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Leading Economic Indicator Suggests Consumer Confidence Strengthening; Notches Seventh Consecutive Monthly Gain

February 28, 2013

The American Chemistry Council's (ACC) monthly Chemical Activity Barometer (CAB) continues to show a slowly expanding U.S. economy, increasing 0.6 percent over January on a three-month moving average (3MMA) basis. The year over year 3MMA showed a 2.9 percent gain over February 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. February was the CAB's seventh consecutive monthly gain.

"The increase in chemical industry activity continues to be a good sign for the overall health of the economy," said Dr. Kevin Swift, chief economist at the ACC. "But uncertainty is still present and the impending sequester is likely to stifle growth slightly for the remainder of the year. The bright spots continue to be increasing activity in construction-related coatings, pigments, and plastic resins, all suggesting a continuing recovery in the housing market. Likewise, plastic resins used in consumer and institutional applications are growing faster, hinting at stronger consumer confidence."

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.

Reflecting the findings of the CAB, a survey published Monday by the National Association for Business Economists (NABE), found that more than 95% of the forecasters surveyed believe that growth in real GDP in 2013 is likely to be negatively affected by uncertainty surrounding the U.S. fiscal imbalances and issues linked to the continuing resolution, sequestration, and the debt ceiling. Participants in the NABE survey also expect that real personal consumption expenditures will continue last year's 1.9% growth rate in 2013 and then accelerate to 2.5% growth in 2014. Panelists also suggested strong growth in residential investment, housing starts, and home prices.

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. NBER is the organization that provides the official start and end dates for recessions in the U.S.