Chemical industry activity as a leading indicator of the business cycle

Activity in the chemical industry has been found to lead that in the overall economy. The author constructs a Chemical Activity Barometer (CAB) that is a leading indicator which can be used to anticipate the peaks and troughs in the US economy’s business cycle. This article discusses the construction of the CAB and its performance. The results were robust and since 1919, the CAB was found to lead National Bureau of Economic Research (NBER) business cycle peaks by an average of eight months and troughs by an average of four months. In this time of such uncertainty, the CAB could be an important tool for economists, business analysts and anyone else trying to follow the US economy