For the second quarter in a row, US chemical manufacturers reported deterioration in their company’s activity level overall (e.g., sales, production, output) and weakening demand across major customer markets.
The latest findings from American Chemistry Council's (ACC) latest Chemical Manufacturing Economic Sentiment Index (ESI) shedds light on the current situation and outlook, and also points to a negative short-term outlook on the economy and the regulatory environment.
Second quarter (Q2) ESI readings indicate chemical manufacturers’ new orders growth was nearly flat, production levels decreased, and inventories of both raw materials and finished goods were worked down. Producer costs related to inputs/raw materials, energy (for fuel and power), and transportation continued to retreat in Q2 while labor costs accelerated.
A new finding in the survey found the level of regulatory burden on domestic chemical manufacturing has risen significantly. The Q2 ESI reading indicates that regulatory pressure remains elevated for many companies and continues to increase for others. ACC’s ESI reading on the change in the level of regulatory burden (i.e., compliance and opportunity costs) over Q2 (compared to Q1 this year) was notably high at 37.5. A strong (+40.0) reading for the coming six months indicates chemical manufacturers are anticipating growing regulatory challenges.
Chemical Manufacturers Assessment of Their Business Q2 2023 Vs. Q1 2023.
"Chemical manufacturers have been navigating an escalating level of regulatory burden on US-based operations, which threatens to erode competitiveness and hold back growth,” said Emily Sanchez, ACC director for Economics and Data Analytics.
“The most recent ESI reading of rising compliance and opportunities costs related to regulations is concerning” Sanchez added. “Chemical companies are challenged in an increasingly unfavorable business environment.”
The ESI is a composite index comprised of several sub-components that track changes in chemical manufacturers’ perspectives on key business variables including:
- Business activity (new orders, production levels)
- Costs (inputs, energy, transportation, labor)
- Labor (levels, availability)
- Capital (spending)
- Inventories
- Supplier Deliveries Times
- Regulatory Burden
- Business activity (new orders, production levels)
For more, see the ACC’s latest Chemical Manufacturing Economic Sentiment Index (ESI) here.
