Rail Merger Threatens Economy

Chemical Manufacturing Economic Sentiment Index

CONTACT US
Scott Jensen
CONTACT US

Economic Sentiment for Chemical Manufacturers Saw Solid Improvements in the First Quarter Even as Production Costs Spiked

Overall economic sentiment for U.S. chemical manufacturers rose in Q1 2026, with several indexes reaching their highest levels since the survey’s inception back in Q1 2023, according to the American Chemistry Council’s (ACC) latest Chemical Manufacturing Economic Sentiment Index (ESI).

Indexes for new orders, order backlogs, production, and capacity utilization all jumped compared to Q4 2025. Optimism over the next six months moderated but remained relatively high. Capital spending rose for the second straight quarter to its highest level since Q2 2024.

Companies’ assessments of their overall activity surged into positive territory after registering negative readings for the previous two quarters. The index for major customer demand leaped into positive territory for the first time since Q2 2024. And while companies’ assessment of U.S. economic conditions remained in contraction territory, the index rose to its highest level since Q3 2024.

“Chemical manufacturing activity expanded substantially in the first quarter of the year, adding to a mild recovery seen the previous quarter” said Diego Saltes, ACC’s Director of Economics and Data Analytics. “Most activity benchmarks portrayed solid growth.”

“Chemical manufacturers are still facing some challenges, as production costs spiked in Q1, especially energy and transportation. The index for labor costs also rose somewhat after remaining tamed over the past two quarters, while the index for employee headcount rose for the first time since Q2 2024 and the index for the availability of skilled labor plunged to its lowest level since Q1 2024.”

“Raw materials inventories expanded for the first time since Q2 2025 while finished goods inventories contracted by less than the previous three quarters,” Saltes added.

“A moderate decline in the expectations indexes could be foretelling some increase in challenges after a very positive quarter. Optimism was likely dampened by sour global economic conditions and surging energy and other production costs amid a complicated geopolitical outlook,” Saltes concluded. 

Company Activity (Sales, Production, Output)

Highlights from the Q1 ESI Report:

  • Solid Quarter: New orders, order backlogs, production, capacity utilization, and supplier delivery times jumped in Q1. Expectations six months ahead moderated but remained positive.
  • Production Costs Spike: Already high energy, transportation, and raw materials costs rose even faster in Q1. Labor costs also increased but at a more moderate pace. Skilled labor availability contracted.
  • Inventories Rise: Raw materials inventories expanded while finished goods stocks contracted slightly after shrinking more heavily in the previous two quarters.
  • US and Global Conditions Decouple: Companies’ assessment of the US economy remained in contractionary territory but moved closer to growth as the index showed the best reading since 2024. At the same time, assessments of global economic conditions slumped.
  • Capex Higher: Manufacturers increased investment in capital equipment, with the index rising for the second consecutive quarter. Expectations six months ahead exhibited a similar performance.

Economic Conditions – Measures chemical manufacturer’s outlook on the overall state of the economy.
 

Disclaimer

The ESI provides quarterly insights from chemical companies engaged in nearly every aspect of the manufacturing sector and the U.S. economy. This latest report builds on eleven quarters of data from Q1 2023 to Q1 2026. You can view the complete findings here.