Tuesday, January 23, 2018

Chemical Activity Barometer Increased in January

by Bill McBride on 1/23/2018 02:29:00 PM

Note: This appears to be a leading indicator for industrial production.

From the American Chemistry Council: Business, Economic Activity Show No Signs of Winter Freeze as 2018 Gets off to Robust Start

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), expanded 0.5 percent in January on a three-month moving average (3MMA) basis and 0.7 percent on an unadjusted basis. This follows an upwardly revised 3MMA gain of 0.7 percent in December and 0.5 percent in November. The CAB is up 4.0 percent compared to a year earlier, indicating a robust economy well into the third-quarter of 2018.
...
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.
emphasis added
Chemical Activity Barometer Click on graph for larger image.

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).

The year-over-year increase in the CAB has been solid over the last year, suggesting further gains in industrial production in 2018.