Chemical Activity Barometer signals increase in US business activity

Chemical Activity Barometer is leading economic indicator derived from a composite index of chemical industry activity

WASHINGTON– The Chemical Activity Barometer (CAB) expanded 0.6 per cent in April following a revised 0.1 per cent increase in March and 0.2 per cent decline in Feb.

Photo: Chevron petrochemical plant in Texas.

All data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB, a leading economic indicator created by the American Chemistry Council (ACC), remains up 1.8 per cent over this time last year, a marked deceleration of activity from one year ago when the barometer logged a 2.7 per cent year-over-year gain from 2014.

On an unadjusted basis the CAB jumped 1.4 per cent, following a solid 0.8 percent gain in March.

In April, production-related indicators were positive, with improvement in plastic resins used in packaging and trends in construction-related resins, pigments and related performance chemistry suggesting a housing recovery.

Equity prices rebounded significantly in April, joined by a firming in product prices. Inventories and other downstream indicators were positive.

The Chemical Activity Barometer 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.

Announced and Expected Plastics Industry Investment
Motivated by Shale Gas Advantage ($ billions).

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 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).