U.S. Economy Strengthens on Gas ‘Tailwind,’ Dow CEO Says
The U.S. economic recovery is gathering strength as cheaper natural gas drives business investment and boosts exports, according to the chief executive officer of Dow Chemical Co. (DOW), the country’s largest chemicals company.
U.S. demand is rising for autos, industrial goods and consumer staples such as packaging, Andrew Liveris said yesterday in an interview at Bloomberg’s headquarters in New York. Dow is running its plants close to capacity because falling gas prices have cut production costs, he said.
Liveris is investing $4 billion in the country over five years to build factories that take advantage of gas prices that are at their lowest in a decade. Cheaper gas is doubly advantageous for U.S. chemical makers, who use it to power their plants and as a raw material for hundreds of products such as polyethylene plastic.
“There are tailwinds, not the least of which is because of the energy competitiveness of this country,” Liveris said. “We see a stronger U.S. economy. It really started last year and is now firmly into this year.”
U.S. gross domestic product rose 3 percent in the fourth quarter, the most since the second quarter of 2010, the Commerce Department said today. U.S. unemployment fell to 8.3 percent in January, the lowest since February 2009. Consumer confidence this month rose to the highest in a year, the Conference Board reported yesterday.
Global electronics demand is slowly recovering as consumers buy more tablet computers and smartphones, Liveris said. Demand from China has improved in recent weeks, he said.
“China is back in the market, based on true demand,” Liveris said in a separate interview on Bloomberg Television’s “InBusiness With Margaret Brennan.” “Europe remains a drag, but I was in Germany last week and I’d say even Germany is starting to look a little better.”
In the U.S., businesses are investing as they grow more confident, creating a virtuous cycle of even greater confidence and investment, he said.
“We may be at the beginning of that cycle,” Liveris said. “If we see the order books strong, there could be a case to be said that this economy will start creating jobs again.”
Dow Chemical fell 2.4 percent to $33.51 at the close in New York. The shares have increased 17 percent this year.
The recent drop in prices for ethane, a gas component used to make ethylene, is due to an unusual number of plant- maintenance projects that cut demand, Liveris said. Ethane prices may temporarily rise and squeeze U.S. plastics profitability from current record levels, he said.
“This will be somewhat volatile for a quarter or two,” Liveris said.
New supplies late this year will lead to an ethane oversupply and prices will revert back to current levels though 2017, he said.
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