Skip to main content
Sister Publication Links
  • Sustainable Plastics
  • Rubber News
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Processor News
    • Suppliers
    • More News
    • Digital Edition
    • End Markets
    • Special Reports
    • Newsletters
    • Videos
    • Injection Molding
    • Blow Molding
    • Film & Sheet
    • Pipe/Profile/Tubing
    • Rotomolding
    • Thermoforming
    • Recycling
    • Machinery
    • Materials
    • Molds/Tooling
    • Product news
    • Design
    • K Show
    • Mergers & Acquisitions
    • Sustainability
    • Public Policy
    • Material Insights Videos
    • Numbers that Matter
    • Automotive
    • Packaging
    • Medical
    • Consumer Products
    • Construction
    • Processor of the Year
    • Best Places to Work
      • 2023 winners
    • Women Breaking the Mold
    • Rising Stars
    • Diversity
    • Most Interesting Social Media Accounts in Plastics
  • Opinion
    • The Plastics Blog
    • Kickstart
    • One Good Resin
    • Pellets and Politics
    • All Things Data
    • Viewpoint
    • From Pillar to Post
    • Perspective
    • Mailbag
    • Fake Plastic Trees
  • Shop Floor
    • Blending
    • Compounding
    • Drying
    • Injection Molding
    • Purging
    • Robotics
    • Size Reduction
    • Structural Foam
    • Tooling
    • Training
  • Events
    • K Show Livestream
    • Plastics News Events
    • Industry Events
    • Injection Molding & Design Expo
    • Livestreams/Webinars
    • Editorial Livestreams
    • Ask the Expert
    • Plastics News Events Library
    • Processor of the Year submissions
    • Plastics News Executive Forum
    • Injection Molding & Design Expo
    • Plastics News Caps & Closures
    • Women Breaking the Mold Networking Forum
    • Plastics in Automotive
    • Bioplastics Live
    • PN Live: Mergers and Acquisitions
    • Polymer Points Live
    • Numbers that Matter Live
    • Plastics in Politics Live
    • Sustainable Plastics Live
    • Plastics Caps & Closures Library
    • Plastics in Healthcare Library
    • Women Breaking the Mold Networking Forum Library
  • Rankings & Data
    • Injection Molders
    • Blow Molders
    • Film Sheet
    • Thermoformers
    • Pipe Profile Tubing
    • Rotomolders
    • Mold/Toolmakers
    • LSR Processors
    • Recyclers
    • Compounders - List
    • Association - List
    • Plastic Lumber - List
    • All
  • Directory
  • Resin Prices
    • Resin Prices Overview
    • Commodity Thermoplastics
    • High Temperature Thermoplastics
    • Engineering Thermoplastics
    • Recycled Plastics
    • Thermosets
  • Custom
    • Sponsored Content
    • LS Mtron Sponsored Content
    • Conair Sponsored Content
    • KraussMaffei Sponsored Content
    • ENGEL Sponsored Content
    • White Papers
    • Classifieds
    • Place an Ad
    • Sign up for Early Classified
MENU
Breadcrumb
  1. Home
  2. News
News
August 13, 2014 02:00 AM

Consumer spending accelerates in second quarter

Bill Wood
PLASTICS NEWS ECONOMICS EDITOR
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Plastics News

    The United States Commerce Department recently released the advance estimate of U.S. gross domestic product in the second quarter of 2014. Their data indicate that real GDP expanded by 4 percent in the second quarter. This rate of expansion was considerably faster than most analysts expected, and it more than made up for the decline of 2.1 percent in the first quarter.

    This GDP data for the second quarter will be revised a couple of times in the coming months, but barring something dramatic, I expect that it will most likely stay well above the 3 percent level. I also expect that this will be the first in a string of several quarters of stronger-than-average economic growth.

    The coming growth rates may not always be as high as 4 percent, but they will likely be at least 3 percent through the end of 2015. The main reason for my optimism is the steady improvement in the data measuring personal consumption expenditures, more commonly referred to as consumer spending.

