Chemistry continued to be bright spot for the economy as U.S. chemical manufacturers reported a boost in activity in the first quarter, but clouds are gathering on the horizon, according to the American Chemistry Council’s (ACC) latest Chemical Manufacturing Economic Sentiment Index (ESI).
Despite weak demand in major markets and challenging economic conditions, the ACC’s index, which measures overall activity (sales, production, output), rose in Q1.
The latest ESI readings show an uptick in chemical manufacturing activity in Q1 2025, with gains in production and new orders
"This improvement comes despite a negative outlook on current U.S. and global economic conditions and ongoing weak customer demand."
However, after a year and a half of capital spending expansion, chemical manufacturers pulled back in Q1. In addition, manufacturers faced increased operating costs.
"Overall, chemical manufacturers believe their activity levels improved in Q1," Moore continued. "But looking ahead, they are pessimistic about the next six months."
Key Highlights from the Q1 ESI Report:
- Early Year Upswing: New orders, production, and capacity utilization increased in Q1. However, expectations for the next six months turned negative.
- Growing Pessimism: Chemical manufacturers noted worsening economic conditions in the U.S. and globally in Q1. Over the next six months, more than two-thirds expect conditions to worsen.
- Inflated Costs: Production costs rose in Q1, with increases in raw materials, energy, transportation, and labor. Manufacturers expect these costs to continue rising.
- Regulatory Relief: The regulatory burden in the U.S. has impacted manufacturers, deterring investments and innovation. With the new Administration, there is hope for regulatory relief. While the regulatory burden increased at a slower pace in Q1, manufacturers expect a slight increase over the next six months.
The ESI provides quarterly insights from chemical companies across the manufacturing sector and the U.S. economy. This latest report builds on eight quarters of data from Q1 2023 to Q1 2025. You can view the complete findings here.
