Mid-Year 2026 Outlook: A Pivotal Moment for American Chemistry

Economic Outlook

It would be an understatement to say that uncertainty has continued into 2026, but it is increasingly tied to geopolitical developments, most notably the ongoing conflict in the Middle East, and the spill over into global energy markets, trade flows, and business sentiment. This outlook assumes a resolution to the conflict by the end of Q2. Even if resolved, residual disruptions are expected to impact the global economy through the rest of the year.

Despite the significant disruptions to the global economy, the U.S. economy has remained broadly resilient heading into mid‑2026, but that resilience continues to mask a growing divergence across sectors. Consumer spending is still expanding (at a slower pace), supported largely by higher‑income households. Middle‑ and lower‑income consumers are facing financial strain from rising inflation, moderating wage growth, and tighter credit conditions. At the same time, business investment continues to expand, led largely by gains in data center and accompanying power infrastructure. Growth in capital spending in other segments of the economy remains muted due to high investment costs and an uncertain demand environment.

U.S. GDP is expected to grow 2.1% in 2026, steady compared to 2025. In 2027, GDP growth remains essentially steady with a 2.0% gain.

Inflation has picked up, largely due to higher oil prices, likely creating headwinds to further monetary policy easing. Following several years of steady (but slow) progress on inflation, we expect consumer prices to accelerate by 3.5% for all of 2026. Assuming a resolution to the situation in the Middle East, the deflationary trend is expected to resume in 2027 with a 2.4% gain in consumer prices.

The unemployment rate is expected to be essentially steady in 2026 and 2027 (4.4% and 4.5%, respectively) as slower demand for labor is met with a declining labor force, which peaked at the end of 2025. In addition, productivity growth has continued its post-pandemic rebound, supported in part by new business creation and investments in automation.

Consumer spending is expected to downshift in 2026 as consumers struggle with higher inflation and slowing wage gains. Higher market returns and home prices have continued to provide momentum to high-income consumers (that own homes and equity portfolios), while those lower down on the income scale are more exposed to higher gasoline and grocery prices. We expect growth in consumer spending to slow to 1.9% in 2026 and 1.8% in 2027 (compared to a 2.6% gain in 2025).

Business investment also continues to run on two tracks – one tied to AI investment and the other tied to more traditional capital spending. Data center construction continues to defy expectations, creating demand for semiconductors, computers, certain electrical equipment, and advanced cooling materials, all of which require chemistry. In addition, the power needs of these data centers have resulted in strong investment in power generation and related infrastructure. On the flip side - despite a boost from the 2026 tax law and lower interest rates, investment outside AI and power remains soft, as businesses contend with higher prices for equipment and materials, and an uncertain economic landscape.

Globally, growth remains subdued amid persistent uncertainty from the Middle East, ongoing trade tensions, and structural shifts as greater protectionism and industrial policy shifts are reshaping global supply chains and investment flows. Growth is expected to downshift in Europe, China, India and economies in the rest of the world (notably in Asia and Africa) that are more vulnerable to oil supply shocks. We expect global GDP to grow 2.7% in 2026 and 2.9% in 2027.

Global manufacturing started the year on an upswing with purchasing managers indices (PMIs) signaling modest expansion. Supply chain disruptions related to the Middle East, however, will be a headwind to industrial activity, especially among oil-importing countries. We expect global industrial production to grow 2.2% in 2026 before accelerating to a 3.2% pace in 2027.

With the reversal of last year’s front-loading activity and disruptions to shipping in the Middle East, world trade volumes are expected to expand by a sharply slower 2.1% in 2026. 

