Summer is nearly over. That always-too-short vacation on the beach is a fading memory. The kids are back in school, and now is the time of year that intrepid economists and other market prognosticators start to publicize their forecasts for the new year.
That's right, I said the new year.
Even though we don't yet really know what the final economic data will look like in the second half of 2014, we are already trying to look ahead to the end of 2015.
During the next few weeks I will be extending my own forecasts for the major economic indicators and critical plastics industry end-markets through 2015. And to kick-off this new forecasting season, let's take a look at the best indicator I know for gauging the vitality and prospects for the U.S. plastics industry —the industrial production index of plastics products. This data series measures the monthly output of plastics products in the U.S. It is compiled by the Federal Reserve Board, and it is released near the middle of every month in the form of an index.
This index of the industrial production of the plastics industry is just one of hundreds that the Fed compiles, calculates and reports. All of this data, much of which is pertinent to plastics processors can be found online.
For the purposes of this analysis, I have downloaded the monthly data for plastics into a spreadsheet and calculated the 12-month rate of change. A rate of change chart is useful in the forecasting process because it will smooth-out the fluctuations and noise in the data that can be caused by seasonality or other non-market related events. What is measured on this chart is the rate of growth, or the momentum, in the data over the period of the past twelve months. If the graph is above the 0-line, then in indicates that the industry grew by that amount during the previous twelve months.
As this chart indicates, the output levels of the plastics industry have enjoyed positive growth for the past five years, and since 2012 the growth rate has been in the range of 5 to 6 percent per year. The graph clearly shows an acceleration in the rate of growth during the past three months, which suggests that the industry will enjoy strong demand for the rest of this year and into 2015.
After expanding by 6.1 percent in 2013, our latest forecast calls for an increase of 6.3 percent in 2014 followed by a gain of 5 percent in 2015. The pace of growth we have enjoyed for the past three years is reminiscent of the rate of expansion that the industry enjoyed throughout much of the 1990's, and it is significantly faster than the average rate of growth that occurred in the 2000's (2001-2010).