Business activity levels continued to expand for most plastics processors in the first quarter, but the pace of growth remained subdued. This is according to the latest data from our quarterly survey of processors with which we calculate the Plastics News Business Monitor Index.
The index value for the first quarter of this year was 106.9. This was a modest improvement over the value of 104.6 registered in the fourth quarter of 2015, and it indicates overall business levels were steady-to-better for a majority of the survey respondents at the start of this year (a value greater than 100 signals a rise when compared with the previous quarter).
The best news was the solid increase in the new orders component of our index when compared with the fourth quarter of 2015. New orders data is a leading indicator for all of the other components of the index. This gain, combined with the rise in production levels for the majority of processors in the first quarter, indicates that the overall growth rate may soon accelerate.
This should come as welcome news because the growth in the plastics industry data was starting to stagnate. According to Federal Reserve Board data, the total output for the plastics industry was flat-to-down in the first quarter when compared with last year. In fact, the Fed data has been in a slow-growth mode for the past five or six quarters.
A closer analysis of the historical data shows that the overall trend in the plastics industry is an extremely reliable indicator of the underlying health of the U.S. economy. During the past five years, the pace of expansion in real GDP has averaged just about 2 percent. The rate of growth in the output of plastics products during this time is just about 3 percent. Lower resin prices and a surge in auto demand are two of the major reasons why the plastics industry has grown faster in recent years, but there should be no doubt that the domestic economy and the plastics industry are closely linked.