Chemical activity barometer slides for third consecutive month

WASHINGTON, Oct. 27, 2015 /PRNewswire/ -- The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), dropped 0.3 percent in October, following a upwardly revised 0.3 percent decline in September and 0.1 percent decline in August. Data is measured on a three-month moving average (3MMA). The pattern continues a marked deceleration over activity earlier in the year. Three consecutive monthly declines is significant, but the cumulative decline is modest and likely represents transitory factors such as the volatile swings in equity markets. Accounting for adjustments, the CAB remains up 1.2 percent over this time last year, also a deceleration of annual growth. In October 2014, the CAB logged a 3.9 percent annual gain over October 2013.

The unadjusted CAB reading for October fell 0.1 percent in October, following a 0.2 percent decline in September and a 0.5 percent drop in August.

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. During October chemical equity and product prices rebounded sharply and led overall equity market performance, production and inventories were flat.

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.

U.S. exports continue to fall, influenced by a slowing global economy. Global trade continues to lag behind both global industrial production and broader economic activity.

Chemical Activity Barometer for the Latest Six Months and Year-Ago Month*

*Percentage changes may not reflect index values due to rounding.

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:
24 November 2015
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 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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SOURCE American Chemistry Council

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