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Blog Home   |   Economic Trends

 

Blog Home   |   Economic Trends

Weekly Chemistry and Economic Trends (September 25, 2020)


4.8%0.6%2.7%
New Home Sales U.S. CPRIGlobal CPRI

MACROECONOMY & END-USE MARKETS

Running tab of macro indicators: 15 out of 20

Macro Table

The number of new jobless claims rose by 4,000 to 870,000 during the week ending 19 September, apparently stalling as new claims have fluctuated within 27,000 range for the last four weeks. Continuing claims fell by 167,000 to 12.58 million and the unemployment rate for the week decreased 0.1 percentage points to 8.6%.

Existing and New Home Sales

Led by a move from urban areas to suburban areas and beyond, existing home sales rose 2.4% to a 6.0 million unit pace in August, a level up 10.5% Y/Y. Sales rose in every region. Inventories fell 0.7% to 1.49 million at the end of August, a level off 18.6% Y/Y but representing only 3.0 months’ supply, an abnormally low level. Inventories fell sharply in all regions except for the Northeast. The August median sales price of $310,600 was up 11.4% Y/Y. New home sales rose by a robust 4.8% in August to their highest pace since 2006. Inventories of new homes slipped for a fifth consecutive month (by 3.3%) and the supply of new homes fell to 3.3 months at the current sales pace. A year ago, there was a 5.5-month supply. Sales were up 43.2% Y/Y. The median sales price fell 4.3% Y/Y.

Headline durable goods orders rose 0.4% in August, about one-third of the anticipated gain due to weakness in orders for fabricated metal products, electrical equipment, motor vehicles, and aircraft. Orders for capital goods excluding aircraft (a proxy for business investment) rose a larger-than-expected 1.8% to $67.7 billion in August. Strength was centered in primary metals, machinery, and computers and electronics. That business investment is expanding is good.

The Richmond Fed reported that manufacturing activity in the Fifth District improved in September. The composite index climbed from 18 to 21 and was led by increases in the indicators for new orders and employment. The third component index — shipments — decreased but remained positive, suggesting continued expansion. Survey results also reflected improvement in local business conditions and increased capital spending. Overall, firms were optimistic that conditions would continue to improve in the next six months. The Kansas City Fed reported that manufacturing activity increased at a slower pace in September and remained lower than a year ago. The composite index eased from 14 to 11. Production, shipments, new orders, and employment rose at a slower pace, while order backlog and supplier delivery time increased. Expectations for future activity were positive.

INTERIM MID-YEAR SITUATION & OUTLOOK

While ACC typically only publishes its Situation and Outlook twice a year (June and December), the rapidly changing economic landscape warrants a more frequent assessment, so we are providing an abbreviated outlook based on data through early-September. The Outlook slide deck and accompanying spreadsheet are available on MemberExchange, ACC’s member platform.

U.S. Outlook Summary

  • The economy likely bottomed out during Q2/Q3 and a recovery is underway. The pace of recovery depends on restoration of supply chains, confidence of consumers and businesses, spending patterns, and hiring. Federal stimulus has successfully supported businesses and many households
  • Hopes for a quick V-shaped recovery have faded as new cases of Covid-19 continue to emerge and have started re-accelerating in certain areas of the U.S. and abroad.
  • Since the last update in June, the expectations for 2020 have improved across the board, however, as the U.S. economy has displayed incredible resiliency and adaptability. As a result, the rebound in 2021 is more muted.
  • GDP is expected to fall by 4.6% in 2020 before rebounding by 3.7% in 2021.
  • Consumer spending declines by 5.1% in 2020 before rebounding by 3.6% in 2021.
  • Business investment was already lower prior to Covid-19. We expect investment to decline of 6.3% in 2020 then grow by 1.7% in 2021.
  • In 2020, industrial productionis set to fall 7.6% before growing by 4.1% in 2021.
  • Unprecedented job losses (especially in services) pushed the unemployment rate to historic highs. The labor market has recouped about half the jobs lost in April and as the recovery evolves, the labor market will improve and the unemployment rate will fall steadily, easing below 5% by 2023.
U.S. and Global Macro Indicators 2020

