I have been thinking a lot about the auto industry recently. I do not have enough information to formulate an opinion about the recent round of contract negotiations, other than to say companies have to make a profit, workers have to be paid, and I hope they can find a win-win deal.
Nevertheless, there is a potential for significant economic consequences in all of this, especially for the plastics industry. So it is useful to take a closer look at some of the recent trends that might affect us.
The first trend I want to highlight pertains to motor vehicle miles traveled. This data has been around for a long time, but I used to take it for granted. The total increased every year, and any fluctuations in the growth rate were mostly due to either the price of gasoline or whether the overall economy was in a prolonged recession.
Then the pandemic disrupted that long-term secular trend. One thing worth noting is the data has not yet recovered to the peak level it hit in 2019. As of right now, it is still about 2 percent below the peak. But it is on a trajectory to get back to another all-time high within a year or so.
The implication here is that demand for motor vehicles and parts, both new and replacement parts, is quite healthy. The precipitous decrease in miles traveled during the pandemic has reversed and is now accelerating upward.
You will note the slope of the line ramped up this past summer. Maybe this was due to more workers returning to the office, or maybe it was due to an increase in recreational travel — or both. Gas prices were higher than they were a year ago, and so were interest rates, but neither of these factors have slowed Americans down in 2023.
Another important indicator is the trend in total U.S. motor vehicle assemblies. Once again, it is easy to identify the disruption in the trend caused by the pandemic, but the post-COVID recovery in this dataset has been more complicated.
The data is currently within about 5 percent of getting back to its pre-COVID levels from 2019, but the cyclical peak in this data was actually hit in 2016. The data had been trending downward for about three years when COVID shut us down, so there is some explanation required when you discuss how far the industry has to go to be fully recovered from the effects of the pandemic.
This cyclical wrinkle notwithstanding, the recovery in this industry would have been much sharper if not for the supply chain issues it encountered in 2021. As a result of these issues, consumer demand and market supply have not yet reestablished their equilibrium because the post-pandemic demand has yet to be fully sated.