After a shaky start to the year, activity levels for extruders of film and sheet improved substantially in the second quarter of 2015. This strong recovery demonstrates that this sector can do well at times when the overall economy is expanding at only a moderate rate of growth. And there is evidence to indicate that demand for plastic film and sheet will accelerate as soon as the U.S. economy start to gain speed in the coming months.
This outlook is based on the trend that emerged in the latest Plastics News Business Monitor Index for film and sheet extruders. The index registered a strong 125.5 in the second quarter. This represents a robust increase from the value of 101.2 that was posted in the first quarter. A value above 100 indicates that overall business levels increased when compared with the previous quarter. Keep in mind that a reading of 125.5 does not mean that total business activity jumped by 25.5 percent, but it does indicate that the upward momentum in this sector accelerated significantly during the second quarter.
The film and sheet segment was one of the strongest performers in our second quarter survey. At 125.5, the index for film and sheet was considerably higher than the 112.2 index value for the entire plastics industry. In other words, this sector accelerated faster than all of the other sectors in the plastics industry last spring. It must be noted that the film and sheet sector was one of the weakest performers in the first quarter of this year. So the strong performance this quarter may partly be due to some catching up, or what economist like to call “regression to the mean.” But a closer look at the data reveals that this segment should continue to be a reliable performer for the foreseeable future.
As the numbers on the table show, all of the sub-indices that we calculate as part of our film and sheet index posted strong gains from their first quarter levels. The most crucial of these was in the new orders category. That sub-index was an outstanding 159.6. This means that 70 percent of our large pool of respondents reported an increase in new orders.
When the new orders level is this strong it drives increases in all of the other categories. Production levels ramped up substantially, and there were still enough new orders to create a large (and therefore rare) increase in backlogs. This surge in new business also resulted in an escalation in the number of employees for the quarter.