It appears highly likely to me that the growth rate for the output of plastics products in the U.S. hit a cyclical peak in the second quarter of this year. If this is correct, then growth in the overall industry topped out at just over 6 percent for the current cycle, and it will now decelerate for the remainder of the year.
My latest forecast calls for the annual growth for the calendar year 2022 to end up at just over 3 percent.
For the sake of clarity, I will add some context to these figures. During the 12-month period that ended in the second quarter of this year, plastics processors increased their overall production levels by about 6 percent when compared with the previous 12 months. Due to the reasons drummed into our heads daily, this pace of growth will not be sustained going forward. The U.S. economy will downshift in the next few quarters, and by the end of the year, the 12-month growth rate for the plastics industry will calculate out to about 3 percent.
Now 3 percent growth for the U.S. plastics industry is a pretty good year. It is not a recession, and output levels overall will likely remain at or even above the levels they registered in the months leading up to the pandemic. Further, the average annual pace of growth in this industry for most of the decade before COVID-19 was exactly 2 percent per year.
So, despite all of the problems caused by labor shortages, skyrocketing inflation, sharply higher oil and resin prices, the war in Ukraine, kinks in the supply chain, a strong dollar, rising interest rates and burgeoning pressures to deselect many types of plastics products — despite all of that — the plastics industry still looks like it will experience an above-average year in 2022.
I realize a lot can happen between now and next January, so I am not taking anything for granted. But as of right now, things look far from dire to me.
I believe the same is true for the overall U.S. economy. The trends in the growth rates for the economy and the plastics industry usually move in similar patterns. Therefore, I believe we are also past the peak growth rate in the overall economy, though we will not get the official Q2 GDP data for a few more weeks.
Forecasting a turning point when you are either at or already past can be tricky, but it is not as difficult as predicting where the next turning point will occur. If we are currently near the peak, then the next turning point will be a cyclical trough. Troughs do not have to occur below the zero line, but when they do, it indicates negative growth — aka a recession.