If you watch TV, you know that there’s big money in pharmaceuticals. Every other commercial seems to hawk some drug that will cure or treat one thing or another. 

(I enjoy hearing the extensive – and sometimes odd – side effects, especially one recently where one of the side effects is the very condition that the medication is intended to treat.)

Pharmaceutical companies can afford to run a plethora of commercials because they are selling lots of drugs. Adjusted for inflation, sales are up about 40% since 2017 — and the commercials help them sell even more. To sell more drugs, you must make more drugs.

Why does this matter?

The Link Between Chemicals Production and Manufacturing

We traditionally think of chemicals production as a bellwether for the overall manufacturing industry, and manufacturing is a huge engine of truck freight volume — far more than retail sales, for example. 

Monsanto once had an ad slogan, “Without chemicals, life itself would be impossible.” To put a finer point on it, we might declare, “Without chemicals, manufacturing itself would be impossible.” 

Chemicals are an important component in some manufactured goods, but they are especially key to the manufacturing process. As manufacturers order more of the chemicals they need to produce stuff, we expect more stuff to be produced. 

However, the strength in manufacturing of pharmaceuticals and other medicines is distorting the data on the broader chemicals manufacturing sector.

What Are Chemicals Production Numbers Saying?

Preliminary figures from the latest months show pharmaceutical and medicine production at its highest level since late 2009, when output was in a prolonged slide. 

While pharmaceuticals output itself has some freight value, it’s nothing compared to the wide range of manufactured goods that depend on other chemicals.

Total chemicals production recently has been the strongest since 2012. But total manufacturing output in August was barely any stronger than it was a year ago and below levels seen at various periods between 2012 and today.

Manufacturing production is not declining; it’s just sluggish, much like it was in 2016.

The Changing U.S. Economy

Excluding pharmaceuticals and medicine, chemicals manufacturing is, like overall manufacturing, not bad but also not great. The data is volatile, but a few outliers aside, recent data shows the production of chemicals excluding pharmaceuticals at around the strongest levels since the beginning of 2019. 

Before then, however, you must go back to the Great Recession to find consistent production levels lower than they are now.

Drilling down another layer, it’s a mixed bag. 

Industrial gas production is running at close to its highest level since 2008, and agricultural chemicals — pesticides, fertilizers, etc. — are close to their highest output in a decade. On the other hand, the key group of basic chemicals looks more like the broader category of chemicals excluding pharmaceuticals.

As we have seen with computer-related manufacturing and the construction of facilities to support it, the pharmaceuticals industry is reshaping parts of the U.S. economy in ways that require us to dig a little deeper when trying to analyze the ramifications for freight.