From Procurement to Profit

Chemical Activity Barometer Continues Gains

The Chemical Activity Barometer, a leading economic indicator created by the American Chemistry Council, notched another solid increase in November over October’s reading.

The gain was on both a three-month moving average (3MMA) basis and an unadjusted basis.

The CAB was up 0.4% and 0.3%, respectively.

The increases continued a bounce back from the effects of Hurricanes Harvey and Irma.

Compared to a year earlier, the CAB is up 3.3% on a 3MMA basis, a pace that continues to suggest further gains in U.S. commercial and industrial activity into 2nd quarter 2018.

The Chemical Activity Barometer has four primary components, each consisting of a variety of indicators: production; share prices; product prices; and inventories and other indicators.

In November, three of these four broad categories continued their climb from the effects of September’s historic storms; only equity markets were soft.

October’s diffusion index remained at 65%. The diffusion index is the number of positive contributors relative to the total number of indicators monitored.

The Chemical Activity Barometer is derived from a composite index of chemical industry activity. The chemical industry has been found to lead the U.S. economy’s business cycle given its early position in the supply chain, and this barometer can be used to determine  trends in the wider economy.

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.

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