Weekly Chemistry and Economic Trends (09-19-25)

Industrial production edged only slightly higher in August, up by 0.1%. Manufacturing output rose by an anemic 0.2%, after edging lower by 0.1% in July. The largest percentage gains were in motor vehicles & parts, textiles, petroleum products, apparel & leather, and nonmetallic mineral products. Assemblies of autos and light trucks rose to a 10.77 million seasonally adjusted annual rate (SAAR), the second fastest pace since March 2024. Capacity utilization was flat at 77.4%, which was below last August's 77.9% rate.

The BLS reported that import prices (which do not include tariffs) rose 0.3% in August, led by higher prices for nonfuel imports. The largest gains were in industrial supplies & materials (excluding fuels), capital goods and consumer goods (excluding autos). The lower dollar and less willingness for foreign exporters to lower prices to mitigate tariffs could have contributed to the rise. Prices for U.S. exports 0.3% and were up 3.4% Y/Y.

According to the NY Fed's Empire State Manufacturing Outlook Survey, manufacturing activity declined in New York State in September after increasing over the summer. The general business conditions index plunged 21 points to -8.7, signaling contraction and the first negative reading since June. The new orders and shipments indexes also dropped significantly, both falling to their lowest levels since April 2024.

In contrast to the New York survey, manufacturing activity expanded in the Philadelphia region, with new orders and shipments rising in September, according to the Philadelphia Fed's Manufacturing Business Outlook Survey. With employment and prices also increasing, survey respondents expressed expectations for growth over the next six months.

Headline housing starts fell 8.5% in August to 1.31 million units' annual pace, the lowest level since May. Chemistry-intensive single-family starts lost 7.0%, wholly driven by a slump in the South. The rest of the regions witnessed gains, which were strongest in the Northeast. Multifamily starts shrank 11.0%. Forward-looking building permits lost 3.7% in August, the fifth consecutive monthly decline. All the regions saw contractions in permits except for a mild gain in the Midwest. Compared to a year ago, housing starts were down 6.0% Y/Y while building permits were off by 11.1% Y/Y.

Separately, homebuilder confidence remained steady at low levels in September. The NAHB/Wells Fargo Housing Market Index was stable at 32. While current sales activity remained the same, lower buyer traffic was offset by higher sales expectations for the next six months.

The Conference Board's Leading Economic Index® fell 0.5% in August, following a small, revised increase in July. The August decline was the largest since April. The index (now at 98.4) was down 2.8% between February and August, a faster rate of decline compared to the 0.9% drop between August 2024 and February of this year. Declining consumer expectations, new orders, housing building permits, average manufacturing weekly hours, and an increase in unemployment claims drove the August decline. The Conference Board cites higher tariffs as a major driver of the slowdown.

Headline retail and food service sales rose 0.6% in August, following a revised 0.6% rise in July. Sales in August were higher at online platforms, clothing & accessory stores, sporting goods & hobby stores, restaurants & bars, motor vehicle & parts dealers, gas stations, grocery stores, electronics retailers, and building & garden centers. On the other hand, sales fell at furniture & home furnishing stores, health & personal care stores, general merchandise stores, and miscellaneous retailers. Core retail sales (excluding vehicle & gas station sales) increased 0.7% after adding 0.3% in July.

Combined business inventories rose 0.2% in July driven by gains in retail, manufacturing, and wholesale inventories. Combined business sales increased by 1.0%, with retail, wholesale, and manufacturing sales also rising in July. The inventories-to-sales ratio ticked lower to 1.37 from 1.38 in June. A year ago, the ratio was 1.40.

FOMC Decision
As widely expected, the Fed lowered its benchmark Federal Funds rate by a quarter percentage point, the first cut in nine months. In addition, the Fed has penciled in two additional rate cuts this year. Explaining the Board's decision, Chair Powell said growing signs of weakness in labor markets outweighed renewed concerns about inflation. The Fed meets again at the end of October and again in mid-December.

Survey of Economic Forecasters - U.S.

