Processing Magazine

Chemical Activity Barometer predicts sub-par growth into 2013

September 25, 2012

aerial of Louisiana refineryWASHINGTON — The American Chemistry Council’s monthly Chemical Activity Barometer (CAB), an economic indicator derived from a composite index of chemical industry activity, showed a 0.3 percent growth over August.

This represents the third consecutive monthly increase in the CAB, and follows small upward revisions for the previous three months, the American Chemistry Council announced Tuesday.

Economic outlook for U.S. chemical industry mixed

“While it is encouraging to see three consecutive months of gains, this is not yet cause for celebration. Rather, what we’re seeing is that the CAB is signaling sub-par economic growth into 2013 as the economy continues to face strong headwinds and concerns around the fiscal cliff crystalize,” said Dr. Kevin Swift, chief economist at ACC.

“Interestingly, we are seeing this year’s economy repeat the pattern of 2010 and 2011. At ACC, we’ve compared this situation to the old Charlie Brown comic strip where Lucy holds the football for Charlie but at the last moment as he goes to kick it, she removes it. Just as the first quarter discussion about economic recovery is finally gaining traction, the proverbial football — the recovery — disappears, hence the ‘Charlie Brown’ effect.”

Chemical Activity Barometer suggests slow economic growth

The CAB can help identify emerging trends in the wider U.S. economy within sectors closely linked to the business of chemistry such as housing, retail and automobiles. Applying the CAB back to 1947, it has been shown to lead the National Bureau of Economic Research (NBER), by two to 14 months, with an average lead of eight months. NBER is the organization that provides the official start and end dates for recessions in the United States.

There were mixed trends in some areas of the September CAB data, with production related indicators mostly positive. In particular, further gains in construction-related plastic resins, coatings, pigments and other chemistry suggest the housing market recovery continues, as reflected in last week’s announcement about housing starts rising 2.3 percent in August. Other components were less positive with product and input prices stable and U.S. exports continuing to slow.

Chemical Activity Barometer (CAB)