|Housing Starts||Chemical Production||Specialty Chemical Market Volumes|
Running tab of macro indicators: 15 out of 20
The number of new jobless claims fell by 33,000 to 860,000 during the week ending 12 September. Continuing claims fell by 916,000 to 12.63 million and the unemployment rate for the week decreased 0.7 percentage points to 8.6%.
Retail sales rose by a slower-than-expected 0.6% in August following a revised 0.9% increase in July. Sales were mixed with the largest gains in restaurants, clothing stores, furniture stores, and building material & garden centers. There were declines in sales at grocery stores, sporting goods stores, and general merchandise stores. Sales at non-store retailers (which includes mostly online platforms) were flat following months of strong growth during the pandemic lockdowns. With consumers spending pent-up savings, retail sales were up 2.5% Y/Y and are well above their pre-pandemic levels.
Housing starts fell 5.1% in August (lower than expected), following a strong gain in July. Chemistry-intensive single-family starts, however, rose 4.1% on top of a 10.1% gain in July; gains in the Midwest and West regions offset declines in the South and Northeast. Forward-looking building permits also fell (off 0.9% in August) but, as with starts, permits for single-family homes were up 6.0%. Compared to a year ago, starts were ahead 2.8% while permits were essentially unchanged, off by 0.1% Y/Y. The NAHB/Wells Fargo Housing Market Index (HMI) jumped a larger-than-expected five points to a record 83. Builder confidence is high given record strong sales, prospective sales and homebuyer traffic.
Import prices advanced further, by 0.9%, in August, following a cumulative gain of 3.3% between April and July. Prices for imported fuels rose 3.3% and prices for nonfuel imports were up 0.7%, the highest monthly gain since early 2011. Export prices also rose (by 0.5%) as gains in nonagricultural goods exports offset declining prices for agricultural exports. Compared to a year ago, headline import prices were off 1.4% while export prices were off by 2.8% Y/Y.
Industrial production downshifted its pace of recovery in August, up by 0.4%. This follows gains of 6.1% and 3.5% in June and July, respectively. Declines in both mining and utility output were offset by a 1.0% gain in manufacturing output. Within manufacturing, there were gains across nearly all major segments, except for motor vehicles which eased following double- and triple-digit gains the previous three months. The largest gains were in apparel, plastic & rubber products, aerospace, petroleum refining, and primary metals. Capacity utilization tightened by 0.3 points to 71.4%, which was up 7.3 points from April’s low of 64.1%, but below the 77.8% rate a year ago.
The index of leading economic indicators (LEI) rose 1.2% in August to 106.5 (2016 = 100), following a 2.0% increase in July and 3.1% increases in June and May. Five of the 10 indicators expanded. The LEI suggest slowing economic gains and that the economy will start 2021 under substantially weakened economic conditions.
Business activity expanded at a solid clip in September according to firms responding to the Empire State Manufacturing Survey. The headline general business conditions index climbed 13.3 points to 17.0. New orders increased modestly and shipments grew significantly. Unfilled orders continued to decline. Inventories edged slightly lower, and delivery times were somewhat longer. Employment was little changed. Input prices increased at a faster pace and selling prices continued to increase modestly. Looking ahead, firms were more optimistic that conditions would improve over the next six months. The Philly Fed’s Manufacturing Business Outlook Survey indicated that manufacturing activity in the region continued to expand this month, according to firms responding to the September. The survey’s current indicators for general activity, new orders, and shipments remained positive for the fourth consecutive month. The employment index improved and remained in positive territory for the third consecutive month. Nearly all of the future indexes increased, suggesting more widespread optimism among firms about growth over the next six months.
Business inventories – a somewhat backward looking indicator of activity – rose 0.1% to $1,914.3 billion at the end of July. Inventories rose among retailers but fell among wholesalers and manufacturers. The combined value of distributive trade sales and manufacturers’ shipments for July rose 3.2% to $1,441.1 billion. This pushed the inventory-to-sale ratio down from 1.37 to 1.33. Peaking at 1.67 in April, a year ago the ratio was 1.39 as headline sales were off 1.2% Y/Y while inventories were off 5.9% Y/Y, suggesting the imbalance is repairing.
The rig count fell by two to 251 rigs during the week ending 11 September. The EIA inventory data showed the seventh drop in U.S. crude-oil stocks in eight weeks, with those inventories falling to a five-month low. Lingering outages from Hurricane Laura pushed oil prices up this week.
For the business of chemistry, the indicators still bring to mind a yellow 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 3.5% to xxx railcars the week ending 12 September (week 37). Loadings were down 5.6% Y/Y and down 5.0% YTD/YTD. 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 5.9%.
Chemical production rose 0.9% in August, marking the third monthly gain. Gains occurred in specialty chemicals, agricultural chemicals, and consumer products but basic chemicals were stable. Within basics, output of inorganic chemicals gained while that for bulk petrochemicals & organics, plastic resins, and synthetic rubber fell back. Output of manufactured fibers was stable. Within specialties, coatings output eased while other specialties gained. Overall production was off 6.6% from January (pre-COVID) and off 5.1% Y/Y. Capacity was stable and with the gain in production, capacity utilization advanced 0.7 points to 76.1%. A year ago, it was 81.6%.
Chemical import prices were flat in August, following gains of 0.4% in both June and July. Prices for exported chemicals, however, continued to gain, up 0.7%. Compared to a year ago, both import and export prices for chemicals were off 4.1% Y/Y.
With the recovery in the U.S. economy slowing, U.S. specialty chemicals market volumes rose a moderated 0.5% in August, off from a revised (and stronger) 2.2% gain in July, a 5.0% gain in June, and the record 12.7% decline in April. Of the 28 specialty chemical segments we monitor, 27 expanded in August, an improvement from 26 rising in July and all 28 declining in April. Thus, on a sequential (one-month change) basis, diffusion was 96%, an improvement from 93% in July and much better than 0% diffusion recorded in April. Of the 25 segments rising in August, 15 (too numerous to mention individually) featured gains of 1.0% or more.
During August, overall specialty chemicals volumes were off 9.3% Y/Y basis, a worse comparison from July. Volumes stood at 101.9% of their average 2012 levels in August. This is equivalent to 6.94 billion pounds (3.15 million metric tons). On a Y/Y basis, there was a gain in only three market and functional specialty chemical segments: cosmetic additives, electronic chemicals, and flavors & fragrances. On a year-earlier basis, diffusion was 11% in August, the same as in July and an improvement from May and April, but much worse than at the start of the year.
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ADI Chemical Market Resources
22 September 2020 Houston, TX
“Growth Plans for the Largest Market Cap USA Chemical Company”
Seifi Ghasemi | Chairman, President and CEO of Air Products.
29 September 2020; 11:00 am to 12:00 pm ET
Chemical Marketing & Economics
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.