European confidence falls into negative territory in October – CMCI

Chris Barker

25-Oct-2016

LONDON (ICIS)–The European Chemical Markets Confidence Index (CMCI) fell into negative territory in October, with confidence trending lower in all indicators as worrying global trends offset fairly positive data in Europe.

The index was down across the board, with confidence in business conditions and order books compared to the last 12 months, falling by the largest amount.

Profitability slipped back into negative territory after briefly trending upward in September. Short-term profitability has been negative for almost the whole of 2016.

12-month profitability forecasts were also down, albeit by less than three points, having seen an overall decreasing trend since the beginning of the year.

However, there were widely diverging expectations in the 12-month forecast, with producers in strongly negative territory and buyers and traders both positive. Expectations for the index as a whole were down by 2.7.

Business conditions were also regarded as more positive by buyers and traders than producers, indicating that Europe is becoming more of a seller’s market.

The falling sentiment comes despite strong figures in the most recent European PMI survey, which showed an improving performance for services and especially the manufacturing sector, with the latter rising to a 30-month high.

EU economic data has also been fairly positive, with the most recent figures showing a rebound for German manufacturing.

However, this was offset by weak data for the world chemicals industry from Cefic earlier in the month, indicating that growth was still sluggish and European overseas exports remaining low, falling by 5% overall in Q2.

Sentiment in the market has also been affected by the recent plunge in the pound sterling against the euro and dollar, as well as growing indications that a ‘hard Brexit’ scenario might take place, which might damage UK chemical exports to the rest of the EU.

Recent statistics also show overall global chemical operating rates falling to their lowest level since 1987, which is considered a negative indication for the global economy.

Overall, sentiment in the chemicals industry reflects a return to the negativity of Q2 after a temporary stabilisation earlier in this quarter.

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 indices 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

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