15 July 2013 16:57 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS)--The American Chemistry Council (ACC) has pushed up its tab of positive indicators for the US economy by one, saying that (US) economic reports for the past two weeks have, for the most part, been positive.
“Another month of solid employment gains suggests that the labour market continues to improve which bodes well for the recovery,” the ACC said in its weekly update released on Friday 12 July.
“Construction spending continued to grow, led by the housing recovery. In the manufacturing sector, signs of improvement were seen in data on factory orders and the ISM purchasing managers index.” It noted, though, that small business optimism had slipped.
Most of this is good news for the chemicals sector.
While US economic performance remains subdued the ACC report is more encouraging than some recent analysis and shows that important industrial and sectoral markets for the chemical industry are seeing better times. Consumer confidence is edging up, construction is stronger and the auto industry is improving.
Growth could be knocked back if the Federal Reserve mis-times its ‘tapering’ of stimulus and fiscal cuts comes too fast. Commentators have warned that US economic growth could still disappoint, so companies have to be prepared. An ACC webinar on 11 July featuring ICIS blogger Paul Hodges highlighted the potential pitfalls.
The International Monetary Fund Global (IMF) said last week (10 July) that global economic growth is being impeded by slower emerging markets, by the extremely weak eurozone, and also by the somewhat weaker US economy. It slashed its figures for Mexico and Brazil and lowered its global numbers.
“The world economy remains in a three speed mode, emerging markets are still growing rapidly, the US recovery is steady, but much of Europe continues to struggle,” the IMF’s chief economist Olivier Blanchard, said.
The twist in the story is that growth is a bit weaker than the IMF forecast in April almost everywhere. The downward revisions are steepest in the emerging market countries.
Blanchard said and the IMF now thinks that the US will grow by 1.7% in 2013 (it forecast in April US 2013 GDP growth of 1.9%). “But we expect growth to actually rebound, and we're predicting a 2.7% in 2014.”
He added that the slight downward revision for US growth in 2013 “is not particularly worrisome” because it hides “a robust recovery in private demand”. The housing market has performed well.
It had warned in June that the rapid pace of spending cuts in the US was slowing growth considerably.
The ACC analysis, however, has reflected the fact that industries and sectors important for the chemical industry are moving in the right direction.
The US labour market is expanding and the unemployment rate has been relatively steady since February. Non-farm payrolls, a good early indicator for the health of the US economy increased by a more than expected 195,000 in June while figures for April and May were revised upwards.
Wholesale trade was up 1.6% in May but inventories were down reflecting the fact that wholesalers continue to cautiously manage their inventories and that there is little confidence, yet, in the manufacturing sector.
However, light vehicle sales showed their best monthly gain since 2007 with sales in June of 16.0 units compared with 15.3m units in May.
Sales of pickup trucks were strong, the ACC said. “At the same time, a variety of new model offerings lured consumers into showrooms and coupled with rising confidence, improved household balance sheets and improved income and job prospects, sales of cars surged to an 8.0m unit pace from 7.4m in May. The Detroit Three and most other manufacturers reported good growth.”
It is that renewed customer confidence - household debt levels were up too – which will help feed the demand for chemicals that underpins the manufacturing economy and the construction, particularly house-building, sector.
Construction spending was up in May and prior month numbers were revised upwards. Non-residential construction was weak and slowing down but the important driver, private home-building, was up 1.2%.
The US construction sector buys more than $8bn worth of products from the chemical industry each year and the ACC estimates that indirectly it purchases more than twice that.
A typical light vehicle contains $3,633 worth of chemicals and chemical products, including plastics and fluids.
Global semiconductor sales were up 4.6% in May according the Semiconductor Industry Association, the largest sequential monthly increase since March 2010. In the US, electronic chemicals are an $11.7bn (€9.0bn) market, the ACC says.
At the more general level, US factory orders were up 2.1% in May, having grown 1.3% in April but shrunk 4.7% in March.
The Institute for Supply Management (ISM) Purchasing Managers Index (PMI) for manufacturing was 1.9 points higher at 50.8, “indicating expansion in the manufacturing sector for the fifth time in the first six months of 2013”, the ACC said.
The new orders index and the production index were both higher but the employment index was lower.
The ACC monitors 20 indicators for the US economy. Currently 16 of those indicators are positive.
($1 = €0.77)
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
Asian Chemical Connections