Weekly Chemistry and Economic Trends (February 18, 2022)
21.1{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}
Chemical Producer Prices
MACROECONOMY & END-USE MARKETS
Running tab of macro indicators: 15 out of 20
The number of new jobless claims was up by 23,000 to 248,000 during the week ending 12 February. For the week ending 5 February, continuing claims dropped 26,000 to 1.59 million, and the insured unemployment rate was unchanged at 1.2{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}.
Retail sales were up 3.8{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} to $649.8 billion in January, higher than expected. Some of the gain can be attributed to higher prices, however. Among major categories, the strongest month over month increases were in nonstore retailers; furniture and home furnishing stores; and motor vehicle & parts dealers. Sporting goods, hobby, musical instrument & book stores; gasoline stations; and health/personal care stores saw declines. The new year started off stronger than 2021, with overall retail sales up 13.0{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y. Compared to a year ago, however, overall retail sales were up 16.9{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}; Y/Y gains were especially strong in gasoline stations (up 33.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}) and food services (27.0{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}).
Retail sales were up 3.8{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} to $649.8 billion in January, higher than expected. Some of the gain can be attributed to higher prices, however. Among major categories, the strongest month over month increases were in nonstore retailers; furniture and home furnishing stores; and motor vehicle & parts dealers. Sporting goods, hobby, musical instrument & book stores; gasoline stations; and health/personal care stores saw declines. The new year started off stronger than 2021, with overall retail sales up 13.0{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y. Compared to a year ago, however, overall retail sales were up 16.9{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}; Y/Y gains were especially strong in gasoline stations (up 33.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}) and food services (27.0{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}).
Combined business inventories rose by 2.1{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} in December with gains in retail, wholesale, and manufacturing inventories. Combined business sales declined by 0.7{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} as gains in manufacturing and wholesale were offset by a drop in retail. Compared to a year ago, business sales were up 15.9{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} while inventories were up 10.5{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y. The inventories-to-sales ratio was slightly higher at 1.29 compared to 1.25 in November, and much lower than 1.35 last November.
Producer prices continue to increase, up 1.0{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} in January, following an increase of 0.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} in December and 0.9{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} in November. Compared to a year ago, headline producer prices were up 9.7{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} while core prices were up 6.9{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y. Excluding the volatile food and energy components, core producer prices were up by 0.9{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}, the largest increase since January 2021. Both goods and services gained, by 1.3{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} and 0.7{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}, respectively. U.S. import prices advanced by 2.0{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} in January following a 0.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} decline in December. The January increase was the largest monthly gain since April 2011. U.S. import prices have risen a notable 10.8{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} over the course of the last 12 months. U.S. export prices advanced by 2.9{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} in January and have risen 15.1{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} over the course of the last 12 months.
Existing home sales surprised to the upside with a 6.7{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} gain to a 6.5 million annual pace in January. Compared to a year ago, sales were off 2.3{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}. The inventory of unsold homes at the end of the month eased 2.3{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} and now represents a 1.6-month supply at the current sales pace. This is lower than last month and lower than a year ago. The median sales price was up 15.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y.
Following gains in November and December, housing activity started the year on a soft note. January housing starts declined4.1{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} from December and were 0.8{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} higher than January 2021. Forward-looking building permits rose by 0.7{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} and were 0.8{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} above the January 2021 level. Homebuilder confidence continued to wane in February according to the NAHB/Wells Fargo Housing Market Index. Despite strong demand, builders are concerned about ongoing supply chain bottlenecks and rising materials costs.
Following a small decline in December, industrial production rose 1.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} in January. Much of the gain was in utility output, with mining and manufacturing posting smaller gains. Within manufacturing, the largest gains were in machinery, food & beverages, textiles, and paper. The largest declines were in printing, petroleum products, motor vehicles, and electrical equipment. Capacity utilization tightened by 1.0{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} to 77.6{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} in January. This was up from 75.0{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} last January. Compared to last year, capacity was up 0.5{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} (reflecting large gains in utility capacity).
Global semiconductor sales continued to expand in December, up 1.5{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} from November with gains across all regions except Japan. Global sales were up 28.3{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y. For the year, global semiconductor sales reached $555.9 billion in 2021, the highest-ever total and up 26.2{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} from 2020. Semiconductor manufacturers ramped up production in 2021 to meet the increasing need for semiconductors as demand for electronics (including automotive) surged.
Citing the spread of the Omicron wave, rising inflation, and persistent supply chain disruptions, the Conference Board’s Index of Leading Economic Indicators fell 0.3{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} in January. It was the first decline in the LEI since February 2021. The decline in January follows solid gains in December (0.7{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}) and November (0.8{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}). Initial claims for unemployment insurance, consumers’ outlook and declines in stock prices, and the average work week in manufacturing all contributed to the decline. The LEI remained ahead by 8.6{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y. Despite the deceleration, broad strength among the indicators suggests continued (but slower) growth into Q2.
The combined oil and gas rig count rose by 19 to 634 during the week ending 11 February. It was a year ago this week that freezing temperatures shut down energy production and damaged chemical facilities. Oil prices were lower compared to last Thursday, but remained historically high as tensions along the Russian border with Ukraine intensified. Natural gas prices moved higher during the week on a colder weather forecast and expectations for higher industrial demand.
For the business of chemistry, the indicators still bring to mind a green banner for basic and specialty chemicals.
According to data released by the Association of American Railroads, chemical railcar loadings were up 2.3{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} to 34,710 for the week ending 12 February (week 6). Loadings were up 4.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y (13-week MA), up 1.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} YTD/YTD and have been on the rise for 7 of the last 13 weeks.
Chemical producer prices continued to increase for the 20th consecutive month in January, up by 0.5{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}. There were sequential gains across nearly all segments except bulk petrochemicals and plastic resins. The largest gains were in coatings and agricultural chemicals. Compared to January 2021, chemical producer prices were up 21.1{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}. Chemical import prices rose for the twentieth consecutive month in January, up by 1.9{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} compared to December and up by 27.3{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y. Chemical export prices rose by 0.7{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} compared to December and were up by 21.6{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y.
Chemical production edged higher by 0.1{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} in January, the fourth consecutive gain. Gains in the production of inorganic chemicals, plastic resins, coatings, adhesives, fertilizers, and crop protection chemicals were offset by lower production of synthetic rubber, manufactured fibers, other specialty chemicals, and consumer products. Production of organic chemicals was essentially flat. Chemical production was off by 0.1{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y (though ahead 1.3{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y on a 3-month moving average basis). Chemical capacity utilization was essentially flat at 81.9{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}. Last January, capacity utilization averaged 84.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e}.
U.S. production of major plastic resins totaled 7.9 billion pounds in December, up 3.9{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} M/M but down 2.5{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y, according to statistics released ACC. Year-to-date production was 91.0 billion pounds, down 0.2{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y. Sales and captive (internal) use of major plastic resins were up 2.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} M/M but down 6.3{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y. Year-to-date sales and captive use were 89.3 billion pounds, down 2.4{dd7d296f04c8497fbd53789c82c7888820e9ba5c2c0620f7eb01a9d3f7fa072e} Y/Y.
Note On the Color Codes
The banner colors represent observations about the current conditions in the overall economy and the business chemistry. For the overall economy we keep a running tab of 20 indicators. The banner color for the macroeconomic section is determined as follows:
Green – 13 or more positives
Yellow – between 8 and 12 positives
Red – 7 or fewer positives
For the chemical industry there are fewer indicators available. As a result we rely upon judgment whether production in the industry (defined as chemicals excluding pharmaceuticals) has increased or decreased three consecutive months.
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