The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council, rose 0.9 percent in October on a three-month moving average (3MMA) basis, a marked deceleration from the 1.5 percent gain in September and 2.6 percent gain in August. On a year-over-year (Y/Y) basis, the barometer was down 3.3 percent in October.

 

The unadjusted data show a 0.1 percent gain in October following a 0.8 percent gain in September and a 1.9 percent gain in August, ACC said. The diffusion index eased from 65 percent to 59 percent in October. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for September was revised downward by 0.26 points and the reading for August was revised downward by 0.30 points. These were volatile months for the data.

 

“With six consecutive months of gains, the October CAB reading remains 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 largely positive. Resins and chemistry used in light vehicles and other durable goods were positive. Gains in plastic resins used in packaging and for consumer and institutional applications were mixed. Performance chemistry and U.S. exports were mixed. Equity prices rebounded, while product and input prices were positive. 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. Month-to-month movements can be volatile, so a three-month moving average of the CAB reading is provided. This provides a more consistent and illustrative picture of national economic trends.