Economic gauges ease but don’t signal recovery - ACC

13 February 2009 19:46  [Source: ICIS news]

WASHINGTON (ICIS news)--Major economic indicators continue to show declines, but the rate of falling sales and consumer spending is showing signs of moderating, top US chemical industry economists said on Friday.

However, that modest moderation in the flood of bad economic news does not necessarily signal a turnaround, and hopes for a quick recovery are unrealistic, according to American Chemistry Council (ACC) economists in their weekly report on trends.

“The economic reports this week were mixed, but more importantly, showed some moderation in the rate of decline,” said the council’s economic trends report.

“Wholesale sales fell again in December but at a smaller rate,” the report noted, and  “overall business sales (combined manufacturing, wholesale and retail) also fell again in December, but slower than in November.”

“Consumer credit, which fell for the third straight month, fell at a slower rate than in November.”

In addition, the council analysis noted that “the January retail sales report showed a small, but solid bounce”.

Might that be a sign, however slim, of a developing recovery in consumer spending?

Not likely, the council economists said.

“The increase in retail sales ... comes on the heels of several months of steep declines and is likely more of a correction than a turning point,” said Emily Sanchez, manager of statistics and surveys in the council’s economics department.

“This deceleration in the rate of decline may be encouraging,” she said, “but again, one month does not make a trend.”

Sanchez noted that US business inventories still have “a considerable over-hang that will need to be worked off before solid demand for manufactured goods comes back”.

Furthermore, “with surging unemployment and recession spreading globally, hopes for a quick recovery are unrealistic”, she said.

“Looking overseas, the outlook is clearly weakening,” she noted.  “Reports on fourth quarter economic growth and the most recent industrial production figures were negative [and] ... the OECD composite leading indicators point to a weakening outlook.”

The Organization for Economic Cooperation and Development (OECD) is made up of the 30 most industrialised nations, chiefly those in western Europe and North America along with Japan and South Korea.

“Turning to the business of chemistry,” Sanchez said, “a steep decline in wholesale sales of chemicals outpaced a smaller decline in wholesale inventories in December.”

And the trade deficit in chemicals widened in December as exports fell sharply, she said.

Railcar loadings of chemical cargoes - seen as the best real-time indicator of the industry’s business - were down by nearly 18% in the first week of February compared with the same week a year earlier, Sanchez noted.

The council’s economists regard the weekly railcar loadings data as too erratic, so they instead look at a 13-week moving average of weekly rail freight movement of chemicals and resins.

But there too the numbers trend down.  Sanchez said the 13-week moving average of car loadings is down by nearly 20% from the same 13-week period of 2008 and “indicates recent deteriorating activity”.

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By: Joe Kamalick
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