Optimism Grows for Future Business Conditions, Hints Leading Economic Indicator; Risks to Consensus Outlook Positive

News provided by

Jul 23, 2013, 09:00 ET

‒ Chemical Activity Barometer (CAB) signals moderately-improving U.S. economy in second-half –

WASHINGTON, July 23, 2013 /PRNewswire-USNewswire/ -- Growth of the U.S. economy is moving from "slow" to "moderate," 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 at cycle peaks, increased 0.2 percent over June on a three-month moving average (3MMA) basis. The barometer is now up 3.9 percent over a year ago, the most since its initial release in June 2012. All four major indicator categories showed growth: production, equity prices, product/selling prices, and inventories. CAB readings for May were revised upward by 0.1 percent while June was revised down by 0.1 percent.

(Photo: http://photos.prnewswire.com/prnh/20130723/DC51066-INFO)

"The Chemical Activity Barometer is signaling a moderately-improving U.S. economy into early-2014," said Dr. Kevin Swift, chief economist at the American Chemistry Council. "Although other recent economic reports have been mixed, fundamentals appear strong, with housing demand still growing and consumers still spending," he added.

Swift pointed out that recent negative housing reports likely reflect a pause rather than a change of trajectory. Permits remain higher than housing starts, mortgage rates remain low, and employment prospects are improving, he explained.

Likewise, plastic resins used in consumer and institutional applications are strengthening. Retail sales are likely to continue to strengthen as moderate job creation outweighs the lingering effects of payroll tax increases, according to Swift.

Earlier this month the S&P 500 reached an all-time record, with chemical equities also nearing all-time highs. Equity prices are often a good indicator of future activity and represent components of most leading economic indicator (LEI) systems, including the CAB.

The CAB is a leading economic indicator derived from a composite index of chemical industry activity. 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 at cycle peaks. NBER is the organization that provides the official start and end dates for recessions in the U.S.

The business of chemistry is a $770 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.

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

	Jul-12	Feb-13	Mar-13	Apr-13	May-13	Jun-13	Jul-13

CAB	89.6	92.4	92.1	92.5	92.7	92.8	93.0
% M/M	0.6	0.0	-0.3	0.4	0.2	0.1	0.2
% Y/Y	-0.1	3.0	2.0	2.8	3.6	4.2	3.8

CAB (3 MMA)	89.4	92.2	92.3	92.3	92.4	92.6	92.8
% M/M	-0.1	0.6	0.1	0.0	0.1	0.2	0.2
% Y/Y	-0.2	3.0	2.7	2.6	2.8	3.5	3.9

*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.

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 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 next CAB is currently planned for:
27 August 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 $770 billion enterprise and a key element of the nation's economy. It is one of the nation's largest exporters, accounting for twelve percent of 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