Our Plastics News Business Monitor Index is a gratifying 112.2 for the second quarter. This is a solid improvement from the 104.5 that was posted in the first quarter. Sizable gains were recorded in all of the components that comprise the total index, but the increases that stand out most to me are the accelerating growth in both new orders and production levels for processors.
The new orders sub-index hit a robust 132.1 and the production sub-index was only a tad lower at 129.5. These values represent double-digit gains from the first quarter values of 119.5 for new orders and 117.5 for production. This is only the second time we have compiled the data and calculated these indices, but I will be very happy if we can sustain values for both overall new orders and overall production around the 130-range in perpetuity.
One more thing that I find interesting is the strong level of optimism that prevails in our industry. There is a strong consensus amongst processors of all types that business conditions will improve in the coming months. The future expectations sub-index was 151.9 for the second quarter, which was a small increase of the strongly-optimistic reading from the first quarter. This sense of optimism is also reflected in the 126.8 reading for the sub-index for capital spending plans.
The PN Business Monitor is a measure of the change in overall business activity for plastics processors and mold makers during the past three months. We introduced these indices earlier this year, and in my opinion they have proven both accurate and insightful. Because they are new to the industry, there has been some confusion about just what the index values actually mean and how they should be interpreted.
Here are the basics — a value greater than 100 indicates that the business activity level increased when compared with the previous quarter. A value of exactly 100 would indicate that the business level was unchanged, while a value less than 100 would indicate that the activity level declined.
Keep in mind that a value of 112.2 for the second quarter does not indicate that the volume of business levels, or output, or sales actually increased by 12.2 percent. What it does mean (without getting too technical) is that there was a significant increase in the number of processors who reported that business levels were up, and a sizable decline in those who reported that business levels declined. Our index measures the change in the underlying trend (up or down), but not the change in the actual amount of business that transpired.
So the Plastics News Business Monitor Index is designed to be an indicator of overall business levels that is easy to compile and easy to understand. We want the questionnaire to be painless and quick so that we can garner a high number of responses. So far these efforts have been a smashing success. And my analysis of this data will continue to improve as we compile more history.
One of the biggest advantages of our data is that we can break the responses out by both type of process (injection molding, blow molding, film and sheet extrusion, etc.), and also by end-market served (automotive, medical, packaging, etc.).
I will take a look some of the type-of-process data below, and I will save the analysis of the various end markets for future columns.
Index values by process
The injection molding index for the second quarter was 110, a modest increase from the first quarter value of 107.8. The injection molding sector covers a wide range of end markets, and it is a good indicator of the overall consumer sector in the U.S.
A value of 110 was a respectable performance during the second quarter when the overall economy grew by just a little more than 2 percent and the macro-indicators for the total U.S. manufacturing sector were trending flat.
It should not come as too much of a surprise that the largest number of responses for our quarterly survey comes from injection molders, so I like to see a solid performance from these companies, and that is what we got.
The indices that enjoyed the largest gains by far were those for extruders of film and sheet and also pipe, profiles and tubing. The film and sheet index jumped from 101.2 in the first quarter to a salubrious 125.5 in the second quarter. Big gains were reported for new orders, production and prices received.
The change in the index for pipe, profile and tubing was just as dramatic. The second quarter value for this index was 121.6, which was a sharp reversal of the 96 posted in the first quarter. The components for new orders, production, backlogs and employees all surged in the latest survey. The jump in this particular index corroborates the recent trends of strong gains in total construction spending so far in 2015. Total construction is up 8 percent for the year-to-date, and it spiked up 12 percent in the month of June when compared with last year.
One other sector that enjoyed an outsized gain in the second quarter was thermoforming. The index for thermoforming was 113.6 in the second quarter, which was significantly better than the 101.9 in the first quarter. Strong gains were noted for the new orders and production categories, while the sharp decline in prices received that was reported in the first quarter appears to have stabilized.