    Inflation-adjusted consumer spending increased at a rate of 2.3 percent in the second quarter when compared with the same period from a year earlier. This was comparable to the 2.2 percent rise that was registered in the first quarter. What is particularly important to the manufacturing sector, including plastics processors, is that spending for durable goods jumped by a robust 6.9 percent in the second quarter when compared with the previous year. This followed a rise of 4.6 percent in durable goods spending in the first quarter.

    This data suggests that consumers are increasingly comfortable in their decisions to purchase big-ticket items such as automobiles, appliances and home electronics. The slow but steady march upward in the monthly employment data is finally at a level where consumers are starting to feel it.

    To be sure, the economy still has a long way to go before we get to full employment. But consumer confidence levels are rising, workforce participation rates are no longer declining, banks are lowering their lending standards for mortgages and there is even evidence of rising wages in some sectors. I will argue that we are in the early stages of what will become a long release of the pent-up demand for our aging durable goods stock.

    This increased propensity to consume durable goods is already starting to have a positive effect on the data from the plastics sector. According to the data compiled and reported by the Federal Reserve Board, the total U.S. output of plastics products jumped by 6.2 percent in the second quarter when compared with the same period a year ago.

    By now everybody knows that the U.S. economy is driven by consumers. We have the biggest economy in the world because we buy the most stuff. And we cannot have a full-fledged economic recovery unless the consumer sector leads the way. In 2014, the measured U.S. economy will be over $17 trillion. About two thirds of that total, or just about $12 trillion, will be accounted for by consumer spending. The bulk of the remainder is divided between government spending and investment in buildings and equipment.

    Of this $12 trillion in consumption, $4 trillion is spent on manufactured goods. This is where the end-markets for plastics products get counted. There are two main categories of goods that consumers purchase: durable goods and nondurable goods. Durable goods are intended to last at least three years and they include automobiles, furniture, building materials and appliances. Obviously, these are big end-markets for injection molded parts and extruded products such as plastic pipe and profiles.

    Jessica Jordan

    Durable goods tend to be more expensive in price, and they also tend to be more discretionary. As a result, the data on spending for durable goods is more volatile. The markets for these products are more vulnerable to things like rising interest rates or economic recessions. In the last recession, the rate of decline in spending for durable goods was more than double the rate of decline for total consumer spending.

    This volatility can also result in large gains when the economy recovers. This year, spending for durable goods is on pace to grow by more than twice the rate of total consumer spending. The processors who supply the durable goods end-markets will be well-advised to monitor this trend.

    You will want to know the direction of the trend. (Is spending for these products increasing or decreasing?) And also the momentum of the trend. (Is the growth in spending accelerating or decelerating?) You should determine the rate of growth when compared to the same period of a year ago, and you should have a sense of what the year-over-year growth rate has been for the past few quarters.

    The year-over-year rate of growth in consumer spending for durable goods spending has been between 6 and 7 percent for the past couple of years, and this is the main reason that total U.S. production of plastics products is currently growing at a comparable rate. At this pace, market conditions can change quickly, and you will need to be forearmed with this information if you want to prepare for changes in materials prices, inventory levels and investments in new employees and equipment.

    And while the durable goods sector is expected to enjoy the stronger growth rates in the coming quarters, this does not mean that things will be unexciting for the nondurable goods end-markets. Nondurables include food, health and beauty products, household chemicals, clothing and gasoline. These products tend to be less expensive than durable goods, and they also tend to be non-discretionary. They also are the biggest end-markets for plastics packaging products.

    The growth rates for these goods tend to be less volatile, and these markets are less vulnerable to the changes in the overall economy. So the growth rates are more reliable, but they do fluctuate and they do tend to be stronger during periods of more rapid economic growth. Processors who supply packaging products will likely experience a noticeable increase in demand in the coming quarters because spending for nondurable goods will exhibit sustained annual growth well above the 2 percent level.

