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At Mid-Year, Leading Economic Indicator Still Shows Slowly Expanding U.S. Economy


Contact: Patrick Hurston (202) 249-6506  
Email: patrick_hurston@americanchemistry.com

Chemical Activity Barometer (CAB) strengthens in June

WASHINGTON (June 25, 2013) – The U.S. economy continues its slow growth, 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 0.3 percent over May on a three-month moving average (3MMA) basis. The barometer is up 3.5 percent over a year ago. Heightened production of plastic resins used in consumer and institutional applications continues to expand, suggesting further economic gains driven by the consumer.

“Virtually all production-related indicators strengthened in June,” said Dr. Kevin Swift, chief economist at ACC. “Most notable is the healthy-paced production of plastic resins used in consumer and institutional applications, suggesting the consumer-led economic expansion is still in place,” Swift added. Although conditions in Japan are improving and Europe’s recession appears to be bottoming out, growth in China has slowed and prospects in other Asian markets remain weak, producing a plateau in U.S. export volumes. 

The CAB is a leading economic indicator derived from a composite index of chemical industry activity. 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.

The business of chemistry is a $770 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.

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.

Applying the CAB back to 1919, 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 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: July 23, 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.

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