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

Acquisition expands Rieke Packaging's stake in Asia

July 28, 2014 4:39 pm ET

Diversified rigid packaging components producer Rieke Packaging Systems now has a bigger footprint in Asia.    More

A third generation is adding to the growth at American Vinyl Co.

July 28, 2014 4:32 pm ET

American Vinyl Co., a compounding and extrusion company that increased its workforce 20 percent this year, is looking to double its space for storing ...    More

Image

Two medical device makers add specialty products through acquisitions

July 28, 2014 3:02 pm ET

The medical merger mania continues this summer as two more medical device manufacturers are swallowed up by bigger competitors.    More

Image

Deal combines US packaging thermoformers

July 28, 2014 12:42 pm ET

Thermoformed medical packager Nelipak Corp. is expanding its North American holdings and access to the U.S. health care market with the purchase of...    More

Image

Material Insights: Bioplastics firms win government funding

July 28, 2014 12:51 pm ET

Also this week, a study takes a look plastic at the ocean surface and comes away with a surprise finding, and new materials capacity announced.    More

Market Reports

Plastics Recyclers Data Report & Directory

This exclusive MS Excel database contains all the companies from Plastics News' ranking of top North American Recyclers and Brokers by reprocessed volume and also includes a directory with materials processes, services offered and company contact information. Data is based on primary research by PN editorial staff.

Learn more

2014 Injection Molding Industry Report

GROWTH, OPPORTUNITY IN SIGHT FOR INJECTION MOLDERS IN 2014

In the wake of the economic turbulence earlier in this decade, molders today find themselves in much better shape. Molders are gaining a competitive advantage by investing in people, equipment and seeking inroads into new markets on a global scale.

Growth in the injection molding industry is going to be driven by low financing costs and a continued move to reshore some business.

Learn more

Shale Gas Market - Analysis of North American Region

This report highlights the impact of shale-based natural gas on the North American plastics market and features an in-depth analysis of production trends in the United States during 2013 and a forecast for 2014 and beyond.

Learn more

Upcoming Plastics News Events

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

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

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

More Events