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Thursday, June 28, 2012

Chemical activity barometer

Here is an economically sensitive index I never heard of before.  This is from the Bloomberg chart of the day.
You can read the full article here  http://www.bloomberg.com/news/2012-06-26/chemicals-flash-u-s-economic-slump-warning-chart-of-the-day.html

I find this to be a very interesting chart myself.  We can clearly see how strong the economy was throughout the 90s.  We can also see this index does a pretty good job of leading industrial production.  There were dips in the index around 1998 and 2010 that were not met with much of a dip in production.  For the rest of the chart, the index works pretty well.  This index has really diverged from production since early 2011. 

From the article.

The Washington-based group’s barometer has slumped 2.5 percent in three months, falling to a 2012 low of 88 in June from a one-year high of 90.3 in March. Three-month declines of 3 percent or more have preceded all but one recession since the beginning of the index’s data in 1947, according to Swift. 

Here is a little different view using the 3 month MA.

The last recession started before or around the time the barometer YOY change went negative.  It looks like it went considerably more negative then it is now before the 2001 recession started.  I think this is yet another index where the next 2-3 months will tell the story on recession or not.


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