US economic recovery likely to continue – American Chemistry Council

NEW YORK (ICIS)–US economic activity is likely to recover from the current “soft patch” in the second half of 2011, driving healthy chemical demand, the chief economist of the American Chemistry Council (ACC) said on Thursday.

“We see a recovery in most end-use sectors, with particular strength is capital goods, which is driving basic chemicals,” said ACC chief economist Kevin Swift during a conference call on its mid-year outlook.

He said he expects US bulk petrochemicals and organics volume output to grow 5.6%, plastics resins at 4.7% and synthetic rubber at 5.7% in 2011. Overall chemical output, excluding pharmaceuticals, is expected to rise by 4.8% in 2011 and another 3.1% in 2012.

He compared the economic downturn of 2008-2009 to a fall into a 20-foot (6-metre) ravine. “We’ve probably gone up 12-14 feet on the other side of the ravine, but it’s been muddy and slippery,” he added.

While the softening of the US manufacturing recovery in the second quarter will affect chemical demand, inventories are well balanced and exports continue to be strong, he said.

“US exports of thermoplastics have doubled since 3-4 years ago to 20% of output. And we see the potential of this growing much higher as the US has emerged as one of the world’s low-cost producers because of shale gas,” said Swift.

For the global chemical sector, the economist said he expects output to grow by 4.8% in 2011 and 5.3% in 2012.

“Output of chemicals in emerging markets will exceed that of the developed countries. Strong gains are expected in China, India, and other emerging markets in the Asia-Pacific region,” said Swift.

However, the economist warned that there is a 25% probability of an alternative scenario where the soft patch devolves into an outright downturn.

“Persistent higher energy prices, the collapse of housing, the supply chain shock emanating from Japan, European debt crisis, US debt issues, uncertainty and other factors are working against the recovery,” said Swift.

“These factors could engender a vicious cycle of financial distress, asset depreciation, and falling incomes, sales, production, and employment. These challenges have the potential to push the global economy back into recession,” he added.

Under this scenario, Swift forecasts US chemical output, excluding pharmaceuticals, to rise by 3.5% in 2011 and just 0.8% in 2012.

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