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ACC's Leading Economic Indicator Breaks Three-Year Pattern, Suggests Modest Expansion Will Continue

May 7, 2013

According to the American Chemistry Council's (ACC) monthly Chemical Activity Barometer (CAB), and despite headlines to the contrary, the U.S. economy remains in a state of slow growth. The economic indicator, shown to lead U.S. business cycles by an average of eight months, increased 0.2 percent over March on a three-month moving average (3MMA) basis. This is the barometer's ninth consecutive monthly gain, following an upward revision in March of 0.1 percent. The year over year 3MMA logged a 3.1 percent gain over April 2012. 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.

"We're still seeing growth, albeit slow, and that's good news," said ACC director of economics and policy analysis Martha Moore. "The data are actually showing a break from the trends of the past three years in which we've had a first-quarter false-positive, only to have things drop off during the second and third quarters of the year."

Flattening activity in construction-related plastic resins, coatings, pigments, and other building and construction-related chemistry may suggest the pace of the housing recovery will slow. In contrast, plastic resins used in consumer and institutional applications continue to expand, suggesting further gains driven by the consumer, but at a moderated pace. "The growth is decelerating, but overall the Chemical Activity Barometer continues to suggest measured expansion of the U.S. economy through 2013," Moore said. Positive gains continued in three broad areas: production indicators, product prices, and inventories.

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