What is the Economic Sentiment Index?
ESI is a quarterly index created by ACC to help better understand the state of the chemical industry. The index reflects member companies' collective views on business activity, client market demand, and economic conditions during the quarter, as well as expectations for the next six months.
ESI is a composite index made up of several sub-indexes that track changes in chemical manufacturers' perceptions of key business variables, including:
Business activities (new orders, production levels)
Cost (input, energy, transportation, labor)
Labor (level, availability)
Capital (expenditure)
stock
Supplier delivery time
How do companies feel about the direction of the economy?
They expect global economic conditions to stabilize somewhat in the second half of the year, with about half of companies expecting more of the same and an even split between those expecting economic conditions to improve or worsen.
What were the main gains?
Future Demand: U.S. chemical manufacturer expect demand in key customer markets to improve by the end of the third quarter of 2023, as well as the company's overall activity levels (e.g., sales, volumes, production). They saw an increase in key business variables, including output measures such as new order volumes and production levels.
Investment: Nearly half of the companies surveyed expect capital spending to increase in the second half of the year.
Outlook: Chemical manufacturers' confidence in the global economic situation has improved, but the U.S. economy is expected to deteriorate further in the coming months.
Bellwether: The cautious optimism of chemical manufacturer is noteworthy because chemical industry activity is a good predictor of future economic activity given its early position in the supply chain in many sectors of the economy.
What should Congress and the White House do?
The chemical industry is the source of the economy. Chemicals are critical to growing food, producing energy, providing safe drinking water, and making life-saving medicines and equipment. The chemical manufacturer is also critical to support national priorities, including energy independence, and competing with other countries in key technologies, such as producing world-class semiconductors and batteries, components, and electric vehicle infrastructure.
To move production back to the United States from places like China, we have to make and move more chemical to the United States. Policymakers can help support critical uses of existing chemical as well as the development of innovative chemical by improving EPA's chemical management program. Similarly, reforming the country's licensing program would help bring more U.S. manufacturers online. It is also important that we address issues that help remove supply chain barriers by adopting modern transport policies for freight rail, sea, and truck transport.
