The Chemical Activity Barometer (CAB) a leading economic indicator created by the American Chemistry Council (ACC; Washington, D.C.; www.americanchemistry.com), rose 2.7 percent in July on a three-month moving average (3MMA) basis following a 0.1 percent gain in June. On a year-over-year (Y/Y) basis, the barometer fell 8.9 percent in July, ACC said.
The unadjusted data show a 1.3 percent gain in July following a 3.4 percent gain in June and a 3.6 percent gain in May. The diffusion index rose to 41 percent. 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 1.36 points and the May reading was revised upward by 1.40 points.
“With three consecutive months of gains, the latest CAB reading is consistent with recovery in the U.S. economy,” 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.
Production-related indicators were mixed in July. Despite improvement in new home sales, housing starts and building permits, trends in construction-related resins, pigments and related performance chemistry were soft. Reflecting a recovery in light vehicles and other industries, resins and chemistry used in durable goods were mixed. Plastic resins used in packaging and for consumer and institutional applications were mixed. Performance chemistry strengthened, while U.S. exports were mixed. Equity prices gained, and product and input prices strengthened. Inventory and other supply chain indicators turned 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.