Chemical industry index says US recovery is gaining momentum

27 August 2013 19:22  [Source: ICIS news]

WASHINGTON (ICIS)--The US economic recovery continues to improve and finally may be gaining some sustaining momentum, a key chemicals industry leading indicator reported on Tuesday.

In its monthly chemical activity barometer (CAB), the American Chemistry Council (ACC) said that the indicator gained 0.1% in August from July (on a three-month moving average) to a reading of 92.9%, marking the fourth monthly gain and its highest level since June 2008.

The August barometer reading also was 3.8% ahead of the same month a year ago, the largest year-over-year increase since September 2010, the council said.

“As we approach the fourth quarter, the US economy seems to be making strides, compared to the baby steps of earlier in the year,” said ACC chief economist Kevin Swift.

The barometer, he said, “is showing a strengthening of year-over-year growth and suggests an economy which finally may be gaining momentum”.

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.

Swift noted that while some of the CAB’s subsidiary measures have shown mixed performance in recent months, the US housing market recovery has added muscle to the overall economy.

He said that there are “solid fundamentals in the housing market, confirmed by further gains in construction-related plastic resins, coatings, pigments and other chemistry, all suggesting that the recovery in housing will continue”.

Another good sign, said Swift, is increasing production of plastic resins used chiefly in consumer and institutional applications. 

That in turn suggests that improving momentum in the economic recovery is due in considerable part to consumer-driven production.

Consumer activity is the principal driving engine of the US economy, accounting for as much as 70% of all commerce and production. Consequently, if consumer spending and consumer-driven industrial production are on the rise, prospects for a steadily improving economy are stronger.

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


By: Joe Kamalick
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