The Chemical Activity Barometer, a leading economic indicator created by the American Chemistry Council, rose 2.7% in July on a three-month moving average (3MMA) basis following a 0.1% gain in June.
The unadjusted data show a 1.3% gain in July following a 3.4% gain in June and a 3.6% gain in May, ACC reported.
On a year-over-year (Y/Y) basis, the barometer fell 8.9% percent in July, reflecting the deep impact of the Coronavirus downturn.
The diffusion index rose to 41%. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for June was revised upward by 1.36 points and the May reading was revised upward by 1.40 points.
“With three consecutive months of gains, the latest CAB reading is consistent with recovery in the U.S. economy,” observed Kevin Swift, chief economist at ACC.
CAB’s four main components, each consisting of a variety of indicators, are: production; equity prices; product prices; and inventories and other indicators
Production-related indicators were mixed in July. Despite improvement in new home sales, housing starts and building permits, trends in construction-related resins, pigments and related performance chemistry were soft.
Reflecting a recovery in light vehicles and other industries, resins and chemistry used in durable goods were mixed. Plastic resins used in packaging and for consumer and institutional applications were mixed.
Performance chemistry strengthened, while U.S. exports were mixed. Equity prices gained, and product and input prices strengthened. Inventory and other supply chain indicators turned positive.
Applying the CAB back to 1912, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks. 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.