Swift Economics LLC

Purchasing managers in the Midwest reported that the Chicago PMI (conducted by the ISM-Chicago and officially named the Chicago Business Barometer™), edged up a larger-than-expected 0.9 points to 57.6 in July, remaining in expansionary territory for a third straight month. e expectations and suggest resilience amidst many ongoing economic challenges. [With this type of diffusion index, a reading above 50 indicates expanding regional business activity, while a reading below 50 signals contraction.] Improvement was driven by new orders, which climbed to their highest level since January 2022.  At the same time, supplier deliveries weakened, while order backlogs slipped back into contraction after two months above the neutral 50 mark. Employment remained in contraction for a fifth consecutive month, falling to its lowest level since March, while production eased but remained in expansion territory. Prices paid was little changed, as respondents continued to cite geopolitical tensions and elevated energy costs despite signs of price stability. This is an important regional index for the chemical industry because Chicago is a geographical focus for plastics processing and the report signals solid expansion in regional manufacturing activity. Overall plastic resin sales correlate well with this index.

The Bureau of Economic Analysis (BEA) reported that the US economy expanded at an annual 2.0% pace in Q2, a disappointing pace below expectations and Q1 growth of 2.1%. Compared to a year earlier, US GDP was up 2.1% y/y. The details suggest a resilient consumer (up 3.2% annual pace) and ongoing strength in business fixed investment. Technology investment is still leading the latter, although non-tech business investment also showed renewed vigor. Even residential fixed investment made a positive contribution. A drawdown of inventories and a large rise in imports weighed on growth. The latter reflects t spending by the tech sector. Government spending weighed on growth. The inflation measures were also softer than expected, which is encouraging, and should result in lessened Fed interest rate hike expectations. 

The Department of Labor reported that US initial jobless claims increased by 9,000 from the previous week to 197,000 in the week ending 25 July. This remains below the average of the last two years and at 1969 levels. Continuing claims, which serve as a proxy for outstanding unemployment in the US, decreased by 7,000 to 1,782,000 in the previous week (ending 18 July). Both real time indicators of the labor market are at low levels. The data remain suggestive of a stable, low-hire, low-fire labor market.

On a year-earlier basis, the strongest growth is in the services sector, where June output was up 2.8% y/y. This was followed by the TUIC sector (up 2.2% y/y), the goods sector (up 1.8% y/y), and FIRE sector (up 0.5% y/y). The year-over-year comparisons are moderating and suggest slowing commerce, industrial, and related activity. 

Our measure for the volume of U.S. economic exchange -- the Index of Business Activity -- increased by 0.2% in June, following a 0.1% gain in May and flat activity in April. During June, the goods and services sectors improved, while the transportation, utilities, information, and communications (TUIC) and finance, insurance, and real estate (FIRE) sectors retreated. Based on these data patterns, commerce, industrial, and related activity in the Cycle 48 business cycle upswing from the 2020 COVID recession appears to be continuing at a slow pace. Additionally, our diffusion measure shows that 52% of the 155 monitored industries are currently expanding.

The Richmond Federal Reserve reported that Fifth District manufacturing activity improved in July but at a slow pace. The composite manufacturing index improved one point to +5. [With this type of diffusion index, a reading above 0 indicates expanding regional business activity, while a reading below 0 signals contraction.] Two of its three component indexes increased somewhat in July: shipments to 8 from 4 and employment to 2 from -1. Meanwhile, the new orders index edged down to 5 from 8. The local business conditions index also turned negative. Order backlogs moved up one point to a +4 reading, and raw materials inventories gained. Finished goods inventories were essentially flat. Price pressures remain elevated. The local business conditions index increased notably to 10 in July from -1 in June. Meanwhile, the future local business conditions index fell to 19 from 22. The future indexes for shipments and new orders remained firmly in positive territory. The expectations index for employment was unchanged at 15 in July. The Fifth Federal Reserve District includes North and South Carolina, Virginia, Maryland, Washington DC, and most of West Virginia. The District has a large chemical industry presence and industries such as furniture, textiles, and other manufacturing with many large customers are located in the Fifth District. Charlotte and Richmond, for example, feature the headquarters of some major specialty chemical companies. 

