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Oxford Economics Forecast

Oxford Economics Forecast

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Published by willbeacham

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Published by: willbeacham on Dec 06, 2010
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Global chemical output slows
World production slowed markedly in 2010Q3 growingonly 0.5% in comparison to 1.8% in Q2. The impact ofthe slowdown was fairly broad-based but was muchmore pronounced in the developed economies wherechemical output declined by 0.4% largely pulled downby Japan. The majority of sub-sectors were flat or downwith strength coming from basic chemicals and man-made fibres. Paints fell following a surge in Q2.
Sluggish growth in H2 will limit the rise in world outputto 7¼% this year with developed economies up by5¼% and emerging markets up by a lower thanexpected 10%. World growth might still post a healthy5¾% in 2011 dropping below 5% by the end of thedecade. Developed economies are projected to growby 3% in 2011 and slip to 2½%, with emerging marketsup by over 9½% initially sliding towards 7% by 2020.
Chemical prices are likely to be higher than expectedgiven rising oil prices but on average over the forecastperiod prices will increase more slowly than inflation. Inthe developed economies, especially the UK,investment has collapsed and employment continues todrop sharply although this fall is now moderating.
Industry Briefing
-15-10-5051015202530352005200620072008200920102011201220132014% yearDevelopedBRICSEastern Europe
Source: Oxford Economics
Chemicals: Output
United States1.7-
Developed countries1.6- Europe (EU12)4.5-
BRICs11.113.212.613.111.711.210.69.5Emerging Markets8.65.910.
Chemicals and Man-made Fibre
Annual percentage changes
Chemicals: Value added in 2009(US$ 2005 prices)
Source: Oxford Economics
Global Industry Forecasts: Winter 2010
Forecast overview
Pace of recovery expected to slow…
The pace of growth in world chemicals is slowing asrestocking fades. Global output in Q3 was down to0.5% growth on the quarter from 1.8% in Q2.Production in the developed economies fell by 0.4% inQ3 held back by Japan in particular which dropped by2.6%. European output was flat growing only 0.5% asthe core economies showed varied progression. Indiangrowth is much lower than trend whereas China hasonly slowed slightly compared to 2009. The majority ofsub-sectors were flat or down but strength continuedcoming from basic chemicals and man-made fibres.The weak performance from pharma in developedeconomies is due to increasing competition fromgenerics in emerging markets such as India.
Below forecast growth in Q3 has led to us down ratingworld growth to 7¼% this year. Moreover, we haverevised 2011 growth to 5¾% with uncertaintysurrounding developments in the global economy inparticular the Eurozone posing a downside risk to ourforecast. We expect an increase of 5¼% in developedcountries output this year followed by 3% in 2011.Meanwhile, emerging markets’ output may post a lowerthan expected 10% this year and 9½% next.Nonetheless, emerging markets are continuing tobenefit at the expense of developed economies.
The rise in prices, driven by energy costs, is not likelyto affect the countries with competitive exchange ratesas they are more able to pass on rising costs. Despitethe recovery, employment continues to fall as forecast -albeit at a slower pace - helping to limit inflationarypressures on wage rises. Investment has collapsed inthe UK and continues to fall across the developedworld where little major recovery is likely before 2011.
…as the US flattens out…
US output was flat in Q3 falling 0.2% but given upwardrevisions to previous quarters we expect chemicaloutput to grow by 3% this year and post 2¼% next yearbefore peaking in 2012 at 4¼%.Basic chemicals areforecast to grow at a solid pace next year given thatgas prices are currently low in comparison to historicallevels. But as they pick up we expect growth to slow toa steady pace of 1% by 2014. Pharmaceuticals willrecover from current sluggishness to peak at 4½% in2012 falling back to 3½%.
-15-10-5051015202530352005200620072008200920102011201220132014% yearDevelopedBRICSEastern Europe
Source: Oxford Economics
Chemicals: Output
-20-15-10-50510152005200620072008200920102011201220132014% yearJapanEU15
Source: Oxford Economics
Chemicals: Output growth
ForecastUS-30-20-1001020302005200620072008200920102011201220132014% yearJapanEU15
Source: Oxford Economics
Chemicals excluding pharma: Output growth

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