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August update on the economy, energy and chemicals



Among major economies, Q3 economic growth in the United States will likely be well above expectations. This reflects a still resilient (but slowing) labor market and consumer spending. Our leading US business barometer has been declining since February 2022 and has signaled conditions consistent with recession. So are other leading indicators. Note that the former ACC CAB leading indicator was based on this leading barometer of the business cycle. The case for a soft landing has improved but it appears that a “rolling recession” scenario may be playing out. Monetary policy has been the tightest in a generation. There are vulnerabilities in the commercial real estate market, student loan repayments are resuming, interest rates are higher as are debt payments relative to incomes, and once excess savings accumulated during COVID are depleted, consumers could retrench.


Our system of national, regional, and global leading business barometers signal conditions that are still consistent with global recession conditions although the risks appear to be easing. China’s recovery has faltered and the government is now providing policy support measures. The latest data indicate recessionary conditions in Europe and growth in many emerging markets is below expectations. The risks to the global economy remain elevated. 


Chemical Equities

As measured by the CEX, chemical equities fell 3.0% during August, but remained up 6.2% since the start of the year. The August decline gain is larger than the 1.8% decline in the S&P 500 for the month. Chemical equities lag the 17.4% gain in the S&P 500 since the start of the year. 


Specialty & Fine Chemicals

After a strong start to the year, US specialty chemical and fine chemical volumes weakened in February and March, rebounded in April, and then slowed in May. In June and July, volumes weakened again. At 3.5 million metric tons in July, volumes were off slightly on a year-over-year (Y/Y) basis. Activity across segments was unfavorable, with only 14 out of 30 market segments expanding in July.


A 1.6 million metric ton market valued at $6.2 billion in the United States in 2022, plastic additives are added to a polymer to provide optimal performance of the material and final plastic product when molded and put into use. Worldwide plastic additives demand was 13.7 million metric tons in 2022. Northeast Asia is the largest market, followed by Europe, North America, and South Asia & Pacific. Other regional markets are small. Plastic additives are segmented by function and include plasticizers, flame retardants, heat stabilizers, impact modifiers, catalyst, lubricants, antioxidants, UV stabilizers, antistatic agents, blowing agents, and a variety of other additives.  Prospects for plastic additives depend on the overall health of plastic processing, and other industries. These in turn are dependent upon building and construction activity, the state of consumer spending, and the overall economy. Toxicity and environmental considerations will figure prominently in the long-term.


Basic Chemicals & Synthetic Materials

Looking further upstream, production of US basic chemicals and synthetic materials rose to 36.8 million metric tons in July, leaving output off from last year. July gains occurred in inorganic chemicals, bulk petrochemicals & other organics, plastic resins, and synthetic rubber

but output declined in manufactured fibers. Capacity utilization improved during the month.  



Oil demand in China is steady as economic recovery is slower than expected. On the supply side, the OPEC+ cuts to output are in place and Russian oil exports volumes are falling. US production is about 12.8 million BPD, but the rig count further eased this month. Our base forecast calls for oil (Brent) to average over $86 per barrel for the remainder of this year, but ease slightly in 2024, and then recover in 2025. There are, however, scenarios for both a low case, and a high case for oil prices. In the United States, improved natural gas supply continues to keep American prices low. In real terms, these prices may be the lowest in decades. 


For more information on subscribing to our monthly specialty & fine chemical (including our economic outlook) service, please shoot me an email or give me a ring. I would be more than pleased to discuss our capabilities with you, or send you a sample.


I thank you for your review and consideration.


Dr. Kevin Swift

Managing Director

Swift Economics LLC 


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