Revised July 17, 2017

46

48

50

52

54

56

58

60

62

64

66

Jun-16 Jul Aug Sept Oct Nov Dec Jan-17 Feb Mar Apr May Jun

ISM Manufacturing Purchasing Managers’ Index(June 2016 – June 2017)

Purchasing Managers' Index New Orders Production Employment Inventories

Source: Institute for Supply Management

56.6%

61.7% 61.0%

77.8%

93.3%

89.5%

2016:1 2016:2 2016:3 2016:4 2017:1 2017:2

NAM Manufacturers’ Outlook Survey by Quarter(First Quarter 2016 – Second Quarter 2017)

Source: NAM Manufacturers’ Outlook Survey

Note: Percentage of respondents who characterized the current business outlook as somewhat or very positive.

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Q1:2016 Q2:2016 Q3:2016 Q4:2016 Q1:2017 Q2:2017

Expected Manufacturing Growth Over Next 12 Months(First Quarter 2016 – Second Quarter 2017)

Sales Exports Capital Investments Full-Time EmploymentAvg. 12-Month Growth Rates

Sales: ↑ 4.8%Exports: ↑ 1.1%

Capital Investments: ↑ 3.2%Full-Time Employment: ↑ 2.7%Source: NAM Manufacturers’ Outlook Survey

Note: Expected growth rates are annual averages.

7.2%

14.9%

28.3%

29.9%

38.8%

55.7%

64.4%

74.7%

Challenges with access to capital

Weaker global growth and slower export sales

Weaker domestic economy and sales for our products

Strengthened U.S. dollar relative to other currencies

Rising raw material costs for our products

Unfavorable business climate (e.g., taxes, regulations)

Attracting and retaining a quality workforce

Rising health care/insurance costs

Primary Current Business Challenges(Second Quarter 2017)

Source: NAM Manufacturers’ Outlook Survey

Note: Respondents were able to check all that apply. Therefore, responses exceed 100 percent.

-1.0%

-0.8%

-0.6%

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

Jun-16 Jul Aug Sep Oct Nov Dec Jan-17 Feb Mar Apr May Jun

Percentage Changes in Manufacturing Production(June 2016 – June 2017)

Manufacturing Durable Goods Nondurable Goods

Source: Federal Reserve Board

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Jun-16 Jul Aug Sep Oct Nov Dec Jan-17 Feb Mar Apr May Jun

Year-Over-Year Industrial Production Growth(June 2016 – June 2017)

Industrial Production Manufacturing Durable Goods Nondurable Goods

Source: Federal Reserve Board

-1.1%

-2.0%

-2.5%

-3.0%

-7.0%

Aerospace & misc. trans. equipment

Textile and product mills

Miscellaneous durable goods

Apparel and leather

Electrical equipment & appliances

0.0%

0.3%

0.7%

1.0%

1.1%

1.2%

1.4%

1.7%

1.8%

2.5%

4.1%

4.3%

4.7%

4.9%

Paper

Plastics and rubber products

Primary metals

Motor vehicles and parts

Furniture and related products

Chemicals

Printing and support

Machinery

Food, beverage and tobacco products

Fabricated metal products

Wood products

Nonmetallic mineral products

Petroleum and coal products

Computer and electronic products

Year-Over-Year Growth in Manufacturing Production by Sector(June 2016 to June 2017)

Source: Federal Reserve Board

YEAR-OVER-YEAR GROWTHManufacturing (NAICS): ↑ 1.4%

Durable Goods: ↑ 1.3%Nondurable Goods: ↑ 1.5%

54.7

52.3

50.4

52.4

54.3

59.6

50.1

58.6

51.150.5

54.8

50.7

53.3

55.8

Canada Mexico China Japan UnitedKingdom

Germany South Korea Netherlands Hong Kong Belgium Brazil France Singapore Taiwan UAE

