U.S. chemical production slipped on a monthly basis in July, affected by uneven factory activity and weak growth in major export markets, 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 July, following a revised 0.2% increase a month ago, with output falling across all seven regions.
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, inched up 1% in July. Within this sector, output rose in several key chemistry end-user markets including appliances, construction materials, computers and electronics, semiconductors, plastic products, rubber products, textiles and apparel.
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. Irregular factory activity and softness in key export markets neutralized gains from strong housing activity and consumer spending during the reported month.
The ACC said that chemical output was mixed across the segments in July. Production gains across consumer products, organic chemicals, synthetic rubber, manmade fibers, coatings and pesticides were masked by declines in industrial gases, inorganic chemicals, chlor-alkali, synthetic dyes and pigments, plastic resins, adhesives, fertilizers, and other specialties.
Overall chemical production moved up 1.4% in the reported month when compared on a year over year basis, following an upwardly revised 1.2% rise in June. On a region-by-region basis, production rose across all regions year over year barring West Coast. Production for the first seven months of 2013, when compared with the year-ago data, was up 0.8%.
On a monthly comparison basis, July reading showed that chemical production in the Gulf Coast region, where key building block materials are produced, fell 0.4%. Midwest, Ohio Valley and Southeast regions logged declines of 0.2%, 0.3% and 0.3%, respectively. Production inched down 0.1% across Mid-Atlantic, Northeast and West Coast regions.
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 $770 billion industry has been consistently leading the U.S. economy’s business cycle due to its early position in the supply chain.
Last year, European debt crisis, weak U.S. manufacturing along with sluggish activity in China and other key emerging markets weighed on companies in the chemical space including majors such as DuPont
, Dow Chemical
, Eastman Chemical
(EMN - Free Report
) and Celanese
(CE - Free Report
While lingering crisis in Europe coupled with other industry-specific challenges continues to pose downside risks, the global chemical industry is poised for a recovery this year. Strength across automotive and aerospace and a recovery in the housing market augur well for the industry.