|3Q GDP (SAAR)||Consumer Spending||Global Chemical Production|
Running tab of macro indicators: 15 out of 20
The number of new jobless claims fell by 40,000 to 751,000 during the week ending 24 October. Continuing claims fell by 709,000 to 7.756 million and the unemployment rate for the week decreased 0.5 percentage points to 5.3%.
Real gross domestic product (GDP) increased at a record (and larger than expected) annual rate of 33.1% in the 3rd quarter and only partially offsets the decline in the 2nd quarter, when real GDP decreased at a 31.4% pace. The increase reflected gains in consumer spending, inventory accumulation, exports, business fixed investment, and housing that were partly offset by decreases in government spending. The implicit price deflator for moved from a 2.1% pace of decline in the 2nd quarter to a 3.7% pace of gain in the 3rd quarter.
Personal income increased 0.9% ($170.3 billion) in September, reflecting increases in proprietors’ income, compensation of employees, and rental income of persons that were partly offset by a decrease in government social benefits. The savings rate eased to 14.3%. Consumer spending rose a solid 1.4% in September with gains in durable goods outpacing spending for non-durable goods and services. The PCE price index rose 0.2% in September and was up 1.4% Y/Y. Core prices (excluding food and energy) also rose 0.2% and were up 1.5% Y/Y. There has been a steady gain in year-earlier comparisons in the latter measure.
Consumer confidence unexpectedly slipped in October as households’ optimism about the future wanes. The index fell 1.0 point to 100.3 and reflects growing uncertainty about the durability of the recovery and the upcoming U.S. election. Plans to purchase a new home increased while plans to purchase autos and appliances declined.
Following several months of strong gains, new home sales fell unexpectedly in September, down 3.5%. Sales eased across all regions except the West. Inventories of unsold new homes edged higher and now represent a 3.6-month supply. Compared to a year ago, sales were up 32.1% Y/Y. The median price was up 3.5% Y/Y.
Durable goods orders continued to gain in September, up 1.9%, ahead of expectations. Gains in orders for primary metals, fabricated metal products, communications equipment, motor vehicles, and civilian aircraft offset declining orders for machinery computers, electrical equipment, and defense aircraft. Core business orders expanded for a fifth consecutive month by 1.0%. Compared to a year ago, headline durable orders were off 0.4%, but core business orders were up 5.9% Y/Y.
Manufacturing conditions continued to improve in Texas during October. According to the Dallas Fed, the general business activity index of the Texas Manufacturing Outlook survey rose by 6.2 points to 19.8, suggesting that manufacturing expanded at a faster rate. The subcomponents for production, capacity utilization, new orders, and shipments all accelerated. Employment and capital expenditures expanded at a slower pace, while inventories declined. Looking ahead, expectations for future business activity edged higher. Manufacturing activity also expanded in the Fifth District, which includes Virginia, Maryland, West Virginia, and the Carolinas. The Richmond Fed Manufacturing Index rose 8 points to 29, its highest reading on record, buoyed by increases in the shipments and new orders components. The Chicago PMI eased 1.3 points to 61.1 in October, edging lower after a sharp increase in September. That said, it still marks the fourth consecutive reading above the 50-mark after sitting below it for a year. Among the five main indicators, new orders was the only category to show a monthly uptick, while production recorded the largest decline but was still positive. Employment did turn negative.
The rig count rose by five to 284 rigs during the week ending 30 October. This may stall as prices move down in light of the rise of coronavirus cases in Europe (and elsewhere) resulting in additional lockdowns. Unfortunately, this hampers productive economic activity and ultimately energy demand.
For the business of chemistry, the indicators still 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 4.1% to 30,947 railcars the week ending 24 October (week 43). Loadings were up 2.8% Y/Y, but down 4.8% on a YTD basis compared to 2019. Loadings have been on the rise for 7 of the last 13 weeks. The 13-week moving average, which is used to smooth out volatility, was down 4.3%.
According to data from the ACC Plastics Industry Producers’ Statistics Group, U.S. production of major plastic resins totaled 7.2 billion pounds during September 2020, down 5.1% compared to the prior month, anddown 0.9% Y/Y. Year-to-date production was 67.3 billion pounds, up 1.5% compared to the same period in 2019. Sales and captive (internal) use of major plastic resins totaled 7.4 billion pounds, down 2.0% compared to the prior month, and up 0.5% Y/Y. Year-to-date sales and captive use was 68.4 billion pounds, a 2.7% increase compared to the same period in 2019.
With improving activity across nearly all nations, our Global Chemical Production Regional Index (Global CPRI) shows that global chemicals production rose 1.5% in September, a slower pace from August, but continuing the global recovery that started in June following declining activity during the January through May period. During September, chemical production increased fairly strongly in every region. Headline global production was stable Y/Y on a 3MMA basis but off 0.9% from the peak December level. Global output stood at 117.5% of its average 2012 levels.
During September, global capacity rose 0.1% and was up 2.4% Y/Y. As a result, with improving production, capacity utilization in the global chemical industry rose 1.0 points to 80.0%. This is down from 82.0% last September and below the long-term (1987-2017) average of 86.5%.
Among chemical industry segments, September results were positive with gains across all segments except for agricultural chemicals which was stable. Considering year-earlier comparisons, growth was mixed, with gains in plastic resins, synthetic rubber, manufactured fibers, bulk petrochemicals & organics, inorganic chemicals, agricultural chemicals and consumer products but with a large year-earlier decline in coatings.
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
Intro to Python Workshop (online)
12 December (9:00 am CDT)
The Association of Industry Analytics (AIA)
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.