The U.S. economy expanded at a pedestrian rate of 1.4 percent in the first half of this year when compared with the same period in 2015.
That is following the advanced estimate released by the Bureau of Labor Statistics saying real GDP in the U.S. grew by an annualized rate of 1.2 percent in the second quarter of this year.
This marked the fifth consecutive quarter that the pace of growth in the overall economy decelerated when compared with the same quarter of a year earlier. And the gain of 1.4 percent so far this year is substantially slower than the increase of 2.6 percent registered for all of 2015. My earlier forecast for the change in real GDP called for an annual gain of 2.8 percent this year, but based on the figures from the second quarter, I have lowered this to a gain of 2.4 percent. This will bring the annual gain right back on trend with the yearly increases from the past six or seven years.
The trend in domestic demand for plastics products is closely tied to the trend in the overall economy. The deceleration in the GDP growth over the past five quarters corresponds with five quarters of flat-to-slightly-negative growth in the total U.S. production of plastics products and about five quarters of a downward trend in the capacity utilization rate for the plastics industry. Now nothing is ever 100 percent certain, but it is highly likely that if we are going to get a pick up in the plastics industry, then it will correlate with stronger macro-economic data.
You might be tempted to think that my forecast for real GDP for 2016 is still too optimistic given the lackluster performance in the overall data in the first half of the year. But a closer look at the details indicates that the gains in the data during the second half of this year should accelerate. The changes over the next two quarters will not be anything dramatic, but they will be enough to push the data up close to the longer-term trend.
Data on total consumer spending accounts for about two-thirds of the GDP total in the U.S., and about two-thirds of all consumer spending is spent on services. The other one-third is spent on goods — both durables and nondurables. The trends in the amounts consumers spend on goods are the most relevant for plastics processors. The durable goods data is important for processors who supply the auto, appliance and electronics industries, while spending on non-durables like food and health care products is what drives demand for many types of plastics packaging products.