The American Chemistry Council (ACC) reported that the US specialty chemicals market ended the year on a strong note, posting a monthly gain of 0.3 percent and a year-over-year gain of 4.4 percent, a significant improvement over the first half of the year, and a pace not seen since September 2010.
All changes in the data are reported on a three-month moving average (3MMA) basis. Of the 28 specialty chemical segments ACC monitors, 21 expanded in November and seven experienced declined. During November, large gains (1.0% and over) were noted in cosmetic chemicals, mining chemicals, oilfield chemicals, and specialties.
The Chemical Activity Barometer has four primary components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators.
In December all of the four core categories for the CAB improved. Production-related indicators were positive, despite last week’s announcement that housing starts tumbled. “Housing starts were at a nine-year high,” noted ACC Chief Economist Kevin Swift. “The foundation remains strong. Overall trends in construction-related resins, pigments, and related performance chemistry were positive and suggest further gains in housing next year,” he added. Other indicators, including equity prices, product prices, and inventory were also positive.
The Chemical Activity Barometer is a leading economic indicator derived from a composite index of chemical industry activity. 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.
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.
