Q3 was supposed to be the turning point for the global economy. Back in April, the IMF had announced:
“Global prospects have improved again but the road to recovery in the advanced economies will remain bumpy. World output growth is forecast to reach 3¼% in 2013 and 4% in 2014. In the major advanced economies, activity is expected to gradually accelerate, following a weak start to 2013, with the United States in the lead. In emerging market and developing economies, activity has already picked up steam.”
We had, of course, been here before – most notably in September 2009 when the leaders of the G20 met in Pittsburgh, USA and congratulated themselves on having delivered “the largest and most coordinated fiscal and monetary Stimulus ever undertaken“, whilst also claiming “it worked“. The blog was sceptical then, and it was sceptical in August this year, when reporting Q2 results under the headline “Earnings disappoint again, as companies face challenge of slowing global growth”.
Hopefully few blog readers were then too surprised when last month the IMF again reversed course and reported:
“Global growth is still weak, its underlying dynamics are changing, and the risks to the forecast remain to the downside. As a result, new policy challenges are arising and policy spillovers may pose greater concern. In particular, markets are increasingly convinced that U.S. monetary policy is reaching a turning point, and this has led to an unexpectedly large increase in long-term yields in the United States and many other economies, notwithstanding the Federal Reserve’s recent decision to maintain its asset purchases. This change could pose risks for emerging market economies, where activity is slowing and asset quality weakening.”
Please note, by the way, that these are not random points taken out of context to prove a point. In both cases, they are the opening paragraphs of the Fund’s major semi-annual ‘World Economic Outlook report.
The problem for the Fund, as with most official forecasters, is that it wilfully refuses to acknowledge the importance of demographic changes for the global economy. As a result, it lacks any sound basis for its forecasts. So instead it continues to swing with the wind – one month things are looking better, then ‘oh dear, things have got worse again’. This is no way for the world’s foremost policy adviser to behave, as it risks losing all credibility.
Even if it didn’t like to admit the importance of demographics, it could easily cover its retreat by focusing on developments in the chemical industry, a tried and trusted leading indicator for the global and regional economies. The blog’s usual quarterly summary below provides all the information the IMF needs to forecast the outlook – it shows that despite reasonable profits in Q3, most companies see little sign of full economic recovery.
Akzo Nobel, as often, sums up the overall mood when noting that the “economic environment remains challenging and we do not expect an early improvement in end-user market segments”. The blog just hopes that someone in the IMF will take note, and persuade the Fund it would be better to be realistic about the outlook. Wishful thinking is a very dangerous strategy at this point in the economic cycle.
Air Liquide. “Positive trend observed since the beginning of the year”
Air Products. “Despite a weak economy, our volumes improved and our productivity initiatives more than offset inflation”
Akzo Nobel. “Economic environment remains challenging and we do not expect an early improvement in end-user market segments”
Arkema. “Economic conditions were more challenging than during the same period in 2012”
Ashland. “Weaker performance by its specialty ingredients division”
Axiall. “Energy advantage continued to support strong export demand”
BP. ““Margins and volumes continue to be under pressure, however, margins and utilization improved slightly”
Bayer. “Polyurethanes business improved on higher volumes, while polycarbonates sales declined as market overcapacities impacted on pricing”
Braskem. “Need for a more comprehensive industrial policy that continues to strengthen the country’s industry and to attract new investments to the sector”
Borealis. “We’re not really seeing an uptick in infrastructure sector demand on pipes or wiring cable. The automotive sector is a challenge”
Brenntag. “Continued uncertainty concerning the development of the overall economic situation”
Celanese. “Earnings growth will continue to be driven by the actions we are taking, not by depending upon increases from the global economy”
Clariant. “Economic environment remained challenging and basically unchanged”
Croda. “Innovation-led sales were very strong in all segments”
DSM. “Economic headwinds had yet to die down”
Dow. “Carrying out self-help measures in a slow-growth world”
DuPont. “Anticipate slightly lower full-year growth rates for global GDP and industrial production”
Evonik. “The global economic situation was still difficult”
ExxonMobil. “Sharp decline in downstream earnings because of significantly weaker refining margins as a result of increased industry capacity”
Huntsman. “Excluding results from Pigments our earnings improved compared to the previous year and quarter
Indorama. “Asian PTA spreads were still less than half of their former levels”
Kemira. “Improved margins across core business divisions”
LG Chemical. “Slowdown in the synthetic rubber market”
Lanxess. “88% year-on-year decline in Q3 net income to €11m ($15m), because of lower product prices and negative currency effects”
Linde. “Negative exchange rate effects that weighed on its revenues”
LyondellBasell. “Underlying this performance were safe, reliable operations coupled with the North American natural gas advantage”
Mitsubishi. “Sales volume of terephthalic acid increased in India from the previous year”
Nova. “A more favourable petrochemicals environment”
OMV. “Negatively affected by increasing naphtha prices and despite higher sales volumes”
Olin. ““The reality of it is there is no increase in demand in North America for both chlorine and caustic this year”
OxyChem. “Higher energy and ethylene costs, which more than offset higher volumes and prices in chlor-alkali and vinyls”
PKN Orlen. “Stable despite severe macroeconomic pressures”.
PPG. “Gradual growth in global demand trends”
PTT Global Chemical. “Sales and margins declined”
PetroLogistics. “Stable operating performance and healthy propane-to-propylene spreads”
PetroChina. “Continued weakness in the domestic chemical markets”
Phillips 66. “Improved margins in olefins and polyolefins, primarily related to increased polyethylene prices, and from solid utilisation rates”
Praxair. “Do not expect much growth, if any, in industrial production in North America and Europe”
Shell. “Sales volumes of chemicals dipping 2%”
Shin-Etsu. “Maintained a high level of shipments of PVC within the US, where demand is steady, as well as to Central and South America”
Siam Cement. “Continued recovery of chemicals margins and volume”
Sinopec. “Optimised the feedstock and product mix which helped to improve the operational profit”
Tasnee. “Falling prices of its products, higher production cost due to increase in the raw materials prices”
TOTAL. “Implementing operational efficiencies and synergies as well as a more favourable petrochemicals environment”
Unipetrol. “Overall macro situation is weaker than everyone on the market expected”
Vopak. “Adverse currency development, higher business development costs and comparable occupancy rates”
Wacker. “Unaltered low price level for solar silicon”
Westlake. “Strong demand for most of our major products and low feedstock costs, resulting from shale gas production”
Williams. “Lower olefin and natural gas liquids margins”
Yansab. “Increased production and sold more products at higher prices”
Yara. “Increasing export levels from China have led to “supply-driven” urea pricing”