Business conditions for North American blow molders improved substantially in the third quarter of this year, and the prospects for the coming months appear bright. This is according to a survey of blow molders recently conducted by Plastics News Research. The survey is part of a new research initiative by PN that will capture and analyze activity in the major sectors of the plastics industry on a regular basis and then identify and report on the pertinent trends in this data.
From my perspective, one of the new and exciting aspects of this research effort, which we are calling the Plastics News Business Monitor, is that we will use this data to create a series of indices that measure levels of business activity for plastics processors and other suppliers to the plastics industry. We will capture information on the most important business activities on a regularly-scheduled basis, and we will track the changes in these metrics over time. The plastics industry is divided into an array of diverse market segments, and these indices will give market participants a more in-depth look at these various segments than ever before.
In the third quarter, our Blow Molding Business Index was 119.6. This index is based on 100, and a value above 100 indicates that business levels increased when compared with the previous quarter, and a value below 100 indicates that business levels declined. Since this is our very first quarter of conducting the survey and calculating the index, it is difficult to put this number in a historical context, but my experience tells me that a value of 119.6 is pretty strong.
If we take a closer look at the sub-indices that comprise the total index, the levels for new orders, production, employees and export orders were all steady-to-higher for the vast majority of respondents. Therefore, it is not surprising that the future expectations component was strongly optimistic, and that this high level of optimism was reflected in the robust level for capital spending plans.
There were two components of the index that were negative: backlogs and prices received for products. This indicates that despite the rising level of demand for blow molded products, the buyers of these products still possess a considerable amount of leverage in the market. A steady upward trend will ultimately lead to longer backlogs, and it will also put upward pressure on prices received for blow molded products.
These comparisons between the trends in new orders and backlogs or new orders and prices received are just a small subset of the types of analyses that can be performed on these data, and our analyses will only get richer as we start to develop historical trend lines. Understanding the relationships amongst all of these activities, and how changes in one or two of these activities can result in changes in the others are crucial to the successful management of companies engaged in manufacturing plastics products.