Publication Date:
Tue, 2013-01-29 09:56
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The American Chemistry Council's (ACC) monthly Chemical Activity Barometer (CAB) showed sustained growth, notching a 0.4 percent gain over December 2012 on a three-month moving average (3MMA) basis.
The year-over-year 3MMA showed a solid 2.8 percent gain over January 2012. The CAB is a leading economic indicator derived from a composite index of chemical industry activity. January marked the CAB's sixth consecutive monthly gain.
"Recent data from the Commerce Department is bearing out what the CAB has been indicating for many months now – that an increasingly solid housing market continues to show signs of momentum and a return to normalcy," said Dr. Kevin Swift, chief economist at the American Chemistry Council, in a release.
Data released last week by the U.S. Department of Commerce showed seasonally adjusted nationwide housing starts rising 12.1 percent in December.
"The chemical industry's early position in the supply chain uniquely positions the CAB against other economic indicators," added Swift. "Throughout last year and into this year we continue to see an acceleration of activity in construction-related plastic resins, coatings, pigments and other chemistry related to the building and construction industry."
Each housing start represents more than $15,000 of chemistry.
The business of chemistry is a $760 billion enterprise and one of America's most significant manufacturing industries, with more than 96 percent of all manufactured goods touched by products of chemistry.
Plastic resins used in consumer and institutional applications also showed signs of growth, suggesting further likely gains in retail sales and consumer spending.
The chemical industry's early position in the supply chain uniquely positions the CAB against other economic indicators. The CAB provides a long lead for business cycle peaks and troughs and 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 1919, it has been shown to lead the National Bureau of Economic Research (NBER) cycle dates, 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 U.S.
The CAB was developed by the economics department at the American Chemistry Council. The chemical industry has been found to consistently lead the U.S. economy's business cycle given its early position in the supply chain, and this barometer can 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. This provides a more consistent and illustrative picture of national economic trends.
