Economist: Plastics sector not fully recovered from Great Recession

By Rhoda Miel
News Editor

Published: July 17, 2013 3:53 pm ET
Updated: July 18, 2013 2:26 pm ET

Image By: Plastics News Alan Tonelson

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Topics Reshoring, Government & Legislation, Industry Trends

A new U.S. report on industrial production points to a recovering manufacturing base, but one researcher is warning that the numbers are not as good as they appear, and that the plastics industry in particular still has a lot of ground to make up.

The capacity utilization rate in the plastics industry overall is still about 20 percent below what it was in late 2007, before the recession, said Alan Tonelson, research fellow with the U.S. Business and Industry Council.

“If we are indeed seeing a genuine manufacturing renaissance, the manufacturing data would be a lot higher,” Tonelson said in a July 16 telephone interview. “The fact that it hasn’t restored everything lost from the recession is telling.”

The Federal Reserve’s industrial production and capacity utilization summary for June showed that U.S. production increased by 0.3 percent in June after a flat result in May. For the second quarter of 2013, production was up at an annual rate of 0.6 percent.

Capacity utilization also increased slightly, by 0.1 percentage point, to reach 77.8 percent — which is 0.1 percentage point higher than a year ago but still 2.4 percentage points below the average from 1972 to 2012.

Manufacturing in plastics and rubber products as a whole was up 4.8 percent for June compared with that month a year ago, the study reported.

But in the raw data, Tonelson pointed out, the results are much murkier. The higher numbers are just part of a cyclical recovery from recession, he maintains, and not a sign of a true growth spurt.

“There’s been a great deal of talk and commentary in the last two years that manufacturing is in, or on the verge of entering, a renaissance,” he said. “I’ve been deeply skeptical of that since I have seen no evidence of it in the data.”

At its pre-recession height, the plastics materials and resins category was measured at more than 103 points in a graded scale during December 2007. It is now at a little more than 83 points. That number is up from a low of 62 in December 2008, however.

There are also pockets of the industry that are doing far better, which further blurs the overall picture, according to Tonelson. The auto sector, for instance, is at 110 on its scale compared to a low of 34 in January 2009. The synthetic rubber category is also over its 100-point scale.

“It seems what [industrial renaissance supporters] are seeing is comparing manufacturing to the dreary period it went through during the previous decade,” he said.

Individual industry improvements provide anecdotal evidence of a full recovery for those who believe in it, he said, but anecdotes are not data.

Manufacturing in plastics and elsewhere is improving, Tonelson said, but he maintains that until numbers really begin to pass pre-recession data, there is no reason to celebrate. The cyclical waves of business could easily undermine the growth that has been seen.

“We’ve seen this movie before,” he said.


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Economist: Plastics sector not fully recovered from Great Recession

By Rhoda Miel
News Editor

Published: July 17, 2013 3:53 pm ET
Updated: July 18, 2013 2:26 pm ET

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