Erie, Pa. — The United States remains a bright spot in the global economy, but the plastics business faces challenges of environmental sustainability, negative plastics-in-the-oceans headlines and finding the next generation of workers, economist Perc Pineda said a conference at Penn State Erie, the Behrend College.
Pineda, chief economist for the Washington-based Plastics Industry Association, said plastics could be impacted by global trade tensions, including the trade dispute between the United States and China, Brexit and lingering debate over the United States-Mexico-Canada Agreement.
"The biggest challenge facing the plastics industry at the moment — because in the plastics industry, the world is our market — is a weak global economy," he said in a keynote address June 20 at the Innovation and Emerging Plastics Technologies Conference. "The United States is the best house in the block at the moment, so to speak."
Pineda said the U.S. economy hit a milestone with the longest economic expansion in U.S. history at the end of June. And it's still growing, at a moderate rate. Pineda was projecting 2.3 percent in gross domestic product growth in the second quarter, flattening out at 2.4 percent in the third and fourth quarters. In 2020, it probably will be 1.8 percent, he said.
"We still have consumers who are engaged. Nothing is keeping the consumers at the moment from spending their money and opening up their wallets," he said. Unemployment is low, jobs are easy to get, inflation is stable and interest rates are low. Retail sales are increasing from last year.
However, Pineda said the U.S. housing market has experienced the slowest recovery after a recession in U.S. history. The rate of the housing recovery has cooled this year.
The day before Pineda's speech in Erie, the Federal Reserve left its key interest rate unchanged but signaled it could cut rates if necessary to sustain the expansion against trade conflicts and other threats.
"At the moment, there's no signs of a recession," he said.
Still, Pineda added, "We're at the stage of economy where there's a lot of mixed signals."
Numbers for manufacturing and the plastics sector bounce up and down each month.
The Plastics Industry Association reported that North American shipments of primary plastics equipment declined in the first quarter from the fourth quarter of 2018. Pineda projects machinery production volume will decline 1.3 percent this year, before rebounding at 2 percent growth in 2020.
Other segments of the industry — plastic resin, plastic products and molds — are in positive territory, he said.
Pineda said the economy is running at close to full capacity, which originally could be the reason for the slight slowdown in spending for industrial equipment because there's not much need for additional manufacturing production.
On the positive side, he said new orders for machinery are holding up. And automotive production should decline only modestly from the 17 million units for the previously four straight years, which is much better than economists expected.
Peak capacity is not translating into lack of hiring, mainly because older skilled plastics workers are retiring, Pineda said.
The economist noted that plastics and rubber jobs still have not returned to the pre-Great Recession levels, even as the industry has increased output. That's because manufacturers have invested in automation, new technology and product development, he said.
But Pineda noted that next-generation employees are hard to find. "Our clients in the industry continue to tell us that it's their No. 1 issue, the No. 1 priority," he said.
The plastics industry — along with overall manufacturing — faces a fundamental challenge.
"It's no longer the preferred sector of the economy where a lot of college graduates want to go into," Pineda said. Instead, a lot of bright, young people want to go to Wall Street, he said. "It's only in the manufacturing sector that you can actually see the real rate of return from capital. In the financial sector, you cannot. You're moving money from one pocket to the other."
At the same time, he noted the industry is getting buffeted by bad news every day. The Great Pacific Garbage Patch, microplastics in fish and your body.
Pineda criticized studies by many nongovernment agencies that slam plastics. Some NGO studies are not peer-reviewed. The agenda of NGOs seems to be "ban plastic altogether," he said.
NGOs make outrageous statements to try and speed up the legislative and regulatory process, which is normally slow and deliberative, Pineda said, comparing it to how long it takes to get a new stop sign in your neighborhood.
"You cannot possibly address public policy based on a cost analysis alone. It has to be based on a cost-benefit analysis. And you cannot include studies that use experimental data," he said.
Pineda said NGO reports get magnified by social media, the source of news for many young people worried about the environment.
But Pineda also gave an economist's answer: "For an economy to thrive, you have to continue to give consumers choices, and that includes products made from and packaged in different materials, including plastics, because there is no other material currently that is as versatile, cost-effective to manufacturers and consumers, and at the same time sustainable, than plastics. And it's disconcerting when we hear arguments to the contrary."