Output in the chemical industry (excluding pharmaceuticals) is expected to grow by 2.7percent in 2007, compared with 2.1percent in 2006, according to the spring Economic Outlook of Cefic, the European Chemical Industry Council. The year 2008 may show a modest slowdown, possibly reaching growth of 2.3percent.

The European chemical industry started the year 2007 on a positive note. During the 1st quarter, output of the chemical industry (excluding pharmaceuticals) rose by 3.6percent compared with the same quarter of the previous year.

The chemical business confidence index for the coming months remains at a high level. Most countries are likely to benefit from a relatively good macroeconomic environment for the EU, with strong domestic demand and favourable external EU trade development, and Germany acting as a locomotive within the European Union.

Industry generally seems to have coped better than expected with high oil prices. Despite the increase in oil prices over recent years, the dampening effects of oil prices on industrial activity have caused less damage than anticipated.

The various chemical sectors are impacted to differing degrees by the global economic climate. Petrochemicals and polymers should show a recovery in 2007 after a very modest year 2006, mainly affected by maintenance problems.

Pharmaceuticals, less sensitive to cyclical factors, are expected to grow at their trend level (5percent) in 2007 after an excellent year 2006.

Inorganic chemicals' growth should stabilise around 2percent. Speciality chemicals are expected to be less dynamic in 2007, mainly affected by the slowdown in some major customer sectors such as construction.

Consumer chemicals continue to benefit from the strong domestic demand and are expected to grow at above 4percent in 2007.

Looking ahead, all chemical sub-sectors are expected to grow at a lower rate in 2008 due to the slowdown in global economic activity. In this context, Cefic expects for 2008 a production increase of 2.3percent (excluding pharmaceuticals). Pharmaceutical production should continue to develop above average so that chemical production including pharmaceuticals should grow by 2.9percent.

After a very good year 2006, the world economy is expected to lose some momentum in 2007 but growth remains fairly robust.

One of the key factors is the mid-cycle slowdown of the US economy. Looking ahead, the world economy is likely to experience a slowdown in 2008. EU GDP is expected to grow by 2.7percent in both 2007 and 2008.

For more information, www.cefic.org