MACROECONOMY & END-USE MARKETS
Running tab of macro indicators: 10 out of 20 YELLOW
The number of new jobless claims fell by 3,000 to 229,000 during the week ending 11 June. For the week ending 4 June, continued claims edged higher by 3,000 to 1.312 million. The insured unemployment rate for the week ending June 4 was 0.9%, same as the prior week.
Headline retail and food services sales fell 0.3% in May and were up 8.1% Y/Y on a nominal basis. Excluding motor vehicles and gasoline stations, core retail sales were $480.6 billion, up slightly (<0.1%) from the previous month but up nearly 8% compared to May 2021. Because the Census data on retail sales is published on a nominal basis, the impact of inflation is not captured. After factoring in inflation, sales have been much weaker. On a Y/Y basis, the largest gains were in miscellaneous store retailers (25.6%) and food service & drinking places (17.5%), slightly offset by a 4.5% decline in electronics & appliance retailers. Sales at gasoline stations were up 4.0% compared to April and up 43.2% compared to May of last year.
Producer prices continued to move higher in May, up 0.8% following a more moderate 0.4% gain in April. Energy prices flared in May with higher gasoline prices accounting for 70% of the gain in goods prices. Prices for goods excluding food and energy rose 0.7%, the slowest monthly gain since December. Prices for final demand services also continued to rise with nearly 30% of the May increase in the index for final demand services attributable to sharply higher prices for truck transportation of freight. Compared to a year ago, headline producer prices were up 10.8% Y/Y, a slight improvement, while core producer prices were up 6.8% Y/Y, the same as last month. U.S. import prices rose 0.6% in May while export prices advanced 2.8%. Import prices are up 11.7% over the last 12 months while export prices have risen 18.9%. The gain in import prices reflects higher prices for fuel imports.
Combined business inventories rose by 1.2% in April with gains in retail, wholesale, and manufacturing inventories. Combined business sales increased 0.4% with gains in manufacturing, retail, and wholesale. Compared to a year ago, business sales were up 13.7% while inventories were up 16.6% Y/Y. The combined inventories-to-sales ratio (1.29) rose slightly from March (1.28).
In recent months, higher mortgage rates and higher costs for building materials and labor has made housing less affordable. In May, housing starts dropped more than expected, by 14.4% from April, following a 0.2% decline from March. Chemistry-intensive single starts fell by 9.2%. Forward-looking building permits fell 7.0%. Compared to a year ago, housing starts fell 3.5% Y/Y while building permits were up 0.2% Y/Y.
Homebuilder confidence continued to slide for a sixth consecutive month in June as rising mortgage rates have curbed homebuyer interest. The NAHB/Wells Fargo Housing Market Index fell two points to 67, the lowest in two years when the U.S. was still in pandemic lockdown.
Growth in industrial production softened in May with the headline index up 0.2%, the weakest monthly gain since December. While mining and utility output rose, manufacturing output declined (by 0.1%) for the first time in four months. The largest gains were in petroleum products, nonmetallic mineral products, furniture, and miscellaneous durable goods. Production of motor vehicles and parts also gained at a slower pace. The largest declines were in wood products, machinery, and electrical equipment (including appliances). Capacity utilization tightened by 0.1 percentage points to 79.0%, its highest reading since the end of 2018.
Fueled by declines in the stock market, lower housing construction activity, and worsening consumer expectations, the Conference Board’s Leading Economic Index® (LEI) moved lower for a second consecutive month in May, down by 0.4%. The index was also down 0.4% over the past six months. “The LEI suggests weaker economic activity is likely in the near term – and tighter monetary policy is poised to dampen economic growth even further.”
ENERGY
Energy prices eased compared to a week ago. Oil prices fell on growing concerns about the durability of the economic expansion. Natural gas prices in the U.S. were lower, but in Europe, the benchmark TTF was sharply higher as Russia cut additional gas supplies to Europe. The oil and gas rig count rose by six to 731 during the week ending 10 June.
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 1.7% for the week ending 11 June. Loadings were up 2.0% Y/Y (13-week MA), up 5.4% YTD/YTD and have been on the rise for 6 of the last 13 weeks.
Following three months of strong gains, chemical production eased by 0.2% in May. Performance among subsegments was mixed. Gains in the output of industrial gases and other inorganic chemicals, synthetic rubber, manufactured fibers, consumer products and specialty chemicals (excluding coatings & adhesives) was more than offset by declining production of organic chemicals, plastic resins, fertilizers, crop protection chemicals, coatings, and adhesives. Compared to a year ago, chemical production was up 2.0% Y/Y. Chemical capacityutilization edged lower by 0.2 percentage points to 84.6%. This was up from 83.8% a year ago. Over the past year, chemical capacity has expanded by 1.1%.
Chemical producer prices continued to increase for a 24th consecutive month in May, up by 1.6%, with gains across all segments. The largest gains were in prices for agricultural chemicals and bulk petrochemicals and organic chemicals. Compared to a year ago, chemical prices were up by 18.3% Y/Y, the lowest Y/Y comparison in a year.
Net exports of chemicals declined $432 million to $1.4 billion in April as imports grew and exports fell in the month. Total chemicals trade was flat in April, holding steady at $30 billion. This follows a substantial gain of 24% in March. Chemical exports were down 2% to $15.7 billion with the largest declines in other specialties and plastic resins. Exports were up 25% Y/Y. Imports rose 1% to $14.2 billion in April as gains in petrochemicals and other specialties offset declines in inorganics, consumer products and agricultural chemicals. Chemical imports were up 35% Y/Y.
U.S. chemical import prices fell 0.1% in May, the first monthly decline since May 2020. At the same time, chemical export prices rose 0.2%, a moderation from a 2.5% gain in April and a 1.4% gain in March. Import prices are up 19.7% over the last 12 months while export prices have risen 5.2%.
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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