US chemical activity barometer suggests slow second-half growth

21 August 2012 16:42  [Source: ICIS news]

A barometerWASHINGTON (ICIS)--A leading US economic indicator rose slightly in August from July, the American Chemistry Council (ACC) said on Tuesday, marking the second monthly improvement and suggesting modest but improving growth for the rest of this year.

The council said that its newly inaugurated chemical activity barometer (CAB) rose by 0.4% in August to 89.4 from July’s CAB reading of 89.0.

The August gain followed a slim 0.2% improvement in July.

While the two-month run of improvements in the barometer was narrow, it represents a change of direction from declines of as much as 0.7% seen in the previous three months.   

ACC chief economist Kevin Swift said that the CAB gains in July and August “suggest slow economic growth for the remainder of the year”.

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.”

Swift said the August improvement was driven chiefly by improving equity prices and positive trends in construction and chemicals production related to light vehicle manufacturing.

However, he said, the August CAB data also include indications that US export activity is slowing.

That could spell trouble for the still wobbly US economic recovery, which has slowed steadily since the end of 2011.

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.

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

By: Joe Kamalick
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