Economy, plastics industry are on the upswing

By Frank Esposito
Senior Staff Reporter

Published: March 14, 2014 1:32 pm ET
Updated: March 14, 2014 1:36 pm ET

Image By: The Gallery Studios Economist Bill Wood sees positive signs for the North American plastics industry.

Related to this story

Topics United States, Plastics News Executive Forum

WESLEY CHAPEL, FLA. — The U.S. economy is growing in key areas that will benefit the plastics market — but some challenges still remain, according to economist Bill Wood.

The S&P 500 stock index has surged tremendously since the Great Recession ended in 2009 and now is at an all-time high.

“The market is saying it’s time to invest,” Wood said Feb. 24 at the 2014 Plastics News Executive Forum in Wesley Chapel, near Tampa.

Wood, founder of Mountaintop Economics & Research Inc. in Greenfield, Mass., also pointed out that the Institute for Supply Management index has been above 50 for most of the time since 2009. That’s a level that signals a period of expansion in manufacturing. U.S. durable goods orders also have increased steadily since 2009, including growth of 4 to 5 percent in 2013.

In the plastics market, U.S. plastic part production also has improved in recent years, but remains below 2007 levels. Production there peaked in 2006, but has grown 6 percent annually for the last couple of years. Growth of 4 to 5 percent is expected in 2014. Wood said those levels may match previous highs by the end of 2014 or by mid-2015.

U.S. plastic manufacturing capacity utilization also has improved since 2009, but, like part production, remains below previous levels.

“Six percent growth has barely moved utilization,” Wood said. “Companies are investing and buying equipment but not hiring more employees.

“Manufacturing is no longer driven by labor,” he added. “It will be mostly technology-driven.”

The dollar value of U.S. plastic and rubber product shipments also is rising even up even if volume is down. Wood said that’s because higher-margin products are being made.

“Companies now can have fewer employees with value and output rising,” Wood explained. “They need to be productive in order to compete.”

Higher corporate profits are driving reinvestment into research and development, while higher food profits are driving packaging growth. U.S. orders for industrial machinery also are up. Plastics machinery makes up less than one percent of the market, but Wood said that overall trend drives demand.

Primary plastics machinery shipments — as tracked by the Society of the Plastics Industry Inc. — also are up, even with processors paying higher resin prices.

“We’re in a period of expansion and growth in the plastics industry,” Wood said.

With all of these indicators up, what’s not to like?

Well, in the broader economy, U.S. housing starts are expected to continue to recover, but remain low historically. They were near 1 million last year, but, according to Wood, need to be at 1.5 million per year to show sustained growth. Housing starts “are the best indicator for consumers,” he said.

“We have a consumer-driven economy, but consumers aren’t doing that well,” he said. “People are still having trouble getting mortgages and new homes.”

In the automotive field, that means that even though sales and builds are up, Wood said that the U.S. “isn’t to the point where people are buying cars because they want to, but because they need to.”

The average car on the road in the U.S. currently is 11 years old, a level that’s high by historic standards.

Real median household income in the U.S. fell during the recession and remained down as of 2012. That area also shows no sign of trending up, which, Wood said, isn’t a good sign for the plastics market.

“Plastic is not a luxury good,” he added. “We still need to sell to the 99 percent.”

The fact that productivity and GDP per capita are up in the U.S. while household income is flat to down indicates that in the U.S. “we have the best economy in the world, but we don’t have distribution,” Wood said.

Manufacturing will play a role in turning this situation around. That sector lost 5 million jobs during the recession. No other U.S. sector lost as much as 1 million.

“We [in the U.S.] have to manufacture our way out of the problem,” Wood said. “We need to decide as a culture what stuff is worth having. We’ll only be in charge of our own destiny if we continue to make parts here.”


Comments

Economy, plastics industry are on the upswing

By Frank Esposito
Senior Staff Reporter

Published: March 14, 2014 1:32 pm ET
Updated: March 14, 2014 1:36 pm ET

Post Your Comments


Back to story


More stories

Image

Deal puts Convergence Packaging under Comar's umbrella

October 24, 2014 2:00 pm ET

Convergence Packaging Holdings LLC, itself a product of mergers, now is joining together with Comar LLC.    More

Image

Automation firms join forces, look to automotive for future growth

October 24, 2014 2:43 pm ET

Hoping to ease the way for automation in some specialized areas of automotive plastics like laser cutting of door panels, a German robot maker and an ...    More

Image

German export sales strong, push for energy savings continues

October 24, 2014 12:34 pm ET

Germany is the engine that drives the European economy — and when it comes to the plastics industry, German machinery is a potent force, an...    More

Image

SRG opens second China auto parts factory

October 24, 2014 11:25 am ET

U.S. automotive supplier SRG Global Inc. said Oct. 23 it is opening its second plant in China, an injection molding, plating and painting facility in ...    More

OSHA investigation launched following blast at NJ reticulated foam plant

October 24, 2014 9:00 am ET

Four workers were concussed and sustained minor injuries during an explosion at the Inoac Crest Foam plant in Moonachie, N.J., earlier this month.    More

Market Reports

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Plastics in Mexico - State of the Industry Report

This report analyzes the $20 million dollar plastics industry in Mexico including sales of machinery & equipment, resins and finished products.

Our analysts provide insight on business trends, foreign investment, top end markets and plastics processing activity. The report also provides important data on exports, production, employment and value of plastics products manufactured.

Learn more

Plastics Caps & Closures Market Report

The annual recap of top trends and future outlook for the plastics caps & closures market features interviews with industry thought leaders and Bill Wood’s economic forecast of trends in growing end markets. You will also gain insight on trends in caps design, materials, machinery, molds & tooling and reviews of mergers & acquisitions.

Learn more

Upcoming Plastics News Events

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

More Events