Rising uncertainty may weigh on business activity, demand for petchems
Rising uncertainty may weigh on business activity, demand for petchems
Uncertainty regarding US economic policy is the greatest since the Global Financial Crisis (see chart above). The US Economic Policy Uncertainty Index is put together by scholars Scott Baker, Nick Bloom, and Steven Davis and includes newspaper coverage among other components. The US economy is expected to shrink almost 6% in 2020, according to the IMF, and without further stimulus, it could suffer permanent damage, warned US Federal Reserve Chair Jerome Powell. But the Trump Administration has suspended formal negotiations on additional stimulus at least until the end of this month. The US President has also not indicated he will renegotiate a trade deal with China even though it looks increasingly difficult for the Asian nation to achieve agreed-on import objectives. This raises the possible spectre of another round of tariff hikes and a further reduction in trade. With such a grim outlook, US companies are likely to curtail investment and hiring while households tighten their belts. Exports from Asia may fall further, reducing regional factory output and demand for petchem feedstocks. Demand for tonnage is poised to weaken until Asia’s overseas markets start to rebound from COVID-19 induced contractions.
