Business activity levels for North American plastics processors were steady-to-better in the fourth quarter of last year when compared with the previous quarter, and their expectations for conditions in the coming year improved.
That news is according to our latest survey of Plastics News subscribers.
Plastics News Business Monitor Index for the fourth quarter of 2015 is 104.6. This is a strong improvement from the third quarter when the Business Monitor Index was 98.7. A value above 100 indicates that business levels increased during the quarter.
The solid gains registered in new orders, production levels, and payrolls for processors in the fourth quarter were more than enough to offset a modest decline in export orders and shrinking backlogs.
Once again, there was a significant decrease reported in the prices that processors received for their products in the most recent quarter, but this is mostly due to the prevailing downtrend in the price of resins in 2015. The good news is that falling resins prices are proving to be a boon for most processors. Only 11 percent of the respondents expect to be less profitable in the coming year than they were in the previous year. This is down from 19 percent in the third quarter.
The improving expectations for profitability are also reflected in the capital spending plans. The past six years have witnessed a steady rise in spending for both new equipment and employees, and if things go as planned, 2016 will be another strong year investment by processors. At a value of 128.3 for the fourth quarter, the sub-index for capital spending plans is at its highest level of the entire year.
This continued improvement in the data from the North American plastics industry is a contrast to the performance of most other segments of the industrial sector. The trend in the data from the overall U.S. manufacturing sector was flat-to-down in the second half of last year. Many manufacturers are struggling with the conditions caused by a strong U.S. dollar, slow growth in many of the key export markets and a low price for most commodities (especially oil and natural gas).
But these conditions are favorable for many segments of the domestic plastics industry. Low commodity prices have resulted in lower materials costs for plastics processors, and the lower energy prices have put more money in the pockets of American consumers. Consumer spending increased by a moderate 2 to 3 percent in 2015, and this has pushed demand for many plastics products steadily higher.