Economics

by guest contributor Paul Hodges

Shale gas developments in the US have sparked a wave of euphoria about the opportunity for a renaissance of its domestic manufacturing base.  Petrochemicals should be one of the main beneficiaries, as the ethane produced from shale gas discoveries now provides the US with some of the cheapest feedstock in the world.

Major producers including Dow Chemicals, Shell and Chevron Phillips have already announced plans to build new ethane-based capacity.  Others are likely to join them.  Current estimates suggest total US ethylene capacity could therefore increase by 25 to 30 percent from today’s 27 million tonnes.

However, one key factor has the potential to spoil the story – much of this new capacity will need to be exported in the form of polyethylene (PE) and other major plastics.  Yet as the chart shows, based on data from Global Trade Information Services, US net PE exports have actually been declining since 2010, even though its cost advantage from shale gas was increasing. Read more

Emily Cadman

Today’s EU foreign ministers meeting to discuss the possible relaxing of sanctions against Myanmar is the latest sign of diplomatic relations easing between the desperately poor south east Asian state and the west.

As relations improve, and investors and businesses eye up opportunities, its worth remembering just how poor Myanmar is compared to its neighbours. Read more

The global economic recovery “remains on life support”, according to Tracking Indices for the Global Economic Recovery, the Brookings Institution-Financial Times index of the world economy.

The Tiger index, which is designed to track the global recovery on a set of macroeconomic, financial and confidence variables, shows a weakening of growth momentum in the emerging markets as well as an anaemic recovery in advanced economies. Read more

Valentina Romei

Markets promptly react to flash releases of economic indicators and large sums of money are lost or made based on zero-point-something percentage points of GDP growth. But, in the excitement of new economic data, it is worth remembering how data is subject to frequent and quite substantial revisions.

Notoriously, in 2010 Japan’s most watched economic indicator was drastically revised downwards, slicing off a full 3.5 percentage points from the annualised growth rate first reported for the third quarter of 2009, prompting soul searching about the quality of Japanese economic data. But revisions occur across many countries and not only after the flash releases.

An OECD database of the various edition of the monthly publication of the Main Economic Indicators (MEI) shows how widespread the issue is. Read more

By Paul Hodges

Chemical prices might not be the first forecasting indicator that springs to mind, but over the recent economic crisis benzene in particular has highlighted economic shifts well before more traditional metrics.

Benzene’s 40 million tonnes of global sales are a key raw material for a very diverse group of end-products, including polystyrene cups, nylon clothing and carpets, pesticides and dyes. Equally, as it is produced from crude oil, benzene provides a highly-sensitive barometer of consumer reactions to changing energy prices.

A key metric is its price premium to naphtha (its oil-based feedstock). The chart above shows this metric since the crisis began in (using ICIS pricing data).

• Typically, the premium has found a floor at $150/tonne
• But it collapsed during October 2008, remaining very weak until February 2009
• The depth of the downturn was also demonstrated by the premium becoming a discount
• It then staged a sharp recovery, which took it back above the $150/t level
Therefore, benzene highlighted, well ahead of other indicators, both the downturn in the wider economy and the equally sudden upturn. Its recent performance therefore merits close attention. Read more

Find out how your living standard compares.

Select the range of years that contains your date of birth and watch as the graphic draws the spread of UK household incomes for people of your generation.

 Read more

Keith Fray

The popular and oft-quoted definition of a recession is two successive quarters or more of falling output, usually referred to as the ‘technical’ definition.

It is of course not really very ‘technical’ – and surprisingly is entirely unofficial. It is an easily measurable and easily understood rule of thumb that suits headlines rather than analysis. Read more