by Bill McBride on 2/21/2017 02:10:00 PM
Tuesday, February 21, 2017
Note: This appears to be a leading indicator for industrial production.
From the American Chemistry Council: Chemical Activity Barometer Continues Steady Climb; Consumer and Business Confidence Strengthening
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), posted a strong gain in February of 0.4 percent, following a similar 0.4 percent gain in January. This follows a steady 0.3 percent gain every month during the third quarter of 2016. All data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB is now up was up 5.0 percent over this time last year, marking its strongest year-over-year performance since September 2010.Click on graph for larger image.
In February all of the four core categories for the CAB improved, with the diffusion index strengthening to 71 percent. Production-related indicators were positive, with the housing report indicating slipping starts, but improving permits. This was coupled with an improvement in U.S. exports. Equity prices also improved at a robust pace, reflecting an improvement in consumer and business confidence. Overall the barometer continues to hint at gains in U.S. business activity through the third quarter.
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).
CAB has increased solidly over the last several months, and this suggests an increase in Industrial Production in 2017.
Posted by Bill McBride on 2/21/2017 02:10:00 PM