The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC; Washington, D.C.; www.americanchemistry.com), rose 0.4 percent in May, following a downward revision of 0.1 percent for April. Compared to a year earlier, the CAB is up 5.0 percent year-over-year, a modest slowing that still suggests continued growth through year-end 2017. All data are measured on a three-month moving average (3MMA).
On an unadjusted basis, the CAB climbed 0.2 percent in May. On a year-over-year basis, the unadjusted CAB is up 4.1 percent, an improvement over one year ago, but easing from first quarter comparisons.
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 May, two of the four broad categories improved, while the diffusion index (number of positive contributors relative to total indicators monitored) fell to 53 percent from 82 percent in April. Production-related indicators were mixed while equity prices retreated again. Input and product prices were rising and inventory and other downstream indicators remained positive.
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.