Skip to main content
Sister Publication Links
  • Sustainable Plastics
  • Rubber News
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Processor News
    • Suppliers
    • More News
    • Digital Edition
    • End Markets
    • Special Reports
    • Newsletters
    • Resin pricing news
    • Videos
    • Injection Molding
    • Blow Molding
    • Film & Sheet
    • Pipe/Profile/Tubing
    • Rotomolding
    • Thermoforming
    • Recycling
    • Machinery
    • Materials
    • Molds/Tooling
    • Product news
    • Design
    • K Show
    • Mergers & Acquisitions
    • Sustainability
    • Public Policy
    • Material Insights Videos
    • Numbers that Matter
    • Automotive
    • Packaging
    • Medical
    • Consumer Products
    • Construction
    • Processor of the Year
    • Best Places to Work
    • Women Breaking the Mold
    • Rising Stars
    • Diversity
    • Most Interesting Social Media Accounts in Plastics
  • Opinion
    • The Plastics Blog
    • Kickstart
    • One Good Resin
    • Pellets and Politics
    • All Things Data
    • Viewpoint
    • From Pillar to Post
    • Perspective
    • Mailbag
    • Fake Plastic Trees
  • Shop Floor
    • Blending
    • Compounding
    • Drying
    • Injection Molding
    • Purging
    • Robotics
    • Size Reduction
    • Structural Foam
    • Tooling
    • Training
  • Events
    • K Show Livestream
    • Plastics News Events
    • Industry Events
    • Injection Molding & Design Expo
    • Livestreams/Webinars
    • Editorial Livestreams
    • Ask the Expert
    • Plastics News Events Library
    • Processor of the Year submissions
    • Plastics News Executive Forum
    • Injection Molding & Design Expo
    • Plastics News Caps & Closures
    • Women Breaking the Mold Networking Forum
    • Plastics in Automotive
    • PN Live: Mergers and Acquisitions
    • Polymer Points Live
    • Numbers that Matter Live
    • Plastics in Politics Live
    • Sustainable Plastics Live
    • Plastics Caps & Closures Library
    • Plastics in Healthcare Library
    • Women Breaking the Mold Networking Forum Library
  • Rankings & Data
    • Injection Molders
    • Blow Molders
    • Film Sheet
    • Thermoformers
    • Pipe Profile Tubing
    • Rotomolders
    • Mold/Toolmakers
    • LSR Processors
    • Recyclers
    • Compounders - List
    • Association - List
    • Plastic Lumber - List
    • All
  • Directory
  • Resin Prices
    • Commodity TPs
    • High Temp TPs
    • ETPs
    • Thermosets
    • Recycled Plastics
    • Historic Commodity Thermoplastics
    • Historic High Temp Thermoplastics
    • Historic Engineering Thermoplastics
    • Historic Thermosets
    • Historic Recycled Plastics
  • Custom
    • Sponsored Content
    • LS Mtron Sponsored Content
    • Conair Sponsored Content
    • KraussMaffei Sponsored Content
    • ENGEL Sponsored Content
    • White Papers
    • Classifieds
    • Place an Ad
    • Sign up for Early Classified
MENU
Breadcrumb
  1. Home
  2. News
September 11, 2018 02:00 AM

Never mind NAFTA, what is the outlook for plastics in Canada?

Bill Wood
Economics Editor
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Bank of Canada

    The U.S. and Canadian economies have always been strongly correlated, but their growth patterns will diverge in the next few years. This will be due in large part to a difference in consumer spending power. Consumer spending in Canada is past its cyclical peak in growth, and it will decelerate over the next two years. Consumer spending in the U.S. will continue to get a boost from tax cuts and rising wages, and it will accelerate moderately in 2018 and 2019.

    My latest forecast calls for real GDP in Canada to expand 2.3 percent in 2018. This is moderately higher than the trend of the past few years, which has averaged right around 2 percent per year. The negative effects of the trade dispute with the United States in the first half of this year will turn positive by year's end after a deal is signed and the Canadian economy can catch some of the tailwind caused by accelerating growth in the United States.

    In terms of the percentage of disposable income, Canadian households have much higher levels of debt outstanding than their American counterparts, and the trend is rising. Conversely, the savings rate for Canadian households is much lower than it is in the U.S., and it is trending lower.

    Stronger household balance sheets will result in a faster pace of GDP growth in the U.S. through 2019, where the gain in the overall economy is expected to be close to 3 percent per year. Canada's economy will register growth of just under 2 percent per year overall.

    One segment of the second-quarter data out of Canada that was disappointing was investment in capital goods. After growing by more than 16 percent in the first quarter, investment in machinery and equipment posted a meager rise of 1 percent in Q2.

    The question for the machinery sector, especially suppliers of plastics machinery, going forward is this: Was the weak performance in the second quarter just a short-term payback for the excessive strength in the first quarter, which means the trend will fall somewhere between these two extremes in the second half of this year? Or was the drop in the second quarter the beginning of a new trend downward in spending on machinery for the foreseeable future?

    In both the U.S. and Canada, there is evidence to suggest that the rate of investment in plastics machinery during the past few years has outpaced market demand for plastics products, and the industry may now be faced with the problem of excess production capacity.

    Jessica Jordan
    Shrinking market for machinery?

    Despite the expectations of growth in the overall economies, we may be past the cyclical peak in equipment demand for the current business cycle, and we will soon be entering a contractionary phase for the equipment sector. This would not be the first time that the plastics machinery industry suffered a recession while the overall economy posted gains. Suppliers to these markets should closely monitor the data in the next few months to determine if a downtrend is confirmed.

