Weekly Chemistry and Economic Trends (July 26, 2024)

Running tab of macro indicators: 10 out of 20

The number of new jobless claims fell by 10,000 to 235,000 during the week ending July 20. Continuing claims fell by 9,000 to 1.851 million, and the insured unemployment rate for the week ending July 13 was unchanged at 1.2%.

Consumer spending rose 0.3% in June with gains in spending on services and nondurable goods. Spending on durable goods eased, following a large gain in May. Disposable personal income rose 0.2%. Adjusted for inflation, real consumer spending was up 2.6% Y/Y while disposable personal income was up 1.0% Y/Y. Annual growth in the price index for personal consumption expenditures (PCE) eased to 2.5% Y/Y in June (from 2.6% Y/Y in May). Excluding food and energy, growth in the core PCE price index remained stable at 2.6% Y/Y. The core PCE price index is the one Fed officials would like to see return to its 2% target.

Existing home sales fell 5.4% in June to a seasonally adjusted annual rate of 3.89 million, the slowest pace since last December. Sales were 5.4% lower than a year ago. The inventory of unsold existing homes at the end of the month rose 3.1% and represented a 4.1-month supply at the current sales pace. That was up from 3.7 months in May. The median sales price climbed 4.1% Y/Y to $426,900, the highest price ever recorded.

Following a 14.9% decline in May, new home sales also fell in June, down another 0.6%. Sales activity rose in the larger South and West regions but was offset by steep declines in the Northeast and Midwest. Inventories of unsold homes continued to expand and represented a 9.3-month supply. Inventories of unsold homes were up 11.2% Y/Y while sales were off 7.4% Y/Y. Compared to a year ago, the median sales price was essentially flat (off by 0.1% Y/Y).

Durable goods orders fell sharply in June, the first monthly decline since January. The decline was concentrated in civilian aircraft which was partially offset by gains in new orders for communications equipment, electronics, machinery, and fabricated metal products. Core business orders (nondefense capital goods excluding aircraft) rose by 1.0%, reversing a decline in May. Headline orders were off 11.1% Y/Y while core business orders were down 2.0% Y/Y.

In its first estimate for the quarter, BEA estimated that Q2 GDP rose at a 2.8% seasonally adjusted annual rate, above expectations and double the pace of growth in Q1. The gain in Q2 was driven by growth in consumer spending (including spending growth on durable and nondurable goods), business investment (especially equipment), inventory investment, and government spending. Offsetting those positive contributions were lower residential investment and a growing trade deficit. Compared to a year ago, GDP was 3.1% higher. Growth in the price index for GDP rose from 2.4% Y/Y in Q1 to 2.6% Y/Y in Q2. Excluding food and energy, the core GDP price index edged higher from 2.7% Y/Y to 2.8% Y/Y.

Oil prices retreated again this week after a surprise rate cut in China and new stimulus measures highlight ongoing challenges in the world's 2nd largest oil consumer (after the US). Natural gas eased to nearly $2/mmbtu as production gains have been sufficient to keep up with record high electric demand while also continuing to add to ample storage levels. The combined oil and gas rig count rose by 2 to 580 during the week ending July 19th.

Indicators for the business of chemistry suggest a yellow banner.

According to data released by the Association of American Railroads, chemical railcar loadings were up to 32,059 for the week ending July 20. Loadings were up 2.2% Y/Y (13-week MA), up (4.1%) YTD/YTD and have been on the rise for 8 of the last 13 weeks.

Following a 0.2% gain in May, ACC's Global Chemical Production Regional Index (Global CPRI) stalled in June. Growth varied by region as Europe and Asia declined while the rest of the world gained. The United States advanced in June while China slowed. Many European countries also saw slower production, except for Germany, which has recorded six months of consecutive growth. Taiwan and Korea also saw improvements as exports rose. Despite rebounding from the devastating flood in May, Brazil's production slid year-over-year as imports impacted local production. Most segments recorded gains except for agricultural chemicals. Global chemicals production growth was up 4.5% Y/Y.

Following a 0.6% gain in May, the U.S. CPRI expanded for a third month, up by 0.9% in June. The U.S. CPRI measures chemical production trends on a three-month moving average (3MMA) to smooth month-to-month volatility. Chemical production rose across all regions in June. The most significant increases were in the Northeast and Mid-Atlantic regions. Compared to a year ago, the U.S. CPRI remained off by 0.3%.

Note On the Color Codes

Banner colors reflect an assessment of the current conditions in the overall economy and the business chemistry of 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

There are fewer indicators available for the chemical industry. Our assessment on banner color largely relies upon how chemical industry production has changed over the most recent three months.

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