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U.S. chemical production sagged on a monthly basis in April as weak manufacturing activity crimped demand for chemicals, according to the latest monthly report from the American Chemistry Council (ACC). The Washington-based chemical industry trade group recently said that the U.S. Chemical Production Regional Index (CPRI) fell 0.1% in April, following a revised 0.5% decline a month ago.

The U.S. CPRI, which was created by Moore Economics to track chemical production in seven regions nationwide, is comparable to Federal Reserve’s industrial production index for chemicals. The CPRI is measured using a three-month moving average.

Output from the U.S. manufacturing sector, the largest consumer of chemical products, edged up 1% in April. Within this sector, output rose in several key chemistry end-user markets including rubber products, motor vehicles, machinery, fabricated metal products, plastics products, semiconductors and computers.

The manufacturing sector serves as a barometer to gauge the overall health of the U.S. economy and is a major driver for the chemical industry which touches around 96% of manufactured goods. However, weak manufacturing activity during recent months led to softer demand for chemicals.

The ACC noted that chemical output was mixed across the segments in April. Production gains across adhesives, coatings, chlor-alkali, consumer products, other specialties and synthetic rubber were neutralized by declines in organic chemicals, pesticides, pharmaceuticals, industrial gases, manmade fibers, plastic resins, fertilizers, and synthetic dyes and pigments.

Overall chemical production nudged up 0.5% in April when compared on a year over year basis. On a region-by-region basis, production rose across Gulf Coast, Ohio Valley, and Southeast regions. Production for the first four months of 2013, when compared with the year-ago data, were up 0.6%.

Monthly reading showed that chemical production improved across Ohio Valley and Northeast in April. On a monthly comparison basis, chemical production in the Gulf Coast region, where key building block materials are produced, fell 0.4% in April. The Ohio Valley and Northeast region logged gains of 0.2% and 0.1%, respectively. Midwest, Mid-Atlantic and Southeast regions registered a 0.1% decline each while production was flat in the West Coast.  

The chemical industry, which is among the biggest industries in the U.S., is cyclical by nature and heavily linked to the overall condition of the U.S. economy. The roughly $760 billion industry has been consistently leading the U.S. economy’s business cycle due to its early position in the supply chain.

Last year, a tough economic backdrop in Europe, uncertainties surrounding the U.S. fiscal cliff, manufacturing slowdown and sluggish activity in China weighed on the companies in the chemical space including majors such as DuPont  (DD - Analyst Report), Dow Chemical (DOW - Analyst Report), Eastman Chemical (EMN - Analyst Report) and Celanese (CE - Analyst Report).

However, the industry is expected to fare relatively better this year, aided by the gradual healing in the U.S. economy, hopes of a rebound in Chinese demand and the signs of a revival in the U.S. housing market.

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