Europe automotive chemical confidence broadly falls in June – CMCI

LONDON (ICIS)–European automotive-linked petrochemical markets confidence has broadly fallen since May, analysis of the June ICIS Europe Chemical Markets Confidence Index (CMCI) showed on Wednesday.

Confidence in current and future business conditions has seen a substantial drop since May as have views on current profitability and order book volumes.

This may reflect several recent downgrades in global GDP. Despite a generally strongly performing European economy through most of June – before the so called Brexit vote in the UK destabilised financial markets – global macroeconomic conditions have become weaker.

With large amounts of European-manufactured automobiles being exported outside of the region – particularly to China – fears of a global downturn may have dented confidence in June.

The world’s “low-growth trap” will cause slower economic expansion during coming years, according to the Organisation for Economic Co-operation and Development (OECD) on 1 June, causing a generalised downward revision in GDP growth forecasts.

According to the OECD, this low-growth trap is causing very low productivity which is dampening the prospects of young people around the world and increasing inequality.

On 7 June, the World Bank also revised down its 2016 global growth forecast to 2.4% from the 2.9% projected in January which it attributed to sluggish growth in advanced economies, low commodity prices, weak global trade and diminishing capital flows.

According to the World Bank, 40% of the downward revision was the direct result of the failure of commodity-exporting emerging market and developing economies to adapt to the low price of crude oil and other key commodities.

Despite this, confidence in increased profitability in the next 12 months has seen a strong upwards swing, tipping from negative in May to positive in June. This may have been linked to Europe’s relative economic strength compared to the rest of the global economy in June, with European GDP being revised upward and passenger car sales continuing to show year-on-year growth.

The newly established ICIS Europe CMCI aggregates sentiment from hundreds of petrochemical market players actively involved in price negotiations across more than 60 different markets.

The Europe CMCI runs from +100, to -100, with zero on each index representing neutral, or uncertain conditions, a negative score indicating bearish expectations and a positive score representing bullish expectations. The indexes also gather sentiment on the comparison between the current situation and the situation across the past 12 months to give a complete picture of current market conditions and confidence. The information is gathered in the third week of each month.  A full methodology is available on request.

For more details on the overall Europe CMCI data, click here