Plastics Processing Contraction Slows Slightly

Numbers in Perspective

Perc Pineda, Ph.D.,Plastics Industry Association

The GBI Plastics Processing Index continued to decline in September, reaching 43.3, which is 6.7 points below the growth threshold of 50. Although there was a slight improvement from 42.2 in August, the three-month moving average at 43.0 indicates continued sluggishness in plastics processing. On a brighter note, the future business outlook component remained steady, with a three-month moving average of 55.3 in September.

Three factors are noteworthy when analyzing the September GBI plastics process:

Seasonal Slowdown: Summer typically represents a weaker period for manufacturing and international trade. Export and import activities usually drop during these months, influencing the lower GBI Plastics Processing Index readings.

Economic Conditions: While data for the third quarter is still incomplete, early indicators suggest manufacturing is stable but lacks significant growth drivers. Because manufacturing is a key market for plastics, the sector’s interest-rate-driven slowdown has constrained plastics processing growth. Even with the Federal Reserve’s 50 basis-point rate cut in September, immediate gains in manufacturing are unlikely due to the lag effects in monetary policy.

Labor Market Trends: September’s job report showed 254,000 nonfarm payroll employees were added, but 79.5% of them were in the services sector, with only 8.3% in the goods producing sector. Manufacturing lost 7,000 jobs, including 4,000 in motor vehicles and parts, which negatively affected plastics processing, while food manufacturing added 2,400 jobs. Plastics and rubber products manufacturing lost 1,700 jobs, with the unemployment rate increasing to 5.9% from 4.2% in August. The third quarter unemployment rate of 4.1% was marginally lower than the 4.2% total civilian unemployment rate in the economy for the same period.

Despite modest month-over-month improvements, the GBI remains below the growth threshold, pointing to sluggish plastics processing activity. However, the stable business outlook component of GBI offers some optimism for the sector’s future.