IHS Markit Purchasing Managers’ Indices for the Top 15 Export Markets for U.S. Manufactured Goods

(June 2017)

Emerging Markets Manufacturing PMI: 50.8

Eurozone Manufacturing PMI: 57.4

Global Manufacturing PMI: 52.6

U.S. Manufacturing PMI (Markit): 52.0

N/A

Source: IHS Markit

297291

176

249

124

164155

216

232

50

207

152

222

12 12-17 -12 -5

0

18 1222

11 9-2 1

Jun-16 Jul Aug Sep Oct Nov Dec Jan-17 Feb Mar Apr May Jun

Monthly Changes in Employment(June 2016 – June 2017, in Thousands of Employees)

Nonfarm Payrolls Manufacturing

Source: Bureau of Labor Statistics

0.6

1.1

5.1

6.3

7.1

7.4

7.7

14.7

15.0

16.4

28.3

Petroleum and coal products

Miscellaneous durable goods manufacturing

Electrical equipment and appliances

Furniture and related products

Chemicals

Nonmetallic mineral products

Primary metals

Fabricated metal products

Machinery

Miscellaneous nondurable goods manufacturing

Food manufacturing

Manufacturing Sectors with the Largest Net Employment Gains

(June 2016 to June 2017, in thousands of employees)

Source: Bureau of Labor Statistics

-1.11%

-0.14%

-0.12%

-0.02%

0.23%

0.23%

0.48%

0.64%

1.23%

Nondurable Goods Consumption

Net Exports

Residential Fixed Investment

Service-Sector Consumer Spending

Nonresidential Fixed Investment

Contributions to Percentage Change in First Quarter 2017 Real GDP Growth

First Quarter 2017 Real GDP Growth↑1.4%

Federal Government Spending

State and Local Government Spending

Durable Goods Consumption

Change in Private Inventories

0.8%

1.4%

3.5%

2.1%

1.4%

3.0%

2.7%

2.5%

1.5%

2.8%

2.4%

2.2%

2016:I II III IV 2017:I II III IV 2018:I II III IV

Real Gross Domestic Product(Chained 2009 Dollars)

Real GDP Forecast:

↑ 1.6% (2016)

↑ 2.3% (2017)

↑ 2.3% (2018)

Source: Bureau of Economic Analysis, NAM calculations using Moody’s Analytics simulation model

OUTLOOK FOR THE US CHEMICAL INDUSTRY

NAM 3rd Quarter Economic Webcast20 July 2017

Dr. Thomas Kevin Swift, CBE

Chief Economist & Managing Director

Perspectives on the Business Cycle, Commerce and Industry

Indicators of US Economic Progress

80

85

90

95

100

105

110

115

05 06 07 08 09 10 11 12 13 14 15 16 17

Real Personal Income less Transfer Payments Real Business Sales Industrial Production Non-Farm Payrolls

Indexed where Last Business Cycle Peak (December 2007) = 100

Sources: Federal Reserve, Bureau of Economic Analysis, and the Bureau of Labor Statistics

US Recoveries/Expansions in History

Duration in Months

0 20 40 60 80 100 120 140

October 1949 - July 1953

May 1954 - August 1957

April 1958 - April 1960

February 1961 - December 1969

November 1970 - November 1973

March 1975 - January 1980

July 1980 - July 1981

November 1982 - July 1990

March 1991 - March 2001

November 2001 - December 2007

Average

June 2009 - ?????

