- Headline Global Chemicals PMI dips to seven-month low of 52.6 in March
- Output, new order and employment growth moderate since late-2017
- Optimism towards the year ahead improves to a three-year high
The latest Global Chemicals sector PMI™ data, produced by IHS Markit, signalled easing growth impetus in the first quarter of 2018. The rate of expansion remained robust, however, as the slowing in part represented some payback after an especially strong upturn in the second half of 2017. Moreover, chemical sector companies remain confident towards future growth prospects.
Global Chemicals PMI data are derived from IHS Markit's PMI surveys in over 40 economies, which include monthly information provided by more than 1,000 chemical manufacturers.
Correction in Q1 2018
At 52.6 in March, the headline IHS Markit Global Chemicals PMI remained above the 50.0 no-change threshold. The figure was below that seen in February, but it still signalled a solid overall improvement in business conditions across the chemical sector.
That said, the headline PMI fell to a seven-month low, matching a similar moderation in global manufacturing growth. The lower headline figure reflected slower output, new order and employment growth than that seen at the end of last year.
Growth momentum peaked in 2017
The slowdown seen so far in 2018 needs to be viewed in the context of the strong performance late last year. Chemical market fundamentals improved throughout 2017. Growth momentum in key markets, such as China and the US, picked up in the second half of 2017, translating into an increase in chemical demand.
Meanwhile in Europe, manufacturing growth boomed towards the end of last year, leading to severe chemical supply shortages being reported across the region. Reflecting the fundamental shift in demand and supply, data from IHS Markit showed a 45% rise in petrochemical prices between July 2017 and January 2018.
Furthermore, increasing demand, as signalled by the PMI data, matched a strong positive upturn in chemical industry stock prices. The S&P500 Chemicals Industry Index rose at a monthly rate of roughly 100 basis points above the post-financial crisis average in the second half of 2017.
Future outlook
Global chemical sector companies remain confident towards their growth prospects in the year ahead. The Future Output Index hit a 37-month high in March. Firms are increasingly confident that supply shortages will dissipate as new capacity comes on stream, particularly in the petrochemicals sector. In line with improving availability chemical prices have softened in recent weeks, thereby indicating that inflationary pressures faced by chemical sector businesses could ease in the coming months. Meanwhile, demand remains solid in key chemical markets.
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