The North American plastics industry started 2015 with strong momentum, and processors are quite optimistic about their prospects in the coming year.
The latest Plastics News Business Monitor index for the first quarter of 2015 is a solid 107.8 (index base is 100). This new index is based on a quarterly, nationwide survey of strategically-targeted Plastics News subscribers. It is designed to measure specifically the critical business activity levels for plastics processors. A value above 100 indicates an overall increase in business activity levels and a value below 100 signals a decrease for that quarter.
Perhaps the most impressive result from the latest survey is the level of optimism that prevails amongst plastics processors. The Future Expectations Index calculated from our survey's respondents is a very positive 152.9. Fully two-thirds of our respondents have a favorable attitude toward the economy in 2015, and 88 percent of them expect to be as profitable or more profitable in the coming year when compared with last year. When it comes to their plans for the coming year, 62 percent expect to expand their operations.
But our new index is much more than a measure of sentiment amongst the owners and managers of plastics processing businesses. It also measures changes and trends in the key business metrics of new orders, exports, prices received, production levels, number of employees and backlogs.
For my money, that is the most exciting feature of this new Business Monitor Index. Every quarter, the staff at Plastics News Research will conduct a survey of a significant sample of their extensive subscriber base, and they will tabulate and compile this data in a format that is comprehensive in scope and simple to understand. It will be my pleasure to analyze and forecast the trends and the changing relationships amongst the various business activities each quarter and report the results to readers of this column.
So this valuable market information will now be available to our audience on a frequent and regular basis. And there are a couple of other key areas where this index represents a substantial improvement over what is currently available in terms of market data. First, Plastics News' readers are uniquely positioned to provide valuable information by process. Data and process-specific analysis about business activity levels for injection molders, blow molders, thermoformers, film and sheet extruders, and pipe and profile extruders will be regular features of our quarterly reporting.
Second, our readers possess vast insight and information about activity levels in all of the major end markets for plastics products. So our quarterly analysis will also include analysis about the automotive, packaging, building and construction, industrial and other crucial end-markets. As time progresses and we increasingly build our market database, we will have an ever-improving ability to compare and contrast trends in important industry sectors and end markets. We will develop greater insight into specific trends in areas such as automotive market demand for injection molded parts or construction market demand for extruded pipe and profiles, or packaging market demand for caps and closures.
But enough of the introduction, let's get to the actual data. For the first quarter of 2015, the new orders and production components of the Business Monitor Index are particularly robust at the present time (see table). These two components represent the most important aspects of a manufacturing operation, and strong gains in these two categories bode well for the future vitality of a business and an industry.
The weakest component of the Index was the sub-index for backlogs. A manager's ability to understand the relationship between the ongoing changes in new orders and production levels is crucial if he or she is going to manage optimally the company's backlogs. So it should prove enlightening to watch the trends in these particular data in the coming quarters.
Breaking out the responses by process, the data indicate that the injection molding segment is particularly strong. The index value for injection molders is 110. Injection molders report strong gains in both new orders and production, and there was a significant increase in the employment component. Backlogs were negative, but to a lesser degree than for other types of processors.
Other processing categories that indicate healthy business conditions at the present time are the blow molders (with an index value of 110.4) and extruders of film or sheet (index value of 108.6). As you would expect when business conditions are good, their expectations for the coming year are also quite optimistic. The future expectations sub-index for blow molders is an exuberant 175 while the expectations sub-index for film and sheet extruders is a subdued, but still optimistic 145.8. One of the factors that is likely constraining the enthusiasm of the film and sheet manufacturers is that they were one of two processor categories (along with extruders of pipe, profiles and tubing) that reported a decline in the prices they received for their products.
The only processor category to report negative results in our survey was extruders of pipe, profiles and tubing. Their overall index value for this quarter is 91.6, but it should be noted that their expectations tallied a positive index value of 123.5.
This decline reported by the pipe and profile extruders is corroborated by the survey responses we received about the building and construction end market. The construction sector calculations were consistently in the bottom half of the major end markets we tracked. This below average performance notwithstanding, the majority of respondents that supply this end-market still expects improvement in the coming year. My own forecast calls for an increase in both housing starts and construction spending in 2015, so I will closely monitor all of these data as the year progresses. If my forecast is accurate, then the index values for the extruded pipe and profile should rise significantly.
As I mentioned, the survey responses and the indices we derive from these responses will be a regular topic of my columns in the future. All that is needed to ensure the future success of this effort is the willingness of you the reader to participate in our quarterly surveys. The survey is intentionally designed to be short, painless and most importantly, confidential. If you invest a few minutes of your time each quarter, we will return to you valuable market and industry data you can immediately use in your planning and daily operations.
I look forward to continuing this dialogue with you. Please let us know if there are ways we can improve our efforts.
Wood can be reached at [email protected]