Global Outlook Summary

  • Global economic output is expected to contract by 4.6% this year and recover only partially in 2021. This is an improvement from previous estimates. Generally, assessments of global economic health over the short-term remain sobering. More analysts, however, appear to be giving consideration to a potential upside scenario.
  • Global trade collapsed as economies across the world entered lockdown earlier this year. World trade volumes will be down 12.6% in 2020 with the contraction weighing heavily on export-oriented sectors. A 12.0% rebound is expected in 2021.
  • As the industrial sector has been pummeled from Covid-19 closures, demand destruction, and logistical challenges, global industrial production is expected to contract by 5.9% in 2020 before improving by 6.3% in 2021.
U.S. Chemicals 2020

ENERGY

Energy

The rig count fell by rose one to 252 rigs during the week ending 18 September. Natural gas stocks rose by 66 BCF, a fairly typical build for this week. This pushed stocks to 3,680 BCF, a level up 15.9% Y/Y and 12.4% above the five-year average. Inventories should be at good levels going into the winter heating season.

CHEMICALS

For the business of chemistry, the indicators still bring to mind a green banner for basic and specialty chemicals.

Chemical Table

According to data released by the Association of American Railroads, chemical railcar loadings, the best ‘real time’ indicator of chemical industry activity, rose by 2.4% to 29,931 railcars the week ending 19 September (week 38). Loadings were down 7.3% 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 5.6%, though it was the 12th consecutive week of improving comparisons, indicating a slow recovery to railcar loadings.

The Chlorine Institute (CI) reported that production of chlorine was 29,156 in August, up 1.7% over the previous month; YTD production was down 9.0% Y/Y. The output of co-produced caustic soda rose slightly (1.1%) to 30,890 and YTD production was down 9.1% Y/Y.

The U.S. Chemical Production Regional Index (U.S. CPRI) which is measured as a three-month moving average (3MMA), rose by 0.6% in August following a 1.0% gain in July and a 1.4% decline in June. During August, chemical output expanded in all regions except the West Coast, with the largest gains in the Gulf Coast region. Compared with August 2019, U.S. chemical production was off by 4.8% Y/Y, the fifteenth consecutive month of Y/Y declines, but an improvement over the past several months. Chemical production remained lower than a year ago in all regions, with the largest year ago declines in the Northeast, Mid-Atlantic, and West Coast regions.

U.S. Chemical Production Regional Index

As measured on 3MMA basis, chemical production continued to improve in many segments including, plastic resins, chlor-alkali, organic chemicals, industrial gases, synthetic dyes & pigments, consumer products, synthetic rubber, manufactured fibers and fertilizers. Production continued to move lower in adhesives, coatings, other specialty chemicals, and crop protection chemicals.

As nearly all manufactured goods are produced using chemistry in some form, manufacturing activity is an important indicator for chemical demand. The recovery strengthened in August, with overall factory activity up by 4.1% (on a 3MMA basis). The trend in production increased for all key chemistry end-use industries that we track, with the strongest gains in appliances, motor vehicles, aerospace, foundries, iron & steel, refining, plastic & rubber products, tires, and apparel.

With improving activity across nearly all nations, the Global Chemical Production Regional Index (Global CPRI) shows that global chemicals production rose 2.7% in August, an improving pace from July, and continuing the global recovery that started in June following declining activity during the January through May period. During August, chemical production increased fairly strongly in every region. Headline global production was off 1.8% Y/Y on a 3MMA basis and off 2.2% from the peak December level. Global output stood at 116.0% of its average 2012 levels.

Global CPRI

Among chemical industry segments, August results were positive with strong gains across all segments. Considering year-earlier comparisons, growth was mixed, with gains in plastic resins, synthetic rubber, manufactured fibers, and consumer products but weak elsewhere with a strong year-earlier decline in coatings and other specialties. 

During August, global capacity rose 0.2% and was up 2.6% Y/Y. As a result, with improving production, capacity utilization in the global chemical industry rose 1.9 points to 79.1%. This is down from 82.6% last August and below the long-term (1987-2017) average of 86.5%.


For More Information

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

Upcoming Events of Interest

“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
Free Webinar
https://cme-stem.org/


Note On the Color Codes

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.

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