Wednesday, February 27, 2019

Chemical Activity Barometer "Flat" in February

by Calculated Risk on 2/27/2019 06:45:00 PM

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

From the American Chemistry Council: Chemical Activity Barometer Is Flat In February

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), posted a 0.0 percent change in February on a three-month moving average (3MMA) basis. On a year-over-year (Y/Y) basis, the barometer is up 0.2 percent (3MMA).
...
“The Chemical Activity Barometer reading was essentially flat in February following three months of decline,” said Kevin Swift, chief economist at ACC. “The cumulative drop was 1.0 percent – still well below the 3.0 percent threshold for a recession signal. The latest CAB signals gains in U.S. commercial and industrial activity through mid-2019, but at a slower rate of growth as compared with a year earlier.”

The government shutdown resulted in delays in publishing many data series that ACC uses to compare the CAB. Such delays can make it more difficult to gauge current economic conditions.

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 softened recently, suggesting further gains in industrial production into 2019, but at a slower pace.