US chemical activity index nudges higher in August

The August chemical activity barometer (CAB) showed a 0.4% growth from July, reflecting gradual economic growth and several positive trends, the American Chemistry Council (ACC) said on Tuesday.

The CAB is a leading economic indicator derived from a composite index of chemical industry activity, the trade group explained.

This is the second consecutive monthly increase in the CAB, and follows upward revisions for June and July. The upward trend suggests slow economic growth for the remainder of the year.

“The August CAB data indicates gradual economic growth, similar to what we saw in July, driven primarily by improving equity prices and positive trends in construction and light vehicle related chemical production,” said Dr. Kevin Swift, chief economist at the ACC.

“This uptick in growth follows three consecutive months of decline and is comparable to patterns observed in 2010 and 2011. The CAB is back at its May 2012 level and is over one percent higher than it was a year ago.”

The 0.4% August increase in the CAB to 89.4 follows a revised 0.2% gain in July. The index is now 1.1% ahead of year-earlier figures. More detailed CAB figures can be found on the ACC’s news release.

The chemical industry’s early position in the supply chain uniquely positions the CAB against other economic indicators, the ACC says.

The CAB provides a long lead for business cycle peaks and troughs and can help identify emerging trends in the wider US 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 US.

There were mixed trends in some areas of the August CAB data, with the production of plastic resins used in consumer and institutional applications remaining tepid, as they have been in previous months.

The data also suggests a continued slowing of US exports, the ACC said.

Among key indicators, company equities grew while production and inventories remained flat, the group said. Prices continued to decline.

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