Chemical sector barometer says US economy gaining speed

23 July 2013 15:55  [Source: ICIS news]

WASHINGTON (ICIS)--The US recovery is picking up more speed, a key chemicals sector activity measure indicated on Tuesday, suggesting that the nation’s economy will show moderately improving growth into early 2014.

In its monthly chemical activity barometer (CAB), the American Chemistry Council (ACC) said that the indicator rose by 0.2% in July from June, on a three-month moving average, to reach 92.8.

The barometer is now up by 3.9% from a year ago, the council said, and the July measure shows growth in all four major subsidiary categories:  production, equity prices, product selling prices and inventories.

“The chemical activity barometer is signalling a moderately improving US economy into early 2014,” said ACC chief economist Kevin Swift.

“Although other recent economic reports have been mixed, fundamentals appear strong, with housing demand still growing and consumers still spending,” he said.

Swift noted that a recent report showed a sharp drop in new home construction, but he said that downturn “likely reflects a pause rather than a change of trajectory”.

“[Building] permits remain higher than housing starts, mortgage rates remain low and employment prospects are improving,” he said.

“Likewise, plastic resins used in consumer and institutional applications are strengthening,” he said, and retail sales are likely to strengthen further as moderate job creation outweighs lingering effects of payroll tax increases early this year.

The CAB combines data from a range of chemicals and sectors, including production of chlorine and other alkalis, 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.

Because chemicals hold an early position in the nation’s supply chain, developments in the industry can presage activity in the broader economy. The council says that the CAB has been shown to lead US business cycles by an average of eight months at cycle peaks.

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

By: Joe Kamalick
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