    RECOMMENDED FOR YOU
    Sigma Plastics Group expands stretch film capabilities
    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Plastics News would love to hear from you. Email your letter to Editor at [email protected]

    Most Popular
    1
    Debate exposes divisions in plastics treaty talks
    2
    GM, Stellantis give $15M lifeline to insolvent supplier
    3
    PVS Plastics expanding in Tennessee, Ohio
    4
    Ohio recycler Return Polymers triples PVC recycling capacity
    5
    Plastics additives one focus in Paris treaty talks
    SIGN UP FOR OUR FREE NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Get our newsletters

    Staying current is easy with Plastics News delivered straight to your inbox, free of charge.

    Subscribe today

    Subscribe to Plastics News

    Subscribe now
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter
    • Instagram

    Plastics News covers the business of the global plastics industry. We report news, gather data and deliver timely information that provides our readers with a competitive advantage.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI 48207-2997

    Customer Service:
    877-320-1723

    Resources
    • About
    • Staff
    • Editorial Calendar
    • Media Kit
    • Data Store
    • Digital Edition
    • Custom Content
    • People
    • Contact
    • Careers
    • Sitemap
    Related Crain Publications
    • Sustainable Plastics
    • Rubber News
    • Tire Business
    • Urethanes Technology
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Processor News
        • Injection Molding
        • Blow Molding
        • Film & Sheet
        • Pipe/Profile/Tubing
        • Rotomolding
        • Thermoforming
        • Recycling
      • Suppliers
        • Machinery
        • Materials
        • Molds/Tooling
        • Product news
        • Design
      • More News
        • K Show
        • Mergers & Acquisitions
        • Sustainability
        • Public Policy
        • Material Insights Videos
        • Numbers that Matter
      • Digital Edition
      • End Markets
        • Automotive
        • Packaging
        • Medical
        • Consumer Products
        • Construction
      • Special Reports
        • Processor of the Year
        • Best Places to Work
          • 2023 winners
        • Women Breaking the Mold
        • Rising Stars
        • Diversity
        • Most Interesting Social Media Accounts in Plastics
      • Newsletters
      • Videos
    • Opinion
      • The Plastics Blog
      • Kickstart
      • One Good Resin
      • Pellets and Politics
      • All Things Data
      • Viewpoint
      • From Pillar to Post
      • Perspective
      • Mailbag
      • Fake Plastic Trees
    • Shop Floor
      • Blending
      • Compounding
      • Drying
      • Injection Molding
      • Purging
      • Robotics
      • Size Reduction
      • Structural Foam
      • Tooling
      • Training
    • Events
      • K Show Livestream
      • Plastics News Events
        • Plastics News Executive Forum
        • Injection Molding & Design Expo
        • Plastics News Caps & Closures
        • Women Breaking the Mold Networking Forum
        • Plastics in Automotive
      • Industry Events
      • Injection Molding & Design Expo
      • Livestreams/Webinars
        • Bioplastics Live
        • PN Live: Mergers and Acquisitions
      • Editorial Livestreams
        • Polymer Points Live
        • Numbers that Matter Live
        • Plastics in Politics Live
        • Sustainable Plastics Live
      • Ask the Expert
      • Plastics News Events Library
        • Plastics Caps & Closures Library
        • Plastics in Healthcare Library
        • Women Breaking the Mold Networking Forum Library
      • Processor of the Year submissions
    • Rankings & Data
      • Injection Molders
      • Blow Molders
      • Film Sheet
      • Thermoformers
      • Pipe Profile Tubing
      • Rotomolders
      • Mold/Toolmakers
      • LSR Processors
      • Recyclers
      • Compounders - List
      • Association - List
      • Plastic Lumber - List
      • All
    • Directory
    • Resin Prices
      • Resin Prices Overview
      • Commodity Thermoplastics
      • High Temperature Thermoplastics
      • Engineering Thermoplastics
      • Recycled Plastics
      • Thermosets
    • Custom
      • Sponsored Content
      • LS Mtron Sponsored Content
      • Conair Sponsored Content
      • KraussMaffei Sponsored Content
      • ENGEL Sponsored Content
      • White Papers
      • Classifieds
        • Place an Ad
        • Sign up for Early Classified