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U.S. chemical production continues its gaining streak on a monthly basis, according to the latest monthly report from the American Chemistry Council (ACC). The chemical industry trade group said that the U.S. Chemical Production Regional Index (CPRI) inched up 0.6% in Feb 2013, following a revised 0.8% gain a month ago. Monthly reading showed that chemical production improved across all regions in February.

The U.S. CPRI, which was created by Moore Economics to track chemical production in seven regions nationwide, is comparable to Federal Reserve’s industrial production index for chemicals. The CPRI is measured using a three-month moving average.

Output from the U.S. manufacturing sector, the largest consumer of chemical products, crept up 0.6% in February following a revised 0.9% gain a month ago. Within this sector, output rose in several key chemistry end-user markets including appliances, aerospace, motor vehicles, construction materials, plastic products, machinery, computers, paper, printing, apparel, furniture and structural panels.

The manufacturing sector serves as a barometer to gauge the overall health of the U.S. economy and is a major driver for the chemical industry which touches around 96% of manufactured goods. Improving consumer spending and capital investment augur well for chemical production.

The ACC said that chemical output was mixed across the segments in February. Production gains across organic chemicals, industrial gases, inorganic chemicals, pharmaceuticals, pesticides, coatings, adhesives, and other specialty chemicals were neutralized by declines in consumer products, plastic resins, synthetic rubber, and manmade fibers, and fertilizers.

Overall chemical production rose 1.2% in February when compared on a year-over-year basis. On a region-by-region basis, production rose across all areas except the Mid-Atlantic and West Coast regions. Production for the first two months of 2013, when compared with the year-ago data, were up 1.3%.

On a monthly comparison basis, chemical production in the Gulf Coast region, where key building block materials are produced, edged higher 0.5% in Feb. The Midwest, Ohio Valley, Mid-Atlantic, Southeast, Northeast regions showed gains of 0.8%, 0.4%, 0.8%, 0.6% and 0.7%, respectively. The West Coast region logged the highest increase of 0.9%.

The chemical industry, which is among the biggest industries in the U.S., is cyclical by nature and heavily linked to the overall condition of the U.S. economy. The roughly $760 billion industry has been consistently leading the U.S. economy’s business cycle due to its early position in the supply chain.

Last year, a challenging economic backdrop in Europe, sluggish activity in China and uncertainties surrounding the U.S. fiscal cliff weighed on the companies in the chemical space including majors such as EI DuPont de Nemours & Co (DD - Analyst Report), The Dow Chemical Company (DOW - Analyst Report), Eastman Chemical Co. (EMN - Analyst Report) and Celanese Corporation (CE - Analyst Report).

However, the chemical industry is expected to fare better this year given the gradual recovery in the U.S. economy, an improved demand scenario in China and the signs of a revival in the U.S. housing market.

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