19 September 2001 23:11 [Source: ICIS news]
HOUSTON (CNI)--A crisis-driven drop in consumer confidence and protective purchasing by chemicals customers likely will have negative impact on chemicals manufacturing in the short run, a top industry economist said Wednesday.
Kevin Swift, chief economist for the American Chemistry Council (ACC), told CNI today that in the wake of last week's terrorist attacks against the US, "the short term impact will be negative" for the US economy as a whole and for the chemicals industry in particular.
Swift noted that the crisis atmosphere engendered by terrorist attacks in New York City and near Washington, DC is having most immediate and apparent impact on travel and tourism but that additional impact on consumer spending may be apparent in the weeks ahead.
The problem with trying to forecast the economic impact of last week's horrific attacks, said Swift, is that "there's really nothing to compare this [crisis] to in recent history." The only relatively severe crisis shocks to the US economy in recent times were the Arab oil embargo of 1973-1974 and the 1990-1991 Gulf War, Swift noted.
"In both of those instances," Swift said, "there was an immediate drop in consumer confidence and a resulting decline in consumer spending."
He said that pattern appears all the more worrisome now since consumer spending is largely credited with keeping the US economy just barely out of recession for the last year or so. The consumer confidence that has sustained the US economy of late "may be gone now," Swift said.
Swift said the anticipated consumer confidence index published by the Conference Board, a New York City-based business research group, should provide the first solid indicator of how badly the US economy may be impacted by the crisis. The Conference Board's consumer confidence index for September is due a week from Friday.
Within the chemicals industry and its customer base, Swift said that industry experiences in the wake of the 1973 Mideast War suggest that chemicals customers now might engage in double and triple ordering in order to ensure availability in anticipation of shortages. Such a pattern could create an artificial and short-term jump in demand followed quickly by a glut of chemicals products on the market, he said.
On the other hand, he added, some companies might sit tight and simply work down their inventories for a couple of weeks until they see how the economy fares.
Swift said he and other economists should have a better idea in a week or two of how badly the economy - and the chemicals industry in particular - may fare.
The nearly 200 member firms of Arlington, Virginia-based ACC account for some 90% of US basic industrial chemicals manufacturing capacity.
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