The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC; Washington, D.C.; www.americanchemistry.com), expanded 1.0 percent in May, following a revised 0.8 percent increase in April and 0.1 percent increase in March. All data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB remains up 2.3 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 0.3 percent in May, following a solid 1.7 percent gain in April.
In May, all four categories for the CAB improved for the second 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 still hinting at an ongoing strengthening of the housing sector. Equity prices further rebounded in May, joined by a firming in product prices. Inventories and other downstream indicators were positive. Trends suggest increased business activity into the fourth quarter.
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.
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.