17 May 2004 00:01 [Source: ICB Americas]
The American Chemistry Coun-cil (ACC) is becoming even more bullish on the economy, although high energy costs and a possible hike in interest rates remain concerns. The first quarter saw stronger hiring and factory orders, and the manufacturing sector appears to be recovering.
“The economic reports released during the past month suggest that the US economy is moving ahead in a broad based and sustainable manner, and the data provide a continued optimistic view for the outlook of the US economy,” says Kevin Swift, the ACC’s chief economist. “Consumer spending is still strong and likely to continue, given tax refunds. What is notable is the swing from the pessimism of a year ago to rising confidence by both consumers and business leaders. There was a healthy rise in hiring, factory orders picked up, and the manufacturing recovery appears on track. The first quarter earnings season is basically over, and large companies comprising the S&P 500 continue to enjoy strong profit growth. This should aid capital spending going forward.”
Chemical shipments rose 3.7 percent from $39.3 billion in February to $40.8 billion in March. The gain was centered on non-pharmaceutical products, which increased by 4.7 percent. Polymer sales rose sharply in the first quarter. The American Plastics Council reports that domestic production of high-density polyethylene (HDPE) advanced 3.9 percent to 1.44 billion pounds in March. On a year-over-year basis, HDPE production has climbed 5.5 percent, and on a year-to-date basis, it has risen 3.1 percent. Polystyrene grew 1.7 percent to 569 million pounds in March. On a year-over-year basis, polystyrene output is off 0.3 percent because of downstream prebuying and inventory accumulation in 2003 in anticipation of the Iraqi war, but on a year-to-date basis, supply has risen 3.2 percent.
Chlorine production increased 3.4 percent, from 34,522 tons per day in February to 35,690 in March, raising operating rates to 92 percent on a nominal basis and 98 percent on an effective basis. Production is up 6.2 percent year-over-year and 2.5 percent year-to-date.
However, oil climbed to $39.38 per barrel for West Texas intermediate, and natural gas at Henry Hub surged to $6.10 per mmbtu. The International Energy Agency estimates that a $10 increase in yearly oil prices will reduce global GDP (gross domestic product) by 0.5 percent. “For the US, the deviation would be 0.3 percent in both 2004 and 2005, with consumer prices rising 0.5 percent this year and 0.6 percent next year,” Mr. Swift says. “The effects on developing nations appear to be higher.”
In February, the chemical industry posted a trade deficit for the twenty-third consecutive month. Exports of chemicals and related products rose 4.1 percent to $8.2 billion, but imports rose by 10.4 percent to $9 billion. Imports rose by 17 percent in December, then fell by 11.6 percent in January. On a year-to-date basis, however, exports have risen by 13.1 percent but imports are up only 8 percent. Exports to China have climbed 30.7 percent, and exports to Latin America have risen by 26.9 percent.
In March, construction spending rose 1.5 percent to a seasonally adjusted pace of $944.1 billion, and global semiconductor sales surged 4.4 percent to $16.28 billion—an improvement of 32.3 percent compared to March 2003. Mr. Swift notes that the construction sector purchases $8 in chemistry for every $1,000 of output, and electronic chemicals is a $6.5 billion market in the US.
Sales of light vehicles fell from an annualized pace of 16.6 million units in March to 16.3 million units in April, although automotive analysts project improvements for 2004 and 2005. A typical vehicle contains nearly $2,000 of chemical products and processing.
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