The long-term outlook for plastic medical equipment and supplies are quite favorable. All the established demographic and technological trends spurring the market remain intact: The global population is aging, global access to medical care is expanding and rapid technological advances continue to bring new products and information to the market.
If you take a multiyear perspective, I expect this sector to grow faster than the overall economy for the foreseeable future. Nevertheless, there are some short-term factors that will likely affect how well this sector will perform this year. The growth rates for the U.S. economy and the overall global economy are expected to decelerate in 2019. And, as we all know by now, global trade is also expected to slow. Usually trade activity slows as a result of slower overall economic growth, but this time it is probably the other way around.
That means if we can get the uptrend in trade started again, we should get another bump in economic growth. But until this happens, all the uncertainty and the new tariff barriers will create a drag on medical equipment and supplies. At least one-third of these products that are manufactured in this country are exported, and some of these exports will likely now be subjected to increased tariffs.
It is too early to tell which way the latest round of negotiations with China will fall, but my best guess right now is we will get some agreement that will stretch the decision out a while longer without achieving a real deal. Meanwhile, folks are still getting older and access to medical care is still steadily improving. So I think this sector will still expand, just not a fast as it might if the export pipeline was wide open.
As always, we will need to watch the indicators. And though it includes a wide range of products — not just those made of plastic — I find that the Fed's index on the industrial production of medical equipment and supplies is a useful indicator for plastics companies that supply the medical industry. For January, the index came in at 94.3 (2012=100). This was a little below the December figure, but it was a solid increase of 4 percent when compared with the same month a year ago.