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May 27, 2014
Economic expansion expected through year's end, ACC's CAB suggests
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC; Washington, D.C.; www.americanchemistry.com), has reached its highest peak since February 2008, while also posting its highest year-over-year gain since September 2010. Measured on a three-month moving average (3MMA) basis, the CAB realized a healthy 0.8% gain over April, and is up a solid 4.1% over this time last year. The data reflect upward revisions for the previous five months, suggesting more than just a rebound from the adverse winter months.
“The index reveals that the underlying fundamentals are good,” said Dr. Kevin Swift, chief economist at ACC. “Based on weekly data, production-related indicators showed healthy growth in May, beating the average 0.3% gain in the first quarter,” he added.
Though housing starts improved last month and sales of existing and new homes were up, activity within the construction-related plastic resins segment was mixed. In contrast, activity within the pigments and other performance chemistry markets, such as adhesives, sealants, and paint additives was stronger. Likewise, upward performance within the electronics chemicals sector was encouraging as the semiconductor industry is a bellwether of the industrial cycle. Furthermore, gains in oilfield chemicals suggest that the boom in unconventional oil and gas continues to progress, enhancing overall economic growth.
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. Overall results in the four primary components of the CAB were positive, with chemical equity prices continuing to outpace the broader market.
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.