by Bill McBride on 12/20/2016 11:07:00 AM
Tuesday, December 20, 2016
Note: This appears to be a leading indicator for industrial production.
From the American Chemistry Council: Chemical Activity Barometer Ends Year on Strong Note; Suggests Expanded Business Growth in Early 2017
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), 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 data is measured on a three-month moving average (3MMA). On an unadjusted basis the CAB climbed 0.6 percent in December, and 4.8 percent for the year.Click on graph for larger image.
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.
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.
This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production. It does appear that CAB (red) generally leads Industrial Production (blue).
Currently CAB has increased solidly over the last several months, and this suggests an increase in Industrial Production over the next year.
Posted by Bill McBride on 12/20/2016 11:07:00 AM