The overall economic outlook for 2005 is optimistic. However, some external factors are raising concerns - and tempers: materials pricing and the old standby, competition from China.
Optimism toward the economy has fallen slightly, but still the majority outlook is favorable with 66 percent of respondents ticking off very and somewhat favorable, vs. last year's 73 percent.
Company outlook also is down from last year, but it remains in a positive spin. Respondents almost equally reported they expect their companies to be either more profitable or about the same as last year, each at about 40 percent. Nonetheless, firms expecting to be less profitable rose by 12 percentage points, from 7 percent in 2004 to 19 percent for this year.
Machinery purchases look a little brighter, with 74 percent of processors reporting plans to buy equipment. Only 26 percent of companies do not plan to buy machinery this year; that's only one percentage point higher than last year.
Staffing level expectations are about the same as last year, with 52 percent having no plans to add or subtract jobs and 41 percent planning to add.
Processors' assessment of public opinion of plastics remains unchanged - it's still on the bright side. On a scale of 1-10, with 10 as best, 78 percent of poll takers gave a score above 5.
Striking a raw nerve
Most notable among processors answering this year's economic outlook survey is the concern over raw materials pricing. With 62 percent of processors choosing pricing, it emerged as the No. 1 concern, displacing the past seven years' top worry: customer growth or cutbacks. And the former fear's fall was not entirely short; it dropped to fourth.
Not since the 1997 economic outlook report has the top concern been raw materials cost. Competition from imports is second followed by health-care costs, and fifth place among processor concerns goes to the value of the dollar.
The materials issue also inspired the most comment among survey takers.
``If raw material prices keep going up, they are nailing the coffin shut!'' wrote Bill Hoge, owner of Jackson, Miss.-based injection molder United Plastic Molders Inc.
``We rely on conversions from other materials. If raw material prices don't stabilize, we lose our competitive advantage,'' John McWilliams, vice president of sales for rotational molder Diamond Plastics Inc. in Dunkirk, Ohio, wrote on his survey form.
Grady Ogle, owner of blow molder GT Plastic & Equipment LLC in Kent City, Mich., had a more optimistic slant. ``My outlook is good,'' he said. ``I have new work starting in the first quarter. I believe oil will fall to $35 a barrel.''
Again this year, comments and complaints about China are noteworthy.
``We lost half of our sales because the Chinese put our customer base out of business,'' reported John W. Knight, chief executive officer of New Concord, Ohio-based thermoformer Fabri-Form Co.
``Low-cost China producers'' and an uneven playing field concern a Burlington, Wis., extruder.
And an injection molder in San Marcos, Texas, said ``reduced growth due to China competition'' has stunted his company during the past few years.
Changes to lean
A noticeable number of respondents reported their leading change for the past few years has been a move toward lean manufacturing.
``Cut back in employment, running lean,'' a Rome, N.Y., injection molder responded in regard to the kinds of changes his company has made.
``We are nearer to being totally electronic in day-to-day operations and in most communications,'' wrote a Quinter, Kan.-based thermoformer.
Plastics News faxed 1,356 surveys and received 144 responses, or 11 percent, to its unscientific poll. Processors were chosen from Plastics News rankings of injection and blow molders; film and sheet manufacturers; pipe, profile and tubing extruders; thermoformers; and rotational molders.