Uncertainty Challenges Chemical Producers

Chemistry is foundational to U.S. manufacturing with more than 80% of basic & specialty chemicals purchased directly by the industrial sector. Following two years of weak manufacturing activity, PMIs for U.S. manufacturing have signaled expansion since the beginning of the year. With the conflict in the Middle East, precautionary stock building has boosted manufacturing activity in some sectors, while other segments have been supported by supply chains leading to data centers. Overall industrial production is expected to rise 1.3% in 2026. Growth in industrial production is uneven, however, with only 12 of 20 key chemistry-consuming end-use industries expected to expand this year. Industries tied to data center investment (semiconductors, computers, electrical equipment), aircraft, oil & gas, and pharmaceuticals are growing, while industries linked to residential construction (e.g., structural panels, appliances, and furniture) remained weak. In 2027, we expect growth in 15 of the 20 industries, with expansion across durable goods.

With more than 33,000 pounds of chemistry products in the average single-family home built in the U.S., housing is an important end-use market for chemistry. Affordability continues to constrain the housing market as mortgage rates have remained well above 6%, lean inventories of existing homes have kept pressure on home prices and building costs have increased. Housing starts are expected to remain steady at 1.36 million in 2026 and are expected to remain essentially flat in 2027 (1.37 million). Remodeling activity, which is linked to existing home sales, is also expected to remain weak through the end of 2026.

Auto manufacturing is another of the most important end-use markets for chemistry, with $4,400 of chemistry in the average North American-built automobile. Affordability, however, has constrained Americans’ ability to purchase new vehicles. Beyond an average purchase price that has exceeded $50,000, the total cost of vehicle ownership (including financing costs, insurance, and maintenance) has escalated in recent years. A couple of one-off bursts of activity boosted sales to 16.2 million in 2025, the best year since the 16.9 million vehicles sold in 2019. Momentum is expected to wane in 2026, however, constraining vehicle sales to a 15.7 million level. A slight bounce is expected in 2027 as affordability improves and inventories expand, bringing vehicle sales up to 16.1 million.

Chemical Volumes Driven by Exports and Manufacturing Recovery

Following several years of contraction due to an unprecedented post-pandemic destocking cycle, U.S. manufacturing expanded through the first several months of the year, which included expansion in the chemical industry. This was consistent with ACC’s Economic Sentiment Index, which found chemical firms felt that their overall business activity improved in Q1, with expansion in production and orders. Despite starting the year on an upswing, the outlook for the rest of the year is mixed. While export demand for advantaged natural gas-based chemistries could expand, output in other segments will be flat to down. Overall, U.S. chemical output volumes are expected to rise only 0.5% in 2026, with gains in basic and agricultural chemicals offset by lower output of consumer products and specialty chemicals.

Basic chemicals production is expected to be higher in 2026 following essentially flat growth in 2025, as gains in the output of organic chemicals, plastic resins, and synthetic rubber and manufactured fibers offset declines in inorganic chemicals. Plastic resins output is expected to rise 0.7% in 2026, as manufacturing demand remains weak with some improvement expected from exports. Specialty chemical output, which rebounded in 2025, is expected to decline slightly (down 0.3%) in 2026 as market demand remains weak in several categories. Specialty chemicals supporting semiconductors, data centers, and healthcare will continue to expand. Output of agricultural chemicals is also expected to rise in 2026 (up 1.9%), but consumer chemicals is expected to finish lower (down 1.9%) as consumer spending slows.

In 2027, U.S. chemical production volumes are expected to improve, up 1.5%. Output of basic chemicals is expected to rise 0.6% while specialty chemical output is expected to be rebound by 2.7% as durable end-use sectors expand. Production of agricultural and consumer chemicals is expected to rise by 2.0% and 2.1%, respectively.

Globally, chemical production is expected to grow by only 0.5% in 2026 due to the significant disruptions to chemical production in the Middle East, parts of Asia, and Europe. As supply chains normalize into 2027, global chemical volumes are expected to grow by 3.2%.

