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Chemical Activity Barometer (CAB) notches tenth consecutive monthly gain
WASHINGTON (May 21, 2013) – Tempered expansion of the U.S. economy continues, according to the American Chemistry Council’s (ACC) monthly Chemical Activity Barometer (CAB) released today. The economic indicator, shown to lead U.S. business cycles by an average of eight months at cycle peaks, increased 0.1 percent over April on a three month moving average (3MMA) basis. This is the barometer’s tenth consecutive monthly gain, following downward revisions for March and April of 0.4 percent for both months. Production of plastic resins used in consumer and institutional applications continues to expand, suggesting further economic gains driven by the consumer. The findings are consistent with other economic data released in recent days showing a six-year high in consumer sentiment. 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 leads that of the overall economy.
“On a year over year basis, the barometer is up 3.1 percent over May 2012,” said Dr. Kevin Swift, chief economist at ACC. “The growth is slower than it was in the first quarter. There’s a modulation created by continued growth in consumer applications of chemical and plastics products, coupled with a softening of construction-related plastic resins,” he said. Key components comprising the CAB showed production, product prices and inventories were flat, while equity prices showed positive gains.
The business of chemistry is a $760 billion enterprise and one of America’s most significant manufacturing industries, with more than ninety-six percent of all manufactured goods touched by products of chemistry.
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 1919, it has been shown to lead the National Bureau of Economic Research (NBER) cycle dates, by two to 14 months, with an average lead of eight months at cycle peaks. NBER is the organization that provides the official start and end dates for recessions in the United States.
Notes to Editors
The CAB 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. 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.
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 1919, it has been shown to provide a longer lead (or perform better) than NBER, by two to 14 months, with an average lead of eight months at cycle peaks. 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 next CAB is currently planned for: June 25, 2013 | 9:00 a.m. Eastern Time.
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 ACC, 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.