USA: Chemical Activity Barometer Slight Decline in US Chemicals Activity
The Chemical Activity Barometer (CAB) slipped 0.1 % in April to 121.6 % on a three-month moving average (3MMA) basis. This follows six consecutive monthly gains and a dip from the barometer’s highest point since modeling began.
Washington/USA — Despite the decline in April 2018, the barometer remains up 3.8 % on a 3MMA compared to a year earlier. Additionally, all four major components remained strong. April production-related indicators improved with US exports rising again and performance chemistries gaining strength. Equity prices, along with product and input prices also rebounded while inventory remained very positive.
The diffusion index rose to 76 %. This index marks the number of positive contributors relative to the total number of indicators monitored.
The chemical industry has been found to consistently lead the US economy’s business cycle. According to the American Chemistry Council, this is due to the industry's early position in the supply chain. Therefore this barometer could 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.
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen 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.