Weekly Chemistry and Economic Trends (December 10, 2021)
MACROECONOMY & END-USE MARKETS
The week’s reports included more evidence of strong demand in the U.S. economy, with several reports posting all-time or historic readings.
The number of new jobless claims fell by 43,000 to 184,000 during the week ending 4 December, the lowest level since September 6, 1969! Continuing claims increased by 38,000 to 1.99 million, and the insured unemployment rate for the week ending 27 November increased by 0.1% points to 1.5%.
Reflecting strong demand for labor with the strong U.S. economy, job openings increased by 431,000 to 11.0 million at the end of October. This was just under the record high reached at the end of July. Job openings increased in several industries with the largest increases in accommodation and food services, nondurable goods manufacturing, and educational services. Total available jobs in manufacturing topped 1 million for the first time ever. According to last week’s employment report, there were 6.9 million unemployed people who said they wanted to work in November, suggesting there were 1.6 job openings for every unemployed person.
Headline consumer prices rose by 0.8% in November and were up 6.8% Y/Y, the highest since 1982. Increases were broad-based, led by energy (up 3.5% M/M) and used cars and trucks (up 2.5% M/M). Core consumer prices of services and goods (less food and energy) have risen 4.9% over the last 12 months, the largest 12-month increase since June 1991. The index for all items less food and energy (core CPI) rose 0.5% in November, led by increases in lodging away from home (up 2.9%) and used cars and trucks.
The U.S. trade deficit in goods and services declined $14.3 billion in October to $67.1 billion, down 17.6% from September as exports increased by 8.1% and imports increased by 0.9%. This reflects a $14 billion decrease in the goods deficit and an $0.3 billion increase in the services surplus.
Wholesale inventories rose 2.3% by the end of October and were 14.4% higher than levels in October 2020. Wholesale sales were up 2.2% in October and were 22.2% higher than a year earlier. The inventories-to-sales ratio was 1.22 in October compared to 1.33 in October 2020.
The ISM Services PMI rose 2.4 points to 69.1 in November, indicating the services sector expanded at a faster pace. Business activity/production and employment accelerated, but new orders grew at the same pace. Inventories contracted at a slower rate. Supplier deliveries continued to slow at the same pace as in October and several comments highlighted ongoing supply chain challenges and labor shortages. The report also noted that commodities in short supply in November included plastic pipe, plastic pipe fittings, plastic products, and PVC.
Factory orders rose by 1.0% in October, a 6th consecutive gain. There were gains across several industries, notably motor vehicles, which expanded for the first time since July. Core business orders rose by 0.7%, continuing a string of gains. Manufacturing shipments rose by 2.0% while inventories rose by 0.8%. The inventories-to-shipments ratio fell from 1.48 in September to 1.46 in October.
Global semiconductor sales rose by 1.1% in October with gains across all regions. Much of the monthly gain was driven by growth in Europe and the Americas with the slowest growth in China and other Asia/Pacific. Compared to a year ago, global sales were up 24.0%.
ENERGY
The combined oil and gas rig count was steady at 569 during the week ending 3 December. Oil prices were up from last Thursday on better demand sentiment, but are still well below pre-Omicron levels. Natural gas prices continued to move lower this week on unseasonably warm temperatures expected through the end of the year. In its most recent Short-Term Energy Outlook, EIA noted, “After rising in recent months, natural gas prices declined in November amid mild weather…that resulted in less natural gas used for space heating than expected. Decreased demand for natural gas also contributed to inventory levels moving closer to the five-year (2016–20) average. Global demand for U.S. liquefied natural gas (LNG) has remained high, limiting some downward pressure on natural gas prices.”
CHEMICALS
For the business of chemistry, the indicators still bring to mind a green banner for basic and specialty chemicals.
The week ending 4 December was a record-breaker for chemical railcar loadings. According to data released by the Association of American Railroads, chemical railcar loadings rose by 8,508 carloads to a record 38,523. Loadings were up 6.1% Y/Y, up 5.6% YTD/YTD and have been on the rise for 8 of the last 13 weeks.
Chemical shipments rose for an eighth consecutive month, by 2.5% in October with gains across all major segments. Chemical inventories also edged higher, by 0.2%, the 15th consecutive gain. Inventories expanded among all major segments, except agricultural chemicals. Inventories were up 9.3% Y/Y while sales were ahead by 13.0% Y/Y. The inventories-to-shipments ratio fell from 1.25 in September to 1.22 in October. A year ago, the ratio stood at 1.26.
Based on SITC data, U.S. chemical exports increased in October, rising 7.2% to $15.9 billion. Exports rose in most sectors of chemicals. Chemical exports were up by 22% YTD/YTD. Chemical imports declined by 3.8% to $14.7 billion in October with declines across all sectors except plastics. Net exports of chemicals increased in October to $1.8 billion. Net exports are up 32% YTD/YTD.
Wholesale chemical inventories rose 3.5% by the end of October to $13.6 billion, a level up 18.7% Y/Y Wholesale sales were up 0.4% in October to $12.2 billion, a level 31.7% higher than a year before. The inventories-to-sales ratio increased to 1.12 in October from 1.09 in September, but was down from to 1.24 a year earlier.
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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