ACC Boosts 2010 Outlook

The American Chemistry Council, the chemical industry's main trade group, has significantly raised its outlook for U.S. chemical output in 2010 to 7.8% growth from the 3.0% rate first estimated in November 2009. Pharmaceuticals output in 2010 will also grow by a strong 7.8% in 2010, compared with 0.4% in 2009, according to ACC. To explain the boost, T. Kevin Swift, senior economist, points to the overall economy, which he says is experiencing a V-shaped recovery that began last summer. Meanwhile, lean producer and downstream inventories mean firms must buy chemicals in larger quantities rather than depend on the stockroom to meet rising demand. The higher growth rate will go a long way to offset the 8.4% decline in chemical output in 2009. However, the inventory effect will disappear by 2011, Swift says, when growth will drop to a 4.8% rate. Moreover, anemic consumer spending, due to high unemployment and depressed home values, will continue to be a drag on growth for the next two years. And new housing construction and auto manufacturing, which help drive demand for many specialty chemicals, will mount only modest recoveries in 2010, Swift predicts. ACC says chemical production may not return to its 2007 peak until 2013.