ACC’s running tab of positive indicators slips to 12 out of 20ACC’s running tab of positive indicators slips to 12 out of 20
After a week of disappointing economic indicators, including sobering home sales and durable goods reports, as well as a downward revision to U.S. gross domestic product (GDP) in the second quarter, the American Chemistry Council's Economics and Statistics Group's running tab of positive indicators slipped by one to 12 out of 20. The ACC continues to fly a yellow-green banner to signal continued caution.
August 27, 2010
Existing home sales were off 27.2% from the most recent report, and were down 25.5% year over year despite record low interest rates; the rate on a 30-year mortgage dropping to 4.3%. New home sales fell by 12.4% to 276,000 units, and were off by 32.4% compared to year-ago figures. Existing home sales were at their lowest level in 15 years, with new home sales at a record low. The ACC noted that the slide coincides with the expiration of homebuyer tax credits, which "kicked the legs out from under a nascent housing recovery," adding that, "it is becoming clear that underlying demand for housing remains extremely weak."
The Bureau of Economic Analysis revised Q2 GDP downwards from its original estimate of 2.4% to 1.6% growth, well off the first quarter rate of expansion of 3.7%. Advanced durable goods actually showed a slight increase, up 0.3% from the most recent report and 15.6% above year-ago figures, but the gain was mostly due to a rebound in commercial aircraft orders, and didn't reflect a broader increase.
Orders for nondefense capital goods, which are a good indicator for business investment, fell sharply, with much of drop due to a steep decline in machinery orders following two months of gains. "Durable goods orders are notoriously jumpy as is the nature of capital spending," the ACC report noted. If a broader view is taken, the apparent trend is one of some recovery.
In the business of chemistry, the indicators show that year‐over‐year (Y/Y) comparisons of industrial production show moderation in several countries, suggesting that the global recovery is weakening. Railcar loadings for chemical goods continue to show improvement, but here again, year-over-year comparisons show decline. July data indicate that customers were restocking inventories during the month, with downstream end use customers' consumption averaging 5.20 billion lb of thermoplastic resins for the past three months.
Over the same period, underlying demand averaged 5.08 billion lb, so that customers along the downstream supply chain built up inventories by about 119 million lb. Domestic production of polypropylene (PP) resin rose over June figures to 1.53 billion lb in July, with production up 8.5% year over year. Sales and captive use were up 19.0% year over year, with capacity utilization climbing to 93%.
Domestic production of polyvinyl chloride (PVC) resins fell to 1.172 billion lb in July compared to June, while production was up 4.0% year over year. Sales and captive use were up 4.9% compared to 2009.
Domestic production of high density polyethylene (HDPE) in July rose compared to June to 1.52 billion lb, but dropped 1.4% from last year, with sales and captive use rising 17.3% compared to 2009. Year-to-date production was up 1.4%, while sales and captive use rose 6.8% for the first seven months of 2010. Linear low-density polyethylene (LLDPE) production rose to 1.12 billion lb, but year over year, it was down 6.1%, although sales and captive use were up 12.5% year over year. —[email protected]
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