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Key Economic Indicator Gains for Sixth Consecutive Month; Hints at Acceleration for Housing Market


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

‒ Chemical Activity Barometer (CAB) up nearly 3 percent year over year –

WASHINGTON (January 22, 2013) – The American Chemistry Council’s (ACC) monthly Chemical Activity Barometer (CAB) released today showed sustained growth, notching a 0.4 percent gain over December 2012 on a three month moving average (3MMA) basis. The year over year 3MMA showed a solid 2.8 percent gain over January 2012. The CAB is a leading economic indicator derived from a composite index of chemical industry activity. January marked the CAB’s sixth consecutive monthly gain.

“Recent data from the Commerce Department is bearing out what the CAB has been indicating for many months now—that an increasingly solid housing market continues to show signs of momentum and a return to normalcy,” said Dr. Kevin Swift, chief economist at the American Chemistry Council. Data released last week by the U.S. Department of Commerce showed seasonally adjusted nationwide housing starts rising 12.1 percent in December. “The chemical industry’s early position in the supply chain uniquely positions the CAB against other economic indicators,” added Swift. “Throughout last year and into this year we continue to see an acceleration of activity in construction-related plastic resins, coatings, pigments and other chemistry related to the building and construction industry.” Each housing start represents more than $15,000 of chemistry.

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.

Plastic resins used in consumer and institutional applications also showed signs of growth, suggesting further likely gains in retail sales and consumer spending.

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.

Notes to Editors

The CAB was developed by the economics department at the American Chemistry Council. 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’s three-month moving average (3MMA) increased 0.4 percent in January, following an upward revision of December’s 3MMA. The CAB has now increased six consecutive months, suggesting a slowly expanding U.S. economy steady but slow growth prospects for 2013.

Of its key indicators, chemical company equities, production, and product/selling prices were up, while inventories were flat.

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 the National Bureau of Economic Research, by two to 14 months, with an average lead of eight months. 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 chemistry industry is one of the largest industries in the United States, generating $760 billion. The manufacturing sector is the largest consumer of chemical products, and 96 percent of manufactured goods are touched by chemistry.

The next CAB is currently planned for: February 26, 2013 | 9:00 a.m. EST.

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 the American Chemistry Council, 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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