U.S. industry, including plastics, looks like it has hit a plateau. No need to freak out: It's a high plateau.
The third-quarter machinery statistics from the Society of the Plastics Industry Inc. — and the analysis by plastics economist Bill Wood — matches closely comments I heard while reporting for Plastics News' Machinery Outlook package, in our Dec. 7 issue.
To boil it down: U.S. injection molding machinery sales seem to have flattened out as 2015 winds down, compared with the year-ago period. This is still good news, since machinery executives told me that injection press shipments probably will break through the 4,000 level this year.
Sales of injection molding machines are a good economic indicator for the plastics industry. Nobody knows the exact number, but I've heard analysts say that injection molding accounts for about 70 percent of the entire industry.
A few injection press executives told me that customers, in recent months, have delayed orders, showing some caution. And the SPI numbers bear that out. The dollar value of injection molding machinery declined 2.4 percent in the third quarter of 2015, compared to the third quarter of 2014.
Overall, shipments of all types of primary plastics machinery, including extruders and blow molding machines, was the same as the first nine months the year before, according to SPI's Committee on Equipment Statistics. Measured third-quarter to year-ago third-quarter, primary machinery declined by 4.6 percent.
For machinery makers, this appears to be just a “cooling off” period, some amount of adjustment after years of really big growth coming out of the Great Recession. Plastics processors bought a lot of machinery! A leveling off is a natural thing, in other words.
Economist Wood said that, the nearly 5 percent third quarter decline from year-ago levels for plastics machinery marked a weaker performance that the 2.2 percent gain in total U.S. business investment in all types of industrial equipment, compiled by the Bureau of Economic Analysis as part of its quarterly report on gross domestic product — which is a seasonally adjusted, annualized rate.
The CES numbers also showed were below the Census Bureau's total value of industrial machinery shipments, which eked out a gain of 0.3 percent in the third quarter, from the year-earlier period, Wood said.
And the Institute for Supply Management reported Dec. 2 that its widely watched index of manufacturing activity dropped to 48.6, the first time it dropped below 50 since November of 2012. (An index below 50 signals manufacturing is contracting).
Not to worry, said Wood: “The manufacturing sector hit a plateau in the third quarter, but this should be considered a period of consolidation rather than a harbinger of an impending economic recession. The plastics industry posted an increase in output, but the growth rate decelerated. This plateau notwithstanding, the recovery in the U.S. economy is still intact, and the plastics industry will continue to be a growth leader in the U.S. manufacturing sector.”