Economists James Meil and Peter Mooney surprisingly didn't ask for blindfolds and cigarettes before speaking at the 2009 Plastics News Executive Forum in Summerlin.
But the views they presented were grim nonetheless, matching the disposition of the plastics market and most of the global economy.
Meil, vice president and chief economist at manufacturing conglomerate Eaton Corp. of Cleveland, said he anticipates the U.S. economy will shrink 2.2 percent during 2009, after growing 1.3 percent in 2008. Manufacturing production should fall 7 percent in 2009, after slipping 2.3 percent last year, said Meil, who has been with Eaton since 1985.
The first half of 2009 will be difficult, because U.S. consumer and business spending is down everybody's sitting on their wallets, he said during a March 2 presentation. There's really no business capital expenditures and no consumer spending. And the stock market isn't signaling that things are coming to an end.
This slowdown can't be good news for the U.S. plastics market, where shipments essentially have been flat since 1995, added Mooney, president of Plastics Custom Research Services in Advance, N.C.
Regional shipments had grown at an annual rate of around 5 percent between 1980 and 1995, but the rate from 1995-2000 was an annual loss of 0.1 percent. The market then rebounded slightly to average 1.4 percent between 2000 and 2007.
This can't all be due to downsizing and down-weighting of plastic products, said Mooney. As global economies mature and consumer needs are satisfied, share of services rise and share of manufacturing declines. And the U.S. has an aging population. You don't need a pickup truck or Little Tikes toys in your yard because you don't have a yard.
Meil added the following to a list of lowlights:
* U.S. exports falling because nobody in the world is buying.
* U.S. housing starts falling to an annual rate of 466,000 last December. The lowest level reached since the end of World War II had been 795,000. I think zero is the theoretical minimum that can be reached, Meil said, deadpan.
* U.S. light-vehicle sales falling to 10 million in 2009 after being around 13 million in 2008.
Even recent low commodity prices haven't helped much, since they've also reduced profit margins. It makes business managers scared when they see this kind of volatility, Meil said.
To get out of the hole, Mooney said there's a need for cooperation between structural plastics processors including injection, rotational and industrial blow molders and industrial thermoformers. He also pointed out that resin makers often don't work with processors on new product development as they once did.
While stating that Japan and Europe are faring as bad as or worse than the U.S., Meil also said he sees a sliver of light in the darkness including U.S. economic growth of 1.5 percent in 2010.
We might get some hope in the second quarter [of 2009.] And we hope to see some growth from fiscal and monetary actions, he said.