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Comment Business & Economics

Chemical Activity Barometer rises in July, ACC says

By Scott Jenkins |

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC; Washington, D.C.; www.americanchemistry.com), rose 0.5% in July on a three-month moving average (3MMA) basis following a 0.8% gain in June. On a year-over-year (Y/Y) basis, the barometer rose 16.3% in July (3MMA).

The unadjusted data show a 0.1% advance in July, a slowdown from a 0.3% rise in June and 1.0% gain in May, ACC said. The diffusion index reached 88% in July. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for June was revised upward by 0.14 points and the reading for May was revised downward by 0.34 points. Monthly revisions have generally been positive during the past year. The July data are provisional and subject to revision.

 

“The latest CAB reading is consistent with expansion of commerce, trade and industry, but growth has peaked,” said Kevin Swift, chief economist at ACC.

 

The CAB has four main components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators.

 

In July, production-related indicators were up. Trends in construction-related resins and related performance chemistry were solid and suggest an improving housing market. Resins and chemistry used in other durable goods were strong. Plastic resins used in packaging and for consumer and institutional applications showed firm growth. Performance chemistry for industry was largely positive. Exports grew, reflecting improvement in overseas markets. Equity prices improved, while product and input prices continued to expand, indicating tightness of key markets. Inventory and other supply chain indicators were positive.

 

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 has been found to consistently lead the U.S. economy’s business cycle, and the barometer can be used to determine turning points and likely trends in the broader economy. Month-to-month movements can be volatile, so a three-month moving average of the CAB reading is provided. This provides a more consistent and illustrative picture of national economic trends.

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