MACROECONOMY & END-USE MARKETS
Running tab of macro indicators: 12 out of 20
The number of new jobless claims was up by fell by 5,000 to 180,000 during the week ending 23 April. Continued claims fell slightly (by 1,000) to 1.4 million, the lowest level in more than 50 years. The insured unemployment rate for the week ending 16 April was unchanged at 1.0%.
New home sales fell for a third straight month in March, off by 8.6%. There were declines in all regions of the country. New home inventories continued to move higher. At the end of March, there was a 6.4-month supply, compared to 5.6 months in February and 4.2 months in March 2021. Compared to a year ago, new home sales were off by 12.6% Y/Y while inventories were up 33.4% Y/Y.
The latest reading of the consumer confidence index, a leading indicator based on US consumer sentiment and expectations, ticked down ever so slightly in April, falling 0.3 points to 107.3. Consumers are feeling less optimistic about the present situation and current business conditions and the labor market. At the same time, they’re feeling better overall about the short-term outlook even while factoring in inflation and higher gas prices and the war in Ukraine. Consumers’ purchasing plans do seem to be influenced by rising prices and interest rates. Overall, purchasing plans were down from recent levels.
Consumer spending rose strongly during March (up by 1.1%) as higher spending on services and non-durable goods (i.e., food and gasoline) offset lower purchases of long-lasting durable goods (i.e., appliances and vehicles). Personal income also rose in nominal terms by 0.5%. Inflation however rose at a faster 0.9%, so personal income declined 0.4% in real terms. Compared to a year ago, the PCE price index was up 6.6% Y/Y, an acceleration compared to the previous month. Excluding food and energy, the core PCE price index (the Fed’s preferred inflation measure) was up 5.2% Y/Y, slightly lower than in February.
The initial estimate of Q1 GDP shows that on a real (inflation-adjusted) basis, economic activity contracted during the first three months of the year. Real Q1 GDP fell at a 1.4% annual rate, following growth at a 6.9% pace during Q4. The largest positive contributions to GDP came from consumer spending on services, nonresidential fixed investment in equipment, durable goods spending, and residential fixed investment. These gains, however, were more than offset by negative contributions from net trade, government spending, private inventories, and nondurable goods consumption. First quarter GDP was up 3.6% Y/Y. This initial estimate, which relies heavily on survey data, will be revised two more times in the months ahead as more complete source data become available. Prices continued to accelerate into Q1, driven in part by the response of commodity markets to the Russian invasion of Ukraine, but also to ongoing supply constraints due to ongoing transportation bottlenecks and worker shortages. The implicit GDP price deflator grew at an 8.0% annual pace and was up 6.8% Y/Y.
Durable goods orders rose 0.8% in March. Increases were led by computers and electronics. Following a small decline in February, core business investment goods (nondefense capital goods excluding aircraft) edged up by 1.0%. Compared to a year ago, headline durable orders were up 12.6% Y/Y while core orders were up by 10.4% Y/Y.
A first look at manufacturing activity in April, the Chicago PMI signaled a moderating expansion in manufacturing in that part of the country. The index, officially called the MNI Chicago Business Barometer™ fell 6.5 points to 56.4. As with other PMIs, a reading above 50 indicates an expansion, thus manufacturing expanded at a slower pace than in March.
ENERGY
Oil prices had eased earlier in the week on a strong dollar and concern about oil demand following the extension of COVID lockdowns in Shanghai and new restrictions in parts of Beijing for the first time. Natural gas prices moved higher as Russia blocked gas exports to Poland and Bulgaria following their refusal to abide by new contract terms stipulating that payment be made in roubles. The combined oil and gas rig count continued to rise, up two rigs to 693. Both commercial crude inventories and natural gas inventories were higher in the most recent week, but remain below their five-year averages.
CHEMICALS
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 5.2% for the week ending 23 April. Loadings were up 9.9% Y/Y (13-week MA), up 8.0% YTD/YTD and have been on the rise for 9 of the last 13 weeks.
Statistics released this week by ACC indicate U.S. production of major plastic resins totaled 7.4 billion pounds during February 2022, down 9.2% compared to the prior month, and up 37.9% Y/Y. Year-to-date production was 15.5 billion pounds, a 13.4% increase as compared to the same period in 2021. Sales and captive (internal) use of major plastic resins totaled 7.4 billion pounds down 0.7% compared to the prior month, and up 6.8% from the same month one year earlier. Year-to-date sales and captive use were 14.9 billion pounds, up 0.9% compared to the same period in 2021.
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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