US demand for petchems was strong in September - Fed

20 October 2010 20:21  [Source: ICIS news]

WASHINGTON (ICIS)--US domestic demand for petrochemicals remained strong during September, the Federal Reserve Board said on Wednesday, helping fuel a continued modest increase in nationwide economic activity.

In its periodic “Beige Book” report on recent economic performance across the country, the Fed said that based on reports from its 12 district offices, “on balance, national economic activity continued to rise, albeit at a modest pace, during the reporting period from September to early October”.

“Manufacturing activity continued to expand, with production and new orders rising across most districts,” the report said.

“Consumer spending was steady to up slightly, but consumers remained price-sensitive and purchases were mostly limited to necessities and non-discretionary items,” the Beige Book related.

Consumer spending is the primary engine of the US economy, driving about 70% of all production, services and commercial activity.

But the Fed report also found continuing recession symptoms in the housing and commercial real estate sectors.

“Housing markets remained weak with most districts reporting sales below year-ago levels,” the report said, and “conditions in the commercial real estate sector were subdued, and construction was expected to remain weak.”

The report from the Fed’s 11th district, which includes Texas, New Mexico and part of Louisiana and is home to much of the nation’s petrochemical and refining capacity, said that “demand continued to be strong for petrochemical products” and “prices for some petrochemicals rose during the reporting period”.

The 11th district also said that petrochemical firms’ “outlooks are positive, but contacts say uncertainty about economic growth, regulatory reform and public policy has introduced more caution”.

“Petrochemical producers noted strong domestic demand for most products,” the Beige Book said, although “export growth continued to slow, reflecting higher prices”.

“Domestic orders for PVC [polyvinyl chloride] used in commercial construction were weak, but exports were stronger,” the Fed said, citing comments from producers.

“Refiners said conditions continued to weaken,” the report added.  “Both margins and operating rates fell since the last report, and gasoline and distillate inventories have risen against seasonal expectations.”

The Fed is the US central bank.

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