US recession to hit chemicals globally - ACC

17 September 2008 16:19  [Source: ICIS news]

Credit crisis to crunch chemicalsBy Joseph Chang


BOSTON, Massachussetts (ICIS news)--With the credit crisis spreading, the US economy will likely go through a recession and the impact will be felt in chemicals globally, Kevin Swift, chief economist at the American Chemistry Council (ACC) said on Wednesday.


"The credit crisis is leading to losses of around $500bn [€355bn] – half in the US and half overseas," said Swift at the Chemical Purchasing Summit, organised by ICIS and Purchasing magazine.


"A shallow downturn and recession scenario with a tepid recovery is likely, with continuing high risk of a major downturn," added Swift.


Economic growth is slowing across the world, said the economist, putting a dent in the decoupling theory, which states that a slowdown in economies such as in the US and Western Europe may not have much of an impact on growth in other emerging economies.


"We are still coupled and live in one world. Transmission is in place," said Swift.


"The softness in the US and Western Europe is spreading to Eastern Europe, and Asia is vulnerable. Latin America had benefited from high commodity prices but now that is weakening."


Global chemical volume growth, which is tied closely with industrial production, is poised to slow to 3% in 2008 from 4.5% in 2007 and 5.2% in 2006, said Swift.


North American volumes are expected to fall 0.2% in 2008, he added.


In August, North American chemical output fell 1.2% year-on-year, noted Swift.


"The supply chain is like a bull whip. The consumer has the handle and the chemical industry is at the end," he said. "The slowdown in consumer spending will go up through the supply chain and hit chemicals."


Despite the negative near-term economic outlook, Swift was optimistic on a recovery starting in 2009 and going into 2010.


"In 2009, we expect the North American capital goods market to soften, but the housing and light vehicles markets to stabilize," he said. "By 2010, we see nearly all end markets start improving."


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By: Joseph Chang
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