Q3 recession to hit US chem earnings - analysts

20 October 2008 18:53  [Source: ICIS news]

HOUSTON (ICIS news)--The US economy fell into a recession during the third quarter, and the nation's chemical companies will likely report weaker earnings as a result, analysts said on Monday.

"We believe hefty earnings cuts are required, consistent with synchronous global recessions," according to a research note by Kevin McCarthy, an analyst with Bank of America. "Few will be spared in our view."

David Begleiter, an analyst with Deutsche Bank, said that third-quarter sales deteriorated, overseas markets weakened, and the US currency strengthened.

Bank of America noted similar trends, which will be only partially offset by falling prices for energy and feedstock.

Deutsche Bank is assuming that the US economy entered a recession during the third quarter. In the fourth quarter, the US economy will likely shrink by 2%, Deutsche Bank said.

Recessions are underway in Europe and Japan, and growth will slow significantly in emerging markets, Deutsche Bank said.

Deutsche Bank expects US GDP to remain flat in 2009. The European countries covered by the euro should shrink by 0.2%. Japan's GDP will grow by 0.4%, China by 8.4% and India by 6.2%.

During the last recession earlier this decade, few chemical companies were able to increase their pre-tax earnings, McCarthy said. Overall, pre-tax chemical earnings fell by an average of 47%.

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By: Al Greenwood
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