Issue Date: January 14, 2008
World Chemical Outlook
THE SUBPRIME MORTGAGE mess and $100-per-barrel oil are making the economic picture at the turn of the year look like a small white ball bouncing on a roulette wheel. Almost every week, when the government releases data on job growth, housing, manufacturing, or retail sales, a gaggle of economic pontificators raises the odds that the U.S. will slip into a recession.
With the probability of a recession closing in on 50-50, we can't know how the year will turn out until this time in 2009. But what we can do is find a consensus among experts prepared to make an educated guess.
They say the world and U.S. economies will in fact grow in 2008, and the chemical industry in all of the world's regions should grow along with it. It won't exactly match the peak year seen in 2006, but it will likely be a far cry from 2002 and 2003, when a deep U.S. manufacturing downturn and global business cycle trough battered the industry.
The U.S. outlook depends largely on whether the loss of housing wealth will significantly crimp consumer spending. Experts say it won't. Moreover, a weak dollar is improving the competitiveness of U.S. exports, including those from the U.S. chemical industry. The American Chemistry Council forecasts 2.1% growth for the U.S. industry in 2008, better than the 1.3% it projects for 2007.
The Canadian chemical sector will also enter 2008 with a sense of uncertainty, and experts there are forecasting a slight decline in chemical shipments. Still, petrochemical executives in western Canada, which is enjoying boosted competitiveness owing to high world oil prices, expect another banner year in 2008.
If the Latin American industry is struggling with anything, it is keeping pace with strong economic growth in that region. There, the priority is on expanding and consolidating the petrochemical sector to set the stage for a new era of prosperity.
European economic forecasters are predicting 2.4% growth in 2008 and 2009, down modestly from 2.9% in 2007. They are watching the impact of the U.S. financial crisis on the global economic environment. The European Chemical Industry Council is expecting 1.9% chemical industry growth, down from 2.6% in 2007.
Asia's emerging economies are expected to keep up their brisk pace in 2008. Chinese economic growth is forecast to reach 10.5%, off slightly from the 11.4% expansion seen in 2007 but still astounding. Chemical makers there are confident that earnings will continue to grow. The other large emerging economy on the continent, India, is expected to see 8.5% growth in 2008, as it did in 2007. In Japan, housing starts and auto sales have been weak. Yet chemical makers are, for the most part, confident about the country's short-term future.
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