“ACC typically updates our economic forecast twice a year, but we wanted to provide an interim update that would reflect some of the potential impacts of COVID-19,” said Kevin Swift, ACC chief economist. “While there is significant uncertainty in the projections, short-term risks are to the downside before a possible rebound in 2021.”
According to the update, U.S. chemical volumes are expected to fall 3.3 percent in 2020 before rising 5.2 percent in 2021. Basic chemical volumes will drop 2.9 percent in 2020 before rising 6.7 percent next year. Chemical shipments are expected to fall 10.0 percent in 2020 before rebounding by 7.8 percent in 2021. Anticipated declines reflect struggling end-use markets and export customers for U.S. chemistry products.
Partially offsetting weakness in U.S. chemical production is strengthening demand for chemistry used in the response to COVID-19. Among the many chemistry solutions used in the fight against the virus are synthetic materials for personal protective equipment (PPE), ingredients for cleaners and disinfectants, and plastics used in medical equipment such as ventilator machines and IV bags.
Automotive and building and construction are key end-use markets for chemistry. According to ACC projections, vehicle sales will fall sharply to 13.1 million in 2020 before improving to 15.5 million in 2021 – down from 16.9 million in 2019. Housing starts will tumble to 1.08 million before edging to a higher 1.19 million pace in 2021. Specialty chemical volumes will decline 4.4 percent in 2020 before rebounding 3.3 percent in 2021.
“Industrial activity started the year on a weak note even before news of COVID-19 emerged in late January,” said Martha Moore, senior director of policy analysis and economics at ACC. “Then supply disruptions from China began to percolate through the U.S. industrial sector. With further shocks to aggregate demand, U.S. industrial production is set to fall 8.4 percent this year before growing by 2.6 percent in 2021.”
Global GDP is expected to contract by 2.5 percent in 2020 before rebounding 6.0 percent in 2021, according to ACC’s update. As the industrial sector has been dealt a series of blows from closures related to COVID-19, demand destruction and logistical challenges, global industrial production will fall 3.9 percent in 2020 before improving 5.6 percent in 2021. Trade and commercial activity have experienced an unprecedented collapse, and world trade is seen shrinking 10.5 percent in 2020 before improving by 9.9 percent in 2021.
U.S. GDP is projected to fall by 4.0 percent in 2020 before rising 4.0 percent in 2021. Consumer spending will decline by 4.6 percent in 2020 before rebounding 4.4 percent next year. Economy-wide business investment was already lower prior to COVID-19 and is expected to decline 9.7 percent in 2020 before showing 3.0 percent growth in 2021.
With more than 20 million people filing unemployment claims in the past four weeks, the unemployment rate is expected to reach over 13 percent by the end of Q2 2020 before steadily easing through 2021. After three years of gains, chemical industry employment is expected to decline by 28,000 (5.1 percent) in 2020. Chemical industry capital spending declines 2.0 percent in 2020, but grows 1.8 percent in 2021.
ACC’s analysis presents an assessment of current conditions and expectations using economic data and publicly available information through April 14, 2020. For the U.S. chemical industry, we use our own model (supplemented by other forecasters), projecting likely paths for the industry in 2020-2022. In addition, we take into account forecasts made by manufacturing economists, economic forecasting consultants and other institutions.
The projections in this release rely on a baseline scenario under which U.S. COVID-19-related restrictions are lifted before the end of Q2 2020. ACC also developed a “pessimistic” scenario under which U.S. restrictions are extended through Q4 2020.
ACC’s Mid-Year 2020 Chemical Industry Situation and Outlook will be published in June. It will provide a review of the U.S. and global business of chemistry and the macroeconomy, offering global and domestic chemical industry data related to production, trade, shipments, capacity utilization, end-use markets, R&D spending, capital spending, employment and wages.
The American Chemistry Council (ACC) represents the leading companies engaged in the business of chemistry. ACC members apply the science of chemistry to make innovative products and services that make people’s lives better, healthier and safer. ACC is committed to improved environmental, health and safety performance through Responsible Care®; common sense advocacy designed to address major public policy issues; and health and environmental research and product testing. The business of chemistry is a $553 billion enterprise and a key element of the nation’s economy. It is among the largest exporters in the nation, accounting for ten percent of all U.S. goods exports. Chemistry companies are among the largest investors in research and development. Safety and security have always been primary concerns of ACC members, and they have intensified their efforts, working closely with government agencies to improve security and to defend against any threat to the nation’s critical infrastructure.
Source: American Chemistry Council