Gains in US housing, consumer spending drive chemicals barometer

23 October 2012 17:26  [Source: ICIS news]

WASHINGTON (ICIS)--A chemicals industry leading economic indicator rose in October from September for the fourth straight monthly gain, driven by the US housing sector recovery and rising consumer spending, a report said on Tuesday.

The American Chemistry Council (ACC) said that its chemical activity barometer (CAB) rose in October to a reading of 90.7, up by 0.6% from the September reading of 90.2.

ACC chief economist Kevin Swift said that strong growth in the CAB for October “was driven in particular by rising activity in construction-related plastic resins, coatings, pigments and other chemistry”.

Those chemical product gains, he said, are “consistent with reports last week that highlighted that home construction was at its highest level for four years”.

He said that monthly CAB data “have been signalling this recovery in housing for some time now, and our indicators suggest that the outlook for the housing sector will continue to improve into 2013”.  That outlook is shared by the US housing industry.

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.

In addition to reflecting strong gains in the US housing sector, the October CAB “also shows notable gains in consumer and institutional applications and in retail sales”, Swift said.

“This suggests that overall US consumer confidence is improving and helps to lower the odds of another US recession,” he added.

However, Swift noted that “uncertainty arising from the impending fiscal cliff and the ongoing threat of worsening conditions in Europe or China continues to pose significant risks to any US economic recovery.”

The “fiscal cliff” refers to automatic and major US income tax increases and federal budget cuts that will be triggered at year end. 

Those additional taxes and spending reductions potentially could cause a new downturn in the US economy, unless Congress and the White House agree to modify them before 1 January.

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

By: Joe Kamalick
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