U.S. chemical production notched up its seventh consecutive
monthly gain in July, thanks to a healthy rise in manufacturing
production - according to the latest monthly report from the
American Chemistry Council (ACC). The gain was broad-based with
output rising in all seven regions in the reported month.
According to a Washington, DC-based chemical industry trade group,
the U.S. Chemical Production Regional Index (CPRI) moved up 0.4% in
July after a revised 0.2% increase a month ago, an early sign that
the industry's recovery momentum will carry over into the second
half of 2014.
The U.S. CPRI, which is measured using a three-month moving
average, was created by Moore Economics to track chemical
production in seven regions nationwide. It is comparable to the
Federal Reserve's industrial production index for chemicals.
The July reading showed a rise in chemical output across the board
with Northeast raking in the highest gain of 0.6%. The Gulf Coast,
where key building block materials are produced, recorded a 0.1%
gain on a monthly comparison basis in the reported month.
Production nudged up 0.4% across Midwest and Southeast.
Mid-Atlantic and West Coast saw a 0.5% gain. Ohio Valley registered
a 0.3% rise.
Output from the U.S. manufacturing sector, the largest consumer of
chemical products, went up 0.6% in July on a three-month moving
average basis after a 0.3% rise a month ago. The sector is a major
driver for the chemical industry which touches around 96% of
Manufacturing gain in the reported month was strongly backed by
increased motor vehicles production and a pick-up in consumer and
business spending. Manufacturing production has rebounded strongly
in recent months after being hit by frigid winter that curbed
activities. This augurs well for U.S. economic growth in the
current quarter. The nation's economy grew 4% in the second quarter
and analysts foresee a 3% rise in the third.
Within the manufacturing sector, gains were witnessed in several
chemistry end-user markets including appliances, motor vehicles,
aerospace, construction supplies, machinery, fabricated metal
products, computers, semiconductors, plastic products and rubber
As seen in June, chemical production was once again mixed across
the segments in the reported month. Gains across chlor-alkali and
other inorganic chemicals, plastic resins, synthetic dyes and
pigments, industrial gases, consumer products and pharmaceuticals
were partly masked by declines in fertilizers, pesticides, organic
chemicals, synthetic fibers, synthetic rubber, coatings and
Overall chemical production went up 1.2% year over year in July
with gains recorded across all regions barring the Gulf Coast. Year
to date, output is up 0.8% compared with the year-ago period.
The U.S. chemical industry, a more than $800 billion enterprise, is
heavily linked to the overall condition of the nation's economy. It
has been consistently leading the U.S. economy's business cycle due
to its early position in the supply chain.
The chemical industry started the year on a positive note following
a tough 2013. With the U.S. economy clawing its way back, the first
half of 2014 showed encouraging demand trends for chemicals and
continued recovery across end-use markets such as non-residential
construction and electronics after being in a rut for the most part
of last year.
Although some industry-specific challenges and slow economic
recovery in Europe remain roadblocks, the chemical industry is
expected to continue to recover through the balance of 2014,
invigorated by cost benefits from a shale gas boom in the U.S.,
strength across agriculture and automotive markets, and significant
shale-linked capital investment by chemical makers including majors
like BASF (
), Dow Chemical (
), ExxonMobil Chemical - a part of Exxon Mobil (
), DuPont (
), LyondellBasell Industries (
), and Shell Chemical - a unit of Royal Dutch Shell (
The ACC envisions national chemical production to move up 2.5% in
2014 (up from a 1.6% increase in 2013) and further improve to a
3.5% gain next year, backed by strong agricultural market
fundamentals, healthy demand from light vehicles market and a
recovery in the housing market.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
DU PONT (EI) DE (DD): Free Stock Analysis
DOW CHEMICAL (DOW): Free Stock Analysis Report
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
BASF SE (BASFY): Get Free Report
LYONDELLBASEL-A (LYB): Free Stock Analysis
To read this article on Zacks.com click here.