Recovery hanging on US fiscal cliff

By Bill Bregar
Senior Staff Reporter

Published: November 30, 2012 6:00 am ET

Industrial equipment, including plastics machinery, was on the ropes during the Great Recession. But plastics equipment now has enjoyed three straight solid years. For the latest, see the stories in this week’s Machinery Outlook package. It’s upbeat reading, but ...

The “but” in the immediate future is whether Congress and President Obama can come up with a deal to avoid the so-called fiscal cliff, a combination of tax increases and spending cuts. It’s certainly hard to have much faith in Washington, after one of the most rancorous presidential elections in recent history.

America’s plastics plants continue to invest in equipment. But nearly across the board — in injection molding presses, blow molders and extruders — plastics machinery executives told Plastics News machinery-beat senior reporter Bill Bregar that sales seemed to slow down in the fall.

That clearly shows that, when it comes to discussions about the economy, the turmoil in Washington has moved front and center.

Bill Wood, a plastics industry economist, points out that U.S. companies are forced to create a Plan A and a Plan B, in case the United States does fall off the cliff.

“Not only is that a huge waste of time, creating a contingency plan — it’s a huge mood dampener,” Wood said.

The Wall Street Journal recently ran a story with this headline: “Investment Falls Off a Cliff.” The subhead spells it out: “U.S. Companies Cut Spending Plans Amid Fiscal and Economic Uncertainty.” The Journal reports that half of the 40 largest U.S. publicly traded companies have announced plans to cut capital investment. “Nationwide, business investment in equipment and software — a measure of economic vitality in the corporate sector — stalled in the third quarter for the first time since early 2009,” the newspaper said.

The plastics industry, and U.S. manufacturing as a whole, has put 2009 in the rearview mirror. Consumers are feeling good. Thanksgiving weekend sales jumped 13 percent. Business leaders are more cautious, watching the slowdown in Europe and China — and the fiscal cliff.

But Wood points out that if the U.S. can avoid the fiscal cliff, companies could turn on the capital spending taps.

“There would be a release. There’s pent-up frustration, but that will turn into pent-up optimism. It’s going to be ‘Ding Dong! The Witch is Dead.’ Projects will be released,” said Wood, who runs Mountaintop Economics and Research in Greenfield, Mass.

Actually, Wood said he is more optimistic than he was a year ago. And the long-awaited home-construction recovery is the reason. We’ve got strong car and truck sales, declining unemployment and renewed consumer confidence. (And no more campaign ads!)

Home sales and new construction have been the final big blocks on the long road back to an economic recovery.

Construction is a key to a strong U.S. economy. “When times are good in the construction trades, times are good in everything,” Wood said. “Construction is going to drive automotive, appliances, electronics — all kinds of consumer durables. Once construction gets going again, we’re going to find the tailwinds are blowing.”

But first, Dorothy’s house has to crush the Wicked Witch of the West.


Recovery hanging on US fiscal cliff

By Bill Bregar
Senior Staff Reporter

Published: November 30, 2012 6:00 am ET

Post Your Comments

Back to story

Market Reports

Thermoformed Packaging 2014 Market Review & Outlook North America

This in-depth report provides analysis and discussions of economic and political conditions, market trends, legislative/regulatory activity impacting supply and demand, business opportunities and threats, materials pricing, manufacturing technology, as well as strategies being implemented by thermoformed packaging companies. In addition, there are reviews of 25 leading thermoformers in the packaging segment, assessing their growth initiatives and performance metrics over 10 years.

Learn more

Automotive Market Review and Outlook 2014 The Americas

This 75-page report features in-depth analysis of the automotive industry for the Americas. It includes discussions of market trends, legislative/regulatory activity impacting production and threats as well as design strategies being implemented by the major automakers. Detailed charts and data tables outline North American automotive production over the last five years.

Learn more

Plastics Building & Construction Market Review and Outlook 2014 with MS Excel chart data

This report provides in-depth analysis of the plastic building and construction market for North America, including discussions of trends, opportunities, threats and the latest developments in construction trends that impact plastics processors.

Learn more

Upcoming Plastics News Events

May 6, 2014 - May 8, 2014Plastics in Medical Devices 2014

May 12, 2014 - May 12, 2014Plastics News Brazil Pharma Summit

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

February 3, 2015 - February 7, 2015Plastics News Executive Forum 2015

More Events