The US is 25% of the global economy, and its performance matters enormously to the chemical industry. So it was good news that US GDP growth stabilised at 2% in Q3, versus the 1.7% level of Q2. But the underlying trends during 2010 are worrying, as the above chart shows:
• Sales growth (blue line) has been slipping, and was only 0.6% in Q3.
• Inventories (red column) have been growing, and rose $110bn in Q3.
This is clearly the wrong way round.
Personal consumption is 70% of GDP, and should be rising by 5% at this stage in a normal recovery. Retailers and manufacturers clearly anticipated this outcome, and increased their orders in advance. But instead, this volume went into inventory, accounting for 72% of Q3′s total GDP gain.
What happens next, is therefore the key question?
Will US consumers remain nervous about the economic outlook? Or will they re-open their wallets over Thanksgiving and Christmas, and return to Boom-year spending habits?
If they spend, then the inventories will soon reduce. But if they don’t, then domestic producers, and foreign exporters, will need to prepare for major destocking in H1 2010.