Chemical manufacturer sentiment declined over the second half of 2024, according to the latest findings from the American Chemistry Council’s (ACC) Chemical Manufacturing Economic Sentiment Index (ESI).
ACC’s index, based on companies’ assessment of their activity level overall (e.g., sales, production, output), turned negative in Q4 as business and economic conditions continued to erode. There is renewed optimism about the year ahead as manufacturers expect demand to improve solidly in the U.S. and modestly in key export markets.
“Recent quarterly ESI readings indicate deterioration across key chemicals business indicators over the last half of 2024. Chemical manufacturers began noting weakened customer demand in Q3 while also reporting that growth for new orders flattened.” said Emily Sanchez, Director for Economics and Data Analytics at ACC.
“In our most recent report, we can see that fall in customer demand and that new orders growth slid further with declines in both foreign and domestic orders. Production levels, which had begun to fall in Q3, continued to decline in Q4. Overall, chemical manufacturers think their company’s activity level (e.g., sales, production, output) deteriorated in Q4,” she continued.
“Looking ahead, there might be light at the end of the tunnel as chemical manufacturers are expecting improvements in their business, customer markets and the U.S. economy coupled with a decrease of new regulations.”
Highlights from the Q4 ESI Report:
- Dropping Demand: Chemical manufacturers reported overall demand from their company’s major customer markets deteriorated in the second half of 2024. Following gains in Q1 and Q2, chemical producers reported that the volume of new orders declined in Q3 and again in Q4. Looking ahead six months, chemical manufacturers expect new business to pick up, led by recovered demand in domestic customer markets.
- Inflated Costs: Aside from input/ raw material costs (which were reported to be roughly stable in Q4), upward pressure on chemicals production costs increased through Q4. Energy costs (for fuel and power), labor costs and transportation costs rose through the end of 2024. Manufacturers expect costs to continue rising over the coming six months.
- Regulatory Relief: Mounting regulatory burden in the U.S. has impacted manufacturers, deterring investments and innovation. With the new Administration, chemical manufacturers think there may be relief with respect to regulatory burden (i.e., compliance and opportunity costs). For the first time, the ESI index on future level of regulatory burden growth was negative, indicating that companies do not believe they will be subjected to an increase in new regulations.
The ESI provides quarterly insights from chemical companies engaged in nearly every aspect of the manufacturing sector and the U.S. economy. This latest report builds on eight quarters of data from Q1 2023 to Q4 2024. You can view the complete findings here.
