Howard Ungerleider
President and Chief Financial Officer at DOW
Thank you Jim, and good morning, everyone. We expect the market dynamics we experienced in late 2022 to continue into early '23. While the pace of inflation has moderated, overall cost levels remain elevated, which has continued to trigger tighter monetary policy in most parts of the world, and is weighing on both business investment and consumer sentiment. The majority of economic forecasts are calling for slower GDP growth globally relative to 2022, although dynamics differ by region, with most regions except Europe still forecasting positive Year-on-Year growth.
In the U.S., we see signs of moderating demand and the continuation of year end destocking trends early in the quarter. Building and construction end markets have been particularly impacted by inflation and rising interest rates with housing starts declining by more than 20% Year-over-Year in December.
Manufacturing PMI contracted for the third consecutive month of 48 while light vehicle sales in the U.S. were down for the full year by 8 percentage points. Easing inflation is leading to improving consumer confidence, albeit from depressed levels in late 2022, while consumer spending remains resilient.
In Europe, we expect demand to remain constrained despite recent improvements in regional energy prices. While the move to five-year highs in gas storage is a positive sign, changing weather forecasts are leading to volatility in the futures markets. High inflation and geopolitical tensions continue to weigh on consumer spending and industrial production.
December Manufacturing PMI has been contracting since July and construction PMI reached its lowest level since May.
In China, while we are very encouraged by recent shifts in COVID policy to ease restrictions and open up orders, we expect these actions to take some time to improve economic activity. This is an area we are closely monitoring as it has the potential to provide a source of significant demand recovery following the Lunar New Year.
And in Latin America, overall, economic growth is expected to slow driven by political tensions, high inflation, and restrictive monetary policy. Given this dynamic backdrop, we will continue to take a region-by-region, business-by-business approach to managing our operations and adapting our businesses to the evolving market realities.
Turning to slide 7, as we highlighted at our last earnings call, we are proactively responding to the current economic environment with a playbook of targeted actions to deliver $1 billion in cost savings. This begins with maintaining a low cost to serve operating model by implementing actions to optimize our labor and service costs, including a global workforce reduction of approximately 2000 roles.
We will continue to increase productivity with end-to-end process improvements now that our digital foundation is in place. And we will also shut down select assets while further evaluating additional actions across our global asset base, particularly in Europe, to ensure long term competitiveness while also enhancing our cost efficiency.
These structural actions are expected to deliver a total of $500 million in EBITDA savings this year. Additionally, we will deliver another $500 million of savings through actions to maximize cash flow, while reducing our operational expenses. This includes decreasing turnaround spend, purchased raw materials, logistics and utilities costs. Importantly we will do this while maintaining safe and reliable operations, which as always remains our top priority. These proactive actions will optimize our cost structure in response to the near-term macroeconomic uncertainty, while maintaining our long-term value creation focus.
Turning to our outlook for the first quarter on Slide 8, in the packaging and specialty plastic segment, improving logistics and lower operating rates led to the fifth consecutive month of inventory declines for U.S. polyethylene in December. Reduced global operating rates are continuing to drive feedstock and input costs down, with ongoing destocking through the value chain impacting functional polymer strength and demand in Europe.
While lower turnaround costs will be a sequential tailwind, we expect lower demand levels in Asia to impact equity earnings, and lower nonrecurring licensing activity from the prior quarter will impact earnings. In total, we expect a $75 million headwind for the segment sequentially.
In the Industrial Intermediates and infrastructure segment, demand remained stable for energy markets and we're monitoring demand for de-icing fluids with a warmer than average winter. However, inflationary pressures and contracting PMI's continue to impact industrial demand, and we expect lower seasonal volumes in building construction end markets. We also anticipate an approximately $25 million headwind due to a third-party outage which is causing a supply disruption on the U.S. Gulf Coast from Winter Storm Elliott.
In the performance materials and coatings segment, we expect demand recovery for performance silicones following year end-customer destocking as well as improved supply availability and lower costs. However, we also anticipate lower siloxane pricing in the quarter as we continue to see pressure from increased industry supply. We expect higher planned maintenance turnaround costs in this segment at our Deer Park acrylic monomer site and performance monomers, all in we anticipate a $25 million tailwind for the segment. In total, we expect the first quarter to be in-line with the fourth quarter performance with a $75 million discrete headwinds I mentioned.
Turning to the full year, we are continuing to provide our best estimates of several income statement and cash-flow drivers. I'll highlight a few notable Year-over-Year inputs. We expect lower equity earnings in the year, down approximately $300 million to $400 million. Total turnaround spending is anticipated to be down by $300 million as we implement our playbook of cost savings actions, while maintaining safe and reliable operations.
We expect share count to remain relatively flat as we plan to continue covering dilution. And finally, we anticipate increasing our capital expenditures to $2.2 billion, well within our DNA of $2.8 billion, as we continue to advance our higher-return, faster payback projects and continue to execute on a decarbonize and growth strategy.
Overall, the macroeconomic backdrop remains dynamic in 2023, we see the potential for additional upside from higher oil to gas spreads, reopening in China following the Lunar New Year, and easing inflation and supply-chain constraints.
We also continue to pay close attention to a range of indicators including pressure from higher interest rates on building and construction, PMI levels, global energy markets and geopolitical dynamics. Dow remains well positioned based on our global footprint, feedstock flexibility and the sustainable solutions we provide for our customers. We will continue to deleverage these competitive advantages to deliver long-term value for our shareholders.
With that, I'll turn it back to Jim.
