a billion isn’t a billion.
"Cash for Clunkers" helped U.S. motor vehicle sales surge.
Figure 1. Global GDP Growth (Annual % Change)
Adhesives are used extensively in manufacturing and
construction applications, filling a unique space in the economic value chain.
Although adhesives and sealants generally make up a very small percentage of a
final product’s cost, they are crucial to its function. Adhesive failure often
leads to product failure and expensive liabilities for a manufacturer. It is
the adhesives’ and sealants’ quality throughout production that makes
estimating short-term fluctuations in demand difficult.
While we at ChemQuest are currently updating our global adhesives reports with
projected growth trends for the next five-year period, we are simultaneously
compiling our annual outlook for the adhesives, sealants and coatings
industries. The first step in that process is determining what macroeconomic
changes are affecting regional economies and end-use demand.
By the end of 2009, the global economy had finally emerged from its worst
economic recession since World War II. The synchronized economic downturn in
2008 is being followed by positive GDP growth throughout nearly all economies,
albeit at vastly different rates. Figure 1 shows the abrupt downturn in both
advanced and emerging economies from 2008-2009 and the expectation of continued
growth, though at slightly lower rates. China
and India were able to avoid
year-over-year declines in their GDP in 2009 and, along with Brazil, are
poised for the strongest growth rates in 2010. The recovery in Europe is the most sluggish, barely emerging with
positive growth at the end of 2009.
The United States is in the middle, with positive GDP growth rates heading into
2010. As of press time, the Q4 2009 annualized GDP is expected to be 4.5% for
but there are worries about the sustainability of future growth. Much of the
rebound in growth is attributable to inventory adjustments, as firms restock
inventory that was liquidated during the downturn. Another factor adding to GDP
growth is the large amount of government spending, which is expected to
decrease in the second half of 2010.
Other, less-positive factors in future GDP are the continued struggles in
residential and commercial construction. Total U.S. construction in 2009 was down
15% compared to 2008. However, while new-home sales appear to have bottomed out
in January 2009, they have yet to break out from the bottom. With uncertainty
surrounding the labor market, and the Federal Reserve expected to end its
support for the mortgage bond market, it is unlikely that construction will
substantially rebound in 2010, but it is not expected to deteriorate further.
Figure 2a. Capacity Utilization - Manufacturing
As shown in Figures 2a-b, capacity usage and industrial
production have both recovered from their recessionary lows. Capacity usage
reached a record low since our global adhesives reports series began in 1972.
Figure 2b. Industrial Production Index (seasonally adjusted)
“Cash for Clunkers” helped U.S.
motor-vehicle sales surge to a seasonally adjusted annual rate (SAAR) of 14.1 million in August - only to drop off to
less than 10 million after the government program ended. Before the crisis,
annual sales in the U.S.
market had been >15 million since 2000. The question is: What number will
this be going forward? Our best guess is about 12 million units in 2010 and 14
million in 2011, which represents a CAGR of 17%. As for adhesives themselves,
ChemQuest estimates overall volume declines of 20% peak-to-trough for the
Figure 3. U.S. Lightweight Auto/Truck Sales (SAAR) (million of units)
On a lighter note, readers may be surprised to learn that
more than one large-scale numbering system is used in the world. The two most
widely used are the long scale and the short scale; it can create confusion if
persons are referring to a large number using different systems. In fact, it
was during a conference call with a Dutch firm that I became aware of this
and most other English-speaking nations use the short-scale numbering system
when referring to large numbers, while continental European nations continue to
use the long-scale system. Until it changed in 1974, the United Kingdom also used the long
The Table shows where the two systems diverge, beginning
with a “billion.” Because of the possibility of a misunderstanding, it’s a good
idea to clarify the meaning of these numbers in international conversations
when they come up.
For more information, phone (513) 469-7555 or
Source of Figure 1: IMF
of Figures 2a, 2b and 3: Federal Reserve