Mark J. Costa
Chairman and Chief Executive Officer at Eastman Chemical
So, it's a great question. And it's one that, as you know and everyone knows, it's a little difficult to call in the moment on what's going on in demand relative to destocking. And I think you got to take it market by market. So the place where we have the greatest headwind is in retail discretionary spend around the planet, especially in Europe and the US.
What you had happened I think and it's been well documented is, we all knew there was going to be a shift from people moving back to more services probably leisure from sort of just buying consumer goods in the COVID situation.
But I don't think anyone really understood the significance of that combined with extreme inflation on how much the pivot could turn into being. So, people stay committed to travel as we all know from the airlines. But with this extreme inflation affordability for everything else in our life, was very constrained. And so they've really cut back on anything that's a discretionary spend.
And then you had all these ships loaded with all kinds of consumer goods caught on the ocean, caught in ports and it all showed up in the second quarter and you saw Walmart, Target, Best Buy, et cetera have a huge problem on retail inventory to sales that continues to now.
Unfortunately, the wholesale chain supplying it doesn't have that much of an inventory, but you still have a huge amount of destocking occurring at the retail level. And you can see that flowing through and impacting some of our customers like Whirlpool or Electrolux and the announcements that they have out there. So you get a pretty significant decline, that's both the demand and a significant destocking event that's occurring, as we are in the fourth quarter. And I'd say, that's the one part of the market. It's a little hard to call to say, when that sort of combined destocking demand situation plays itself out.
When you look at the broader set of what's going on, there are other factors impacting the market. So you've got Europe in stagflation where high energy costs and high inflation is driving a drop in consumer demand, but energy costs are staying high. You've got China with a no-COVID policy, constraining consumer behavior and a B&C industry that's been in trouble for over a year. And the US building construction market is not doing well either as you can see in all the housing data that's been coming out recently even in the third quarter GDP number. So, that impacts a lot of demand across our portfolio.
The B&C is not off as much especially in North America. It's quite sort of -- there's a lot of momentum in that market of houses still being completed and painted and appliances being brought forward, but you can see that coming off as you go into next year. And then, you even have even stable markets that -- like a P&G and other markets out there, who are doing well, but they're still looking at their inventory and going to destock high-cost inventory to generate cash for the end of the year and position themselves for lower prices in the future. So, you've got modest destocking going on in stable markets that I think will play itself out by the end of the year. You've got Europe and China which has been challenged for a while, so that destocking I think is largely playing itself out by the end of the year. The US has more in the earlier phase of that destocking and change for what's going on in the marketplace. So, those are sort of the way we see it around the world.
And then, you've got positives, right? So the automotive trends are good. You've got recovery that we're already seeing as a benefit in the third quarter and sequential improvements into the fourth quarter. You've got the EV trends, where we make an exceptionally large amount of money relative to an ICE car 2.5, three times as much value. So, as those are becoming more part of the mix that gives us another mix upgrade.
And you've got consumers that are still in a financial -- consumers in a financial system are still relatively healthy, that sort of balances out some of these trends. So, we think that a good amount, greater than 50% of destocking plays itself out through the end of the fourth quarter. And so that means, as you look at next year, with the destocking being more behind us and returning to sort of what we're thinking about as mild recession terms, demand improves in a meaningful way as you get past the fourth quarter from a primary market demand point of view.
And then on top of that, as we look at next year, if we get innovation happening across our marketplace that's going to drive a lot of growth. And you've got the lack of the outages that we had this year that hit us by about $100 million of missed volume mix that put us well below market demand this year. So, there's a lot of upside in that available capacity and a lower planned shutdown schedule in a meaningful way next year that gives us more volume to sell. So, there's a lot of reasons that as we get through this quarter, some of this destocking behind us, that volume next year will be better, even in a mild recession.