The year 2001 will be a bumpy one for U.S. plastics processors, predicts CIT Group.
The Livingston, N.J., firm said real shipments of plastic products will fall 1 percent this year, the first decline since 1991, to $133.9 billion. The falloff will occur in the first half of the year, followed by new growth in the second half of 2001, the financial firm said in an updated forecast. Its forecast assumes recession will be avoided and federal interest-rate policy will give the U.S. economy "a soft landing" in 2001.
This year follows modest growth of 1.7 percent in 2000. Last year's increase in real shipments was well below the 4 percent hike in 1999, CIT estimated. Real shipments take into account the effects of monetary inflation.
Weakness in early 2001 is due largely to slumps in housing, automotive and high-technology markets, said CIT vice president of economic research Michael Paslawskyj. Some sectors such as health care and food are doing well, but they can't offset the weakness in big-ticket consumer markets.
Paslawskyj said he expects federal interest-rate cuts to amount to 100 basis points this year, which will prime economic activity in 2002. The cuts will boost spending and lead to 6 percent growth next year in real plastic shipments. He said shipments should reach a record $141.9 billion in 2002.
CIT said processors overall were able to obtain modest price increases in 2000 after several years of decline. The wholesale price index for finished plastic products rose 2.5 percent last year, the first increase since 1995. CIT expects product prices to increase another 1 percent in 2001 and stabilize next year.
While domestic markets sag, foreign trade continues to grow. U.S. processors exported an estimated $12.1 billion last year, creating a plastic product trade surplus of a record $2.1 billion. CIT predicts exports will grow to $13.7 billion in 2002, leading to a $3 billion surplus. Mexico and Canada are the main recipients of U.S. exports, while U.S. imports are dominated by Canada and China.
Shipments of plastic machinery could be hurt by relatively low capacity-utilization rates among processors, CIT warned. Processors overall will run plants at about 75 percent of capacity this year, slightly lower than last year's rate.
