USA: Market Scenario Chemical Activity Barometer Sinks in April: ACC
The American Chemistry Council (ACC) has reported that the Chemical Activity Barometer (Cab) fell 5.5 % in April on a three-month moving average basis following a downwardly revised 2.9 % decline in March.
Washington/USA – The Chemical Activity Barometer (Cab) fell 5.5 per cent in April on a three-month moving average (3MMA) basis following a downwardly revised 2.9 per cent decline in March. On a year-over-year (Y/Y) basis, the barometer fell 7.3 per cent in April.
The unadjusted data shows a 6.7 per cent decline in April following an 8.9 per cent decline in March and a 1.0 per cent decline in February. The diffusion index slumped from 47 per cent to 35 per cent in April. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The Cab reading for March was revised downward by 1.04 points and that for February was revised upward by 0.07 points.
“The latest Cab reading is consistent with a recession,” said Kevin Swift, chief economist at ACC. “The declines of April and March are the most pronounced, pervasive and persistent in the post-World War II period.”
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.
Production-related indicators generally declined in April. Trends in construction-related resins, pigments and related performance chemistry were generally negative. Plastic resins used in packaging and for consumer and institutional applications were mixed. Performance chemistry was negative and U.S. exports were weak. Equity prices are improving. Product and input prices were negative. Inventory and other supply chain indicators were negative.
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 this 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.
Applying the Cab back to 1912, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the Cab leads by one to seven months, with an average lead of four months. The median lead was three months. The Cab is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
The Cab comprises indicators relating to the production of chlorine and other alkalies, pigments, plastic resins and other selected basic industrial chemicals; chemical company stock data; hours worked in chemicals; publicly sourced, chemical price information; end-use (or customer) industry sales-to-inventories; and several broader leading economic measures (building permits and new orders). Each month, ACC provides a barometer number reflecting activity data for the current month, as well as a three-month moving average. The Cab was developed by the economics department at the American Chemistry Council.
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