posted on 27 October 2015
from the American Chemistry Council
The Chemical Activity Barometer (CAB) 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 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 November, the components were mixed, with production flat, equity prices up, production down, and inventories continuing to improve.
Caveats on the Chemical Activity Barometer (CAB):
The definition of the CAB:
This index is a mixture of monetary / non-monetary elements with an analysis methodology which is not transparent - and does include some non-chemical industry elements such as the ISM manufacturing index and residential building permits. The composition and concept of the CAB according to the authors:
As this is a relatively new leading index, our biggest concern is backward revision (which degrades real time accuracy). Thankfully (providently?) backward revisions have been relatively small to date.
No single economic forecasting index has proven to have all the answers, as the reason the economy recesses is a combination of changing dynamics. Econintersect will continue to review this leading index and others as part of our monthly economic forecast.
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