Economic Recovery Is Slow, Chemical Industry Trade Group Indicator Finds

Repeating a pattern seen in 2010 and 2011, economic growth dipped in the middle of this year, dashing hopes for an imminent robust recovery, says the American Chemistry Council, the U.S. chemical industry’s main trade association.

ACC’s Chemical Activity Barometer, a leading indicator of overall economic performance that the association introduced in June, increased just 0.3% in September over the previous month and 1.8% over the same month a year ago. CAB hit a recent peak of 90.0 in April, declined in May and June, and has since grown slowly.

“While it is encouraging to see three consecutive months of gains, this is not yet cause for celebration,” says T. Kevin Swift, ACC’s chief economist. “Rather, what we’re seeing is that the CAB is signaling subpar economic growth into 2013 as the economy continues to face strong headwinds and concerns around the fiscal cliff crystallize.” The fiscal cliff is the combination of federal spending cuts—called sequestration—and automatic tax increases; both are scheduled to kick in at the start of 2013. Congress has until the end of the year to take action to avoid this cliff.

CAB is a monthly index that includes chemical production, price, and company stock data, as well as end-use measures such as inventories and new building permits. ACC has calculated CAB back to 1947 and has found that its peaks foreshadow recessions, as measured by the National Bureau of Economic Research.

An ACC chemical production report issued last week also signals economic weakness. According to the report, U.S. chemical production slipped 0.2% in August versus July and 0.4% compared with August 2011. Year-to-date data show a modest gain of 0.2% against the 2011 period.

Europe, which has been mired in a fiscal crisis for several years, is worse off, according to data compiled by ACC’s counterpart, the European Chemical Industry Council. Its most recent production report shows that European chemical output declined 2.4% for the first six months of the year.