Leading economic indicator shows deceleration of growth compared to first half of year
- Chemical Activity Barometer growth slows as consumer confidence ebbs -
WASHINGTON, Aug. 26, 2014 /PRNewswire/ -- The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), continued to see moderated upward growth this month, with a 0.2 percent gain over July as measured on a three-month moving average (3MMA). This represented a deceleration from the 0.4 percent gain in July and an average gain of 0.5 percent for the first six months of 2014. Despite the softening pace, the August CAB marked a string of gains going back to April 2013. Though the pace of growth has slowed, current gains have the CAB up a solid 4.3 percent over this time last year, and the barometer remains at its highest level since January 2008.
"Consistent with other recent economic reports, including the Conference Board and the Chicago Fed National Activity Index, the Chemical Activity Barometer continues to point to a slowly expanding U.S. economy, at least through the first quarter of 2015," said Dr. Kevin Swift, chief economist at ACC. "What makes the CAB unique however, is its lead time in predicting the ebbs and flows of the economy, and the slight drag on plastic resins used in consumer and institutional applications parallels the weaker consumer confidence we are seeing," Swift added.
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 August, the components were mixed, with production flat, equity prices and inventories up, and product prices down.
Though the production indicator was flat in August, construction-related coatings, pigments and other performance chemistries remained strong. Likewise, chemical equities outpaced the broader market this month. Commenting further on this month's reading, Swift also noted that despite renewed economic troubles in Europe, China, and Latin America, U.S. exports are picking up with the United Kingdom and our NAFTA partners.
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 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 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 2007 was used) of a reference time series. The latter is the Federal Reserve's Industrial Production Index.
Chemical Activity Barometer for the Latest Six Months and Year-Ago Month*
| Aug-13 |
Mar-14 |
Apr-14 |
May-14 |
Jun-14 |
Jul-14 |
Aug-14 |
||
| CAB |
93.5 |
95.6 |
96.1 |
96.7 |
96.9 |
97.3 |
97.2 |
|
| % M/M |
0.5 |
0.7 |
0.5 |
0.6 |
0.2 |
0.4 |
-0.1 |
|
| % Y/Y |
4.0 |
3.9 |
4.1 |
4.1 |
4.3 |
4.6 |
4.0 |
|
| CAB (3 MMA) |
93.1 |
95.1 |
95.5 |
96.1 |
96.5 |
96.9 |
97.1 |
|
| % M/M |
0.2 |
0.5 |
0.5 |
0.6 |
0.4 |
0.4 |
0.2 |
|
| % Y/Y |
4.0 |
3.0 |
3.6 |
4.0 |
4.2 |
4.3 |
4.3 |
|
*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:
23 September 2014
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.
www.americanchemistry.com
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SOURCE American Chemistry Council
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