Chemical Activity Barometer rises in September, indicates recovery of economy

Written on: September 30, 2020 by SprayTM

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 1.6% in September on a three-month moving average basis following a 2.7% gain in August. On a year-over-year basis, the barometer was down 4.3% in September.

The unadjusted data show a 0.7% gain in September following a 2.2% gain in August and a 1.9% gain in July. The diffusion index rose from 35% to 65% in September. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for August was revised upward by 0.89 points and that for July was revised upward by 0.42 points.

“With five consecutive months of gains, the September CAB reading is consistent with recovery in the U.S. economy,” said Kevin Swift, Chief Economist at ACC.

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.

In September, production-related indicators were mixed. Trends in construction-related resins, pigments and related performance chemistry were positive and suggest further gains. Resins and chemistry used in light vehicles and other durable goods were positive. Gain in plastic resins used in packaging and for consumer and institutional applications were mixed as economic recovery in the service sector slows. Performance chemistry improved, while U.S. exports were mixed. Equity prices flattened, while product and input prices were fairly stable. Inventory and other supply chain indicators were positive.

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 the barometer can be used to determine turning points and likely trends in the broader economy.

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