• U.S. GDP is expected to grow by 1.7% in 2025 (slightly higher than last month) and by 1.7% in 2026.
• Compared to a 2.8% gain in 2024, growth in consumer spending is expected to moderate to a 2.0% pace in 2025 (slightly higher than last month's survey) before easing further to a 1.4% gain in 2026 (slightly lower). The changes in expectations likely reflect consumers' front-loading purchases into 2025 to avoid tariff impacts.
• Business investment growth is expected to slow from 4.0% in 2024 to 3.4% in 2025 before easing further to 1.6% in 2026, both higher compared to the August survey.
• Following two years of weak growth, we look for industrial production to grow by 1.0% in 2025 (led by a strong Q1) and 0.4% in 2026. Both were higher than last month's survey.
• Sales of autos and light trucks rose to 15.8 million in 2024 (still below trend). Adding to affordability concerns, tariffs are expected to raise the cost of vehicles further. In 2025, vehicle sales are expected to be flat at a 15.8 million pace (despite higher sales in March and April), before slipping further to a 15.5 million pace in 2026 (slightly lower than last month's survey), as affordability constraints persist.
• Also struggling with affordability, housing starts fell to 1.37 million in 2024 and are expected to be ease further to 1.35 million in 2025. Housing starts are expected to remain comparatively weak in 2026 at around 1.36 million, slightly higher than last month's survey.
• The unemployment rate is expected to increase slightly from 4.0% in 2024, averaging 4.2% in 2025 and rising to 4.5% in 2026, both steady from last month's survey.
• Growth in consumer prices is expected to ease slightly to 2.9% in 2025 (reflecting lower growth in services prices that are expected to offset higher prices for goods). In 2026, inflation continues to moderate with consumer prices growing 2.8% (slightly higher than last month's survey).
• Expectations for the 10-year Treasury were slightly higher for 2025 and 2026.

Survey of Economic Forecasters - Global

• Compared to the June outlook, global GDP growth expectations rose to 2.8% for 2025. The 2026 global growth forecast edged lower to 2.6%.
• Global inflation pressures have eased since 2022 but remain elevated. Inflation will continue to moderate, advancing at a 3.3% pace in 2025 and further easing to a 3.0% pace in 2026. Both were higher compared to the June survey.
• Following more than two years of weakness in 2023 and 2024, global manufacturing continues to face headwinds in 2025 but is expected to firm slightly in the years ahead. Global industrial production is expected to grow 2.0% in 2025 and 1.7% in 2026, but both have been downwardly revised.
• Following a modest recovery in 2024, world trade volumes are expected to continue to expand over the next few years at a sharply slower pace. World trade volumes are expected to grow by only 2.1% in 2025 and 1.7% in 2026, both higher than in the June survey.

According to data released by the Association of American Railroads, chemical railcar loadings rebounded, moving higher to 34,891 for the week ending September 13th. Loadings were up 1.4% Y/Y (13-week MA), up 1.7% YTD/YTD and have been on the rise for seven of the last 13 weeks.

Chemical production fell by 0.6% in August, following a similar decline in July. During August, production was higher for organic chemicals, basic inorganic chemicals, industrial gases and plastic resins. Those gains were more than offset by lower production of coatings and other specialty chemicals, synthetic rubber, manufactured fibers, and agricultural chemicals. Production of consumer products was flat. Chemical capacity utilization slipped by 0.3 points to 80.4%, slightly higher than the 80.1% rate a year ago.

Chemical import prices (which do not include tariffs) fell 0.5% in August, the third straight monthly decline. Compared to a year ago, import prices were off 2.7% Y/Y. Chemical export prices, however, rose 0.4% during the month and were up 2.6% Y/Y.

Energy Wrap-Up
• Oil prices were a little higher than last week on new Ukrainian attacks on Russian refineries and a Fed rate cut.
• U.S. natural gas prices dipped below $3/mmbtu on record Permian production.
• The combined oil & gas rig count rose for a second week, up by two to 534.

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