The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), increased by 0.1 percent in July. This follows consecutive monthly gains during the second quarter, despite downward revisions in May and June. Data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB remains up 2.1 percent over this time last year, a slight deceleration of annual growth as compared to this time last year.
The CAB has four primary components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators. During July, chemical equity prices were down, while product prices and production were flat, and inventories continued to improve.
The Chemical Activity Barometer is a leading economic indicator derived from a composite index of chemical industry activity. 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.
Applying the CAB back to 1919, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve's Industrial Production Index.
"A number of trends remain evident as we head into the second-half of the year," said ACC chief economist Kevin Swift. "There was upward momentum in plastic resins used in light vehicles, which are on track for a very good sales year, but we also continue to see declines in oilfield chemicals and U.S. exports overall, largely as a result of softer oil prices and a strong U.S. dollar. Despite these modest headwinds, the Chemical Activity Barometer is still signaling slow, albeit potentially accelerating, gains in business activity into the early part of 2016."
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. The CAB was developed by the economics department at the American Chemistry Council.
The next CAB is currently planned for August 25, 2015.
For related articles, news, and equipment reviews, visit our Equipment Zones
Click here for a List of Equipment Manufacturers
Click here for information about the upcoming Powder & Bulk Solids Texas Conference/Exhibition