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Strong Chemical Outlook Could Forecast Positive Economic Conditions

Tue, 10/22/2013 - 10:47am

The partial shutdown of the federal government earlier this month didn’t take the steam out of the U.S. economy, according to the American Chemistry Council’s (ACC) monthly Chemical Activity Barometer (CAB). The CAB increased 0.3 percent over September on a three-month moving average basis, and remains up 3.1 percent over a year ago. It continues to be at its highest point since June 2008. “Despite the uncertainty being fueled by political gridlock in Washington, the fundamentals of our economy appear to be healthy,” said Dr. Kevin Swift, chief economist at the American Chemistry Council,” he said.

Though some recent reports have hinted at a slowing of consumer spending, these are likely related to news coming out of Washington, according to Swift. “Production of plastic resins used in consumer applications appears actually to be strengthening, suggesting further gains driven by consumers. This bodes well for retailers as the important holiday shopping season approaches,” he added. 

Other notable benchmarks within the barometer also held strong. Chemical equities continued to outpace the overall market, as measured by the S&P 500, and inventories and new orders expanded, likely restored by a return of business confidence following the end of the government shutdown.

The Chemical Activity Barometer is 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.

The CAB comprises indicators relating to the production of chlorine and other alkalies, pigments, plastic resins and other selected basic industrial chemicals; chemical company stock data; hours worked in chemicals; publicly sourced, chemical price information; end-use (or customer) industry sales-to-inventories; and several broader leading economic measures (building permits and new orders

The American Chemistry Council (ACC) represents the leading companies engaged in the business of chemistry.

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