The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC; Washington, D.C.; www.americanchemistry.com), rose 0.8% in June on a three-month moving average (3MMA) basis following a 1.3% gain in May. On a year-over-year (Y/Y) basis, the barometer rose 19.5% in June (3MMA), ACC said.
The unadjusted data show a 0.1% decline in June, primarily due to weakness in equities, following a 1.3% gain in May. The diffusion index reached 85% in June. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for May was revised upward by 0.73 points and that for April was revised upward by 0.35 points. The June data are provisional and subject to revision.
“In summary, the latest CAB reading is consistent with expansion of commerce, trade and industry,” said Kevin Swift, chief economist at ACC. “The year-over-year gains have likely peaked, suggesting a potentially slower pace of expansion.”
The CAB has four main components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators.
In June, production-related indicators were positive. Trends in construction-related resins and related performance chemistry were solid. Resins and chemistry used in other durable goods were strong. Plastic resins used in packaging and for consumer and institutional applications were positive. Performance chemistry for industry was largely positive. Exports were positive, while equity prices fell back. Product and input prices were positive, as were inventory and other supply chain indicators.
The CAB is a leading economic indicator derived from a composite index of chemical industry activity. Due to its early position in the supply chain, chemical industry activity has been found to consistently lead the U.S. economy’s business cycle, and the barometer can be used to determine turning points and likely trends in the broader economy. Month-to-month movements can be volatile, so a three-month moving average of the CAB reading is provided. This provides a more consistent and illustrative picture of national economic trends.