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May 21, 2013

Chemical Activity Barometer shows modest growth in U.S. economy

Scott Jenkins

Tempered expansion of the U.S. economy continues, according to the American Chemistry Council’s (ACC; Washington, D.C.; monthly Chemical Activity Barometer (CAB) released today. The economic indicator, shown to lead U.S. business cycles by an average of eight months at cycle peaks, increased 0.1% over April on a three-month-moving-average (3MMA) basis. This is the barometer’s tenth consecutive monthly gain, following downward revisions for March and April of 0.4% for both months.
Production of plastic resins used in consumer and institutional applications continues to expand, suggesting further economic gains driven by the consumer. The findings are consistent with other economic data released in recent days showing a six-year high in consumer sentiment. The CAB is a leading economic indicator derived from a composite index of chemical industry activity. Due to its early position in the supply chain, chemical industry activity leads that of the overall economy.
“On a year over year basis, the barometer is up 3.1% over May 2012,” said Kevin Swift, ACC chief economist. “The growth is slower than it was in the first quarter. There’s a modulation created by continued growth in consumer applications of chemical and plastics products, coupled with a softening of construction-related plastic resins,” he said. Key components comprising the CAB showed production, product prices and inventories were flat, while equity prices showed positive gains.
In last week’s ACC Weekly Chemistry and Economic Report, ACC said that Overall production of the business of chemistry rose 0.2% to 87.2% of its average 2007 level during April.
Meanwhile, the Organization for Economic Cooperation and Development (OECD) released its composite leading indicator (CLI) for March and the data continue to show improvement relative to late 2012 in most major economies, the ACC report said. In the U.S., the CLI continues to point to economic growth firming. In Japan, it indicates that growth should remain above trend. In the Euro Area as a whole, the CLIs continue to indicate a gain in momentum. The CLIs for the U.K., Canada, Brazil and Russia point to growth close to trend rates. In China, the CLI indicates that growth is returning to trend while for India, it continues to indicate growth below trend.

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