The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), fell 0.4% in October on a three-month moving average (3MMA) basis following stable activity during the third quarter. On a year-over-year (Y/Y) basis, the barometer was off 0.5% (3MMA).
The unadjusted measure of the CAB for October showed a 0.7% decline. The diffusion index fell to 47% in October – the first time since May 2016 that it was below 50%. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for September was revised downward by 0.44 points and that for August by 0.25 points.
“The CAB signals a pronounced slowdown in U.S. commerce through the second quarter of 2020,” says Kevin Swift, chief economist at ACC.
The CAB has four main components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators.
Production-related indicators in October were mixed. Trends in construction-related resins, pigments and related performance chemistry were slightly positive and suggest slow gains in housing activity. Plastic resins used in packaging and for consumer and institutional applications were mixed, suggesting headwinds for the consumer. Performance chemistry eased, reflecting the global manufacturing slowdown. U.S. exports were mixed, equity prices slumped and product and input prices fell. Inventory and other indicators were positive.
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