Leading Economic Indicator Breaks Three-Year Pattern; Suggests Modest Expansion Will Continue

WASHINGTON, April 23, 2013 /PRNewswire/ -- Despite headlines to the contrary, the U.S. economy remains in a state of 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, increased 0.2 percent over March on a three month moving average (3MMA) basis. This is the barometer's ninth consecutive monthly gain, following an upward revision in March of 0.1 percent. The year over year 3MMA logged a 3.1 percent gain over April 2012. The CAB is a leading economic indicator derived from a composite index of chemical industry activity. Due to its early position in the supply chain, chemical industry activity leads that of the overall economy.

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"We're still seeing growth, albeit slow, and that's good news," said ACC Director of Economics and Policy Analysis Martha Moore. "The data are actually showing a break from the trends of the past three years in which we've had a first-quarter false-positive, only to have things drop off during the second and third quarters of the year," Moore said.

Flattening activity in construction-related plastic resins, coatings, pigments and other building and construction-related chemistry may suggest the pace of the housing recovery will slow. In contrast, plastic resins used in consumer and institutional applications continue to expand, suggesting further gains driven by the consumer, but at a moderated pace. "The growth is decelerating, but overall the Chemical Activity Barometer continues to suggest measured expansion of the U.S. economy through 2013," Moore said.  Positive gains continued in three broad areas: production indicators, product prices and inventories.

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.

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.

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

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

During April, the various components of the CAB:

Where ˄ is continued growing activity; ‒ is flat or insignificant growth in activity; and v is slowing or negative growth (declining activity).

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:
21 May 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 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.

http://www.americanchemistry.com/newsroom

The American Chemistry Council (ACC) represents the leading companies engaged in the business of chemistry.  ACC members apply the science of chemistry to make innovative products and services that make people's lives better, healthier and safer.  ACC is committed to improved environmental, health and safety performance through Responsible Care, common sense advocacy designed to address major public policy issues, and health and environmental research and product testing.  The business of chemistry is a $760 billion enterprise and a key element of the nation's economy.  It is one of the nation's largest exporters, accounting for twelve cents out of every dollar in U.S. exports.  Chemistry companies are among the largest investors in research and development.  Safety and security have always been primary concerns of ACC members, and they have intensified their efforts, working closely with government agencies to improve security and to defend against any threat to the nation's critical infrastructure.

SOURCE American Chemistry Council

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