including appliances, aerospace, computers, semiconductors, petroleum refining, iron & steel products, oil & gas extraction, paper, structural panels, and furniture.
U.S. specialty chemicals market volumes ended the 3rd quarter on soft note, falling 0.1% in September, after rising 0.2% in August. All changes in the data are reported on a three-month moving average (3MMA) basis. Of the 28 specialty chemical segments we monitor, 11 expanded in September, off from 18 in August. Fourteen markets declined in September and three were flat. During September, large market volume gains (1.0% and over) occurred only in foundry chemicals. On a sequential basis, diffusion was 45%, off from 70% in August but up from 38% in July.
Performance chemistry reflects trends in manufacturing. In the 1st quarter, specialty chemical market volumes fell and the 2nd quarter was flat. For the 3rd quarter as a whole, volumes fell and off from 4th quarter levels.
During September, the overall specialty chemicals volume index was up only 0.3% on a year-over-year (Y/Y) 3MMA basis. Year-earlier comparisons have eased after 3rd quarter 2018. The index stood at 114.1% of its average 2012 levels in September. This is equivalent to 7.78 billion pounds (3.52 million metric tons). On a Y/Y basis, there were gains in 12 market and functional specialty chemical segments. Compared to last year, volumes were down in 16 segments. On a year-earlier basis, diffusion was 43%.
A spreadsheet (with monthly history back to January 1997) is available for ACC members on MemberExchange. The spreadsheet also contains notes on the methodology.
ACC members can access additional data, economic analyses, presentations, outlooks, and weekly economic updates through MemberExchange.
In addition to this weekly report, ACC offers numerous other economic data that cover worldwide production, trade, shipments, inventories, price indices, energy, employment, investment, R&D, EH&S, financial performance measures, macroeconomic data, plus much more. To order, visit http://store.americanchemistry.com/.
Every effort has been made in the preparation of this weekly report to provide the best available information and analysis. However, neither the American Chemistry Council, nor any of its employees, agents or other assigns makes any warranty, expressed or implied, or assumes any liability or responsibility for any use, or the results of such use, of any information or data disclosed in this material.
Contact us at ACC_EconomicsDepartment@americanchemistry.com
“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.