Senior executives at U.S. plastics processors are seeing improving financial results and feeling optimistic about the future, according to a recent survey by the Manufacturers Association for Plastic Processors.
The most important reason for optimism: a belief that COVID-19 vaccinations will open up the economy and consumer spending.
MAPP Executive Director Troy Nix presented the findings in a Jan. 22 webinar.
"When I was coming into this data and the analysis of this data, I was very, very cautious. But I will tell you that the deeper that I got into the data, the more optimistic I became. And not only about the momentum from the third to the fourth [quarter of 2020], but also about first-quarter forecasts and basically what we're looking at in terms of anticipation for 2021," Nix said.
A majority of those polled, some 56 percent, said their sales had increased in the fourth quarter of 2020 compared with the third quarter, while 17 percent reported a decrease. That's a significant improvement over the same period in 2019, when only 37 percent had reported an increase, and the historical average of 52 percent. MAPP's data goes back to 2004.
Asked why sales are up, "the predominant response was that the program volumes with current work are increasing," Nix said. "That says to me that there's pent-up demand."
The poll showed that 50 percent of processors had added jobs in the fourth quarter, which is far above the historical average of 33 percent. That was also the highest increase for a fourth quarter since 2009, when the U.S. economy was recovering from the Great Recession.
Likewise, 54 percent reported that their backlog had increased in the fourth quarter, 33 percent said it had stayed the same, and 13 percent reported a decrease.
"Activity definitely picked up in the third quarter. This is 23 points right now above the 10-year average. So this is pretty amazing," Nix said.
Looking at the outlook for 2021, starting with employment levels, Nix said 54 percent of the companies plan to boost employment this year.
"This, ladies and gentlemen, is the highest first-quarter projection ever recorded since we actually began asking this question about workforce expansion. It's 15 points above the historic average," Nix said.
"My only issue, when I see that everybody wants to expand, is this concept of where you're going to get your employees? Because obviously, when we get to the very end of this presentation, 90 percent of you basically have workforce development, hiring, recruiting, etc., as challenges. So that's going to be very interesting."
Some 67 percent expect first-quarter sales to be higher than the fourth quarter of 2020. Of those respondents, the average level of sales growth they expect is 12 percent.
Likewise for the next 12 months, 82 percent of respondents expect sales to increase, 5 percent expect a decrease and 13 percent predicted that 2021 sales will be about the same as 2020. Of those expecting an increase, the average level of anticipated sales growth is 15 percent.
MAPP asked respondents to say what factors played a role in their prediction, and "the No. 1 one thing that came out of this optimism was the vaccine. People have a lot of hope that this vaccine is going to change what's happening in terms of demand, and even outlook of the consumers," Nix said.
The survey also showed that some processors are unsure about their profit levels in 2021, in part because of "the unknown of the new administration and what could happen with regulations" and other issues since the election of President Joe Biden.
Processors' top concern for 2021 is the pandemic recovery, and No. 2 is workforce development, which includes worker retention, training and minimum wage increases.
MAPP polled its member companies between Dec. 7 and Jan. 18, and received responses from 221 individuals. Most were from companies with between $15 million and $50 million in annual sales. Some 86 percent were from injection molders, 5 percent from extruders, 4 percent blow molders, and the remainder included other processes including rotational molding and compression molding. The top end markets are consumer goods, medical and automotive.
MAPP members can access the survey results from the Indianapolis-based organization at www.mappinc.com.