MACROECONOMY & END-USE MARKETS
Running tab of macro indicators: 6 out of 20
The number of new jobless claims rose by 13,000 to 196,000 during the week ending February 4. Continuing claims increased by 38,000 to 1,688,000 million, and the insured unemployment rate for the week ending January 28 was up by 0.1 percentage point to 1.2%.
The U.S. trade deficit increased in December by 10.5% to $67.4 billion as imports rose 1.3% and exports fell 0.9%. Imports of goods increased notably in a few categories including consumer goods and automotive vehicles, while industrial supplies and materials were down. U.S. goods exports are down as the high dollar and economic deterioration abroad weaken demand. Leading this decline were industrial supplies and materials and consumer goods. Exports in foods, feeds, and beverages increased.
Consumer debt grew at the slowest pace in two years in December, up 0.2% (or 2.9% SAAR). Both revolving (i.e., credit cards) and non-revolving (i.e., auto and student loans) saw lower growth rates. Compared to a year ago, household debt levels (excluding mortgages) were 7.8% higher. As the cushion of excess pandemic savings has been worked down during the past year, increasingly consumers were turning to debt to finance consumer spending. December’s report suggests that uncertainty about the economy and higher borrowing costs are resulting in a more cautious approach to household borrowing.
At the wholesale level, sales were flat in December following a 1.4% decline in November. Higher sales of computer equipment, professional equipment, electrical equipment, hardware and farm goods offset lower sales of lumber, apparel, petroleum products, chemicals, and alcohol. Wholesale inventories edged slightly higher, up 0.1%, following a 0.9% gain in November. Sales were up 7.3% Y/Y while inventories were up 17.6% Y/Y. The inventories-to-sales ratio remained steady at 1.36 compared to November but was up from 1.21 in December 2021. Among the categories with the largest monthly increase in the inventories-to-sales ratio were automotive, lumber, machinery, apparel, chemicals, alcohol and miscellaneous durables and nondurables.
Global semiconductor sales fell by 4.4% in December to $43.4 billion. Sales were lower in all regions, with the largest declines in the Americas and China. Compared to last December, sales were off 14.7%. For all of 2022, global semiconductor sales were up 3.2% to a record $573.5 billion. As with many other manufacturing industries, strong growth at the beginning of 2022 was offset by weakness toward the end of the year. SIA notes that among the different segments, analog chips (i.e., used in vehicles), saw the highest annual growth.
ENERGY
Oil prices moved higher during the week on higher expectations for global growth. Natural gas prices continue to fall below $2.50/mmbtu with continued unseasonably warm temperatures. With the recent retreat in natural gas prices over the past six weeks, the competitiveness of U.S. natural gas-based chemistry has been enhanced. The combined oil and gas rig count fell by 12 to 757.
CHEMICALS
For the business of chemistry, the indicators brings to mind a red banner for basic and specialty chemicals.
According to data released by the Association of American Railroads, chemical railcar loadings were up 1,174 to 32,743 for the week ending 4 February. Loadings were down 10.5% Y/Y (13-week MA), down 9.8% YTD/YTD and have been on the rise for 7 of the last 13 weeks.
At the wholesale level, chemical sales fell 1.3% in December, following flat growth in November. Chemical wholesale inventories edged lower by 0.2% following a 2.0% decline in November. Compared to last December, sales were up 9.1% Y/Y while inventories were 15.3% Y/Y higher. As sales fell faster than inventories, the inventories-to-sales ratio for chemicals rose from 1.12 in November to 1.14 in December. Last December, the ratio was a lean 1.08.
The U.S. surplus in chemicals trade rose by $1.5 billion in December. Exports rose 2.5% to $13.7 billion. Declines in plastic resins, adhesives and sealants, and coatings were offset by higher exports in all other categories of chemicals. Imports fell 9.3% to $11.6 billion in December with declines across all categories.
Chemicals exports growth was generally strong after an initial COVID shock drop. Exports were on an upward trend since late summer 2020 but began to moderate in August last year. Chemical exports rose 16.9% to $179.0 billion in 2022. Imports growth also slowed down last year but, like exports, posted strong year-over-year growth and rose 20.4% to $154 billion in 2022. Net exports of chemicals were $24.5 billion in 2022, down $300 million from 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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