Disruptions to Chemicals Trade

As the second largest manufacturing exporter, the U.S. supplies the world with advanced materials and other chemistry products. The U.S. chemical industry has maintained a trade surplus for decades. With broad disruptions to global trade flows in 2025, U.S. chemical exports fell 3.4% in 2025. With disruptions to Middle East and some Asian production due to the conflict, exports of American-made chemistry have been on the rise and are expected to be up 4.0% in 2026. That momentum is expected to slow into 2027 with only a 0.5% gain expected in U.S. chemical exports. U.S. chemical imports also fell in 2025, down 9.8%. Imports are expected to decline again in 2026 (down by 1.0%). As the manufacturing recovery gains traction in 2027, imports of chemicals (including materials not manufactured in the U.S.) are expected to increase, up 2.0%. Despite the competitive advantage made possible by abundant natural gas resources, the U.S. industry is increasingly challenged by unfair import competition and overregulation.

Capital Spending Slowed by Uncertainty

Tailwinds from reinstated tax credits, partially offset by an uncertain demand landscape and still-high borrowing costs, led to a 1.3% gain in chemical industry capital spending on equipment and structures in 2025. Growth in chemical industry capital spending is expected to remain muted in 2026, up 0.9%. Capital expenditures are expected to accelerate in 2027 and beyond, growing by 3-4% per year.

Chemical Industry Employment Flattens

Chemical industry employment continued to ease in 2025 and is expected to be essentially flat in 2026 and 2027. The 545,000 workers in the chemical industry earn significantly higher pay than the manufacturing average ($108,000 in 2025) and their paychecks support local communities throughout the U.S.

American Chemistry Supports U.S. Competitiveness in the Long-Term

America’s abundant energy resources enable an energy and feedstock advantage that make U.S. production attractive globally. A renewed attention to promote American manufacturing has been a welcome development. Hundreds of billions of dollars of recently announced investments in U.S. manufacturing (advanced manufacturing, in particular) will create demand for American chemistry over the next decade since all manufacturing has chemistry in its supply chain. New and innovative industries also rely on chemistry. For example, the data centers that are powering the race to ensure America’s AI dominance require leading edge materials, including chemicals.

Provisions incentivizing capital investment and R&D activities in the One Big Beautiful Bill tax package can enhance competitiveness, but more needs to be done on the policy front to ensure the future competitiveness of the industry. Improvements to the Toxic Substances Control Act would increase the attractiveness of the U.S. market for innovative new products. A pro-growth permitting system could tackle the backlog of permit applications and unleash American energy. Smart reforms to transportation policy and thoughtful trade policies would further enhance the industry’s position. In addition, implementing policies championing advanced recycling could be a catalyst to reduce plastic waste and support economic growth. Establishing a smart regulatory environment is vital to producing more chemistry in America and improving America’s ability to compete with other countries.

As with any outlook, there are variables that could alter the projected outcomes, key among them is the duration of the conflict in the Middle East. In addition, significant uncertainty remains regarding trade policy that could impact this forecast to the upside or the downside. Chemical investments are made for the long-term (up to 60 years in some cases), so a stable business landscape is imperative for decision makers. In addition, the Fed’s interest rate policy (and its impact on borrowing costs) is an important variable. Furthermore, new or escalating geopolitical conflicts, unexpected financial volatility, external shocks (i.e., weather, cyberattacks, etc.) could also disrupt this outlook. On the upside, gains from AI-driven productivity and better-than-expected improvements in the U.S. investment landscape would promote more economic growth.

Chemistry has been the cornerstone American success over the past 250 years with its material innovations fueling technological progress, enabling American leadership, and continuing to power the breakthroughs of tomorrow. A model America First industry, the U.S. chemical industry is vital to global leadership thanks to a combination of a cost advantage afforded by U.S. energy resources with a strong innovation platform and a highly skilled and productive workforce.

The full data set with historic trends and forecasts through 2028 is available to ACC members on ACCExchange and to others on the ACC Store.

Click here for a pdf of the accompanying tables.

And visit the Economic Elements of Chemistry for additional industry information.

Note: The forecasts in this blog reflect a compilation of consensus forecasts from other economists, consultancies, and ACC analysis.

^{Reasonable effort has been made in the preparation of this publication to provide the best available information. However, neither the American Chemistry Council, nor any of its employees, agents or other assigns makes any warranty, expressed or implied, or assumes any liability or responsibility for any use, or the results of such use, of any information or data disclosed in this material.}