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Comment Business & Economics

Chemical Activity Barometer rose in January, 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), jumped 0.6 percent in January on a three-month moving average (3MMA) basis, following a 0.1 percent gain in December. On a year-over-year (Y/Y) basis, the barometer rose 1.4 percent.

The unadjusted January data showed a 1.0 percent gain following a 0.5 percent increase in December and a 0.4 percent gain in November. The diffusion index rose to 62 percent in January. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for December was revised upward by 0.33 points and that for November was revised downward by 0.22 points, ACC says.

“The CAB signals gains in U.S. commerce into the third quarter of 2020,” 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 swelled in January, according to ACC. Trends in construction-related resins, pigments and related performance chemistry improved, suggesting further gains in housing. Plastic resins used in packaging and for consumer and institutional applications were mixed. Performance chemistry improved, while U.S. exports were weak. Equity prices rose, while product and input prices were mixed. Inventory and other indicators were mixed.

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 this 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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