The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC; Washington, D.C.; www.americanchemistry.com), rose 0.1 percent in July on a three-month moving average (3MMA) basis, improving upon June and May performances which were essentially flat. The barometer is up 3.9 percent year-over-year (Y/Y/), a slower pace than of that earlier in the year, ACC says. The unadjusted CAB also increased, notching a 0.2 percent gain, up from a 0.1 percent gain in June. July readings indicate a continued expansion of U.S. commercial and industrial activity well into the first quarter 2019.
The Chemical Activity Barometer has four primary components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators.
All four broad categories remained strong, according to the ACC. Production-related indicators in July were mixed as trends in construction-related pigments and related performance chemistry were slightly positive and suggested further gains in housing activity. Reflecting a strong retail and food services sector, plastic resins used in packaging and in many other consumer and institutional applications were mixed and suggest further but modest gains in retail sales. U.S. exports also continued to rise as did equity prices; product and input prices; and inventories.
The diffusion index slipped from 82 percent to 71 percent and the annualized six month growth rate slowed. This index marks the number of positive contributors relative to the total number of indicators monitored.
The Chemical Activity Barometer is a leading economic indicator derived from a composite index of chemical industry activity. The chemical industry has been found to consistently lead the U.S. economy’s business cycle given its early position in the supply chain, and this barometer can be used to determine turning points and likely trends in the wider economy. Month-to-month movements can be volatile so a three-month moving average of the barometer is provided. This provides a more consistent and illustrative picture of national economic trends.