Released May 19, 2020 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Industrial Info's North American Spending Gap Index, a measure of project fallouts, amounted to $280 billion in April, an increase of 217% from the same month in 2019.
Project fallout includes those projects that have been cancelled, placed on hold or delayed due to unfavorable market or economic conditions. The index measures project fallout as the gap between the dollar value of projects scheduled to begin construction in a given year and the actual value of projects that begin construction. At the start of 2020, Industrial Info was tracking about $714 billion of projects that were scheduled to begin this year. As each month passes, the index compares current activity to what was projected in January and measures the fallout rate. The index then compares current results to the previous year's results and measures its progress.
The $280 billion spending gap as of April compares with a gap of $88 billion a year earlier, reflecting the economic turmoil triggered by the COVID-19 pandemic. Of the 12 major industries followed by Industrial Info, only one --
Click on the image at right for the Spending Gap Index.
The project spending gap for Oil & Gas Production more than doubled year over year to $83 billion last month. Reduced economic activity resulting from shelter-in-place restrictions due to COVID-19 caused U.S. petroleum demand to fall nearly 27% to 14.2 million barrels per day (BBL/d) in April, the American Petroleum Institute (API) reported on May 14. Gasoline deliveries fell more than 31% to their lowest level since 1972, while jet fuel posted its largest monthly decline on record, falling nearly 56% to 600,000 BBL/d.
However, on a weekly basis, total U.S. petroleum demand rebounded by 1.6 million BBL/d as of May 1 after appearing to bottom out during the second week of April, the API said.
"April was widely expected to reflect the weakest oil market data yet -- and may be a low point that is reflected on for decades to come," said API Chief Economist Dean Foreman in a press release. "Significant uncertainty remains over the state of oil markets in the weeks ahead, but the realignment of the supply and demand balance coupled with the gradual reopening of state economies leads us to be cautiously optimistic that the worst may be behind us."
U.S. oil-targeted drilling fell a record 52% over the past two months as producers adjusted output to align with the demand drop. Domestic oil production fell 900,000 BBL/d in April to 12 million BBL/d, which, combined with reductions in natural gas and other liquids output, amounted to the largest monthly decline in U.S. total liquids supply on record, the API said.
"The industry's operational flexibility has enabled producers to adjust output and mitigate against this swift and sudden decline in demand," Foreman said.
For related information, see May 1, 2020, article - ConocoPhillips Slashes Oil Production as COVID-19, Weak Prices Hit $6 Billion in Projects
Industrial Manufacturing sectors also took a big hit in project spending last month, with the spending gap widening 211% to $32 billion compared with April 2019. Industrial Manufacturing covers a wide swath of projects, ranging from transportation and data centers to automotive plants.
The Institute of Supply Management (ISM) said on May 5 that activity in the manufacturing sector contracted in April, and the overall U.S. economy contracted after 131 consecutive months of expansion. The ISM's Purchasing Managers Index (PMI) for April registered 41.5%, down 7.6 percentage points from the March reading of 49.1%, and its lowest level since April 2009, when it registered 39.9%.
The economic downturn in the U.S. will continue for the rest of 2020, the ISM said in its Spring 2020 Semiannual Economic Forecast. A 19.1% decrease in capital expenditures is expected in 2020, according to the forecast. The ISM's Manufacturing Business Survey respondents forecast that manufacturing employment will decrease by 5.3% by the end of 2020, compared to the end of 2019.
The Metals & Minerals project spending gap widened nearly 194% to $43 billion. The American Iron and Steel Institute (AISI) reported May 11 that for the month of March, U.S. steel mills shipped 7,802,192 net tons, a 6.3% decrease from the 8,327,990 net tons shipped in March 2019, but a 0.4% increase from the tons shipped in February this year. Shipments for the first three months of this year were 24,109,603 net tons, a 0.2% decrease compared with first-quarter 2019 shipments.
For related information, see May 4, 2020, article - U.S. Steel Corporation Looks to Future Despite First-Quarter Loss, Idled Assets and April 29, 2020, article - Steelmaker Nucor Evaluates Capital Projects as It Cuts Planned Spending and May 18, 2020, article - Steel Giant ArcelorMittal Suffers $1.1 Billion First-Quarter Loss.
On the other hand, some steel companies were continuing with their project plans; see April 22, 2020 article - Steel Dynamics Presses on With Big Texas Steel Mill Project, Reports Strong First-Quarter Results.
The Chemical Processing Industry's project spending gap widened to $22 billion, a relatively low year-over-year increase of 13%. The American Chemistry Council's (ACC) Chemical Activity Barometer (CAB) for April fell 7.3% year over year. The CAB consists of indicators for production, equity prices, product prices, inventories and other items.
"The latest CAB reading is consistent with a recession," said Kevin Swift, chief economist at ACC. "The declines of April and March are the most pronounced, pervasive and persistent in the post-World War II period."
Meanwhile, Industrial Info's North American Industrial Project Spending Index as of April amounted to nearly $433 billion, a 28.7% drop from April 2019. The spending index measures the value of all projects in the pipeline for the year. Year-over-year reductions were reported in all but three of the 12 industries followed by Industrial Info.
Click on the image at right for the North American Project Spending Index by industry.
Industrial Info's North American Construction Starts Index, which measures the amount of project activity that has been funded and started construction for the year so far, amounted to nearly $89 billion as of April, up 0.7% from a year earlier. Total investment values rose in seven of the 12 industries tracked by Industrial Info.
