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Chemical Activity Barometer rose 0.1% in March, 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 0.1 percent in March on a three-month moving average (3MMA) basis, the first gain in five months. On a year-over-year (Y/Y) basis, the barometer is down 0.3 percent (3MMA).

The unadjusted measure of the CAB rose 0.3 percent in March following six months of shrinking activity. It declined 0.1 percent in February and had a flat reading in January. The diffusion index rebounded to 65 percent in March, up from 57 percent in February, ACC says. A year earlier, it was 71 percent. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored.

“The CAB continues to indicate gains in U.S. commercial and industrial activity through mid-2019, but at a markedly slower rate of growth, as measured by year-earlier comparisons,” 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 in March were mixed. Trends in construction-related resins, pigments and related performance chemistry were mixed and suggest further slowing in housing activity. Plastic resins used in packaging and in consumer and institutional applications were slightly positive. Performance chemistry and U.S. exports were mixed. Equity prices slumped, while product and input prices rose. Inventory and other indicators were positive.

The CAB 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.

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