US CAB Index Eases In July

Indicative of Late-cycle Activity

The U.S. Chemical Activity Barometer, or CAB, recorded a 0.2 percent decline in July, according to the latest figures from the American Chemistry Council.

“A pattern of fluctuating barometer readings – months up followed by months down – indicates late-cycle activity,” said Kevin Swift, chief economist at ACC. “The CAB reading continues to signal moderate gains in U.S. commercial and industrial activity through late 2019, but rising volatility suggests change may be on the way.”

The CAB posted a 0.2 percent fall on a three-month moving average basis following three months of gains in March-May and weak months in the winter

Based on four main components of production, equity prices, product prices, and inventories and other indicators, the CAB index is a signal for breakbulk demand in the industry. The ACC notes that 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 as determined by the National Bureau of Economic Research.

Plastic Resins

The ACC notes that production-related indicators in June were slightly positive, with increased demand for plastic resins used in packaging and for consumer and institutional applications. Trends in construction-related resins, pigments and related performance chemistry were mixed, however, and “suggest few gains in housing activity.”

Despite this, the ACC outlined positive overall performance chemistry figures even as equity prices slipped in July.

“The diffusion index rose to 65 percent in July. The diffusion index marks the number of positive contributors relative to the total number of indicators monitore,” Swift noted.

Plastic Waste Legislation

The growth in plastics demand was balanced by a call for legislators to end plastic waste in the environment, with the ACC campaigning against new legislation which “suggests banning certain plastics,” noting that studies have shown this may have “unintended consequences” including increasing greenhouse gas emissions and other environmental impacts.

“America’s plastics makers are partnering with government, scientists and non-profit organizations to develop solutions to help end plastic waste, such as by designing new products for greater recyclability, and by increasing technologies and systems to collect and repurpose more of our plastic resources,” the ACC said in a statement.

An independent industry association, the ACC represents a diverse set of companies engaged in the business of chemistry using best-in-class member engagement, political advocacy, communications and scientific research.