Click on the image at right for the North American Construction Starts Index by industry.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Project fallout includes those projects that have been cancelled, placed on hold or delayed due to unfavorable market or economic conditions. The index measures project fallout as the gap between the dollar value of projects scheduled to begin construction in a given year and the actual value of projects that begin construction. At the start of 2020, Industrial Info was tracking about $714 billion of projects that were scheduled to begin this year. As each month passes, the index compares current activity to what was projected in January and measures the fallout rate. The index then compares current results to the previous year's results and measures its progress.
The $280 billion spending gap as of April compares with a gap of $88 billion a year earlier, reflecting the economic turmoil triggered by the COVID-19 pandemic. Of the 12 major industries followed by Industrial Info, only one --
The project spending gap for Oil & Gas Production more than doubled year over year to $83 billion last month. Reduced economic activity resulting from shelter-in-place restrictions due to COVID-19 caused U.S. petroleum demand to fall nearly 27% to 14.2 million barrels per day (BBL/d) in April, the American Petroleum Institute (API) reported on May 14. Gasoline deliveries fell more than 31% to their lowest level since 1972, while jet fuel posted its largest monthly decline on record, falling nearly 56% to 600,000 BBL/d.
However, on a weekly basis, total U.S. petroleum demand rebounded by 1.6 million BBL/d as of May 1 after appearing to bottom out during the second week of April, the API said.
"April was widely expected to reflect the weakest oil market data yet -- and may be a low point that is reflected on for decades to come," said API Chief Economist Dean Foreman in a press release. "Significant uncertainty remains over the state of oil markets in the weeks ahead, but the realignment of the supply and demand balance coupled with the gradual reopening of state economies leads us to be cautiously optimistic that the worst may be behind us."
U.S. oil-targeted drilling fell a record 52% over the past two months as producers adjusted output to align with the demand drop. Domestic oil production fell 900,000 BBL/d in April to 12 million BBL/d, which, combined with reductions in natural gas and other liquids output, amounted to the largest monthly decline in U.S. total liquids supply on record, the API said.
"The industry's operational flexibility has enabled producers to adjust output and mitigate against this swift and sudden decline in demand," Foreman said.
For related information, see May 1, 2020, article - ConocoPhillips Slashes Oil Production as COVID-19, Weak Prices Hit $6 Billion in Projects
Industrial Manufacturing sectors also took a big hit in project spending last month, with the spending gap widening 211% to $32 billion compared with April 2019. Industrial Manufacturing covers a wide swath of projects, ranging from transportation and data centers to automotive plants.
The Institute of Supply Management (ISM) said on May 5 that activity in the manufacturing sector contracted in April, and the overall U.S. economy contracted after 131 consecutive months of expansion. The ISM's Purchasing Managers Index (PMI) for April registered 41.5%, down 7.6 percentage points from the March reading of 49.1%, and its lowest level since April 2009, when it registered 39.9%.
The economic downturn in the U.S. will continue for the rest of 2020, the ISM said in its Spring 2020 Semiannual Economic Forecast. A 19.1% decrease in capital expenditures is expected in 2020, according to the forecast. The ISM's Manufacturing Business Survey respondents forecast that manufacturing employment will decrease by 5.3% by the end of 2020, compared to the end of 2019.
The Metals & Minerals project spending gap widened nearly 194% to $43 billion. The American Iron and Steel Institute (AISI) reported May 11 that for the month of March, U.S. steel mills shipped 7,802,192 net tons, a 6.3% decrease from the 8,327,990 net tons shipped in March 2019, but a 0.4% increase from the tons shipped in February this year. Shipments for the first three months of this year were 24,109,603 net tons, a 0.2% decrease compared with first-quarter 2019 shipments.
For related information, see May 4, 2020, article - U.S. Steel Corporation Looks to Future Despite First-Quarter Loss, Idled Assets and April 29, 2020, article - Steelmaker Nucor Evaluates Capital Projects as It Cuts Planned Spending and May 18, 2020, article - Steel Giant ArcelorMittal Suffers $1.1 Billion First-Quarter Loss.
On the other hand, some steel companies were continuing with their project plans; see April 22, 2020 article - Steel Dynamics Presses on With Big Texas Steel Mill Project, Reports Strong First-Quarter Results.
The Chemical Processing Industry's project spending gap widened to $22 billion, a relatively low year-over-year increase of 13%. The American Chemistry Council's (ACC) Chemical Activity Barometer (CAB) for April fell 7.3% year over year. The CAB consists of indicators for production, equity prices, product prices, inventories and other items.
"The latest CAB reading is consistent with a recession," said Kevin Swift, chief economist at ACC. "The declines of April and March are the most pronounced, pervasive and persistent in the post-World War II period."
Meanwhile, Industrial Info's North American Industrial Project Spending Index as of April amounted to nearly $433 billion, a 28.7% drop from April 2019. The spending index measures the value of all projects in the pipeline for the year. Year-over-year reductions were reported in all but three of the 12 industries followed by Industrial Info.
Industrial Info's North American Construction Starts Index, which measures the amount of project activity that has been funded and started construction for the year so far, amounted to nearly $89 billion as of April, up 0.7% from a year earlier. Total investment values rose in seven of the 12 industries tracked by Industrial Info.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
