The global economy is slowing led by a pronounced slowdown in the United States, the result of the housing downturn and the credit crunch, according to the release of the American Chemistry Council (ACC) 2007 Year End Situation and Outlook publication.
The report said a rocky landing and period of sub-par growth is expected, but the risks are high. Slowing economic growth will affect the global demand for chemistry.
For the US business of chemistry, 2007 represented a year of slower growth compared to 2006 as downstream inventory corrections affected output earlier in the year and offset strong exports. Volumes increased 1.3 percent in 2007, down from a 2.1 percent increase in 2006. Shipments reached $639 billion in 2007, a new record.
With exports leading demand, overall US production volume for the business of chemistry is expected to increase 2.1 percent in 2008 and 2.3 percent in 2009. The value of shipments will increase to $654 billion in 2008 and $675 billion in 2009.
The story for 2007 has been record exports of $154 billion, the result of the low dollar and strong overseas economic growth. This resulted in a surplus during 2007 for the first time since 2001. Looking ahead, export demand will continue to be a driver, with exports reaching $169 billion in 2008 and 1$80 billion in 2009. The surplus will improve to $2.1 billion in 2008 but with rising imports will erode in 2009.
Improved profit margins set the stage for moderate increases in capital spending by the US business of chemistry, which reached $23.8 billion in 2007. As the current investment cycle enfolds, capital spending likely increase 6.3 percent to $25.3 billion in 2008 and 6.0 percent to $26.8 billion in 2009. Improving capacity utilization rates could trigger even higher capital spending.
Research and development spending amounted to $27.1 billion in 2007 and continued gains are expected but will be modest. During 2008, R&D spending will increase to $28.3 billion and during 2009 will increase to $26.8 billion.