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January 28, 2014

U.S. economy recovery likely to continue restrained pace through 2014, CAB indicates

Scott Jenkins

The first Chemical Activity Barometer (CAB) reading of 2014 strengthened slightly, pointing to continued growth and an improving U.S. economy throughout 2014, according to the American Chemistry Council (ACC; Washington, D.C.; www.americanchemistry.com). The barometer in January ticked up to 94.0, increasing 0.2 points over December on a three-month moving average (3MMA) basis. This marks the ninth consecutive monthly gain for the CAB, which is now up 2.6% over a year ago. This growth is at a more moderate pace since the 0.4% gain last seen in September 2013. The CAB is an established leading economic indicator, shown to lead U.S. business cycles by an average of eight months at cycle peaks, and four months at cycle troughs.

“Slow and steady isn’t a bad thing when you consider the alternative,” said Kevin Swift, chief economist at the ACC. “This recovery seems to lag compare to previous post-recession recoveries, but overall the fundamentals remain strong, including the ongoing expansion in chemistries related to construction and consumer-related resins, as well as light vehicle sales,” he added. Pointing to a particularly bright spot, Swift noted that there have been strong gains of late in electronic chemicals, food additives, foundry chemicals, lubricant and paint additives, mining chemicals, and printing ink.  

Overall results in the four primary components of the CAB were mixed, with production and inventories up, product/selling prices flat, and a drop in equity prices.

ACC’s 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.

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