The American Chemistry Council’s updated Chemical Activity Barometer continues its uptrend. From the report is and extract below:

 

The Chemical Activity Barometer is a leading economic indicator derived from a composite index of chemical industry activity. The chemical industry has been found to consistently lead the U.S. economy’s business cycle given its early position in the supply chain, and this barometer can be used to determine turning points and likely trends in the wider economy. Month-to-month movements can be volatile so a three-month moving average of the barometer is provided. This provides a more consistent and illustrative picture of national economic trends.

Applying the CAB back to 1919, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.

Below is the index and the S&P ($SPY)

Screen Shot 2015-07-28 at 12.27.00 PM

“A number of trends remain evident as we head into the second-half of the year,” said ACC Chief Economist Kevin Swift. “There was upward momentum in plastic resins used in light vehicles, which are on track for a very good sales year, but we also continue to see declines in oilfield chemicals and U.S. exports overall, largely as a result of softer oil prices and a strong U.S. dollar,” Swift said. “Despite these modest headwinds, the Chemical Activity Barometer is still signaling slow, albeit potentially accelerating, gains in business activity into the early part of 2016,” he added.”

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