NEW YORK (ICIS)–Global supply chain
constraints, shortages of materials and labour,
and inflation are the biggest risks to the US
economic outlook, the chief economist of the
American Chemistry Council (ACC) said on
Tuesday.
“Supply chain constraints are the biggest risk
– it’s just pervasive,” said ACC chief
economist Kevin Swift on a press briefing on
the US chemical industry’s Mid-Year Situation
and Outlook.
In a recent roundtable discussion among
trade-association economists, “to a person,
it’s all they talked about – they can’t get
labour, they can get raw materials… You have
CEOs telling their purchasing people to double
order if they have to,” he added.
The double ordering is a big risk if conditions
return to normal quickly and the value of
high-priced inventory collapses, he noted,
comparing the situation with that in the 1970s.
“A lot of these supply chain constraints… it’s
been one thing after another. It’s amazing we
just can’t catch a break,” said Swift, citing
the US mid-February winter storm that knocked
out petrochemicals and other materials capacity
for months, and the blockage of the Suez Canal
in March and overall shipping container
dislocations.
The impact of these events continues to be long
lasting, impacting many industries downstream.
“For example in Hickory, North Carolina, the
center of the furniture industry, we still
can’t get foam for upholstered furniture. Some
of these constraints may ease fairly quickly
but there are others that will take some time,”
said Swift.
“More and more there are a lot of industries
where it’s not going to be transitory. I think
it’s going to be heightened for some time, at
least until the fall, and then maybe ease then.
But there’s just still too many constraints,
including constraints on labour. Businesses
just can’t find people, and they’re going to be
in many ways bidding against the federal
government to get talent,” he added.
The economist cited the JOLTS (Job Openings and
Labor Turnover Summary) report by the US Bureau
of Labor Statistics (BLS), which, when last
published on 8 June showed a record high 9.3m
job openings as of the last day of April, which
outpaced the number of hires in April by a
factor of over 1.5-1.
INVENTORIES TO REMAIN
LEAN
On raw materials such as
chemicals and plastics, inventories are
unlikely to be rebuilt quickly amid continuing
strong demand.
“The thing I hear when talking with people is
there’s not going to be a quick return of
inventories. They’re still going to be quite
lean,” said Swift.
“If you went back to February, you may have
heard… it’ll come back quickly, we’ll rebuild
inventories by the summer. But from what I
understand, it’s going to be a lot longer for
plastic resins and [others],” he added.
“Some of it’s being met by imports but not as
much as you might have anticipated looking at
this early on. This is a problem that’s going
to take a long time to unwind,” said Martha
Moore, senior director – policy analysis and
economics at the ACC.
The supply constraints from the US winter storm
and other issues impacting downstream markets
will curtail US chemicals volume growth in
2021.
“Certainly compared to our forecast when we
were looking at this in December, we had much
higher numbers [for US production and
shipments]. So this has really knocked the legs
out from our initial projections for 2021,”
said Moore.
While the second half of 2021 should see much
stronger production volume from the US
chemicals industry, the whole year will be
impacted by a weaker first half, she noted.
For 2021, the ACC economists expect US
chemicals production volumes to rise 1.4% after
a decline of 3.6% in 2020. However, because of
higher prices, shipments are expected to jump
8.1% to $525.6bn in 2021 following a 13.5%
decline in 2020.
OPTIMISTIC OUTLOOK FOR US
ECONOMY
Even weighed down by
supply chain constraints, the US economy is
clearly on the upswing, with strong gains in
consumer spending and business investment
expected to lead to GDP growth of around 6.4%
in 2021, followed by 4.3% growth in 2022,
according to the ACC.
Key chemicals end markets of housing and
automotive are expected to see V-shaped
recoveries in 2021.
US housing starts are expected to rise from
1.40m in 2020 to 1.59m in 2021, a level that
also outpaces the 1.30m in pre-pandemic 2019.
This is even amid shortages of materials,
appliances and labour. Rapidly rising home
prices are also impacting affordability, he
noted.
Light vehicle sales should rebound strongly
from 14.4m in 2020 to 17.0m in 2021, which is
about level with 16.9m in 2019. Auto production
is being constrained by the semiconductor
shortage, which could last two years, the
economist said.
Focus article by Joseph Chang
Thumbnail image shows US dollars. Image by
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