Domestic Economic Outlook Remains Uncertain Despite Improvements

14 July 2003 00:00  [Source: ICB Americas]

The US economy appears to be healing, although slowly, and the American Chemistry Council (ACC) remains cautious in its projections for the rest of the year. Sales of light vehicles rose in May, but construction was soft and employment weakened in June. The ACC expects a resumption of growth in the second half of 2003. Nevertheless, high costs for oil and natural gas remain a concern.

"The second quarter is shaping up to be a challenging one for the industry," notes ACC senior director Kevin Swift. "Capacity utilization for the business of chemistry fell another 0.2 percentage points to 74.1 percent in May. The price index for basic chemicals fell 1.6 percent in May, but is 9.7 percent above year-earlier levels. With the exception of wood chemicals and some inorganic chemicals, gains were experienced across the board. On the other hand, the index for feedstocks is 45 percent above that of a year ago."

Domestic production of basic chemicals fell 0.9 percent in May. Mr. Swift blames that decline on setbacks in organic chemicals, acids, miscellaneous inorganic chemicals and synthetic materials, including plastic resins, synthetic rubber and man-made fibers. "Those losses were partially offset by gains in other basic inorganic chemicals," he says. "Production of specialties fell by 0.7 percent and was led by adhesives, coatings and industrial gases."

The production of chlorine and caustic soda also fell in May, and most major polymers faced "sequential deterioration." Coatings and industrial gases were stronger than they were in May 2002, "with industrial gases posting a 16.3 percent increase as the electronics sector is showing renewed signs of life." Adhesives are down on a year-over-year basis. The price index for specialties was flat in May and now stands 1.7 percent above year-earlier levels.

On a revenue basis, shipments by the business of chemistry fell 0.1 percent in May and are 5.1 percent above 2002 levels. For basic chemicals, shipments are up 10.4 percent from 2002, while specialty chemicals shipments are up 2 percent on a comparable basis. Both sectors had modest declines in May.

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