Leading indicators signal chemicals slowdown

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The latest leading indicators from the OECD (shown in red above) are now diverging quite strongly from actual Industrial Production performance (shown in blue). The chart is taken for the latest American Chemistry Council (ACC) weekly report, and the ACC comment that the indicators should anticipate changes in ‘global industrial activity’ and ‘provide early signals of turning points (peaks and troughs)’. The ACC adds that they are also ‘good indicators for basic and specialty chemicals, 85% of which are sold to the industrial sector’.

The puzzle is the divergence that seems to have opened up since 2005. Before then, actual industrial production seemed to track the indicators very well, with a suitable lag. Perhaps the availability of cheap credit between 2005-7 allowed a higher level of production than normal? Whatever the cause, the ACC is not optimistic that this divergence will continue, commenting that ‘the data suggests that global industrial production will further slow’.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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