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How the U.S. business of chemistry can forecast larger trends in the overall economy

Chemistry plays an integral role in technology, products and processes across a range of industries. But did you know chemistry can also be used to forecast larger trends in the U.S. economy?

Today, ACC is excited to release the first monthly report of the Chemical Activity Barometer (CAB), a new, leading macroeconomic indicator grounded in statistical analysis. The goal of the CAB is simple — to anticipate the peaks and troughs in the overall U.S. economy and highlight potential trends in other domestic industries.

This month, the CAB shows a decline of 1.3% over the previous month, signaling that after a relatively strong start to 2012, there is a slowing of the U.S. economic recovery. As we look to the remainder of 2012, the CAB points to a continued weakness in economic growth in the second half of the year.

Chemistry-Dependent Economy

The U.S. business of chemistry is a $760 billion enterprise that employs nearly 800,000 men and women. Nearly 96% of all manufactured goods are directly touched by chemistry. That means our products are present in some form in nearly every facet of the American economy.

But what gives chemistry its unique forecasting ability is not its prevalence, but its early position along the supply chain. It is this upstream positioning that makes chemistry a critical tool for predicting the direction of downstream activity and, ultimately, the U.S. economy.

To be sure, it is a robust, productive chemical industry that drives economic and job growth across the country.

Leading Trend Analysis

In the coming months, we are confident that the CAB will lead the National Bureau of Economic Research (NBER) business cycle peaks by an average of eight months and the NBER cycle troughs by an average of three months.

We also believe that the CAB will provide valuable insight into other critical areas of the U.S. economy, including manufacturing and housing trends, for which chemistry plays a major role.

For example, this month the CAB indicates that construction-related activity has been weakened as production of chlor-alkalies and some construction-related polymers declined after several months of increased production. The decrease is noteworthy because chemicals are used in a wide variety of building and construction materials for housing such as siding, window frames and doors. The CAB also appears to suggest that the long-anticipated U.S. housing market recovery is emerging, but the recovery will be slow.

By studying chemical production levels that are critical to the health of these specific industries, we believe the CAB will identify trends and turning points in these, and other, valuable sectors.

To receive next month’s Chemical Activity Barometer update, please subscribe to our blog. You may also visit our CAB webpage to learn more about chemistry’s influence on the U.S. economy.

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