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--INDEX SIGNALS SLOW GROWTH FOR REMAINDER OF YEAR--
- Softening of export markets expected to continue.
- Barometer suggests similarities to 2010 and 2011 economic cycles.
WASHINGTON, D.C. (August 21, 2012) – The American Chemistry Council (ACC) today released the third monthly report of its Chemical Activity Barometer (CAB), a leading economic indicator derived from a composite index of chemical industry activity. The August CAB showed a 0.4 percent growth over the previous month. This is the second monthly increase in the CAB, and follows upward revisions for June and July. The upward trend suggests slow economic growth for the remainder of the year.
“The August CAB data indicates gradual economic growth, similar to what we saw in July, driven primarily by improving equity prices and positive trends in construction and light vehicle related chemical production,” said Dr. Kevin Swift, Chief Economist at ACC. “This uptick in growth follows three consecutive months of decline and is comparable to patterns observed in 2010 and 2011. The CAB is back at its May 2012 level and is over one percent higher than it was a year ago.”
The chemical industry’s early position in the supply chain uniquely positions the CAB against other economic indicators. The CAB provides a long lead for business cycle peaks and troughs and can help identify emerging trends in the wider U.S. economy within sectors closely linked to the business of chemistry such as housing, retail and automobiles. Applying the CAB back to 1947, it has been shown to lead the National Bureau of Economic Research (NBER), by two to 14 months, with an average lead of eight months. NBER is the organization that provides the official start and end dates for recessions in the U.S.
There were mixed trends in some areas of the August CAB data, with the production of plastic resins used in consumer and institutional applications remaining tepid, as they have been in previous months. The data also suggests a continued slowing of U.S. exports.
Notes to Editors
This is the third monthly report of the CAB. It was developed by the economics department at ACC. 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.
The CAB’s three-month moving average (3 MMA) increased in August, suggesting steady but slow growth prospects in the months ahead. The June and July CAB was revised upward from last month’s report, from 88.5 for both months to 88.8 and 89.0, respectively.
Of its key indicators, production-related indicators, chemical company equities grew while production and inventories remained flat, while prices continued to decline. Other conclusions over the past three-month moving average basis and how this compares to August 2011:
The CAB comprises indicators relating to the production of chlorine and other alkalies, pigments, plastic resins and other selected basic industrial chemicals; chemical company stock data; hours worked in chemicals; publicly sourced, chemical price information; end-use (or customer) industry sales-to-inventories; and several broader leading economic measures (building permits and new orders). Each month, ACC provides a barometer number, which reflects activity data for the current month, as well as a three-month moving average. 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.
Applying the CAB back to 1947, it has been shown to provide a longer lead (or perform better) than the National Bureau of Economic Research, by two to 14 months, with an average lead of eight months. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of three months. The median lead was also three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2007 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
The chemistry industry is one of the largest industries in the United States, generating $760 billion. The manufacturing sector is the largest consumer of chemical products, and 96 percent of manufactured goods are touched by chemistry.
The next CAB is currently planned for: September 25, 2012 | 9:00 a.m. EDT
The CAB is designed and prepared in compliance with ACC’s Antitrust Guidelines and FTC Safe Harbor Guidelines; does not use company-specific price information as input data; and data is aggregated such that company-specific and product-specific data cannot be determined.
Note: Every effort has been made in the preparation of this publication to provide the best available information. However, neither the American Chemistry Council, nor any of its employees, agents or other assigns makes any warranty, expressed or implied, or assumes any liability or responsibility for any use, or the results of such use, of any information or data disclosed in this material.