U.S. chemical manufacturing activity levels, including sales, production, and output, continued to improve in the third quarter, according to the latest findings from the American Chemistry Council’s Chemical Manufacturing Economic Sentiment Index (ESI).
While chemical manufacturers’ sentiment around the state of the global economy deteriorated in Q3, their assessment of the U.S. economy improved. Chemical manufacturers expect improvement in U.S. economic conditions over the remainder of 2024 and into 2025. However, they expect weakness in the global economy to continue.
“Chemical manufacturers reported gains in activity in every quarter this year,” Emily Sanchez, ACC director for economics and data analytics, said in a news release. “We’re seeing some deceleration in some of the key ESI index readings, however.
“Based on feedback from chemical manufacturers regarding customer demand and broader conditions, our understanding is that the economic situation and outlook is mostly stable, particularly as it relates to domestic business. Looking ahead six months, chemical manufacturers are optimistic about their business, customer demand overall, and the U.S. economy.
“They are less optimistic about the global economy in the months ahead.”
Highlights from the Q3 ESI report:
- Chemical demand deteriorates: Following gains in Q1 and Q2, chemical producers reported that the volume of new orders declined in Q3. While orders were up domestically, foreign orders decreased. In the next six months chemical manufacturers expect an increase in orders, both domestic and foreign.
- Capital spending rises: Once again chemical manufacturers reported increased capital spending, which has been on the rise for the past five quarters. Looking ahead, capital spending is expected to grow over the next six months, with over half of companies expected to expand their capital spending.
- Most production costs higher but coming down: Aside from energy costs (for fuel and power) which were reported to be lower in Q3, production costs continued to increase. Labor, transportation and input/raw materials costs continued to rise for the third straight quarter in Q3, however, the production costs trend is decelerating.
- Regulatory burden continues to build: Signaling a stubborn trend, 38% of manufacturers reported an increase in their regulatory burden in Q3, with more than half (63%) expecting it to grow even more over the next six months.