As a lifetime student of the American economy, I have developed a grudging appreciation for the holiday season over the years. Now don't get me wrong, I still believe fervently that far too much of our nation's time and income are gratuitously allocated toward non-productive or, worse yet, counter-productive goods and services all in the name of holiday cheer.
But I must admit that the trend in retail sales and consumer spending data in the fourth quarter can be a useful indicator of what we can expect from consumers in the New Year. There is typically a seasonal decline in nominal spending for many types of goods in the first quarter, but that does not always mean the economy is losing momentum. It just means it is necessary to make an appropriate seasonal adjustment to the data to gauge the underlying trend.
The Bureau of Economic Analysis has been struggling in recent years to figure out what an appropriate seasonal adjustment should be in the first quarter of the year; nevertheless, there are times when a strong performance in the fourth-quarter data is a good sign that the growing momentum will carry over into the first-quarter data and beyond.
I believe this will be the case as 2017 comes to an end and 2018 gets started. And the good news is that this acceleration in the growth rate in consumer spending will also soon be evident in the trends in the data for the plastics industry.
The early consumer data based on spending from Black Friday and Cyber Monday indicate that Americans are increasing the amount they spend this holiday season when compared with last year, and the rate of increase is accelerating moderately. The early estimates indicate that a year-over-year gain in the range of 4 percent is likely in 2017 when compared with last year.
This is about a half of a percentage point higher than the average annual increase since the recession ended, and it is also about half a percentage point higher than the annual gain for the past two years. So if you are like me and are feeling about half a percentage point more joyful in 2017 than you did last year at this time, now you know why.
My enthusiasm about the prospects for the domestic plastics industry in the coming year are not solely based on the latest retail sales data. I am also feeling jolly about the recent trends in a couple of my favorite data series — the Federal Reserve's index of industrial production of plastics products and its index of industrial production of consumer goods that excludes high-tech products, motor vehicles and parts, and energy products.
This particular consumer goods series includes large categories such as food, clothing, paper products and household and personal chemical products. It also includes many categories of smaller products such as housewares, sporting goods and toys. Obviously, many of these basic consumer goods sectors are important end markets for plastics products.