Sources: NBER and ACC analysis

0

10

20

30

40

50

60

70

80

90

100

110

120

48 52 56 60 64 68 72 76 80 84 88 92 96 00 04 08 12 16

Recession Chemical Activity Barometer

Index where 2012 =100 (3MMA)

Our Leading Barometer (CAB) of the US Business Cycle Suggests Accelerating Activity Through Year-End

-25

-20

-15

-10

-5

0

5

10

15

20

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Recession Industrial Production Chemical Activity Barometer

% Change Year-over-Year (3MMA)

Year-over-Year Chemical Activity Barometer vs. Industrial Production

US Light Vehicle Sales Peaking but Remain Elevated while US Housing Continues its Slow Rise

0

2

4

6

8

10

12

14

16

18

20

05 07 09 11 13 15 17 19

Light Vehicle Sales - Millions of Units (SAAR) Housing Starts - Thousands of Units (SAAR)

0

500

1,000

1,500

2,000

2,500

05 07 09 11 13 15 17 19

Sources: BEA, Census, and ACC analysis

Perspectives on Energy

US Oil and Gas Production Recovers with Gas Regaining New Highs

Million Barrels per Day (BPD) Billion Cubic Feet (BCF) per Day

45

50

55

60

65

70

75

80

85

3

4

5

6

7

8

9

10

11

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Crude Oil Production (left) Natural Gas Production (right)

Sources: EIA and ACC analysis

Resulting in Surging Ethane Supplyand Ethane Exports

0

250

500

750

1,000

1,250

1,500

1,750

2,000

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Ethane Domestic Demand Ethane Net Exports

Thousand Barrels per Day

Sources: EIA and ACC analysis

Perspectives on Chemistry

US Feedstock Costs Remain Advantaged

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

05 06 07 08 09 10 11 12 13 14 15 16 17

Western European Naphtha ($/metric ton)

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

05 06 07 08 09 10 11 12 13 14 15 16 17

US Ethane ($/gallon)

Sources: EIA and ICIS

Oil-to-Gas Ratio: A Proxy for US Petrochemical Competitiveness

0

5

10

15

20

25

30

35

40

45

70 75 80 85 90 95 00 05 10 15 20

Divide Brent oil price ($ per barrel) by Henry Hub natural gas

price ($ per million BTUs). When the ratio is above 7, US

competitiveness is favorable vis-à-vis other major producing

regions. Above 10 and competitiveness is further enhanced.

The current ratio is very favorable for US competitiveness and

exports of petrochemicals, plastics and other derivatives.

Sources: EIA, ICE, NYMEX

Lower US Manufacturing Costs: Case of High Density Polyethylene (HDPE)

US Gulf Coast(2005)

US Gulf Coast(2016)

NorthwestEurope(2005)

NorthwestEurope(2016)

Middle East(2005)

Middle East(2016)

NortheastAsia (2005)

NortheastAsia (2016)

Raw Materials Utilities Direct Costs Other Costs

$ per Metric Ton

By 2016, US among the low cost producers globally, but because of

lower falling oil and naphtha prices…a shallower (less steep) cost

curve

Sources: ACC analysis

US Basic Chemical and Synthetic Materials Production Outlook

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Quarterly Production (000 MT)

Sources: ACC, AFPM, AMFA, CI, USGS and ACC analysis

Year % ∆

2014 5.0%

2015 0.5%

2016 2.0%

2017 0.3%

2018 5.5%

2019 8.3%

US Basic Chemical and Synthetic Materials Production and Capacity Utilization Outlook

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

05 07 09 11 13 15 17 19

Quarterly Production (000 MT) Operating Rate (%)

Sources: ACC, AFPM, AMFA, CI, USGS and ACC analysis

60%

65%

70%

75%

80%

85%

90%

95%

100%

05 07 09 11 13 15 17 19

Evolution of US Specialty Chemical Markets

% Change Year-over-Year in Volumes

US Specialty Chemical Market Volume Outlook

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Quarterly Market Volume (000 MT)

Year % ∆

2014 3.4%

2015 0.3%

2016 -0.9%

2017 4.5%

2018 2.5%

2019 3.0%

For Further Information

Please feel free to address questions to:

Dr. Thomas Kevin Swift, CBE

Chief Economist & Managing Director

American Chemistry Council

Email: kevin_swift@americanchemistry.com

Follow me on Twitter @DrTKSwift