Long-term growth in chemistry is expected to accelerate in 2013.

 

Following a strong 2011 fourth quarter, the U.S. economy started 2012 on firm ground with gains in consumer spending, manufacturing output and housing. Those positive gains appear to be eroding, according to the American Chemistry Council’s (ACC) Mid-Year 2012 Situation and Outlook. The report finds that first and second quarter 2012 growth was weak, and that underlying drivers will constrain growth for the remainder of the year.

 

Regarding the business of chemistry, the financial crisis in Europe, as well as the slowdown in China and other emerging economies, continues to take a toll on demand for U.S. exports. This outlook, coupled with weakness in U.S. manufacturing, will likely produce muted demand for chemical products in the second half of this year. Overall, American chemistry output is anticipated to rise by 0.5% in 2012, before accelerating to a 2.3% growth rate in 2013.

 

Despite a weakened outlook for GDP growth, global chemistry continues to advance, with expectations for output of chemicals in emerging markets to outpace production in developed countries. China is projected to continue to grow strongly, but at a slower pace than the previous decade. India, Africa, Latin America and other emerging markets will continue to expand, with the strongest growth in 2012 expected in specialty chemicals, consumer products, and agricultural chemicals. Overall, output is expected to grow by 2.3% in 2012, 4.3% in 2013, and 4.7% in 2014.

 

The rest of the year is expected to see slow growth, with improvements in investment spending and residential investment as the bright spots. Lower energy prices will support modest gains in consumer spending and help to offset the effects of high unemployment and low wage growth, which are constraining incomes. The consensus forecast for U.S. GDP is for continued growth, expanding by 2.2% in 2012 and 2.4% in 2013. The recovery remains fragile with multiple risks on the horizon, and the wrong trade, tax or other policy initiatives could derail activity.

 

In the chemical industry, strong gains in capital spending by American chemistry are expected during the next several years, resulting from announced new investment in petrochemicals and derivatives arising from shale gas developments. Capital spending in the business of chemistry will reach $35.5 billion in 2012 and will steadily rise to $51.5 billion in 2017.

 

Looking further ahead with an eventual resolution in Europe and rebounding growth in emerging markets, the American Chemistry Council expects growth in chemistry to accelerate in the coming years, growing faster than U.S. GDP.

 

For more information, visit www.americanchemistry.com.