The Federal Reserve isn’t convinced that the U.S. economy has achieved a soft landing, which is bad news for some key end markets for plastic products, according to PN Economics Editor Bill Wood.
“I’m of the opinion that we have not yet landed,” Wood said in the February Numbers That Matter livestream (recording below). “And I believe this is shared by the Fed, and many other analysts and economists, is that the landing will occur at the time that the rate of inflation gets down to the sustainable range somewhere around 2 percent.”
Wood said the construction and automotive end markets have been slow to recover because they are sensitive to higher interest rates.
“So what does that mean for the plastics industry? Well, the plastics industry, if you look at the data from the Federal Reserve Board on output — plastics products — it peaked right at the same time the Fed started hiking interest rates ... and it has declined in the 22 or 23 months ever since.”
Wood said the slump for the U.S. plastics industry “is the largest decline in that data we've ever seen. And all of this at a time when the economy is not really in a recession, officially. So plastics is clearly, clearly under stress as a result of high interest.”
Wood said the combination of high inflation and high interest rates will have a negative impact on the plastics industry.
Other topics of the livestream included detailed looks at automotive and construction data, the impact of government spending and regulations on the industry, and factors impacting resin pricing.
The next Numbers that Matter Live is scheduled for March 26.