US machinery shipment value dropped in second quarter

The value of second-quarter shipments of injection molding and extrusion equipment dropped almost 20 percent to $331.6 million in a much more subdued manufacturing landscape compared with a year ago.

The year-over-year decline of 19.8 percent was reported Aug. 16 by the Plastic Industry Association's Committee on Equipment Statistics.

The value of machinery shipments tracked by CES decreased 4.1 percent compared with the previous quarter.

Single-screw extruders, however, stand out among the lower numbers, which also take into account twin-screw extruders and injection molding presses. Shipments of single-screw extruders exhibited a remarkable increase, according to a news release from the Washington-based trade association.

Shipments of the extruders used to manufacture many building products, such as some plastic pipes and vinyl window profiles, were up 39.3 percent compared with the prior quarter and up 40.9 percent compared with 2022.

Meanwhile, shipments of twin-screw extruders, which are used for compounding and food packaging, experienced significant declines of 15 percent quarter over quarter and 11.2 percent year over year.

At the same time, shipments of injection molding machinery declined 6.1 percent from quarter to quarter and have experienced a substantial decrease of 23.6 percent when compared to the prior year.

The crucial indicators for machinery sales also are down, according to Bill Wood, Plastics News' economics editor and founder of Mountaintop Economics & Research Inc.

"The industrial output of plastics products is down 6 percent on the year to date, and the capacity utilization rate for processors is down in the past 12 months from about 84 percent at the peak, according to the government's measurement, to 77 percent," Wood said in a phone interview. "So output of product is down and use of existing capacity is way down. You're not going to sell new machines into that environment."

Wood said extruder data can be very volatile because it draws from a small sample of machine builders. Also, twin-screw extruder data is not broken down.

"They don't distinguish between compounding co-rotating extruders and counter-rotating extruders," Wood said. "I don't know if people are buying compounding extruders or making big huge pipe or decking."

The latest CES report reflects a shift in spending from manufactured goods to services, Perc Pineda, chief economist for the trade group, said in the release.

"The manufacturing sector is the main customer of the plastics industry. Although the U.S. economy exhibited resilience in the first half of 2023, the decline in plastics machinery shipments signifies a subdued manufacturing landscape," Pineda said. "Notably, the upswing in personal consumption expenditures (PCE) that followed the conclusion of the COVID-19 recession reached its peak in the first quarter of 2021, subsequently maintaining a consistent trajectory. Interestingly, PCE on services commenced its recovery at a slower pace post-COVID-19 recession, and this upward trend has persevered, playing a pivotal role in driving the economic expansion in the first half of the year."

Wood put it this way: "Consumer spending is decelerating, especially for goods. The service sector is doing better and it's propping the whole economy up. But the goods sectors isn't as good and plastics is part of the goods sector. Automotive isn't bad, but housing starts are way down. Then, there's packaging. Berry just shut 20 plants. That tells you something."

The trade group's equipment committee also tracks the outlooks for market conditions and equipment expectations. The new survey of plastics machinery suppliers indicates more participants expect market conditions to improve over the next 12 months compared with the previous year. CES says the percentage of those expecting conditions to either remain the same or improve rose to 46 percent.

CES also reports that during the second quarter, U.S. exports of plastics machinery saw an uptick of 10.2 percent and reached a total value of $252.8 million.

Mexico and Canada continue to be the prime export destinations for U.S. plastics machinery. The two countries receive exports worth $126.4 million, which accounts for 50 percent of the entire U.S. plastics machinery export value.

As for imports, CES reports a decline of 10.5 percent to a value of $458.6 million as well as a shrinking of the trade deficit in plastics equipment by 32 percent to $205.8 million.

"As the economy readjusts, the shift between goods and services consumption is underway," Pineda said. "However, sustaining a robust economic expansion, given a 5.5 percent benchmark interest rate or possibly higher in 2023, appears unlikely. The reliance on household debt for consumption raises concerns, particularly with the resurgence of student loan payments in September. This has the potential to adversely affect consumer spending and subsequently impact the plastics industry."

Global economic conditions and U.S. constraints, such as labor supply, also play pivotal roles, according to Pineda. He said the German recession, European Union slowdown and China's economic deceleration are poised to influence the U.S. economy's output, including the plastics sector.