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February 25, 2014

CAB ends nine-month growth trend, ACC says

Scott Jenkins

Seasonal factors from an unusual winter across the country have likely skewed statistical reporting from government agencies despite attempts to adjust for them. Nonetheless, the pace of economic expansion continues to moderate from the fourth quarter of 2013, according to the American Chemistry Council's (ACC; Washington, D.C.; www.americanchemistry.com) monthly Chemical Activity Barometer (CAB), released today. The economic indicator, shown to lead U.S. business cycles by an average of eight months at cycle peaks, was flat in February, ending nine consecutive monthly gains on a three-month moving average (3MMA) basis. The barometer is up 2.1 percent over a year ago, also a slower growth pace on a year/year basis. The CAB reading for December 2013 and January 2014 were revised upwards slightly from earlier reports.

"Economic data for December, January and February are certainly skewed by recent weather events such as the polar vortex that engulfed much of the country," said Kevin Swift, chief economist at the ACC. "It will take some time before the data reflect normalcy, but we know concretely that chemical equity prices strengthened in February and are outpacing that of the broader market, which is very encouraging," he added.

Overall results in the four primary components of the CAB were mixed, with product/selling prices and inventories flat, while equity prices were up and production was down. Swift noted that weekly production-related indicators for February were down most likely due to the recent adverse weather.

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, ACC says. 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.

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