The Conference Board reported that its measure of consumer confidence edged down 1.4 points to 90.8 in July. The Present Situation Index -- based on consumers’ assessment of current business and labor market conditions -- retreated by 3.6 points to 114.9, its third monthly decline. The Expectations Index -- based on consumers’ short-term outlook for income, business, and labor market conditions -- remained unchanged at 74.7. The Expectations Index has tracked below 80 for 17 consecutive months. The survey period for this month’s preliminary results was 1–22 July, encompassing ongoing conflict in the Middle East.. Consumers anticipate little improvement in business conditions over the next six months, but expectations for the labor market were slightly less negative. Expectations for household incomes moderated but remained optimistic overall Plans for buying big-ticket items improved slightly. Buying plans for autos and home-buying expectations continued their upward trend. Spending plans for TVs, refrigerators, and washing machines rose. Consumers planned to spend more on services over the next six months. Consider the limited extent to which surveys like this foreshadow consumer spending (and the associated chemistry). Keep in mind that meta-analyses on consumer behavior find that our stated intentions explain only about 25% to 35% of what we actually do.

The Dallas Federal Reserve reported that Texas manufacturing conditions accelerated in July. The index of general business activity increased 1.3 points to a positive reading of +1.3. [With this type of diffusion index, a reading above 0 indicates expanding regional business activity, while a reading below 0 signals contraction.] The production index, a key measure of state manufacturing conditions, rose 6.0 points to +10.1, a strong expansionary reading. Other measures of manufacturing activity also pointed to rising activity this month.  The new orders index rebounded 4.1 points to a +6.4 reading. The shipments index rose 1.7 points to +8.87 in July. Capital spending improved during the month. Unfilled orders remained in negative territory and finished goods inventories edged down to a less expansionary reading.  Labor market measures suggested improving head counts. Price pressures for raw materials remained intense and selling prices advanced. Wage growth also advanced. Uncertainty regarding outlooks became less opaque The outlook is good, with the company outlook index rising 0.2 points to a +128.7 reading in July. Expectations for manufacturing activity six months from now remain very positive. 

During June 2026, US specialty chemical and fine chemical volumes ticked up 0.1% to 3.452 million metric tons (or 7.76 billion pounds). This follows a 0.7% gain in May and a 0.2% gain in April. Overall volumes were up 0.4% on a year-over-year (y/y) basis. Segment-wise, June saw mixed strength in activity, with 15 out of 30 market segments expanding. During June 2026, five segments -- cosmetic additives, electronic chemicals, flavors & fragrances, lubricant additives, and rubber processing chemicals -- featured a gain of 1.0% or more. There were also solid gains in agrochemical intermediates, antioxidants, catalysts, and oilfield chemicals. The other 21 segments that we cover generally reflect trends in activity among their customer industries. This month's focus is on our quarterly outlook for all specialty & fine chemical segments. Next month we will examine the long-term prospects for adhesives & sealants. 

The Census Bureau reported that sales of single-family homes rose 1.6% to a seasonally adjusted annualized pace of 628,000 units in June. During June sales rose in the Northeast, Midwest, and South but fell in the West. The rise in sales resulted in the inventory of houses for sale easing 0.2% to 485,000 at the end of June, This pushed the months’ supply down to 9.3 months at the current sales pace. A year earlier, days’ supply was 9.0 months. These levels are well above what builders prefer. Compared to a year earlier (in 2025), June sales were down 5.6% y/y while inventories were off 3.2% y/y. Meanwhile, the median sales price for new homes during June fell to $398,300, a level down 2.7% from a year ago. Builders have provided smaller and lower-cost offerings in light of affordability challenges and are offering incentives to move inventory. As I’ve mentioned before, the cure for high prices is high prices.