Processing Activity Nears Expansion Level

The Gardner Business Index (GBI) for Plastics Processing reached 49.2 in April, up 0.6 points from March’s reading. 48.6. The index is based on survey responses from subscribers to Plastics Technology. Indices above 50 signal growth; below 50, contraction.

Slowed contraction primarily in new orders and production drove slowed contraction in April’s index overall. Contraction in backlog slowed as well, but backlog remained more contracted than other driving components.

FIG 1 Contraction for plastics processing overall and custom processing in particular slowed in April.

Employment and export contraction were slightly accelerated and level, respectively. Supplier deliveries lengthened a little faster again, representing another encouraging sign that business is picking up. Optimism about future business has been positive and steady for about three months now.

FIG 2 New orders and production lead slowed contraction in April.

Overall business activity for custom plastics processing continued to closely parallel total plastics processing.

ABOUT THE AUTHOR: Jan Schafer is director of market research for Gardner Business Media, parent company of both Plastics Technology magazine and Gardner Intelligence. She has led research and analysis in several industries for over 30 years. She earned a bachelor’s degree in psychology from Purdue University and an MBA from Indiana University. She credits Procter & Gamble for 15 years of the best business education. Contact: 513-527-8952; jschafer@gardnerweb.com.

Numbers in Perspective

In the last six months, the GBI Plastics Processing Index has ranged from 42.6 to 49.2, illustrating a discernible pattern of fluctuation. Despite this, there now appears to be an overall positive trend, with values trending higher toward the latter end of the period.

Perc Pineda

The Index dipped below the 50 mark in July 2022 (Figure 1), following the Federal Reserve’s commencement of interest rate hikes in March 2022. Notably, the three-month treasury bill yield had previously remained near zero from March 2020 through March 2022, reflecting the Fed’s decision to maintain its benchmark rate at 0 in response to the economic disruption caused by COVID-19. As short-term interest rates increased, reflecting heightened borrowing risks, they predictably had the opposite effect on the manufacturing sector, including the plastics industry.

Despite this, the U.S. economy continued to expand. Parsing the aggregate, however, reveals weaknesses in the housing market due to higher mortgage rates and zero growth in overall manufacturing so far. Fed funds interest rate cuts, the probability of which has decreased, will not automatically increase plastics production.

Currently, the intersection between the eventual effects of the current prolonged monetary policy stance on the labor market and price levels, and market demand, will determine the shifts in plastics production for the rest of the year.

ABOUT THE AUTHOR: Perc Pineda, Ph.D., chief economist of the Plastics Industry Association (PLASTICS), is an industry thought leader and PLASTICS’ primary expert and spokesperson on the U.S. and global economy, industry research, statistics, trends and forecasts. He produces PLASTICS’ two annual flagship publications — Size & Impact and Global Trends — and trademarked the Global Plastics Ranking. Read his views and insights on the economy and the plastics industry at plasticsindustry.org.