Economic trends favour US chemical sector in 2012 – economists

18 January 2012 20:41  [Source: ICIS news]

NEW YORK (ICIS)--The US chemical sector is poised to benefit from favourable macroeconomic conditions in 2012, two economists said on Wednesday.

“2012 will be a slightly stronger year than 2011 from an economic standpoint. Industrial production is beginning to heat up in this country, and this is consistent with leading indicators and on-the-ground information,” said Alan Beaulieu, president of US-based economics research and consulting firm ITR.

Beaulieu spoke at a meeting of the Societe de Chimie Industrielle in New York City.

The economist sees US industrial production rising 4.5% in 2012, driving growth in the chemical sector.

Positive factors for a continued recovery include rising exports, expansionary monetary policy, higher levels of bank lending, an improving employment picture and solid retail sales.

“There is about $1.5 trillion [€1,200bn] in excess reserves in US banks. Once banks are induced to lend again, this can have a significant impact on growth,” said Beaulieu.

US corporations are also sitting on about $2,000bn in cash, he added.

While the eurozone’s financial troubles are cause for concern, Beaulieu sees governments led by Germany and France, and the European Central Bank winning the day by containing the debt crisis contagion.

He expects economic activity in the eurozone to be flat in 2012, and the euro remaining intact as a currency.

The economist also expects China to manage its housing bubble and inflation issues and churn out 13-14% annual industrial production growth in the next two years.

Beaulieu expects inflationary pressures to emerge in the global economy, but this is not expected to cause any downturn until 2014, he said.

American Chemistry Council chief economist Kevin Swift likewise sees an improved outlook for the US economy and the chemical sector in 2012, but notes that several factors are conspiring to limit the upside.

“We expect growth, but subpar growth compared to a typical recovery,” Swift said at the Societe meeting.

Trends working again robust growth in the US include a consumer debt deleveraging cycle that still likely has two years to play out and a high level of unemployment, he said.

Swift expects US industrial production growth of 2.9% to outpace GDP growth of 2.1% in 2012.

Boosting the industrial sector and lifting chemicals will be higher light vehicle sales and housing starts.

The economist expects light vehicle sales to rise from 12.8m units in 2011 to 13.7m units in 2012 – a gain of 7% – before rising to 14.6m units in 2013.

Housing starts are expected to increase from 600,000 in 2011 to 690,000 in 2012 – a gain of 15% – and then jump to 1.09m in 2013.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joseph Chang
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