by Bill McBride on 1/24/2017 03:44:00 PM
Note: This appears to be a leading indicator for industrial production.
From the American Chemistry Council: Chemical Activity Barometer Starts New Year with Strong Gain
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), started the year on a strong note, posting a monthly gain of 0.4 percent in January. This follows a 0.3 percent gain in December, November and October. All data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB was up 4.6 percent over this time last year.
In January all of the four core categories for the CAB improved and the diffusion index was stable at 65 percent. Production-related indicators were positive, with the housing report indicating accelerating activity and trends in construction-related resins, pigments and related performance chemistry generally improved. Other indicators, including equity prices, product prices, and inventory were also positive.
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen 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.
Click on graph for larger image.
This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production. It does appear that CAB (red) generally leads Industrial Production (blue).
CAB has increased solidly over the last several months, and this suggests an increase in Industrial Production over the next year.