May 28 | 2020
(Americas) CAB Falls 5.4 %
Production decline in the U.S. chemicals industry has pushed the Chemical Activity Barometer index lower in May, according to the latest figures from the American Chemistry Council.
The CAB index posted a fall of 5.4 percent in May on a three-month moving average basis following a 5.4 percent decline in April.
“The May CAB reading is consistent with a recession, but given the small unadjusted decline of only 0.3 percent, one that may bottom out,” said Kevin Swift, chief economist at ACC.
U.S. Exports Weak
The index showed sharp declines year-on-year, with a drop of 12.4 percent in May compared to the same period in 2019.
“Trends in construction-related resins, pigments and related performance chemistry were negative, as were resins used in appliances, light vehicles, machinery and other durable goods ... Performance chemistry was negative and U.S. exports were weak,” the ACC noted.
Based on four main components of production, equity prices, product prices, and inventories and other indicators, the CAB index is a key signal for breakbulk demand in the chemicals industry.
The sector’s early position in the supply chain means the CAB index consistently leads the U.S. economy’s business cycle and analysis of the CAB as a forecasting tool suggests that it provides a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research, according to the ACC.
Input Prices Firming
The ACC notes that despite negative indicators for inventory and supply chain, the CAB index shows equity prices are improving and product and input prices are firming.
Indicators covered by the CAB include 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, industry sales-to-inventories, and several broader leading economic measures.
Headquartered in Washington D.C., the ACC is an independent industry association represents a diverse set of companies engaged in the business of chemistry using best-in-class member engagement, political advocacy, communications and scientific research.