Chemical sector barometer indicates further slowing in US economy

24 July 2012 15:40  [Source: ICIS news]

WASHINGTON (ICIS)--A key indicator of US industrial activity and the overall economy was flat in July after falling for three consecutive months, the American Chemistry Council (ACC) said on Tuesday, suggesting a weak second half and slowing exports.

The council said that its new chemical activity barometer (CAB) held steady at 88.5 in July, the same reading in June.

“July data continue to suggest that broader US economic growth in the second half of 2012 will be weak, while the CAB also suggests a slowing of US exports during the rest of the year,” said ACC chief economist Kevin Swift.

Slowing export activity could have disproportionate impact on the overall US economy because export trade has accounted for as much as 40% of US growth since the recession ended in June 2009, according to the Associated Press.

Consequently, a decline in export trade could further jeopardise the already wobbly US recovery.

The council also noted that a three-month moving average for the chemical activity barometer declined in July, further suggesting “muted growth prospects in the months ahead”.

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 the ACC.

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

Although the CAB flat-lined in July, the three straight months of decline in the measure leading up to July are “historically a sign of slowing economic activity”, the council said.

Applied retroactively, the CAB was at 90.3 in March, fell to 90 in April, then to 89.4 in May and to 88.5 in June.

The continuing weak economic data reflected in the CAB echo multiple other recent reports indicating that the US economy is slowing significantly, in large part because of the ongoing eurozone debt crisis, which in turn is hurting US export sales.

Federal Reserve Board chairman Ben Bernanke said last week that the US economy is decelerating and that a new recession looms in early 2013.

US business economists also reported that they expect the nation’s economy to weaken in the second half, and the International Monetary Fund (IMF) warned that the euro crisis has reached a new and critical stage.

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

By: Joe Kamalick
+1 713 525 2653

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index

Related Articles