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Running tab of macro indicators: 11 out of 20

The number of new jobless claims was fell by 2,000 to 250,000 during the week ending 13 August. Continuing claims increased by 7,000 to 1.44 million, and the insured unemployment rate for the week ending 6 August was unchanged at 1.0%. 

Headline retail and food services sales were flat compared to June but up 10.3% compared to July 2021. Excluding motor vehicles & parts & gasoline stations, sales were up 0.7% compared to the previous month, suggesting some continued momentum in other segments. On a Y/Y basis, the largest gains were in gasoline stations (39.9%), nonstore retailers (20.2%), and miscellaneous store retailers (17.8%), slightly offset by declines in electronics & appliance stores (-9.9%). 

Following a revised small gain in June, housing starts fell sharply, by 9.6% to a 1.45 million pace in July with declines in both single-family and multifamily. Gains in the comparatively small Northeast region were more than offset by declines in the Midwest, South, and West regions. Forward-looking building permits also fell in July, down by 1.3% after holding relatively stable in June. Permits for chemistry-intensive single-family homes continued to fall for a fifth consecutive month. Compared to a year ago, housing starts were off 8.1% Y/Y (single-family down 18.5% Y/Y) while building permits were ahead by 1.1% Y/Y (single-family down 11.7% Y/Y). Separately, Homebuilder sentiment fell for an eighth consecutive month to its lowest level since May 2020 with sharply lower buyer traffic and lower sales traffic currently and expected over the next six months. The NAHB/Wells Fargo Housing Market Index fell six points to 49, indicating a contraction in homebuilding activity.

Existing home sales fell 5.9% in July to a 4.81 million seasonally adjusted annual pace, a rate 20.2% lower than a year ago. At the end of July, inventories stood at 1.31 million homes for sale or under contract. That’s up 4.8% from June but unchanged from a year earlier. The level of inventories represents a lean 3.3-month supply. With historically lean inventories, the median sales price moderated slightly but is still up 10.8% from a year ago to $403,800.

The nominal value of combined business inventories continued to expand in June, up 1.4% with gains across all major segments of the supply chain. The largest gains were in retail. Combined business sales rose 1.3%. Compared to a year ago, business inventories were up 18.5% Y/Y while sales were up by 14.5% Y/Y. The inventories-to-sales ratio remained unchanged at 1.30 in June. A year ago, the ratio was 1.26.

In a surprising show of resilience, industrial production rose by 0.6% in July. The gain follows flat growth in June and a modest decline in May. Utility output was lower, but both mining and manufacturing output rose. Within manufacturing, the largest gains were in motor vehicles and parts, fabricated metal products, aerospace,  plastic and rubber products, and apparel. There were declines in electrical equipment, printing, and primary metals. Compared to a year ago, manufacturing output remained higher by 3.2% while overall industrial production was up 3.9% Y/Y. Capacity utilization tightened by 0.4 percentage points to 80.3%. A year ago, capacity utilization was 78.2%. Overall industrial capacity has grown 1.3% Y/Y.

A first look at August, several of the regional manufacturing surveys are signaling contraction. The New York Fed’s Empire State Manufacturing Survey plunged by 42.4 points to -31.3, the second largest decline on record (since the index began in 2001). There were sharp declines in shipments and new orders. Looking ahead, businesses do not expect much improvement over the next six months. In Philadelphia, following two months of negative readings, the Fed’s current activity index rose 19 points to +6.2, suggesting that manufacturing was mostly steady. Indicators about conditions six months from now remained weak.

The Conference Board’s Leading Economic Index® (LEI) continued to move lower for a fifth consecutive month, down another 0.4% in July. Over the previous six months (January through July), the LEI was down 1.6% compared to a 1.6% gain during the prior six-month period. This composite basket of broad economic indicators suggests recession risks are rising in the near term. Compared to last July, the LEI was ahead just 0.2% Y/Y.

Oil prices dipped earlier in the week on weak economic news in China, but were moving up as of yesterday on EIA’s latest inventory report which showed higher-than-expected withdrawals from oil and gasoline stocks. Crude oil inventories in June were at their lowest level since 2004. Natural gas prices climbed in the most recent week, back near $9/mmbtu. With just two months left in the rebuild season, inventories are still nearly 13% below average. European gas prices continued to rise and were equivalent to $65-$70/mmbtu this week. The combined oil and gas rig count rose by 2 to 761 during the week ending 8/12.

For the business of chemistry, the indicators still bring to mind a yellow banner for basic and specialty chemicals.

According to data released by the Association of American Railroads, chemical railcar loadings were up 2.0% for the week ending 13 August. Loadings were down 0.5% Y/Y (13-week MA), up 3.7% YTD/YTD and have been on the rise for 7 of the last 13 weeks. 

U.S. production of major plastic resins totaled 7.7 billion pounds during June 2022, down 6.3% M/M and down 4.1% Y.Y, according to statistics released by ACC. Year-to-date production was 47.6 billion pounds, up 6.8% Y/Y. Sales and captive (internal) use of major plastic resins totaled 7.7 billion pounds down 4.3% M/M and down 2.0% Y/Y. Year-to-date sales and captive use were 47.1 billion pounds, up 6.4% Y/Y.

Following three months of weak growth, chemical production rose by 0.6% in July. The increase reflected higher output of industrial gases and other inorganic chemicals; manufactured fibers; coatings, adhesives and other specialty chemicals; plastic resins and consumer products. These gains were offset by lower production of petrochemicals and other organic chemicals; synthetic rubber; fertilizers and crop protection chemicals. Compared to a year ago, chemical production was up by 0.9% Y/Y. Chemical capacity utilization rose by 0.3 percentage points to 82.1%. A year ago, capacity utilization was 85.0%. 

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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