New chemicals sector indicator sees US recovery slowing further

26 June 2012 21:47  [Source: ICIS news]

WASHINGTON (ICIS)--The US economic recovery is slowing further, a new chemicals sector report indicated on Tuesday, suggesting that the nation will experience modest or even decreased growth for the rest of this year.

In the inaugural issue of its monthly chemical activity barometer (CAB), the American Chemistry Council (ACC) said that the already wobbly US economy could generate even less growth in the second half.

CAB, the council’s new leading economic indicator, fell by 1.3% in June from a retroactive measure of the barometer for May.

Developed by the ACC’s economics department, the CAB combines data from a range of chemicals and sectors including production of chlorine and other alkalies, pigments, plastic resins and other basic industrial chemicals.

The barometer also factors in chemical company stock data, hours worked in chemicals manufacturing, and publicly available chemicals pricing and inventories. Broader data sets, such as housing starts and new orders for general manufactured goods, also are included, according to ACC chief economist Kevin Swift.

“The chemical industry has been found to consistently lead the US economy’s business cycle given its early position in the supply chain,” the council said, “and this barometer can be used to determine turning points and likely trends in the wider economy.”

The council noted that chemicals production is one of the largest US manufacturing sectors, with $760bn (€608bn) in sales, touching more than 95% of overall US production activity.

“The CAB provides a long lead for business cycle peaks and troughs and can help identify emerging trends in the wider US economy within sectors closely linked to the business of chemistry,” Swift said, including housing, retail and automobiles.

“After a relatively strong start to 2012, the CAB is signalling a slowing of the US economic recovery,” he said.

Retroactive to the beginning of this year, the monthly CAB showed US economic gains of 0.6% in January, 0.2% in February and 0.6% in March.

But beginning with a 0.6% decline in April, the CAB shows economic cooling of 0.7% in May and the sharper 1.3% drop in June.

The CAB indicator of a cooling US economy follows other recent reports suggesting that the nation’s growth is slowing.

US general manufacturers have lowered their outlook for production and GDP growth for this year, and a survey of small firms showed that owners are discouraged and likely will hold back on spending and hiring.

US retail sales fell in May for the second month, and US Fed chairman Ben Bernanke told Congress earlier this month that he anticipates continuing high unemployment and little prospect of an economic upturn.

US GDP growth fell to 1.9% in the first quarter this year after scoring a near-normal 3% GDP expansion in the fourth quarter of 2011.

The CAB has been calculated for the overall US economy back to 1947.

($1 = €0.80)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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