Weekly Chemistry and Economic Trends (11-07-25)

Note: Construction Spending; International Trade; Manufacturers' Shipments, Inventories, and Orders; Wholesale Trade; Nonfarm Payrolls and the Unemployment Rate were scheduled for release this week but are unavailable due to the federal government shutdown. Where available, we will include alternative private-sector data in order to continue monitoring the U.S. economy.

The manufacturing sector contracted in October for the eighth consecutive month, as the ISM Manufacturing PMI® dropped 0.4 points to 48.7, signaling that manufacturing activity contracted a faster pace than in September. Production shifted to contraction after expanding in September. New orders, employment, order backlogs, imports and export orders decreased but at a slower pace. Supplier deliveries slowed at a faster pace while customers' inventories were again assessed as "too low." Six manufacturing industries reported growth while 12 reported contractions.

The ISM Services PMI® rose to 52.4 in October from the breakeven level of 50 registered in September (a level above 50 corresponds to an expansion while a level below 50 indicates a contraction in the services sector). The increase was led by business activity/production, new orders, and new export orders, which increased at a faster rate. Employment and inventories declined at a slower pace, while order backlogs and imports contracted faster. Inventory sentiment remained "too high", with supplier deliveries slowing further. Prices continued to increase at a slightly faster pace.

Light vehicle sales tumbled in October, dropping to a seasonally adjusted annual rate of 15.3 million units, driven down by declines in electric vehicles sales and most other segments. Compared to last year, sales fell 4.5%.

A proxy for the BLS nonfarm payrolls data, ADP reported that U.S. private sector employment rose by 42,000 in October after losing a revised 29,000 in September. October's was the first increase in employment since July. Job gains were reported in construction, natural resources/mining, education, and health care, as well as trade, transportation, and utilities. Meanwhile, professional business services, information, leisure and hospitality, and manufacturing (down by 3,000) witnessed declines. Among size classes, only very large employers (with 500+ employees) added to payrolls, same as in September. The ADP National Employment Report is an independent and high-frequency view of the private-sector labor market based on the aggregated and anonymized payroll data of more than 26 million U.S. employees.

According to data released by the Association of American Railroads, chemical railcar loadings were down 2.7% to 31,983 for the week ending 11/1. Loadings were up 1.5% Y/Y (13-week MA), up 1.6% YTD/YTD and have been on the rise for six of the last 13 weeks.

Within the details of the ISM Manufacturing PMI® report, the chemical industry was reported to be in contraction as new orders, production, employment, inventories, order backlogs, new export orders, and imports fell. The chemical industry continued to report slower supplier deliveries, with customers' inventories being deemed as "too low". One chemical industry respondent noted, "Business continues to remain difficult, as customers are cancelling and reducing orders due to uncertainty in the global economic environment and regarding the ever-changing tariff landscape;" with another adding, "Wonder has turned to concern regarding how the tariff threats are affecting our business. Orders are down across most divisions, and we've lowered our financial expectations for 2025."

U.S. chemical manufacturers' overall level of activity contracted in the third quarter, according to companies participating in ACC's quarterly Chemical Manufacturing Economic Sentiment Index Survey. ACC's index, based on companies' assessment of their activity level overall (e.g., sales, production, output), turned negative in Q3, with chemical manufacturers reporting weak demand in major customer markets and challenging economic conditions domestically and abroad. More than half of respondents indicated major customer market demand deteriorated in Q3, a higher proportion than in Q2. The overall volume of new orders fell in Q3, as both domestic and foreign orders dropped. And while expectations over the next six months improved for new orders, production levels, and capacity utilization, companies expect an acceleration in production costs over the same period. Inventories shrank in Q3 as companies indicated accelerating destocking, which is expected to continue, albeit at a slower pace, over the next six months.

Energy Wrap-Up
• Oil prices fell amid concerns about oversupply and weakened demand.
• The combined rig count fell by two to 539 during the most recent week.

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