The CAB(Chemical Activity Barometer) reports a new historic high of 115.15. The CAB, a new economic indicator introduced June 2012, has been effective as an indicator of economic activity spanning 1919-Present.
It works well because it includes a broad mix of economically sensitive measures based on the production and use of chemicals which add productivity to every economic sector.
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The CAB leads by two to fourteen months, with an average lead of eight months. The CAB is a composite index which is comprised of indicators drawn from a range of chemicals and sectors, including chlorine and other alkalies, pigments, plastic resins and other selected basic industrial chemicals. It first originated through a study of the relationship between the business cycles in the production of selected chemicals and cycles in the larger economy. Other specific indicators used include:
- Hours worked in chemicals;
- Chemical company stock data; publicly sourced, chemical price information;
- End-use (or customer) industry sales-to-inventories; and
- Several broader leading economic measures (building permits and ISM PMI new orders).
The CAB’s recent up-turn is forecasting continued economic expansion. Equity markets ($SPY) should follow.