US Chemical Industry Faces Prolonged Slowdown as Recovery Deferred to Mid-2026

The American Chemistry Council (ACC) has released its 2025 Year-End Economic Outlook Report, projecting that weak growth in US chemical production and broader industrial activity will extend into 2026. According to the report, US chemical output is expected to rise by just 0.7% in 2025, before slowing further to 0.3% in 2026.

While overall economic uncertainty has eased somewhat, the ACC notes that persistent headwinds remain, including trade volatility and elevated interest rates. From late 2024 through early 2025, US manufacturing momentum weakened as shifts in tariff policies and high customer inventory levels weighed on output across chemical-consuming industries. Looking ahead, the ACC anticipates a recovery inflection point around mid-2026, with momentum strengthening in the second half of the year. The delayed impacts of industrial capacity expansion plans and interest rate cuts are expected to support faster growth from late 2026 through 2027.

Performance across chemical segments continues to diverge. Specialty chemicals posted overall growth of 4.3% in 2025, driven largely by an 8.4% increase in coatings. However, the segment is projected to contract by 0.2% in 2026, with coatings growth slowing sharply to 0.4%. Basic chemicals recorded marginal growth of 0.1% in 2025, as declines in inorganic chemicals and plastic resins partially offset gains elsewhere. Growth in basic chemicals is forecast to rebound to 1.2% in 2026, although production of synthetic rubber and man-made fibres is expected to decline. Agricultural chemicals and household chemicals remain under sustained pressure, with output projected to fall by 1.0% and 1.5% respectively in 2026. In 2025, agricultural chemical production increased by 2.7%, while household chemical output declined by 2.2%.

End-use markets also showed uneven trends. Of the 20 downstream sectors tracked in 2025, 11 recorded declines in chemical consumption, including a 3% contraction in apparel, while semiconductors and electronics led growth with a 12% increase. Artificial intelligence (AI) emerged as the primary growth engine, driving US corporate investment growth to 4.1% in 2025 and directly boosting demand for semiconductor materials and data centre cooling chemicals. By contrast, non-AI sectors faced reduced investment plans amid high interest rates and rising raw material costs, partially offsetting overall gains. Corporate investment growth is expected to moderate to 2.6% in 2026.

Consumer market performance also diverged. High-income households increased spending amid strong equity markets, supporting overall household consumption growth of 2.6% in 2025. However, the ACC expects consumption growth to slow to 1.8% in 2026.