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Keep Your 'Ion' the Prize

Posted by Taylor St. Germain on Jan 13, 2021 10:01:18 AM

As many of our ITR speakers have discussed in recent blog posts, US Industrial Production is poised for growth in 2021. However, I want to get more specific and talk about one of the larger subsegments of Industrial Production: US Chemicals and Chemical Products Production. Chemical Production accounts for 12.45% of US Industrial Production. The US Federal Reserve Board's definition of this subsegment notes that it is concerned with "the transformation of organic and inorganic raw materials by a chemical process" and with the production of products.

As subscribers to our ITR Trends Report™ have known for months, we are forecasting an overall year-over-year growth rate of 1.3% for Chemical Production for 2021. That’s a pleasant change from the current 12/12 rate-of-change, at -3.7%.

Recent cyclical transitions in the rates-of-change for Chemical Production signal that recovery is likely. We refer to these transitions as ITR Checking Points™.

  • The Production 1/12 reached a low of -6.7% in April 2020 and has risen each month since, reaching 2.8% in November.
  • The Production 3/12 reached a low of -6.2% in June 2020 but has since finished November at 3.3%.
  • In November, the Production 3/12 upward-passed the 12/12, which often signals an approaching a 12/12 low.

Along with the ITR Checking Points, we have reliable forward-looking metrics that also point to better times ahead. Please see the two charts below.

capacity utilization

barometer index

Both charts include the US Chemicals and Chemical Products Production year-over-year growth rate plotted with a leading indicator that has been shifted forward on the x-axis to account for its lead time. Both leading indicators suggest that we are likely to witness an imminent trend reversal for Production, and that positive momentum will continue as we move deeper into 2021. It is essential that you identify bottlenecks in your processes and make necessary improvements in order to increase efficiencies ahead of the upcoming mild rise in Production.

 

Taylor St. Germain

Analyst and Speaker

 

 

Topics: ITR Experts Say