15 December 2011 15:59 [Source: ICIS news]
By Joe Kamalick
WASHINGTON (ICIS)--Although the ?xml:namespace>
In its annual year-end situation report and outlook for the year ahead, the American Chemistry Council (ACC) cautions that while things are improving in North America, the
“Although the global economy is in its third year of recovery, the pace of improvement slowed,” the report said, citing higher energy prices, the earthquake and tsunami in
“The global economy has reached a critical state,” said the report.
“A global soft-patch has emerged and has been centered in manufacturing,” the council’s economic team said, which is critical because “the manufacturing sector represents the primary customer base for chemistry”.
“Business investment and exports have been drivers boosting manufacturing output, but recent indicators suggest that the strong manufacturing recovery in the
Kevin Swift, chief economist at the ACC, said that while the US fourth quarter gross domestic product (GDP) is likely to show a fairly strong gain of 2.5% to 3% on an annual basis, “that is probably not sustainable going forward, given headwinds all around the globe, particularly in Europe”.
Swift noted that the EU industrial production report, issued this week, already shows declining activity, “and what is expected will be a mild 2012 recession in Europe has already started”.
“That will cause some transmission to us,” he said, “and at a minimum is going to hit us in the form of fewer exports to the EU.” He noted that US chemicals exports to
And because chemicals often lead industrial sectors as trends develop, he said, other
“Exports are going to slow for the
The developing European recession also could impact the
As the recession takes hold in Europe, Swift said, there could be a “flight to safety”, meaning that an increasing number of European investors will pull out of the euro market and euro-denominated investments and seek a somewhat safer harbour in the
“And as the euro weakens and the dollar appreciates, that will hurt our exports worldwide,” Swift said.
He said he expects that US GDP will see 2% growth overall for 2012, with one or another quarters stronger or weaker than others.
“The likelihood is that the
In normal economic times, what economists call “trend growth” would mean annual US GDP expansion rates of 3% to 3.5%.
“While not the most likely scenario, the probability of another recession remains elevated,” the council’s economic advisors said, adding that “The European debt crisis continues to present one of the greatest risks to the world economy.”
Despite the clearly improving if modest
In its rather sombre evaluation, the
US GDP expanded at an annual rate of 2.5% in the third quarter ended 30 September, a solid improvement from the mediocre 1.3% growth rate seen in the second quarter and vastly better than the first quarter’s barely breathing 0.4% performance.
The Fed noted that “there are significant downside risks to the economic outlook, including strains in global financial markets”, the latter a reference to the continuing European financial crisis and the risk of
($1 = €0.77)
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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