US Fed reports chems, other business weakening

05 March 2008 22:23  [Source: ICIS news]

WASHINGTON (ICIS news)--US business activity is weakening with retail trade soft and manufacturing sluggish, including production cutbacks in refining, chemicals and plastic resins, the Federal Reserve Board said on Wednesday.

 

Reporting on current economic conditions in its periodically issued “Beige Book,” the US central bank said that two-thirds of its 12 district offices “cited softening or weakening in the pace of business activity, while the others referred to subdued, slow or modest growth”.

 

“Retail activity in most districts was reported to be weak or softening,” the Fed said, adding that “Services industries in many districts - including staffing services in Boston, port activity in New York and truck freight volume in Cleveland - appeared to be slowing”.

 

“Manufacturing was said to be sluggish or to have slowed in about half the districts while several others indicated manufacturing results were mixed or tends were steady,” the bank said.

 

“Residential real estate markets generally remained weak,” the bank said, and “reports on commercial real estate markets were somewhat mixed but also suggest slowing, on balance, in many districts.”

 

The broad US manufacturing sector and the home building industry are both key downstream consumers of chemicals and chemical-based products.

 

“Upward pressure on prices from rising materials and energy prices was noted in almost all the district reports,” the central bank said.

 

The Fed said that its 11th district bank office at Dallas, Texas, which covers the bulk of the US refining and petrochemicals production territory, reported that “refiners cut production in the face of weak margins and high gasoline inventories”.

 

Refining utilisation rates dropped sharply from 89% to 85%, the district bank reported, noting that the decline was twice the normal seasonal reduction.

 

“Domestic demand for polyvinyl chloride [PVC] remained weak, particularly for residential construction, although sales remained fairly strong for commercial and public construction,” the Dallas bank said.

 

“Polypropylene [PP] producers have reduced production to maintain prices in the face of weak demand,” the Dallas district said, adding: “Base chemicals and plastics continue to pull back from the massive exports that occurred last fall.”

 

Regarding the economy overall, the Fed said:  “All districts commenting on the near-term outlook mentioned caution or concern on the part of at least some segments of manufacturing … indicating that some firms are adjusting their hiring or capital spending plans downward.”

 

The Fed said business executives contacted by district bank researchers “expressed a great deal of uncertainty about the outlook for growth, and some said they are preparing for the possibility of an economic downturn”.

By: Joe Kamalick
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly