Plastics Index Shows Fourth Consecutive Monthly Gain

Numbers in Perspective

Perc Pineda, Ph.D., Chief Economist, Plastics Industry Association

The Gardner Business Index (GBI) for December rose to 46.1, which is higher than in previous months but still indicates a weaker business environment for the plastics industry. New orders and production components of the GBI increased both month-over-month and year-over-year. Year-end performance varies by industry: service sectors, like travel, typically experience strong growth in December due to the holiday season, while manufacturing often slows, except for efforts to address backlogs or meet year-end shipment deadlines. Notably, the backlog component of the GBI showed a monthly increase in December, though it remained lower than the same period last year.

In 2024, the plastics industry faced its second consecutive year of sluggish manufacturing performance, even as the broader U.S. economy expanded. Manufacturing output — the primary driver of demand for plastics — declined, while the housing sector experienced reduced activity, as evidenced by falling housing starts and lower existing and new home sales. Weak manufacturing performance can be attributed to high inventories, while the housing sector faced challenges due to postpandemic underbuilding and low housing supply as homeowners avoided selling to evade higher mortgage rates.

Although immigration has been cited as a factor in economic growth last year, policymakers must recognize that while immigration has supported the services sector, its benefits to manufacturing have been minimal. Looking ahead to 2025, lower interest rates are expected to boost demand across the industry’s value chain. Notably, the future business component of the GBI rose to 68.9 on a 3-month moving average. However, labor shortages in manufacturing will remain a persistent issue.