posted on 21 June 2016
from the American Chemistry Council
The Chemical Activity Barometer (CAB) expanded 0.8 percent in June following a revised 0.9 percent increase in May and 0.7 percent increase in April. All data is measured on a three-month moving average (3MMA).
Accounting for adjustments, the CAB remains up 2.5 percent over this time last year, a marked deceleration of activity from one year ago when the barometer logged a 2.7 percent year-over-year gain from 2014. On an unadjusted basis the CAB jumped 0.4 percent in June, following a similar 0.4 percent gain in May. The CAB is signaling higher U.S. business activity through the end of the year.
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.
In June, all four categories for the CAB improved for the third month in a row. Production-related indicators were positive, with improvement in plastic resins used in packaging and trends in construction-related resins, pigments and related performance chemistry were positive and suggest recovering housing activity. Equity prices further gained in June, joined by a firming in product prices. Inventories and other downstream indicators were positive.
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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