    I believe this question about plastics product demand growth vs. production capacity will ultimately prove more relevant next year than the current worries about the trade dispute between the U.S. and Canada. I admit to being more than a little entertained by all the high-stakes, political intrigue emanating from the recent trade dispute. Each side has been rigorously coached about what to say to the media, or even what to leak to the media.

    To become better informed of the pending economic consequences, I have tried to investigate the areas of disagreement between the two sides. This means I may be only slightly more informed than the average interested bystander, but I really cannot find anything of substance in this dispute. Apparently, the most contentious issue between these two countries is the 270 percent tariff Canada imposes on imports of U.S.-made milk powder.

    Got milk?

    Now, 270 percent sounds like a big tariff, but is all this rhetoric and posturing and uncertainty just because of an argument over the milk powder market? You would have to be in the reality TV production business to make this stuff up.

    This may not seem like such a big deal on the surface, but it is an election year in both countries. Wisconsin dairy farmers were strong supporters of President Donald Trump, and the Canadian dairy farmers have a pretty strong lobby in Ottawa. So here we are in a tiff with our closest ally and neighbor that could have serious implications — positive and negative — for many segments of the plastics industry.

    I swore off making political predictions a long time ago because I have all I can handle trying to make sense of the economy. Nevertheless, there is a lot more at stake here for Canada than there is for the United States. Trade with America accounts for a substantial portion of their GDP, and there is little doubt that Trump is leveraging the asymmetric risks that are strongly tilted in favor of the U.S. Canadians are strong and resourceful, but they need a trade deal a lot more than the U.S.

    Canada is America's second-largest export market — the European Union is slightly larger — therefore, I believe the strongest probability is that all of this will be resolved soon, and a trade deal will get signed. I am not guaranteeing anything, but there is way too much at stake to believe otherwise.

    RECOMMENDED FOR YOU
    Plastics firms work to eliminate PFAS use as pressure mounts
    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Plastics News would love to hear from you. Email your letter to Editor at [email protected]

    SIGN UP FOR OUR FREE NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Get our newsletters

    Staying current is easy with Plastics News delivered straight to your inbox, free of charge.

    Subscribe today

    Subscribe to Plastics News

    Subscribe now
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter
    • Instagram

    Plastics News covers the business of the global plastics industry. We report news, gather data and deliver timely information that provides our readers with a competitive advantage.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI 48207-2997

    Customer Service:
    877-320-1723

    Resources
    • About
    • Staff
    • Editorial Calendar
    • Media Kit
    • Data Store
    • Digital Edition
    • Custom Content
    • People
    • Contact
    • Careers
    • Sitemap
    Related Crain Publications
    • Sustainable Plastics
    • Rubber News
    • Tire Business
    • Urethanes Technology
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Processor News
        • Injection Molding
        • Blow Molding
        • Film & Sheet
        • Pipe/Profile/Tubing
        • Rotomolding
        • Thermoforming
        • Recycling
      • Suppliers
        • Machinery
        • Materials
        • Molds/Tooling
        • Product news
        • Design
      • More News
        • K Show
        • Mergers & Acquisitions
        • Sustainability
        • Public Policy
        • Material Insights Videos
        • Numbers that Matter
      • Digital Edition
      • End Markets
        • Automotive
        • Packaging
        • Medical
        • Consumer Products
        • Construction
      • Special Reports
        • Processor of the Year
        • Best Places to Work
        • Women Breaking the Mold
        • Rising Stars
        • Diversity
        • Most Interesting Social Media Accounts in Plastics
      • Newsletters
      • Resin pricing news
      • Videos
    • Opinion
      • The Plastics Blog
      • Kickstart
      • One Good Resin
      • Pellets and Politics
      • All Things Data
      • Viewpoint
      • From Pillar to Post
      • Perspective
      • Mailbag
      • Fake Plastic Trees
    • Shop Floor
      • Blending
      • Compounding
      • Drying
      • Injection Molding
      • Purging
      • Robotics
      • Size Reduction
      • Structural Foam
      • Tooling
      • Training
    • Events
      • K Show Livestream
      • Plastics News Events
        • Plastics News Executive Forum
        • Injection Molding & Design Expo
        • Plastics News Caps & Closures
        • Women Breaking the Mold Networking Forum
        • Plastics in Automotive
      • Industry Events
      • Injection Molding & Design Expo
      • Livestreams/Webinars
        • PN Live: Mergers and Acquisitions
      • Editorial Livestreams
        • Polymer Points Live
        • Numbers that Matter Live
        • Plastics in Politics Live
        • Sustainable Plastics Live
      • Ask the Expert
      • Plastics News Events Library
        • Plastics Caps & Closures Library
        • Plastics in Healthcare Library
        • Women Breaking the Mold Networking Forum Library
      • Processor of the Year submissions
    • Rankings & Data
      • Injection Molders
      • Blow Molders
      • Film Sheet
      • Thermoformers
      • Pipe Profile Tubing
      • Rotomolders
      • Mold/Toolmakers
      • LSR Processors
      • Recyclers
      • Compounders - List
      • Association - List
      • Plastic Lumber - List
      • All
    • Directory
    • Resin Prices
      • Commodity TPs
        • Historic Commodity Thermoplastics
      • High Temp TPs
        • Historic High Temp Thermoplastics
      • ETPs
        • Historic Engineering Thermoplastics
      • Thermosets
        • Historic Thermosets
      • Recycled Plastics
        • Historic Recycled Plastics
    • Custom
      • Sponsored Content
      • LS Mtron Sponsored Content
      • Conair Sponsored Content
      • KraussMaffei Sponsored Content
      • ENGEL Sponsored Content
      • White Papers
      • Classifieds
        • Place an Ad
        • Sign up for Early Classified